Rhinelander Paper Co. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 11, 2005 Decided April 12, 2005

No. 04-1133

RHINELANDER PAPER COMPANY,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

STATE OF WISCONSIN,

INTERVENOR

On Petition for Review of Orders of the

Federal Energy Regulatory Commission

Elizabeth W. Whittle argued the cause for the petitioner.

Joel M. Cockrell, Attorney, Federal Energy Regulatory

Commission, argued the cause for the respondent. Cynthia A.

Marlette, General Counsel, and Robert H. Solomon, Deputy

Solicitor, Federal Energy Regulatory Commission, were on

brief. Dennis Lane, Solicitor, Federal Energy Regulatory

Commission, entered an appearance.

Peggy A. Lautenschlager, Attorney General, State of

Wisconsin, and Philip Peterson, Assistant Attorney General,

State of Wisconsin, were on brief for the intervenor.

2

Before: SENTELLE, HENDERSON and ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Rhinelander

Paper Company (Rhinelander) seeks review of orders of the

Federal Energy Regulatory Commission (FERC or Commission)

which renewed Rhinelander’s license to operate a hydroelectric

project pursuant to the Federal Power Act (FPA), 16 U.S.C. §§

791a et seq. Rhinelander challenges two provisions of the

license: one that retains the project’s historical property

boundary (rejecting, pending preparation of a land management

plan, Rhinelander’s proposal to remove a large portion of the

property from the project boundary) and a second provision that

requires Rhinelander to develop and implement a plan to

monitor invasive plant species at the project. For the following

reasons, we deny Rhinelander’s petition for review.

I.

On June 26, 1998 Rhinelander filed an application for a

license to continue operating its 2.12 megawatt hydroelectric

project on the Wisconsin River in Oneida County, Wisconsin,

which has been licensed to operate since 1938.1 In its

application Rhinelander sought to modify the project’s boundary

by removing from it some 2,478.5 acres, most of which is

privately owned, out of a total area of 2,771 acres (excluding the

reservoir), leaving approximately 292.5 acres within the project.

In November 1999 FERC opened the proceeding to comments,

motions to intervene, recommendations and terms and

conditions. The Department of the Interior, United States Fish

and Wildlife Service (FWS), intervened and submitted a letter

1

Since June 30, 2000, when its previous license expired,

Rhinelander has been operating the project under an annual license

pending disposition of its application.

3

dated January 3, 2000, which did not oppose approval of

Rhinelander’s application but offered two recommendations

relevant here.

First, the FWS opposed Rhinelander’s request that FERC

modify the project boundaries within the license terms.

Expressing concern that some of the land that Rhinelander

owned and proposed to remove might “have high wildlife and

recreational values,” 1/3/2000 Letter from FWS to FERC at 15

(JA 50), the FWS recommended maintaining the existing project

boundary “until, at least, the [Rhinelander-owned] land that is

proposed to be removed from the project boundary is clearly

identified so the FWS can make an informed decision.” Id. (JA

50). Accordingly, the FWS recommended that FERC require

Rhinelander to prepare, in consultation with the Wisconsin

Department of Natural Resources (DNR), a land management

plan for land owned by Rhinelander to “include wildlife

management, forest harvest compatible with wildlife

management, and protection of habitat for Federal and State-

listed threatened and endangered species.” Id. at 14 (JA 49).2

Second, the FWS proposed requiring Rhinelander to work

with the FWS and the DNR to monitor and control the spread at

the project of exotic invasive plant species such as purple

loosestrife (Lythrum salicaria) and Eurasian water-milfoil

(Myriophyllum spicatum). The FWS acknowledged there was

no evidence of the plants at the project at that time but noted

infestation might become a problem over the term of the license.

In March 2003 FERC staff issued a Final Environmental

Assessment (Final EA) of the license which addressed each of

the two issues raised by the FWS. First, the Final EA

recommended that FERC modify the project boundary as

2

The FWS did not object to removing privately held residential

property.

4

Rhinelander requested because the “2,478.5 acres of land that

would be excluded from the current boundary is primarily a

highly developed, privately-held residential area” which “would

not be necessary to maintain project operations” and “their

removal would neither diminish public access to the reservoir,

nor have an adverse impact on sensitive environmental

features.” Final EA at 90 (JA 235). Second, with regard to

exotic and invasive plants, FERC’s Final EA acknowledged

there was no apparent infestation at that time but “agree[d] with

the FWS recommendation to control the spread of purple

loosestrife and Eurasian watermilfoil.” Id. at 78 (JA 229).

Accordingly, the EA recommended that “Rhinelander, in

consultation with FWS and DNR, develop a plan for

Commission approval, to monitor purple loosestrife and

Eurasian milfoil in project waters and implement measure[s] to

control/eradicate these species, as appropriate,” id. (JA 229),

agreeing with Rhinelander that “any control measures

implemented by Rhinelander should be limited to its own

property.” Id. at 79 (JA 230).3

On August 20, 2003, FERC’s Director of the Office of Energy

Projects (Director) issued an order granting the license with the

two provisions based on the FSW recommendations.

Rhinelander Paper Co., 104 F.E.R.C. ¶ 62,134 (2004). First,

notwithstanding the Final EA’s contrary recommendation, the

Director rejected Rhinelander’s proposed boundary modification

because he “agree[d] with the FWS that the record in this

proceeding does not contain sufficient information on which [to]

make an informed decision with respect to Rhinelander’s

proposal to reduce the amount of land within the project

boundary.” 104 F.E.R.C. at 64,339 (¶ 22). The Director found

specifically that Rhinelander had “not demonstrated that the

3

According to FERC’s rehearing order, the Final EA estimated an

annual monitoring cost of $9,270. 106 F.E.R.C. at 61,557.

5

lands at issue are not needed for project purposes, such as for a

shoreline buffer zone, public recreational access, or the

preservation of habitat necessary for threatened or endangered

species.” Id. Nonetheless, the Director advised Rhinelander

that, after it filed and obtained Commission approval of a land

management plan pursuant to Article 410 of the license,4 it could

submit an application to amend the license to remove excess

property “accompanied by information adequate to address the

issues identified above.” Id. Second, the Director ordered

Rhinelander within one year to submit for FERC approval “an

exotic species control plan to monitor invasive species,” such as

purple loosestrife and Eurasian water-milfoil, at the project. 104

F.E.R.C. at 64,344 (art. 406). The plan is to include “(1) a

description of the monitoring method; (2) frequency of

monitoring; (3) documentation of providing [sic] the monitoring

results to the Wisconsin DNR and FWS; and (4) a description of

and implementation schedule for providing public information

about the species.” Id.

4

Article 410 directs that within one year of license issuance

Rhinelander submit a land management plan which

shall include, but not be limited to, the following: (1) establishment

of appropriate buffer zones; (2) a detailed map that clearly identifies

the Rhinelander Project boundary, Federal lands, lands designated

residential use, undesignated lands, areas of special concern, such

as an identified forested wetland; (3) describe the environmental and

recreational effects from removing the 28.5 acres of Federal land

from the project boundary; (4) describe the existing or future use of

all the proposed land to be removed from the project boundary; (5)

describe the timber management practices to benefit wildlife and

protect other important resources; (6) identify designated public

access for recreational use of project lands, except in areas where

restricted access is necessary; and (7) an implementation schedule.

104 F.E.R.C. at 64,346.

6

Rhinelander requested rehearing on the two contested issues,

which FERC denied in a February 18, 2004 order.5 106

F.E.R.C. ¶ 61,164 (2004). On the request to modify the

project’s boundaries, FERC first determined there is no need “to

retain in the project boundary any of the lands at issue for

purposes of public recreational facilities and access.” 106

F.E.R.C. at 61,556 (¶ 17). FERC nonetheless decided to “affirm

the Director’s conclusion (the EA’s recommendation

notwithstanding) that Rhinelander’s proposal for land removal

must await further information and analysis, forthcoming in the

Land Management Plan . . . for purposes of establishing an

appropriate buffer zone around the reservoir, understanding

exactly where residential development has occurred vis-à-vis the

reservoir shoreline, and determining where to draw a new

project boundary to best serve the public interest considerations

described above.” Id. (¶ 18). FERC also upheld the plant

monitoring requirement as an appropriate condition pursuant to

section 10(j)(1) of the FPA, which requires FERC “to include in

each hydroelectric license conditions ‘to adequately and

equitably protect, mitigate damages to, and enhance, fish and

wildlife (including related spawning grounds and habitat),’

based on recommendations from federal and state resource

agencies.” 106 F.E.R.C. at 61,557 (¶ 22) (quoting 16 U.S.C. §

803(j)(1)).

Rhinelander filed a timely petition for review on April 16,

2004.

II.

“We review a Commission licensing decision under the FPA

to determine whether it was ‘arbitrary and capricious.’ ”

5

Rhinelander also sought rehearing of the Director’s decision to

grant a 30-year rather than a 40-year license. FERC granted rehearing

on this issue and amended Rhinelander’s license accordingly.

7

Alabama Rivers Alliance v. FERC, 325 F.3d 290, 296 (D.C. Cir.

2003) (citing North Carolina v. FERC, 112 F.3d 1175, 1189

(D.C. Cir. 1997), cert. denied, 522 U.S. 1108 (1998); Bangor

Hydro-Elec. Co. v. FERC, 78 F.3d 659, 663 & n.3 (D.C. Cir.

1996)). We examine each license provision separately.

A.

We first consider FERC’s decision to retain the existing

project boundary in the new license. Under FERC’s regulations,

a project boundary “must enclose only those lands necessary for

operation and maintenance of the project and for other project

purposes, such as recreation, shoreline control, or protection of

environmental resources.” 18 C.F.R. § 4.41(h)(2). Rhinelander

contends that the lands proposed to be removed are not

“necessary” for operation of the hydroelectric project and that

FERC was therefore required under its own regulation to

remove the lands from the project boundary. We disagree.

FERC grounded its decision on section 10(a)(1) of the FPA,

which directs:

That the project adopted, including the maps, plans, and

specifications, shall be such as in the judgment of the

Commission will be best adapted to a comprehensive plan for

improving or developing a waterway or waterways for the use

or benefit of interstate or foreign commerce, for the

improvement and utilization of water-power development, for

the adequate protection, mitigation, and enhancement of fish

and wildlife (including related spawning grounds and habitat),

and for other beneficial public uses, including irrigation, flood

control, water supply, and recreational and other purposes

[authorized under 16 U.S.C.] section 797(e) of this title[;] if

necessary in order to secure such plan the Commission shall

have authority to require the modification of any project and

of the plans and specifications of the project works before

approval.

8

16 U.S.C. § 803(a)(1). FERC has construed this section to

impose on both the Commission and the licensee “statutory

obligations to protect project shoreline and aquatic resources”

which require that the project boundary encompass a “buffer

zone area” adequate to protect the surrounding environment.

See Georgia Power Co., 76 F.E.R.C. ¶ 61,281, at 62,438 (1996).

In this proceeding, the Commission concluded it had insufficient

evidence to determine whether such buffers are needed around

the reservoir and where residential development is located in

relation to the reservoir. Rhinelander contends it submitted

adequate information, pointing to an aerial map, appended to its

application, and a later supplement submitted in response to

FERC staff inquiries. FERC reasonably found these filings

deficient.

The map Rhinelander filed with its 1998 license application,

pursuant to 18 C.F.R. § 4.41(h), simply identifies (by number)

the parcels making up the project property and, in the case of

property owned by Rhinelander, identifies the particular public

record(s) recording the conveyance of each to Rhinelander. It

provides no other specific information about any of the parcels.

Nor does the supplement, filed September 8, 2001, do much to

fill in the gaps. It reveals little about the types or uses of the

land to be removed—only that the “majority” is “in private

ownership,” 8/7/2001 Letter from Douglas Spaulding to

Rhinelander at 2 (JA 95) (filed 9/6/2001). Further, it provides

only estimates of the amount of land in residential use and

identifies the “undeveloped” land as “scattered in small areas

throughout the area encompassed by the current project

boundary.”6 Id. Given the generality of the information

6

With the supplement, Rhinelander submitted a topographical map,

prepared by the United States Department of the Interior,

Geographical Survey, on which the responses in the supplement were

based. The map is no more informative than the supplement itself.

9

provided, FERC did not act arbitrarily or capriciously in

requiring additional data about the specific location of the types

of land to be removed—and, in particular, the relationship of the

land to the shoreline—to enable the Commission to make an

informed determination of which land to remove from the

project boundary. 7 Accordingly, we uphold FERC’s decision to

require Rhinelander to submit a land management plan sufficient

to resolve FERC’s concerns before modifying the project

boundary.

B.

Next, Rhinelander challenges FERC’s requirement in Article

406 of the license that Rhinelander develop and implement an

exotic species control plan. Rhinelander contends that the

requirement is beyond the Commission’s authority under section

10(j)(1) of the FPA, which the Commission invoked to impose

it. Section 10(j)(1) of the FPA directs in relevant part:

That in order to adequately and equitably protect, mitigate

damages to, and enhance, fish and wildlife (including related

spawning grounds and habitat) affected by the development,

operation, and management of the project, each license issued

under this subchapter shall include conditions for such

protection, mitigation, and enhancement.

16 U.S.C. § 803(j)(1). Rhinelander contends that the spread of

the two plant species is not caused by any activity related to

operating a hydroelectric dam and that “the noxious weeds are

therefore not an affect of the generation of hydroelectric

7

Rhinelander claims it has been treated differently from other

licensees that were permitted to remove land from their projects,

citing So. Calif. Edison Co., 107 F.E.R.C. ¶ 61,067 (2004). But the

facts of that case were quite different. The property removed

consisted of a switchyard and two transmission lines which, unlike the

parcels here, were specifically identified and well-defined facilities.

10

energy,” Rhinelander Br. at 18 (emphasis original), so as to

bring them within the ambit of the quoted statutory language.

As a consequence, Rhinelander maintains, FERC has authority

to impose the monitoring condition not under section 10(j)(1)

but only as part of a “comprehensive plan” under section

10(a)(1). We believe that FERC reasonably construed section

10(j)(1) to authorize the requirement in Article 406.

We review an agency’s interpretation of a statute it is

authorized to administer under the familiar two-step Chevron

framework:

“We first ask ‘whether Congress has directly spoken to the

precise question at issue,’ in which case we ‘must give effect

to the unambiguously expressed intent of Congress.’ If the

‘statute is silent or ambiguous with respect to the specific

issue,’ however, we move to the second step and defer to the

agency's interpretation as long as it is ‘based on a permissible

construction of the statute.’ ”

Noramco of Del., Inc. v. DEA, 375 F.3d 1148, 1152 -1153 (D.C.

Cir. 2004) (quoting Bluewater Network v. EPA, 372 F.3d 404,

410 (D.C. Cir. 2004) (quoting Chevron U.S.A. Inc. v. Natural

Res. Def. Council, 467 U.S. 837, 842-43 (1984))). We conclude

that FERC’s reliance on section 10(j)(1) reflects, at least, a

permissible reading of the statutory language—and, in

particular, of the phrase “affected by”—and should therefore be

sustained under the second step of the Chevron inquiry.

The verb “affect” means, very broadly, “to produce an effect

on; to influence in some way.” Black’s Law Dictionary 92 (8th

ed. 2004); see also Webster’s Third New Int’l Dictionary 35

(1993) (“affect” means “to produce an effect (as of disease)

upon”); United States v. Wiant, 314 F.3d 826, 830 (6th Cir.

2003) ( “ ‘To affect’ means ‘to act upon; influence; change;

enlarge or abridge; often used in the sense of acting injuriously

upon persons or things.’ Black's Law Dictionary 57 (6th

ed.1990). Nowhere does the term imply any de minimis

11

limitation; . . . .”). There can be little doubt, as Rhinelander’s

counsel acknowledged at oral argument, that a hydroelectric

project such as Rhinelander’s, which traps water to turn turbines

before discharging it back into the river, “affects” the river’s

waters and the fish and wildlife within them. Cf. Mine

Reclamation Corp. v. FERC, 30 F.3d 1519, 1525 (D.C. Cir.

1994) (noting that “conventional hydroelectric project” has

“significant continuing effect upon any stream or waterway” so

that water source is “affected” by project within meaning of

FERC regulation). Rhinelander further acknowledged that the

invasive species may spread when their seeds “flow down the

river” and “may arrive in an area as a hitchhiker on construction

equipment, boats[,] vehicles or the shoes of recreational

visitors.” Rhinelander Br. at 17. Thus, the activities of its

project may increase the spread of these noxious weeds and it is

undisputed that, as they spread, purple loosestrife “can out-

compete valuable native wetland plants” and Eurasian

watermilfoil “can cause aquatic weed problems and alter fish

communities by providing too much refuge for prey species.”

106 F.E.R.C. at 61,557 (citing 1/3/2000 Letter from FWS to

FERC at 12-13 (JA 47-48)). Accordingly, we conclude FERC

has authority to require the plant control plan pursuant to the

directive in section 10(j)(1) “to equitably protect, mitigate

damages to, and enhance, fish and wildlife” which are “affected

by” Rhinelander’s “development, operation, and management of

the project.”

Rhinelander nonetheless contends FERC is foreclosed from

imposing the requirements of Article 406 by its decisions in two

other cases, in which the Commission “found that the agency-

proposed monitoring and eradication recommendations were not

proper.” Rhinelander Br. at 18. We believe Rhinelander reads

too much into the decisions it cites.

In Weyerhauser Co., 76 F.E.R.C. ¶ 61,057 (1996), FERC

summarily rejected 12 recommendations of the FWS and the

Wisconsin DNR, including “cooperating with the agencies on

12

control of purple loosestrife,” as “outside of the scope of section

10(j) of the FPA, in that they involve studies that could have

been performed prior to licensing, or do not otherwise qualify as

measures to protect, mitigate damages to, or enhance fish and

wildlife.” 76 F.E.R.C. at 61,342-43 (emphasis added).8 One

year later, in Northern States Power Co. of Wis., 78 F.E.R.C. ¶

62,087 (1997), FERC clarified its position, indicating that it is

the implementation of control measures—rather than simple

monitoring—that may fall outside the Commission’s authority

under section 10(j)(1). In Northern States, the Commission

rejected as “premature” the recommendation of the FWS and the

Wisconsin DNR that the licensee be required under section

10(j)(1) to cooperate with the agencies “in implementing a plan

to control the spread of purple loosestrife” when “there is not

substantial evidence that such a plan is needed.” 78 F.E.R.C. at

64,247-48 (1997). FERC concluded then that section 10(j)(1)

authorized it at that stage simply to require that the licensee

“monitor the project impoundment for the presence of purple

loosestrife,” deferring actual control measures until the weeds

became an actual problem. See 78 F.E.R.C. at 6,4256 (art. 408)

(“If at any time during the term of the license, the Wisconsin

DNR or FWS deem it necessary to control/eliminate purple

loosestrife, the licensee shall cooperate in this measure.”). This

is precisely what FERC did here when it required Rhinelander

to submit within one year “an exotic species control plan to

monitor invasive species”—with the caveat that if, during the

license term, purple loosestrife or Eurasian water-milfoil should

become a problem requiring control measures, at that time the

Commission “may require the licensee to cooperate with the

Wisconsin DNR and FWS to undertake reasonable measures to

control or eliminate the invasive species in project area.” 104

F.E.R.C. at 64,344 (art. 406). Because FERC imposed only a

8

FERC nonetheless imposed the control requirement under section

10(a)(1) because of its “beneficial effects.”

13

monitoring requirement at this time, we see no inconsistency

among its decisions.

For the foregoing reasons, the petition for review is denied.

So ordered.