878 F.3d 258
D.C. Cir.2017Background
- The Hudson River-Black River Regulating District (District) operates the Conklingville Dam and Great Sacandaga Lake; Erie Boulevard Hydropower, LP (Erie) operates downstream FERC-licensed hydro projects that benefit from the dam’s regulated flow.
- Under 16 U.S.C. § 803(f) (FPA §10(f)), upstream operators may be reimbursed by downstream licensees for interest, maintenance, and depreciation; New York state assessments previously required broader payments under state law.
- In Albany Engineering v. FERC, this Court held state-law headwater assessments preempted by §10(f) and remanded to FERC to consider equitable remedies, but did not directly unwind private settlements or resolve refunds.
- Erie had settled state-court challenges to District assessments in a 2006 Settlement Agreement that released claims for 2000–09 and included an inadmissibility provision except for enforcement of the settlement.
- FERC conducted a multi-year headwater benefits investigation and in 2012 calculated Erie’s §10(f) benefits owed for 2002–08; FERC announced an equitable crediting framework for earlier overpayments but left specific credit determinations for later proceedings.
- In 2015 FERC refused to grant Erie credits for its past state-law payments because Erie had contractually released those claims in the 2006 Settlement; other downstream licensees who had not settled received credits. Erie petitioned for review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §10(f) preemption requires FERC to award credits/refunds despite a prior private settlement | Erie: Albany’s preemption ruling means state-law collections were unlawful and Erie must be credited regardless of its 2006 settlement | FERC/District: §10(f) preemption does not nullify independent contracts; FERC has equitable discretion and may enforce private settlements | Court: §10(f) allows equitable remedial credits but does not automatically undo private settlements; FERC reasonably denied credits to Erie given the 2006 settlement |
| Whether FERC exceeded its statutory/regulatory authority by crediting some licensees but enforcing the 2006 Settlement against Erie | Erie: FERC’s regulatory scheme required uniform crediting under its rules and past orders; it improperly relied on the Settlement | FERC: It followed its regulations to calculate §10(f) charges and exercised equitable authority in awarding or denying credits based on settlement status | Court: FERC properly followed §11.11 calculations and validly exercised equitable discretion to treat settled and unsettled parties differently |
| Whether the 2006 Settlement was admissible/considered by FERC given its inadmissibility clause | Erie: Settlement barred from being used; exception limited to court enforcement, not administrative proceedings | FERC/District: Settlement exception permits enforcement in any action or proceeding; FERC may consider and give effect to the release | Court: The Settlement was properly before FERC under its enforcement exception and FERC permissibly relied on it |
| Whether FERC acted arbitrarily or capriciously departing from precedent or regulations | Erie: FERC departed from its prior statements/orders and its regulations without reason | FERC: Calculations were based on a full investigation; remedial credits are equitable and within §10(f) authority; prior orders did not preclude reliance on settlements for equitable decisions | Court: FERC’s explanation and distinction between calculation and equitable remedy provided a rational basis; not arbitrary or capricious |
Key Cases Cited
- Albany Eng’g Corp. v. FERC, 548 F.3d 1071 (D.C. Cir. 2008) (held state headwater assessments preempted by FPA §10(f) and remanded remedial questions to FERC)
- Am. Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) (preemption does not necessarily undo private contractual obligations)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary and capricious review standards for agency action)
- Burlington Resources Inc. v. FERC, 513 F.3d 243 (D.C. Cir. 2008) (Commission must give weight to private settlements; later legal developments do not automatically void settlements)
- Reynoldsville Casket Co. v. Hyde, 514 U.S. 749 (1995) (final judgments and settled cases are not reopened merely because of new legal principles)