Public Utility District No. 1 of Pend Oreille County v. City of Seattle, City of Seattle v. Public Utility District No. 1 of Pend Oreille County

MERRILL, Cir- Before HAMLEY and Judges, Judge. BYRNE, cuit District and Judge. MERRILL, Circuit brought this action condemn Seattle properties appellant Public owned (PUD) Utility pursuant Federal 16 U.S.C. § question presented is whether the holder a Commission Federal Power hydroelectric license project upon construct and, compensate the owner of shorelands values, of ad- the owner joining uplands, project. needed for the municipal corpo- Appellant PUD ais organized existing ration under the Washington, laws of the State of the bound- boundaries coextensive with County. oper- aries of Pend Oreille gen- utility properties ates electric for the and transmission eration of electric Pend sale. PUD’s is the lifeline flowing River, navigable stream, Oreille northerly generally in a from direction Washington British into Beginning pursuant Columbia. to a license issued the Federal Commission, Box PUD constructed its Canyon project, on the Pend Dam located up- of and Oreille River miles south stream from the Canadian border. hydroelectric years prior this, Some had studies the river been conducted by engineer Hugh Cooper, im- L. pressed suitability him as a with Canyon” dam site of “Z 17 miles located Canyon and downstream from Box upstream miles from the Canadian By Cooper acquired border. had parcels rights, various of land and preliminary he secured a Dill, Klobucher, plans Ennis Clarence & FPC and submitted C. Wash., ap- hydroelectric Ennis, Spokane, William construction of a Utility Canyon. pellant-appellee, appli- Public District. at Z In 1936 his cation for properties a license was denied without of PUD’s needed for prejudice. In 1953 his project.2 rights, together plans engineer- pretrial At conference the issue was ing data, acquired by were PUD. raised as to Seattle’s as a federal They parcel included fee title to a licensee to assert the Government’s upland Canyon, being or fast Z land at navigational servitude. proposed Canyon power site of the Z tentatively District Court ruled that plant, perpetual and either fee title or a not, could and PUD offer flooding easement for in shorelands ex- evidence of the value of its shorelands tending beyond Canyon, Box down- including and easements, flow water (north) point stream to a near the Can- power value, and the site value rights adian border.1 These lands and upland. so, its trial PUD did subject are the of this suit. but the court struck all evidence values acquired attributable had to water months after PUD for the Six rea- City Cooper proved son that properties the of Seattle PUD had not such value by any permissible preliminary applied (It for a to the FPC standard. had hypothesized fully feasibility explore profitably of a oper- and ating power plant hydroelectric project presented constructed to be and testi- mony on mile down on the Pend River a value of Oreille the lands and Canyon question operation.) from Z at a site known to such an Boundary. August The court found: granted preliminary year a three was permit. highest use of the PUD “The and best possibility Discussions sought to be condemned by joint operation PUD were had hydroelectric pur- this action is for City sepa Seattle, and but in 1957 the poses.” rately applied for for license an FPC found, It further however: proposed project. PUD its testimony site value opposition com and filed a intervened expressed for witnesses the defend- peting application its for a for license having only stricken, ant evi- been Canyon proposed project. appli Z dence the record as to value is that hearing, cations were consolidated plain- testified to witnesses for the tiff, mutually since the two ex no which includes hearing and clusive. After an extended only value. Based evidence comprehensive decision the examiner cause, as to value admitted in this Boundary project, in favor of the property the fair market value July FPC on issued its order sought property to be deny granting a license Seattle * * * $16,000.” taken ing application. 26 F.P.C. 54 PUD’s assigned specifically The court (1961). The order was Commission’s upland $1430, taken the value of and to an Appeals affirmed Court of gaging easement for a station and Public Util Columbia. measuring cable the nominal sum of County $1. ity Dist. No. 1 of Pend Oreille balance, $14,569, is the value at- FPC, U.S.App.D.C. 363, tached to the shorelands and easements. denied, cert. Judgment accordingly. was entered S.Ct. L.Ed.2d 716 judgment Seattle commenced March cross-appeals this suit From this parts for condemnation of those been taken. PUD that the court contends Uplands high remainder, retaining mean are those above the easement in the mark, water while shorelands are be fee. navigability tween the line of of the river up 2. Seattle condemned all shorelands high and the mean mark. The Canyon, to Box the 212 82 acres out of Cooper Washington State of had sold fee upland gaging parcel, station acre easement. title less mineral shorelands; to some of these had sold him described purposes use of the river bottom navigation evidence erroneously its struck no is not a contends site value. Seattle public given “the since have been all should at very easements, and that owner’s title was ject nature sub- flow shorelands public accordingly to that use in the interest reduced must be navigation.” Thus the Government has $1431. any property ‘taken’ “not CROSS-APPEAL. I. SEATTLE’S primarily subject use to put the contentions discuss had first which it been should be no at all Seattle: assigned the shorelands Chicago, M., In United States v. St. up-

power-site the taken attributes 592, Co., 596, P.& P. R. lands. 772, 775, (1941), 85 L.Ed. 1064 this would be is conceded Court states: necessary result had the federal of “The project undertaken been repeatedly Government, has been United States itself and had the States of a held, bed the entire extends to The issue been the condemnor. below stream, the lands which includes is different when whether situation highwater ordinary exer- mark. The power project condemnation are a limits these within cise of by the United States undertaken not prop- any private of an invasion is not erty by a of the Federal Power but licensee lands for which in such Commission. compensation. make United States A. Shorelands damage not from sustained results turn the matter of shore- We first to prop- riparian owner’s a lands. bed, erty stream but power to which lawful exercise dominant navi Government’s always property sub- been that ject.” gational power, in is the aid servitude navigation, to utilize the stream bed navigable up waters shorelands of apparent that the navi It is thus high ordinary water level. nature, gational servitude, does Twin Power property destroy all or exclude navigable 76 S.Ct. in and banks the beds (1956), L.Ed. the Court states: exist continue to Such streams. governmental subject are held interest of the United States power in of an easement. the nature origi- the flow of a nates the Commerce Clause. That question then, is the Fed- whether speaks power, clause property. not of terms Act, seq. et eral 791a U.S.C. § power is But the a domi- governmental power (1964), bestows this nant one can asserted to the be on a licensee. any competing exclusion of or con- position that the first observe flicting privilege one. The is a distinguishable from that licensee is which we have called ‘a dominant respect the United States with servitude’ By furthering interest. of the national Later the Court refers to the servitude license the United States issuance of a navigation.” as an “easement of acting interest is not in the national U.S. at 76 S.Ct. 259. through to the same extent the licensee Explaining if it undertook the of an exercise of as it would effect power, The United acts in the Court in United itself. scale; Co., public interest on a national v. Chandler-Dunbar Water Power scale, often on a local on U.S. licensee 57 L.Ed. thought governmental of insufficient dimensions to be states that The choice between manufacturers. national assertion warrant groups involves a value interests require- two many cases power.3 In legislative essentially char- regula- permission and ments of legislative intent Unless the acter. interest national all that tion are adopt clear, slow courts should is a licensee Frequently the requires. which is construction the effect utility manu- or even privately owned rights and of property destruction purposes seeking facturer, license for power to create them. state’s profit. beyond silence as But mere Congress, then, was confronted language legislative in the Power intent, decision; whether need for a interpreted to constitute an Act has been (through bestowal to exercise express denial of the servitude. licensees) consti- measure of its the full 10(c) U.S.C. Section power. tutional 803(c), provides part: § expressly, It has not so done hereunder shall “Each licensee significance. Nia- In FPC v. fact damages occasioned to liable gara Mohawk the construc- of others L.Ed. 686 operation tion, maintenance, or (1954),4 the Court states: appur- project works of the works “ * * exercise of [T]he accessory thereto, construct- tenant or making servitude, allowances license, in no ed under the and event law, rights preexisting under state there- shall the United States liable requires clear authorization.” for.” interpreted require eminently to This has been This seems to us to be property compensation for state-created sound. We are here concerned with sev being rights and inconsistent with important competing as eral interests. On as such a of values property destruction the one hand are state-created governmental rights, the follow assertion often owned the state itself.5 Henry Son, power. Ford & Inc. On the other rate-based benefits to 369, power company Little Falls Fibre consumers and 140, (1930).6 shareholders, 5.Ct. L.Ed. 483 to and sometimes benefits 7(b) Act, those later cit- 6. In this case and some of 3. the § Power 16 U.S.C. § ed, the 800(b), requires distinguish § the dealt with Court also to the FPC protects Act, projects develop U.S.C. § between which call for rights: per state-created water ment the States and those chapter “Nothing mitting shall contained this In of construction a licensee. intending affecting may or be construed the former situation license any way FPC, to interfere or in to affect issue. See Udall v. respective (1967). with the laws of the L.Ed.2d 87 S.Ct. control, appropriation, relating Furthermore, authority the to of the FPC in ir- of water used distribution to license under the Act extends uses, municipal rigation or other or for small size. to ones of See 18 C.F.R. acquired any right therein.” vested 4.60 § appears However, from Ford clear 4. later In this case and others cited 10(c) re- of the Act which §is dealing Court was with the Federal Wa- taking quires compensation ter Act Stat. rights, property and 27§ state-created incorporated now I of which is Part rights simply bring clear- water serves Act. the Federal Power 10(c). scope ly In FPC of § within Niagara Corp., present paid Mohawk Power 347 U. 5. In the case Seattle has Washington $6,000 the Court for the use S. State of stating: rights so reads of the the state retained usufructuary apparently shorelands, Act treats more than “The and rights.” property rights $40,000 like other use of the waters of the Qreat power purposes. Cf., Seaboard Northern Oreille River for Pend infra, § in n. where cases cited at issue. assuming and, permittee, the Gov- Niagara Mohawk Power In FPC v. con- exercised its ernment supra, states: the Court navigable streams trol over Act], the license nor “Neither [the through permittee Federal under the it, expressly abolishes issued not the it was Water Power rights any existing proprietary * government do. so to intention Niagara River. use waters of general purpose contrary, On express of the makes no assertion permit what would of the act was paramount of the Government infringement of the otherwise be an Niagara or of to use flow government and of the federal any other ex- navigation, an interference with existing clusion users.” is, purpresture, requiring however, permittee, due to make And further: compensation in- where the private “Respondent’s property. private volved subject are rooted state put way, law To in another paramount rights of State expressly recognizes case, Nation. the instant both the by the established and determined and the Nation have made requires expressly of the state and law superior limited assertions their permittee, where it interferes rights.” 347 U.S. at S.Ct. at rights, compensate the owners assume, contend- therefor. If we as is ed, government in this case In United States v. Twin might, in the aid of Co., supra, the Court states: river, Joaquin impound waters San legislative history and construc tributary feed them streams particular may tion of enactments lead suited the river in a best into manner Congress to the conclusion exer regard power, cised less than its constitutional rights riparian owners of other appropriating fell short of the flow purposes for of the stream the waters public domain, of the river the irrigation, com- etc., and without provided existing private therefor, assumption pensation such compensa under state law should be government avail the because cannot recognized. ble or otherwise Such in exer- the Ford Case holds were United States v. Gerlach Live through permit- powers cise Co., stock U.S. [339 tee Federal Power Water (1950)], 94 L.Ed. 1231 and Fed permittee com- Act such must make Niagara eral Power Commission v. pensation private taken.”7 for so Corp., supra, Mohawk Power 74 L.Ed. S.Ct. 98 686.” (or that think that this case We do not Dam Auth. v. Grand- of Grand River expressions in These our Hydro, 93 ruling early reinforce an of this court on infra), discussed L.Ed. question. In United States distinguishable ground upon Central Stockholders’ law under state condemnation there was (9th 1931), Cir. we stated: not exercise and did involve an Supreme in Court held granted power domain of eminent Case, effect, Ford in was not servitude, if it the Power Act. Congress any the intention of to vest portion sovereign operative, in nature power is not Crisp, Ga., (5th County F.2d To the same effect is Great Northern denied, 1960), Ry. Co., Washington cert. Elec. Cir. Co. v. (1961); (1989) L.Ed Union .2d 373 cited Wash. 86 P.2d 208 Snyder Light Supreme Niagara Es & Elec. Power Co. v. Mohawk. 1933). (8th F.2d Cir. Air tate Line R. Co. v. See also- Seaboard parties the Act itself acquire with- as between right or take determining is, fair It as a factor giving compensation. relevant out power not does serve to eliminate discussed, in nature as we for market The Court states: need value. avoids an easement taking question. Thus “It is clear that the Federal Power require condemnation it does far Act said to have so cannot be contrary, it elim- On the its exercise. for a affected the use this land condemnation, save the need inates destroy or site as to otherwise suit capacity of a perhaps in the render valueless the owner’s judgment. declaratory purpose. use it for That Act United Government’s servitude; licensee in the constitutional value, whether, sation sary demned such values sideration. gests such of such values amounts sible claim of a States v. Twin in the suggestion B. The next Language in Chandler-Dunbar to its values are Uplands Co., supra. flow uplands of FPC this is because that if shorelands could not be asserted. conclude determining itself were question private property interest City Power in no case is settled Chandler-D unbar may site may stream,8 from which they sense, and be taken value of that Seattle to an concluded that must be the condemnor presented fair proper. navigational follow. Co., supra; assert impermis- assertion into con the con compen market United if Water neces taken sug- as tion Act.” 335 U.S. at 373. While the measure of value in a condemnation ac- one of its serves the merely sites. not to chaser, Act use of the land for a placed * * * ling have entered into the tary negotiations.” seeking In that case the Court of this of it as a “In a “As between these two brought by prohibit ^[*] derived seeks to ^[*] It no has attached conditions to voluntary purchase destroy, petitioner, question land, to determine seeks to unobligated seller, limitation licensees encourage development their respondent, preserve Federal the Federal Power as a upon negotiated price. inevitably reliance expressly willing pur- “appropriate rather corporations their volun- of this land sales site. the value as such. enhance, a wil- ques- price than Act re- now, clarifying City, tion has Later reason Twin been laid cases States, to rest the error of such United the Court the rule shown recognize yet expressly ques- has not a conclusion. cases dealt with the These running is tion as to of a stream licensees. while water ownership, capable private is not of satisfied, however, We are right susceptible and that of a of precludes rule which assertion of right may to the land add value against value apply the United does not States appurtenant. to which it is licensee; the case goes the case Auth. v. United Thus in River Dam Grand 372, hand in Grand-Hydro, 359, hand 69 S.Ct. Government’s navigational 120, 114, a condemna- servitude. 93 L.Ed. 64 Virginia United States made clear that v. Elec. & Power tion under it is state great navigable Supreme in a is 8. states: stream capable private ownership “Ownership is incon- 69, wholly upon ceivable.” 229 U.S. at S.Ct. an individual 33 the lands of 674, running 667, conceivable; L.Ed. 57 is

673 788, typically proof 624, of com- are established 365 81 S.Ct. U.S. parable proof (1961) No of such a value L.Ed.2d Court stated: sales. 5 838 presented PUD, increment just navigational priv- “Thus, as the witnesses Seattle’s testified that the tak- ilege permits the Government enjoyed en lands no such increment. riparian reduce value of lands Second, denying highly riparian there is the owner access enhanced may fully compensation for value that attach to as- the stream package (and omitted], it also sembled land several his loss [citations disregard parts) permits prospective due to the fact that the Government to arising power project dependent upon same fact the value from this is use compensating package. riparian proof location in PUD’s was limited appro- the owner when fast lands are this sort. Its witnesses priated.” capitalizing valued the earnings completed power plant In Twin is Canyon, subtracting at Z the cost of described as one “that inheres in the construction. Their estimates resulted Government’s servitude in a value of between seven and nine U.S. 76 S.Ct. at million dollars for the lands involved. then, understand rule, as we sort Enhanced value against a may assert it, that one impermis being perilously close comes ato attributable values condemnor to a proof profit attributable sible power with condemnor opportunity rather frustrated business require the hold; tobe this would to land itself. See than exercise pay for condemnor Auth., U.S. Dam v. River condemnation) Grand (through act of L.Ed.2d 80 S.Ct. right. to withhold of its a rea there must be At the least as to conclude We likelihood that absent sonable exercising the Government’s licensees reasonably would, near land the future, value, navigational servitude, full market question put use proper including value, earnings anticipated that the compensation. measure rel. TVA v. United ex result. Seattle, the Upon the contentions Powelson, U.S. in error. Court was not (1943); United Olson 87 L.Ed. 1390 af- cross-appeal, Seattle’s States, (1934); firmed. Land Continental L.Ed. 1236 (9th States, F.2d 104 Co. United APPEAL PUD II. OF denied, 1937), Cir. cert. (1937); L.Ed. 552 appeal PUD and turn to the (5th Cir. Cooper, States v. the District Court its erroneously contention 1960). its evidence of struck site value. while Court found that The District yet completed may generally to the assem- be said PUD had not Power value bling package, types. First, the it could be there is of land of its be two engaged nonetheless, it could in since increment one credited with it assembling reasonably PUD for a that would lands needed be assumed the of assembling by willing pay complete in power project to be able to the be would purchase to eminent land resort able include such order to be to Nevertheless, package. Such values domain.9 in its needed disregarded. determining ex rel. a condemnee be In whether Powelson, supra. pack- The District land TVA v. would be able to assemble could, by necessary engage age volun- land that in certain Court found PUD to a tary transfer, possible the lands of assembled resort Z project a “low” dam must needed for domain condemnee eminent such proof problem lies rejected type for the burden of of with this necessarily proving value. Where condemnor and assumed reason that it competed a acquisition license. We condemnee have for federal FPC of an prospects license, agree. of the unsuccessful foresight, competitor, as a matter of Accepting proper in case a speculative be deemed too him by capitalization may be evaluated land pre-existing to attach value to the likeli- earnings project of into which succeeding hood of his in his efforts.11 incorporated,10 we hold that is to be it judgment appeal of PUD not of evaluation are methods such affirmed. contemplated proper, use since the remote, requires a use too when Judge been ob

federal license which (concurring BYRNE, District is the dissenting and where the condemnor part, tained part): in competitor for a successful portion I in the concur with the Court license. opinion dealing appeal of the unable, however, PUD. I am to concur us in Common tells such sense majority's as to views Seattle's loss a multimillion dollar case cross-appeal. the condemnee is due to claimed apparently major- It is view acres land but a few ity cross-appeal that reversal on Seattle’s qualify for its failure to the needed would, effect, overrule United States impose To this loss license. Cir., v. Central Stockholders it, require is to condemnor a cost cases, but as I two view the obtaining compensate the license, its they clearly distinguishable. inability condemnee latter’s ease involved Stockholders pay Central obtain a The winner must license. proceeding in the state a condemnation the loser’s losses. The successful licen riparians con- see, effect, received court lower where must assume and make grants California on compensation demnation based deficiencies just River Dam as Grand which caused failure of the condemnee’s Authority Grand-Hydro, 335 U.S. application. policy In our a involved public 93 L.Ed. of the Power Act in interest proceeding in the state requires proposition condemnation a it rejected. In cases courts of Oklahoma. both holder, an FPC license held By ruling do not hold we proceeding domain ac- state eminent a condemnor can use its federal tion, not claim the benefit could pre-existing destroy values. license to servitude permitted The licensed should Hydro, United States. Grand destroy enhance nor neither public Authority, a Grand River Dam on its condemned behalf. Oklahoma, sought agency of the Virginia Elec. & United States v. See Hydro, to condemn lands owned Grand Co., supra, utility. Authority, while Federal Power a license from the held at 792. damages, powers Canyon, PUD also claimed “severance” domain that eminent Canyon project. required relation to Box it to obtain have been “high” meant was Z clear But what dam at savings possible com or, course, from the Canyon, for a loss operation spec- Z finding one owner bined This adds dam. Canyon Canyon project proof. en with the Box offer nature ulative of PUD’s terprise. foot This the same stands on Eden Memorial 10. United States See ing Z Can as (9th Ass’n, Cir. F.2d 933 Park yon lands. cf., Orgel, 1965).; Valuation Under 162-63 Eminent Domain §§ Congress to cant retains project, chose since its Commission build the ex- licensed take over a courts lands in state condemn the by paying year piration of license the 50 law, to exercise rather than under state and, to the licensee the net investment powers. The Oklahoma its Section 21 keeping thus, interest held, has a direct Supreme of state a matter Court (See to minimum paid. construction costs had to be site valuation Act.) 6,10 14 of Supreme Sections Court af- The United States nothing ground firmed on my opinion, chooses licensee when a could said Federal Power Act be granted powers to exert supersede in this situation. the state law instituting pursuant action Section an further The Court stated: Act, the con- 21 of the entitled to including States, its comitants of that the United “If either seeking to servi- benefit of the federal such, were licensees the Federal tude. acquire under land different face cross-appeal, I Seattle’s above. those stated considerations reverse. special enjoys United States in relation which affect streams and also streams ex- we commerce interstate opinion upon what would

press no ain appropriate measure of brought by condemnation action .the licensees one United States (formerly Joan E. HELLER Joan TRUST upon rights derived under in reliance Trust), Trust E. Smotkin Arizona (335 Power Act.” the Federal Trustee, Trust, Smotkin Ari- Carole D. 121) (Emphasis Co., Trustee, Trust M. Hel- zona Robert supplied). Heller, ler and Joan E. husband and us, wife, Trust, unlike Grand- Harold J. Smotkin Arizona case now before Co., Trustee, Trust E. Smot- and Edward Stockholders, Hydro Central involves Betty Smotkin, kin and husband and J. brought by a a condemnation action wife, Petitioners, “in reliance licensee of upon under the Federal derived writing Judge Merrill, COMMISSIONER OF INTERNAL REV- Power Act”. Respondent. ENUE, majority, that no value at concedes assigned should to the shorelands No. power-site or to attributes Appeals United Court of States, itself, uplands taken if the United Ninth Circuit. Why were distinc- the condemnor. Aug. and a tion between the licensee of United States? Su-

preme such distinction Court makes no Grand-Hydro. The distinction made Supreme between actions brought law state courts under state brought “in actions reliance Act”. Federal Power Congress

Surely did not intend that heavy costs

added initial construction

should burden the users

merely undertook because a licensee gov- rather than the federal

construction particularly signifi- This is

ernment.

Case Details

Case Name: Public Utility District No. 1 of Pend Oreille County v. City of Seattle, City of Seattle v. Public Utility District No. 1 of Pend Oreille County

Court Name: Court of Appeals for the Ninth Circuit

Date Published: Oct 25, 1967

Citation: 382 F.2d 666

Docket Number: 20196_1

Court Abbreviation: 9th Cir.