SALT LAKE CITY, et al., Plaintiffs-Appellants, v. WESTERN AREA POWER ADMINISTRATION; William H. Clagett, in his capacity as Administrator of the Western Area Power Administration; The United States Department of Energy; John S. Herrington, in his capacity as Secretary of Energy of the United States, and the United States of America, Defendants-Appellees, Coalition of Consumer-Owned Power Systems, Amicus Curiae, Colorado River Energy Distributors Association, Inc., Defendant-Intervenor/Appellee, National Wildlife Federation, Grand Canyon Trust, American Rivers, Inc., Amicus Curiae.
No. 88-1976
United States Court of Appeals, Tenth Circuit
Feb. 22, 1991
Rehearing Denied April 18, 1991
926 F.2d 974
Rex Lee of Sidley & Austin, Washington, D.C. (Donald R. Allen, Cyndi Stich, and J. Barton Seitz of Duncan, Allen and Talmage, Washington, D.C., Dale A. Kimball, Gary A. Dodge, and Jill A. Niederhauser of Kimball, Parr, Crockett & Waddoups, Salt Lake City, Utah, with him on the brief), for intervenor-appellee Colorado River Energy Distributors Ass‘n, Inc.
C. Max Vassanelli, Atty., Civ. Div., Dept. of Justice (John R. Bolton, Asst. Atty. Gen., Brent D. Ward, U.S. Atty., Dennis G. Linder, Robert S. Greenspan and Karen Stewart, Attys., Civ. Div., Dept. of Justice, of counsel Susan Earley, Western Area Power Admin., with him on the brief) Washington, D.C., for federal appellees.
S. Elizabeth Birnbaum of Nat. Wildlife Federation, Washington, D.C., filed an amicus curiae brief on behalf of Nat. Wildlife Federation, Grand Canyon Trust and American Rivers, Inc.
Clinton A. Vince and Nancy A. Wodka of Verner, Liipfert, Bernhard, McPherson and Hand, Alan H. Richardson, American Public Power Ass‘n, Washington, D.C., C. Pinckney Roberts, Columbia, S.C., Wallace F. Tillman and Michael D. Oldak, Nat. Rural Elec. Coop. Ass‘n, Washington, D.C., Charles L. Compton, Laurens, S.C., L. Clifford Adams, Jr., of Hurt, Richardson, Garner, Todd & Cadenhead, Atlanta, Ga., as counsel for Mun. Elec. Authority of Georgia, and Carlos C. Smith of Strang, Fletcher, Carriger, Hodge & Smith, Chattanooga, Tenn., as counsel for Tennessee Valley Public Power Ass‘n, filed an amicus curiae brief on behalf of the Coalition of Consumer-Owned Power Systems.
Before LOGAN and TACHA, Circuit Judges, and THEIS, District Judge.*
LOGAN, Circuit Judge.
Plaintiffs, Utah Power & Light (UP & L) and more than one hundred of its subscriber cities, towns and counties in Utah and Wyoming, appeal the district court‘s grant of summary judgment in favor of defendants, the Western Area Power Administration (WAPA), the Department of Energy (DOE), and various officials of these agencies. The district court found that WAPA‘s interpretation of federal law governing preference in the sale of federal hydroelectric power was reasonable and that WAPA‘s decision to purchase nonfederal power in order to maximize sales of firm federal power was not ultra vires.1 We affirm.
A
The activities challenged in this case fall under the jurisdiction of WAPA‘s Salt Lake City Area office, which markets power generated from the Salt Lake City Area Integrated Projects (SLCA-IP), including the Colorado River Storage Project (CRSP). The basic statute governing power marketing from the SLCA-IP is the CRSP Act,
WAPA sells power under long-term marketing criteria. While WAPA was formulating its Post-1989 General Power Marketing and Allocation Criteria, see 48 Fed.Reg. 38,289 (1983); 49 Fed.Reg. 34,900 (1984); and 51 Fed.Reg. 4,844 (1986), UP & L applied for federal power on behalf of its customer municipalities that had authorized it to do so. The application requested an allocation of power for the municipalities as qualified preference entities under the federal reclamation laws. The application stated that, upon receipt of an allocation of federal power, each municipality would enter into a contract with UP & L under which the latter would provide utility services at cost. UP & L also applied for a preferential allocation of federal power on its own behalf, to be resold to its customers at cost. Alternatively, UP & L argued that it should be allowed to bid for federal power. WAPA determined that neither UP & L nor its customers qualified as preference entities under applicable reclamation laws and accordingly rejected plaintiffs’ applications.
Plaintiffs’ first challenge to WAPA‘s refusal to allocate power to them is based on federal preference law. Section 9(c) of the Reclamation Project Act of 1939,
Plaintiffs argue that the utility responsibility requirement is contrary to the plain language of § 9(c). They argue that the statutory language clearly makes every municipality a preference entity and that WAPA‘s contrary interpretation is entitled to no deference. Rejecting this argument, the district court applied the analysis set forth in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). The court first asked whether Congress had directly spoken to the precise question at issue, namely, whether the statutory preference given to municipalities mandates equal treatment of municipalities that own their own distribution systems and those that do not. Employing traditional tools of statutory construction, the court found no intent on this question. We agree.
Plaintiffs correctly point out that neither the court nor the defendants have controverted plaintiffs’ oft-repeated assertion that the meaning of the word “municipalities” is clear. But plaintiffs’ references to the Oxford English Dictionary do not make clear the meaning of a preference in the sales of power to municipalities. The question critical to this appeal, whether the preference applies only to sales directly to municipalities or also embraces indirect sales through investor-owned (i.e., for-profit) intermediaries such as UP & L, is not answered by asserting that “everybody knows ... a ‘municipality’ is a town or city.” Plaintiffs-Appellants’ Principal Brief at 13. If indirect sales are included, then the preference clause authorizes the agency to confer economic benefits upon investor-owned utilities.3 It is not at all clear from the text of the statute that such a result was intended.
On the second prong of the Chevron analysis, 467 U.S. at 843, 104 S.Ct. at 2781-82, the district court found WAPA‘s interpretation of the preference clause “fully reasonable.” III R. tab 233 at 40. We agree that WAPA‘s construction of the statute must be upheld.
The agency‘s interpretation need not be the only one it could have adopted, or the one that this court would have reached had the question initially arisen in a judicial proceeding. Chevron, 467 U.S. at 843 n. 11, 104 S.Ct. at 2782 n. 11. Indeed, the agency‘s interpretation is entitled to special deference when, as here, the agency is interpreting a statutory scheme that it is entrusted to administer, its interpretation has “‘involved reconciling conflicting policies, and a full understanding of the force of the statutory policy in the given situation has depended upon more than ordinary knowledge respecting the matters subjected to agency regulations.‘” Id. at 844, 104 S.Ct. at 2783 (quoting United States v. Shimer, 367 U.S. 374, 382, 81 S.Ct. 1554, 1560, 6 L.Ed.2d 908 (1961)).
It is reasonable to conclude, as WAPA has, that the benefits of preferential access to federal hydroelectric power should be enjoyed by the public rather than the private sector. Plaintiffs’ challenge to this interpretation, “fairly conceptualized, really centers on the wisdom of the agency‘s policy, rather than whether it is a reasonable choice within a gap left open by Congress....” Id. at 866, 104 S.Ct. at 2793. Therefore, their challenge must fail. Id.
Plaintiffs also argue that, even if the utility responsibility requirement is reasonable, WAPA arbitrarily and capriciously refused to recognize plaintiffs’ compliance with it. Specifically, they assert that a 1978 legal opinion of the DOE “suggested that power may be allocated to a city which secures through contract the means of delivering the power to its customers as well as administrative functions such as meter reading, billing and accounting.” Plaintiffs-Appellants’ Principal Brief at 17. The legal opinion referred to, however, indicates that in order to achieve utility responsibility, the applying city would have to own or lease utilities itself, and not merely contract with the investor-owned utility normally serving it to act as its agent in purchasing federal power. See Dep‘t of Energy General Counsel, “Request of City of Needles for Reinstatement of Sales of Federal Power for Benefit of Its Citizens” 3-5 (Nov. 21, 1978), III R.Supp. tab 216 App. K; see also id. at 5 (“As a practical matter Needles would likely be required to purchase, lease, or condemn [the investor-owned utility‘s] distribution system that serves the City and [the utility‘s] charter to provide utility service.“). Nothing in the plaintiff municipalities’ application suggests that they would take any steps to acquire UP & L‘s distribution system.
UP & L argues that it should be deemed a preference customer in its own right. As support for this proposition, UP & L points to its application for power on its own behalf, arguing that its proposal to distribute federal power at cost to its customers is consonant with the preference for “municipal purposes” contained in
B
Plaintiffs also attack the Post-1989 Criteria as inconsistent with
Four circuits have considered whether § 5‘s widespread use clause provides law to apply to an agency‘s power marketing decisions. We agree with their unanimous conclusion that it does not. See Brazos Elec. Power Coop. v. Southwestern Power Admin., 819 F.2d 537, 543-44 (5th Cir. 1987), reh‘g denied, 828 F.2d 1083 (5th Cir. 1987); Electricities of North Carolina, Inc. v. Southeastern Power Admin., 774 F.2d 1262, 1266-67 (4th Cir. 1985); Greenwood Util. Comm‘n v. Hodel, 764 F.2d 1459, 1464-65 (11th Cir. 1985); City of Santa Clara, 572 F.2d at 667-68. Thus, even if § 5 of the Flood Control Act applies to the sale of power generated by the CRSP, implementation of that section in WAPA‘s power marketing decisions is “committed to agency discretion by law” under the Administrative Procedure Act,
II
A
Plaintiffs next allege that WAPA‘s practice of buying and reselling power produced at nonfederal power plants (nonfederal power) is ultra vires and part of a scheme to “broker” nonfederal power in order to maintain the agency‘s importance in the electric power industry. WAPA purchases nonfederal power in order to “firm up” federal power supplies. Because hydropower fluctuates with water levels, its availability above a certain level cannot be guaranteed.4 By purchasing nonfederal power, WAPA can ensure a dependable supply of energy. Plaintiffs argue that WAPA is without statutory authority to make such purchases and that its actions are therefore ultra vires. We agree with the district court‘s conclusion that the CRSP Act does not prohibit WAPA from purchasing nonfederal power.
The CRSP Act does not mention nonfederal power. The Act does provide, however, that CRSP projects “shall be operated in conjunction with other Federal power plants, present and potential, so as to produce the greatest practicable amount of power and energy that can be sold at firm power and energy rates....”
The plain language of § 620f does not prohibit WAPA from purchasing nonfederal power; the words of the statute simply are not clear on this point. Further, the statute‘s legislative history does not demonstrate a congressional intent to prohibit nonfederal power purchases. See H.R.Rep. No. 1087, 84th Cong., 2d Sess., reprinted in 1956 U.S.Code Cong. & Admin. News 2346, 2362 (reiterating that hydroelectric powerplants should be operated to produce greatest amount of energy that can be sold at firm power rates). Nor can we accept plaintiffs’ argument that WAPA cannot interact with nonfederal entities absent specific congressional approval. Although Congress occasionally has expressly authorized nonfederal power purchases,6 courts “have long recognized the inherent power of the Secretary to purchase power on ‘credit’ from other sources when conditions prevent hydro-electric facilities from functioning at capacity.” United States v. Sacramento Municipal Util. Dist., 652 F.2d 1341, 1345 (9th Cir. 1981) (citing Kansas City Power & Light Co. v. McKay, 115 F.Supp. 402 (D.D.C. 1953), vacated on other grounds, 225 F.2d 924 (D.C. Cir.), cert. denied, 350 U.S. 884, 76 S.Ct. 137, 100 L.Ed. 780 (1955)) (emphasis added). See also Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 338-39, 56 S.Ct. 466, 478-79, 80 L.Ed. 688 (1936) (recognizing authority of power marketing agency to interchange energy with private power company).
At the same time, however, § 620f does not expressly direct WAPA to purchase nonfederal power. Rather, the plain language and legislative history of § 620f merely direct WAPA to maximize the sale of federally produced power at firm rates. The statute and its legislative history are silent regarding how WAPA should accomplish this objective. As we discussed in Part IA, when an administering agency‘s interpretation of a statute is challenged, and traditional tools of statutory construction yield no relevant congressional intent, the reviewing court must determine if the agency‘s construction is a permissible one. See Chevron, 467 U.S. at 842-43, 104 S.Ct. at 2781-82.
WAPA‘s interpretation of § 620f--that it requires WAPA to purchase nonfederal power in order to maximize sales of federal power at firm rates--is permissible. The availability of hydroelectric power fluctuates with water levels. Thus, if a federal project‘s hydroelectric power is sold by itself, “the amount of firm power available is reduced, and in some cases, firm power cannot be offered at all for some periods of time.” 49 Fed.Reg. 34,900, 34,915 (1984). It therefore seems reasonable that WAPA interprets § 620f as requiring it to purchase nonfederal power to ensure maximum sales of federally produced power at firm rates.
WAPA‘s interpretation of § 620f is supported by several other factors. Federal power marketing agencies commonly employ firming arrangements. See, e.g., Brazos Elec. Power Coop., 819 F.2d at 540-41 (Southwestern Power Administration engaged in firming arrangement with private utilities company); Greenwood Util. Comm‘n v. Mississippi Power Co., 751 F.2d 1484, 1490 (5th Cir. 1985) (private utility company provides Southeastern Power Administration with thermal resources to enhance dependable capacity of its hydro resources). Moreover, courts interpreting general reclamation statutes have held that federal power marketing agencies have inherent authority to purchase some nonfederal power. See Sacramento Municipal Util. Dist., 652 F.2d at 1345; Kansas City Power & Light, 115 F.Supp. at 417-18. Finally,
B
Alternatively, plaintiffs challenge the scope of WAPA‘s nonfederal power purchases. According to its Post-1989 Criteria, WAPA is planning to purchase nonfederal power on a new scale. In the past, WAPA‘s purchases of nonfederal power were based on an average water year basis; purchase of power in drought years was balanced by excess federal power in wet years. 49 Fed.Reg. 34,900, 34,923 (1984). Under the Post-1989 Criteria, however, WAPA plans to purchase 400 gigawatt hours of nonfederal power to meet its firm commitments in an average water year. 51 Fed.Reg. 4,844, 4,845 (1986). Plaintiffs argue that this proposal violates case law limiting the amount of nonfederal power that WAPA may purchase. The district court rejected this argument and held that WAPA may purchase such nonfederal power as is “reasonably necessary” to maximize the sale of federal power at firm rates. III R. tab 233 at 51.
We apply the arbitrary and capricious standard of review to WAPA‘s nonfederal power purchasing decisions.
“must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one. The court is not empowered to substitute its judgment for that of the agency.”
401 U.S. at 416, 91 S.Ct. at 824 (citations omitted).
Applying this standard, we conclude that the proposed nonfederal power purchases found in WAPA‘s Post-1989 Critieria are not arbitrary and capricious. WAPA examined the relevant factors in concluding that the scope of its nonfederal power purchases was reasonably incidental to maximizing sales of federally produced power at firm rates. See 51 Fed.Reg. 4,844, 4,856-58 (1986); 49 Fed.Reg. 34,900, 34,923-24 (1984). We cannot say that WAPA made a clear error of judgment in reaching this conclusion. We therefore affirm the district court‘s decision that, as a matter of law, such purchases are not ultra vires.
In a closely related argument, plaintiffs challenge WAPA‘s determination of expected CRSP firm marketable resources for the post-1989 period. Plaintiffs contend that WAPA arbitrarily and unreasonably overestimated CRSP hydro resources in deriving the Post-1989 Criteria, thereby “creat[ing] new paper resources that will require WAPA to purchase even more nonfederal power to enable it to meet its contractual obligations when” these resources fail to materialize. Plaintiffs-Appellants’ Principal Brief at 41. We disagree. Our review of the record convinces us that WAPA‘s estimation of future CRSP firm marketable resources was not arbitrary and capricious. See 51 Fed.Reg. 4,844, 4,856-58 (1986); 49 Fed.Reg. 34,900, 34,920-24 (1984); III R. tab 233 at 48-49 n. 38. We therefore reject this argument.
C
Finally, plaintiffs allege that WAPA‘s decision to participate with private utilities in the construction and financing of the Craig-Bonanza transmission line is ultra vires and that the transmission line is being built to promote WAPA‘s “brokering activities.” As plaintiffs point out,
Accordingly, we AFFIRM the district court‘s decision granting WAPA‘s motion for summary judgment.7
TACHA, Circuit Judge, dissenting.
I respectfully dissent from the majority on whether this court must defer to the determination of Western Area Power Administration (WAPA) that the approximately 155 Utah and Wyoming cities, counties, and towns represented by Utah Power and Light (UP & L) are not preferred entities under the Colorado River Storage Project Act (CRSP Act),
The Supreme Court in Chevron explained the approach federal courts must follow in construing statutory language:
When a court reviews an agency‘s construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency must give effect to the unambiguously expressed intent of Congress.
Id. at 842-43, 104 S.Ct. at 2781. Based on Chevron, a reviewing court defers to a reasonable agency interpretation only on issues Congress did not address--“gap[s] left, implicitly or explicitly, by Congress.” Id. at 843, 104 S.Ct. at 2781. As the Court pointed out, gaps may indicate Congress‘s implicit or explicit delegation of authority to the agency to regulate that specific issue. Id.
In a series of cases following Chevron, the Court has reiterated that deferential review does not replace the federal courts’ continuing duty to interpret statutes using the traditional tools of statutory construction. See Dole v. United Steelworkers, 494 U.S. 26, 110 S.Ct. 929, 934, 108 L.Ed.2d 23 (1990); NLRB v. United Food & Commercial Workers Union, 484 U.S. 112, 123, 108 S.Ct. 413, 420-21, 98 L.Ed.2d 429 (1987); see also INS v. Cardoza-Fonseca, 480 U.S. 421, 430-46, 107 S.Ct. 1207, 1212-21, 94 L.Ed.2d 434 (1987) (applying traditional tools of statutory construction to statutory requirements to determine whether two standards are identical). Deferential review is only appropriate when a court is unable to discern congressional intent. See Chevron, 467 U.S. at 842-43, 104 S.Ct. at 2781; National Grain & Feed Ass‘n v. OSHA, 866 F.2d 717, 733 (5th Cir. 1989). A court does not defer to an agency interpretation--even a longstanding interpretation--that is clearly at odds with the plain language of the statute. See Public Employees Retirement Sys. v. Betts, 492 U.S. 158, 109 S.Ct. 2854, 2863, 106 L.Ed.2d 134 (1989).
Section 9(c) of the Reclamation Act, incorporated into the CRSP Act, states that in “sales [of power] preference shall be given to municipalities.”
WAPA‘s position--that “municipalities” must mean “entities with utility responsibility” when read in the context of the legislative history and administrative interpretation--leaves me baffled. According to traditional rules of statutory construction, we look first to the statutory language and then, if necessary, to the legislative history and statutory construction by an administering agency. See Brock v. Writer‘s Guild, West, Inc., 762 F.2d 1349, 1353 (9th Cir. 1985); Baltimore Gas & Elec. Co. v. Heintz, 760 F.2d 1408, 1413 (4th Cir. 1985). It is settled law that when statutory language is unambiguous and free from irrational result, the plain language of the statute controls. See, e.g., Glenpool Util. Servs., 861 F.2d at 1214 (citing Edwards v. Valdes, 789 F.2d 1477, 1481 (10th Cir. 1986)).
WAPA‘s argument subverts these well-established rules by relying on an agency construction to introduce ambiguity into the statutory language. I agree with the district court that the legislative history of section 9(c) is not “particularly helpful or conclusive” regarding a municipality‘s utility responsibility. See Reclamation Project Act of 1939: Hearings on H.R. 6773 and H.R. 6984 Before the House Comm. on Irrigation and Reclamation, 76th Cong., 1st Sess. (1939). Further, I am convinced the reference to municipalities in the statute is unambiguous apart from the controversy created by the agency‘s extraneous requirement of utility responsibility. See Request of City of Needles for Reinstatement of Sales of Federal Power for Benefit of its Citizens, Department of Energy General Counsel Opinion (November 1978); see also Disposition of Surplus Power Generated at Clark Hill Reservoir Project, 41 Op. Att‘y Gen. 236 (1955). In my view, bootstrapping a regulation dealing with a statute to justify an agency construction of that statute is improper--especially when the compatibility of the regulation with legislative intent is at issue.
The majority assumes a principal distinction Congress may have intended to make in enacting section 9(c) was between municipalities purchasing power directly and those receiving it indirectly. This assumption is not supported by either the language of the statute or its legislative history. For purposes of interpreting the statute to ascertain Congress‘s intent, I can see no difference between the power request of a single municipality and the request of a group of municipalities represented by another entity that distributes power to them at cost. In my view, the congressional intent expressed in the plain language of section 9(c) is to provide preference to municipalities simply based on their status as political subdivisions, not on their capacity to distribute power.
In asking if Congress addressed the “precise issue” whether municipalities with utility responsibility and those without should receive equal treatment, the majority overlooks the real issue in this case: Whether section 9(c) requires WAPA to give preference to municipalities. On this question, the statute is clear--“preference shall be given to municipalities.”