NC Department of Environmental v. FERC
3f4th655
| 4th Cir. | 2021Background
- McMahan applied for a FERC license to operate the Bynum Hydroelectric Project on the Haw River; FERC issued a 40‑year license to McMahan on Sept. 20, 2019.
- As required by Clean Water Act § 401, McMahan sought a North Carolina § 401 water‑quality certification from NCDEQ; NCDEQ ultimately granted certification with conditions on Sept. 20, 2019.
- FERC concluded NCDEQ had waived its § 401 authority because McMahan twice withdrew and resubmitted its § 401 application and FERC found coordination between the parties to evade the one‑year review period; FERC issued the license without NCDEQ’s conditions.
- NCDEQ filed for rehearing, submitting an affidavit and contemporaneous correspondence showing McMahan initiated withdrawals and that NCDEQ took numerous substantive actions during the review; FERC denied rehearing.
- PK Ventures (owner of the Project) separately challenged FERC’s jurisdiction over the Project and contended McMahan’s § 401 applications were invalid under North Carolina law because McMahan was not the owner.
- The Fourth Circuit granted NCDEQ’s petition, vacated the license and remanded with instructions to incorporate NCDEQ’s § 401 conditions; it denied in part and dismissed in part PK Ventures’ petition (jurisdiction challenge denied; state‑law application challenge dismissed for lack of federal jurisdiction).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NCDEQ waived its § 401 certification authority by failing to act within one year because McMahan repeatedly withdrew and resubmitted applications | NCDEQ: § 401’s one‑year clock is request‑specific; withdrawn requests are no longer pending and NCDEQ took substantive actions within the year on the relevant requests | FERC: withdrawals/refilings were part of a coordinated scheme (per Hoopa Valley) to circumvent the one‑year limit, so state waived authority | Court: Vacated FERC’s waiver finding; remanded and ordered license re‑issued to include NCDEQ’s conditions (state did not waive) |
| Whether FERC’s factual finding of coordination (that NCDEQ directed/encouraged withdrawals) is supported by substantial evidence | NCDEQ: record and Higgins affidavit show McMahan initiated withdrawals and NCDEQ merely provided procedural responses and substantive review activity | FERC: emails and correspondence show coordination and justify waiver finding | Court: FERC’s coordination finding is not supported by substantial evidence; FERC improperly dismissed NCDEQ’s affidavit and ignored context |
| Whether FERC had jurisdiction under the Federal Power Act to license the Project (navigability, post‑1935 construction, interstate commerce) | PK Ventures: Haw River not navigable; dam predates 1935; Project wouldn’t affect interstate commerce | FERC: Haw River is tributary of navigable Cape Fear River; turbine added in 1940 is qualifying post‑1935 construction; proposed use affects interstate commerce | Court: FERC properly exercised jurisdiction; PK Ventures’ jurisdictional challenge denied |
| Whether McMahan’s § 401 applications were invalid under North Carolina law because McMahan was not the owner | PK Ventures: NC rules required applicant to certify ownership or authority to apply, so application was invalid | FERC/Respondent: validity of state‑law requirements is a matter for state courts and not reviewable here | Court: Dismissed that portion of PK Ventures’ petition for lack of federal jurisdiction (state‑law challenge must be raised in state court) |
Key Cases Cited
- Hoopa Valley Tribe v. FERC, 913 F.3d 1099 (D.C. Cir. 2019) (held coordinated withdraw‑and‑resubmit scheme between applicant and states effected waiver of § 401 authority)
- Aquenergy Sys., Inc. v. FERC, 857 F.2d 227 (4th Cir. 1988) (post‑1935 construction requirement for FERC jurisdiction)
- L.S. Starrett Co. v. FERC, 650 F.3d 19 (1st Cir. 2011) (headwaters and tributaries of navigable waters qualify as Commerce Clause streams)
- AES Sparrows Point LNG v. Wilson, 589 F.3d 721 (4th Cir. 2009) (FERC’s interpretation of § 401 not entitled to Chevron deference because EPA administers the CWA)
- Appomattox River Water Auth. v. FERC, 736 F.2d 1000 (4th Cir. 1984) (standard of review for FERC orders: arbitrary, capricious, abuse of discretion, or unsupported by substantial evidence)
- Universal Camera Corp. v. NLRB, 340 U.S. 474 (1951) (framework for substantial‑evidence review requiring consideration of the whole record)
- First Iowa Hydro‑Elec. Coop. v. FPC, 328 U.S. 152 (1946) (Federal Power Act implements national regulation of water resources)
- Sierra Club v. U.S. Army Corps of Eng’rs, 909 F.3d 635 (4th Cir. 2018) (discussing CWA’s allocation of state and federal authority)
- NY State Dep’t of Env’t Conserv. v. FERC, 991 F.3d 439 (2d Cir. 2021) (rejecting a reading that allows non‑final agency procedural acts to avoid waiver under § 401)