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Green Island Power Authority v. Federal Energy Regulatory Commission

August 10, 2009

GREEN ISLAND POWER AUTHORITY, ADIRONDACK HYDRO DEVELOPMENT CORPORATION, PETITIONERS,
v.
FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT,
ERIE BOULEVARD HYDRO POWER, L.P., INTERVENOR.



SYLLABUS BY THE COURT

Petition for review of several orders and notices issued by the Federal Energy Regulatory Commission during the proceedings to relicense the School Street Hydroelectric Project. Adirondack Hydro Development Corporation's petitions are denied on the ground that it lacks standing to challenge any of the orders or notices issued in the administrative proceedings. We grant Green Island Power Authority's petition for review of the order denying its motion to intervene, vacate the license order, and remand the case for further proceedings consistent with this opinion.

The opinion of the court was delivered by: Katzmann, Circuit Judge

Argued: December 19, 2008

Before: SACK and KATZMANN, Circuit Judges.*fn1

This case arises out of proceedings before the Federal Energy Regulatory Commission ("FERC") to relicense the School Street Hydroelectric Project. It calls upon us principally to consider the validity of the order denying Green Island Power Authority's ("Green Island") motion to intervene, and the order granting a new license to Erie Boulevard Hydropower, L.P. ("Erie") to operate the School Street Hydroelectric Project for a term of forty years. For the reasons stated below, we find that Adirondack Hydro Development Corporation ("Adirondack") lacks standing to challenge any of the orders issued during the administrative proceedings. We further find that FERC acted arbitrarily and capriciously when it denied Green Island's motion to intervene in the relicensing proceedings. Because we cannot conclude that this error was not prejudicial, we vacate the license order and remand the case for further proceedings consistent with this opinion.

BACKGROUND

The School Street Hydroelectric Project ("School Street Project" or "School Street") is located on the Mohawk River in Albany and Saratoga Counties in New York State. It diverts water from the river at a dam located nearly 4000 feet upstream from Cohoes Falls, New York's second largest waterfall. The water runs through a power canal that is 4400 feet long and 150 feet wide and ultimately flows into a powerhouse containing five generating units with a total installed electrical capacity of 38.8 megawatts ("MW"). The water flows through the powerhouse and is returned to the Mohawk River downstream from Cohoes Falls. In total, water diverted from the river by the School Street Project bypasses approximately 4500 feet of the riverbed, including the waterfall.

The School Street Project dam was constructed in 1831, and the facility began to be utilized to generate electrical power in 1916. Niagara Mohawk Power Corporation ("Niagara Mohawk") filed an application for an original license to operate the School Street Project on August 20, 1965.*fn2 The Federal Power Commission*fn3 issued such a license to Niagara Mohawk on June 11, 1969, for a term to run from April 1, 1962 to December 31, 1993. See Niagara Mohawk Power Corp., 41 F.P.C. 772, 773 (1969).

Niagara Mohawk held the license and operated the School Street Project for that entire term. Two years prior to the end of the term, on December 23, 1991, Niagara Mohawk filed an application for a new license for the School Street Project, pursuant to § 15(c)(1) of the Federal Power Act ("FPA"). See 16 U.S.C. § 808(c)(1) ("Each application for a new license pursuant to this section shall be filed with the Commission at least 24 months before the expiration of the term of the existing license."). That application proposed to add a 21-MW capacity generator to the School Street Project, which would have increased its total electrical generating capacity to approximately sixty megawatts. In addition, the application proposed recreational, fisheries, historic preservation, and water quality enhancements.

Niagara Mohawk was the only entity to submit an application for the School Street Project by the statutory deadline of December 31, 1991. In response, FERC issued public notice describing in broad terms the proposal contained within that application and setting a deadline of April 12, 1993, for the filing of comments, protests, and motions to intervene. Timely motions to intervene were filed by American Whitewater Affiliation, American Rivers, Inc., New York Rivers United, the Natural Heritage Institute, the National Audubon Society, R. Pisani and W. Corrigan, the United States Department of the Interior, and Adirondack Mountain Club.

As part of the relicensing process, Niagara Mohawk was required to request a certification from the New York State Department of Environmental Conservation ("NYS DEC") that the discharge from the School Street Project into the Mohawk River would comply with applicable provisions of the Clean Water Act. See 33 U.S.C. § 1341(a)(1). Indeed, FERC was prohibited from granting a license until this certification had been provided, unless NYS DEC waived the requirement, which it could do by failing or refusing to act on Niagara Mohawk's certification request within "a reasonable period of time (which shall not exceed one year) after receipt of such request." Id. Niagara Mohawk requested this certification for the School Street Project, which NYS DEC denied in November 1992 without prejudice to renewal. Niagara Mohawk appealed that decision, and it and NYS DEC entered into settlement negotiations regarding the certification and licensing of School Street and nine other hydroelectric projects operated by Niagara Mohawk. Those negotiations continued into 2005; during that time period, FERC issued annual licenses, pursuant to 16 U.S.C. § 808(a)(1), that allowed Niagara Mohawk to continue to operate the School Street Project. See Table of Notices of Authorization for Continued Project Operations, 66 F.E.R.C. ¶ 61,145, 61,279 (1994).

While the negotiations between Niagara Mohawk and NYS DEC were on-going, FERC continued to analyze the School Street license application. In November 1995, FERC issued public notice that the School Street Project was ready for an environmental analysis. It stated that Niagara Mohawk intended to add an additional generator to increase School Street's installed capacity to approximately sixty megawatts, which would require an expansion of the existing powerhouse and excavation of the power canal. The notice solicited comments, reply comments, recommendations, terms and conditions, and prescriptions. See Notice of Application Ready for Environmental Analysis (Nov. 16, 1995).

Niagara Mohawk responded to this notice by informing FERC that it no longer viewed the installation of the proposed 21-MW generator as economically feasible, and it advised FERC that its environmental analysis should consider, as an alternative, relicensing School Street without that additional generating capacity. See Letter from Jerry L. Sabattis, Niagara Mohawk Hydro Licensing Coordinator, to John H. Clements, Director, FERC Office of Hydropower Licensing (Dec. 13, 1995), at 2 (stating that Niagara Mohawk "no longer intend[ed] to install" the generator). Notwithstanding Niagara Mohawk's view that the removal of the proposed generator would "materially affect[] Niagara Mohawk's fish protection/enhancement plan proposal," id.,FERC did not issue any public notice of this change. Instead, it issued a draft environmental assessment of the School Street Project in November 1996 that analyzed the license application both with and without the 21-MW generator, concluding that it "d[id] not recommend [Niagara Mohawk's] proposed new [generator] and related improvements to the power canal." See Draft Environmental Assessment for Hydropower License (Nov. 1996), at 53. FERC issued public notice announcing the availability of the draft environmental assessment and seeking comments on it. See Notice of Availability of Draft Environmental Assessment, 61 Fed. Reg. 60,277 (Nov. 20, 1996).

One of the parties that filed comments was the NYSD Limited Partnership, the owner of the New York State Dam Hydroelectric Project, which was located on the Mohawk River approximately one mile downstream from the School Street Project. In addition, Adirondack, the managing general partner of the NYSD Limited Partnership, filed a motion to intervene out-of-time in the School Street relicensing proceedings on March 26, 1997; it asserted that its interest in the proceedings derived from its ownership interest in the New York State Dam, which could be adversely impacted by FERC's licensing order given (1) its location relative to School Street and (2) the fact that the School Street Project impacted downstream flows on the Mohawk River. FERC granted Adirondack's motion to intervene on August 19, 1997.

Following Adirondack's intervention, time passed without much action in the relicensing proceedings. In February 1999, Niagara Mohawk and Erie submitted a joint application seeking approval of, inter alia, (1) the transfer of School Street's license from Niagara Mohawk to Erie, and (2) substitution of Erie in place of Niagara Mohawk as the applicant on the pending School Street license application. FERC issued public notice of this application and set a deadline of June 9, 1999, for filing comments and motions to intervene. See Notice of Transfer of Licenses and Soliciting Comments, Motions to Intervene, and Protests (May 5, 1999). FERC subsequently granted the application, the School Street license was transferred to Erie, and Erie was substituted on the pending license application. See Order Approving Transfers of Licenses, Partial Transfer of License, and Substitution of Applicants, 88 F.E.R.C. ¶ 62,082, 64,159 (1999).

The proceedings then sat idle again for almost two years until May 2001, at which time Erie sent a letter notifying FERC that Erie had reviewed the pending license application in light of the then-current market conditions and concluded that "the addition of a new [generator] would now appear to be economically feasible." Letter from William J. Madden, Jr., Attorney for Erie Boulevard Hydropower, L.P., to David P. Boergers, Secretary, Fed. Energy Regulatory Comm'n (May 30, 2001), at 1. Erie therefore requested that FERC "evaluate the merits of the new license proposal as originally filed." Id. FERC did not issue public notice of Erie's change in position, nor did it seek motions to intervene.

Instead, FERC completed its final environmental assessment ("FEA") of the School Street license application and issued public notice of its availability on September 28, 2001, setting a comment deadline for forty-five days later. See Notice of Availability of Final Environmental Assessment (Sept. 28, 2001).In the FEA, FERC compared the School Street Project as proposed in the original license application (with the 21-MW generator) with possible alternatives, including (1) a proposal containing changes recommended by FERC's staff and (2) relicensing the School Street Project without any changes. Moreover, FERC considered, but dismissed, the options of granting a "nonpower license"*fn4 or retiring School Street altogether, because those options were "not reasonable in the circumstances of this case." Final Environmental Assessment (Sept. 2001), at 12-13.

With respect to the proposed addition of the 21-MW generator, FERC concluded that "[w]hile [Erie's] motivation for the proposal to construct the new unit which would produce incremental power at cost more than one-hundred-fifty percent more than its current value in the market is unclear, it should be given the opportunity to pursue the project expansion, since the additional unit would have no significant detrimental environmental impacts and would produce more power from a renewable resource." Id. at 72.

In July 2004, Green Island filed an application (along with supporting comments) for a preliminary permit to study the potential development of the Cohoes Falls Project, a proposed 100-MW capacity hydroelectric project to be located on the Mohawk River just downstream from the School Street Project. See Green Island Power Auth., 110 F.E.R.C. ¶ 61,034, 61,108--09 (2005). It followed this up on September 7, 2004, with a motion to intervene in the School Street relicensing proceedings, stating that it first developed an interest in the proceedings in 2001 when it assisted the City of Cohoes in an effort to secure the School Street site from Erie. It did not seek to intervene until 2004, however, because it was not until that time that Green Island had developed what it considered to be a better proposal for this stretch of the Mohawk River. Green Island moved to intervene because it recognized that the Cohoes Falls Project could be developed only if the School Street Project dam were removed and the powerhouse decommissioned.

FERC denied Green Island's application for a preliminary permit, finding that because the School Street and Cohoes Falls Projects could not co-exist, "any development application for the Cohoes Falls Project would be a relicense application filed in competition with the School Street application." Green Island Power Auth., 110 F.E.R.C. ¶ 61,034, at 61,110. FERC considered such an application barred by § 15(c)(1) of the FPA, because the "deadline for filing relicense applications for the Cohoes Falls project fell in 1991, two years before the School Street license expired. Thus, any development application [Green Island] might file would be more than 13 years late." Id. FERC found also that its own regulations barred acceptance of the preliminary permit application. Id. at 61,111. It did not act on Green Island's motion to intervene at this time.*fn5

In March 2005, Erie filed an offer of settlement (the "Offer of Settlement") with FERC pursuant to Rule 602 of FERC's regulations. See 18 C.F.R. § 385.602. The Offer of Settlement, which was signed by Erie, the United States Fish and Wildlife Service, the National Park Service, NYS DEC, New York Power Authority, New York Rivers, New York State Conservation Council, and Rensselaer County Conservation Alliance, proposed, inter alia, that Erie would: (1) operate the School Street Project in run-of-river mode; (2) ensure certain minimum flows of water to the bypassed stretch of the Mohawk River, including a 500 cubic feet per second aesthetic flow over Cohoes Falls during daylight hours on weekends and federal holidays from May 15 to October 31; (3) install certain fish protection mechanisms; and (4) consider installing a new turbine-generator unit and powerhouse addition that would increase the electrical generating capacity of School Street by approximately eleven megawatts. With respect to the proposed 11-MW generator, which would replace the proposed 21-MW generator in the license application, the Offer of Settlement provided that "within five years of license issuance, Erie Boulevard could install and operate a new 'fish-friendly' turbine generator unit in a new powerhouse or powerhouse addition . . . ." Order on Offer of Settlement and Issuing New License, 118 F.E.R.C. ¶ 61,101, 61,514 (2007). As part of the Offer of Settlement, NYS DEC issued a draft water quality certificate in accordance with § 401 of the Clean Water Act.

FERC issued public notice of the Offer of Settlement on March 24, 2005, and, pursuant to 18 C.F.R. § 385.602(f)(2), noted that the deadline for filing comments was twenty days from that date. See Notice of Settlement Agreement Accepted for Filing and Soliciting Comments (Mar. 24, 2005). Green Island filed extensive comments in opposition. It also renewed its motion to intervene, which had been pending since the middle of 2004, asserting that FERC should have solicited interventions because the Offer of Settlement constituted a material amendment to the School Street license application.

Furthermore, on May 15, 2006, Green Island, Adirondack, and amici curiae Capital District Regional Planning Commission, New York Association of Public Power, and Friends of the Falls submitted what they labeled an "Alternative Offer of Settlement" for FERC's consideration. The Alternative Offer of Settlement proposed to resolve the School Street relicensing proceedings by permitting Erie to choose between two options: (1) the immediate termination of Erie's license; or (2) the issuance of a conditional license to Erie. Once Erie had selected one of the proposed options, Green Island planned to submit an application to license the Cohoes Falls Project; that application was attached to the Alternative Offer of Settlement. Green Island, however, recognized that FERC was statutorily barred from considering the application as a competing license application for the School Street site. Consequently, it included the application with the Alternative Offer of Settlement "for informational purposes only," arguing that FERC could consider the information contained in the application when deciding whether to grant a license to the School Street Project.

On that same day, the New York Association of Public Power, the Friends of the Falls, and the Capital District Regional Planning Commission all filed (1) motions to intervene out-of- time in the School Street relicensing proceedings and (2) comments in support of the Alternative Offer of Settlement. The New York Bicycling Coalition, the City of Watervliet, the Town of Green Island, the Village of Green Island, the Preservation League of New York State, and the Public Utility Law Project of New York, Inc. all filed similar motions and comments on June 2. Additionally, the Town and Village of Green Island, the New York Bicycling Coalition, the Preservation League of New York State, the City of Watervliet, and the Alliance for Economic Renewal signed on to the Alternative Offer of Settlement.*fn6

FERC rejected the Alternative Offer of Settlement and the attached proposed license application as simply "another attempt to place Green Island's untimely competitive proposal before the Commission." Notice Rejecting Pleading (May 24, 2006). In response, Green Island and Adirondack filed a "Joint Motion to Present Evidence or, in the Alternative, Offer of Proof" (the "Joint Motion to Present Evidence") on June 5, 2006, in which they explained that the Alternative Offer of Settlement was not a competing license application but rather was submitted to provide helpful evidence to demonstrate that Erie's license application and Offer of Settlement were not best adapted to a comprehensive plan for the Mohawk River.

FERC rejected this motion as well, again on the ground that the filing was an "attempt to place Green Island's untimely competitive proposal before the Commission." Notice Rejecting Motion (June 28, 2006).On that same day, FERC also denied Green Island's motion to intervene out-of-time. See Notice Denying Late Intervention (June 28, 2006). In doing so, FERC noted that Green Island had developed an interest in the proceedings in 2001 but had impermissibly "[sat] on its rights" for three years before filing its motion to intervene in 2004. Id. at 1. Further, FERC concluded that Green Island's "primary interest" in the proceedings, i.e., "having its proposed Cohoes Falls Project considered as an alternative to the School Street Project," was not a sufficient reason for FERC to grant intervenor status, because FERC was statutorily barred from considering untimely license applications. Id. at 2.

In addition, FERC denied the motions to intervene filed by all of the other parties that had expressed support for the Cohoes Falls Project proposal, because (1) no party had shown good cause as to why it had waited so long to seek leave to intervene, and (2) each party's primary interest -- supporting the Cohoes Falls Project as an alternative to the School Street Project -- was insufficient to warrant intervenor status at that stage of the proceedings.*fn7

Green Island and Adirondack requested rehearing of FERC's orders denying the Alternative Offer of Settlement and the Joint Motion to Present Evidence, and Green Island and all of the other parties that had sought to intervene out-of-time requested rehearing of FERC's denial of those motions. FERC denied all of these requests. See Order Denying Rehearing, 117 F.E.R.C. ΒΆ 61,189 (2006) (the "November 16 Order Denying Rehearing"). At the outset of this order, FERC reiterated its view that Green Island could not file an application for the Cohoes Falls Project proposal "because that project would compete with School Street and a license application for Cohoes Falls was not filed within the statutory window for competition in the School Street proceeding." Id. at 61,931. Furthermore, FERC stated that it "look[ed] with ...


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