80 F.4th 956
9th Cir.2023Background
- PURPA (1978) directs FERC to “prescribe, and from time to time thereafter revise, such rules as it determines necessary to encourage” qualifying facilities (QFs), and sets an 80 MW cap for small power production facilities.
- FERC’s 1980 rules established (a) a one-mile bright-line site test for aggregation, and (b) a fixed-rate option (contract rates fixed at contract formation) tied to utilities’ full avoided costs to facilitate QF financing.
- The 2005 Energy Policy Act narrowed mandatory-purchase obligations where QFs have nondiscriminatory access to organized markets; FERC implemented a 20 MW rebuttable presumption in Order 688.
- In 2020 FERC issued Order 872 (and 872‑A), revising PURPA rules: a 10‑mile irrebuttable separateness cutoff (rebuttable between 1–10 miles); letting States eliminate fixed energy rates (while preserving fixed capacity rates); permitting States to adopt a rebuttable presumption that LMP reflects avoided cost; and lowering the market‑access presumption threshold from 20 MW to 5 MW.
- SEIA and environmental groups challenged Order 872 in the Ninth Circuit (also intervenors on both sides). The court upheld the rule changes under PURPA and the APA but held FERC violated NEPA by failing to prepare at least an environmental assessment (EA); it remanded without vacatur.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Order 872 as a whole violates PURPA’s command to “encourage” QFs | Order 872 reduces incentives and therefore conflicts with an unambiguous statutory directive to encourage QFs | PURPA delegates broad discretion to FERC to prescribe and revise rules “as it determines necessary to encourage,” so changing the degree of encouragement is permissible | Court: PURPA is ambiguous on this point; under Chevron FERC reasonably concluded the revised regs still encourage QFs overall — challenge denied |
| Validity of the 2020 Site Rule (one/ten‑mile scheme and rebuttable presumption for 1–10 miles) | New rule departs from plain meaning of “site,” is arbitrary, disruptive to reliance, and retroactive as applied to recertifications | Congress delegated site definition to FERC; the rule addresses strategic disaggregation and is a reasonable, explained policy choice that limits retroactivity | Court: Defer to FERC (Chevron step two), rule is not arbitrary or capricious, reliance concerns considered, and rule is not unlawfully retroactive |
| Modification of the Fixed‑Rate Rule (States may eliminate fixed energy rates) | Eliminating fixed energy rates contravenes PURPA’s nondiscrimination and avoided‑cost limits and harms QF financing; FERC lacked evidentiary support | PURPA does not require a fixed‑rate option; FERC reasonably concluded variable (time‑of‑delivery) pricing better ensures payments do not exceed avoided cost and States retain flexibility | Court: FERC’s interpretation reasonable; change adequately justified and not arbitrary or capricious; nondiscrimination requirement satisfied because QFs still receive full avoided cost |
| NEPA: whether FERC violated NEPA by not preparing an EA/EIS for Order 872 | Environmental petitioners: sweeping rule changes could foreseeably reduce renewables and increase fossil generation; an EA (at least) required | FERC: rules are procedural/clarifying or too speculative to model downstream environmental effects; no EA required | Court: Environmental groups have Article III and prudential NEPA standing; FERC erred—Order 872 not categorically excludable and FERC failed to take required “hard look”; remand for EA but without vacatur due to disruptive consequences |
Key Cases Cited
- Chevron U.S.A. Inc. v. NRDC, Inc., 467 U.S. 837 (1984) (two‑step deference framework for agency statutory interpretation)
- American Paper Inst., Inc. v. American Elec. Power Serv. Corp., 461 U.S. 402 (1983) (upholding full‑avoided‑cost rule under PURPA)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary and capricious standard under APA)
- Department of Transportation v. Public Citizen, 541 U.S. 752 (2004) (NEPA limits where agency lacks discretion to prevent downstream action)
- Winding Creek Solar LLC v. Peterman, 932 F.3d 861 (9th Cir. 2019) (discussion of QF rate options)
- American Forest & Paper Ass’n v. FERC, 550 F.3d 1179 (D.C. Cir. 2008) (upholding Order 688 market‑access presumption)
- Klamath‑Siskiyou Wildlands Ctr. v. Boody, 468 F.3d 549 (9th Cir. 2006) (EA required when action is not categorically excluded)
- Allied‑Signal, Inc. v. U.S. Nuclear Regulatory Comm’n, 988 F.2d 146 (D.C. Cir. 1993) (balancing test for vacatur vs. remand)