Keating v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 14, 2009 Decided June 19, 2009

No. 08-1005

JOSEPH M. KEATING,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

On Petition for Review of Orders

of the Federal Energy Regulatory Commission

Joshua P. Thompson argued the cause for petitioner. With

him on the briefs were James S. Burling and Damien M. Schiff.

Robert M. Kennedy Jr., Attorney, Federal Energy

Regulatory Commission, argued the cause for respondent. On

the brief were Cynthia A. Marlette, General Counsel, Robert H.

Solomon, Solicitor, and Holly E. Cafer, Attorney.

Before: SENTELLE, Chief Judge, ROGERS and BROWN,

Circuit Judges.

Opinion for the Court filed by Chief Judge SENTELLE.

2

SENTELLE, Chief Judge: The Federal Energy Regulatory

Commission granted Joseph Keating a license to build a

hydroelectric power plant in 1992. At Keating’s request, the

Commission stayed the four-year statutory deadline for

commencing construction on the project to allow Keating to

obtain the necessary water rights. Over fifteen years after the

license issued, the Commission lifted the stay and Keating’s

license expired. Keating now petitions for review of the

Commission’s decision to lift the stay, arguing that the record

does not support the decision and that his reliance on the stay

should estop the Commission from lifting it. We deny the

petition because Keating was not entitled to an indefinite

extension of the stay and the Commission’s findings concerning

the remaining hurdles to commencing construction were

sufficient to support the denial of a further stay.

I

In July 1992, the Commission issued Keating a license to

develop his proposed “Tungstar Project,” a hydroelectric power

plant in the Inyo National Forest in California. Joseph M.

Keating, Order Issuing License, 60 F.E.R.C. ¶ 61,016 (July 2,

1992). Under the proposed project, a dam would divert water

flowing from Morgan Creek and a nearby tungsten mine’s water

treatment facility through a 3,500-foot-long penstock to one 990

kilowatt turbine generator. Id. at 61,061. After exiting the

powerhouse tailrace, the water would “enter a 4,000-foot-long,

man-made, meandering channel where suspended mine water

flocculants w[ould] settle out” before the water would enter Pine

Creek below its confluence with Morgan Creek. Id.

Under Section 4(e) of the Federal Power Act (FPA), 16

U.S.C. § 797(e), the United States Forest Service may impose

conditions on the grant of a license on land within its

jurisdiction. The Forest Service required Keating to obtain a

3

special use permit from the Service before starting construction,

which he did in November 1995. That permit in turn required

Keating to obtain the necessary water rights before beginning

construction.

Section 13 of the FPA, 16 U.S.C. § 806, requires a licensee

to commence construction of a newly licensed hydroelectric

facility within two years of license issuance but allows the

Commission to extend the deadline once for a maximum of two

additional years. If the licensee does not commence

construction within the statutory time frame, then “the license

shall . . . be terminated” by the Commission after notice to the

licensee. Id.; see 18 C.F.R. § 6.3 (requiring 90 days’ notice to

the licensee before termination). Nevertheless, the Commission

has stayed the commencement-of-construction deadline beyond

the statutory four-year period when a licensee was required to

await “necessary actions of other federal or state agencies,” such

as approval of plans, before commencing construction. Boise-

Kuna Irrigation Dist., 111 F.E.R.C. ¶ 61,271, 62,216 (2005);

see, e.g., R.L. Garry Corp., 51 F.E.R.C. ¶ 61,115, 61,310 (1990);

cf. Kings River Conservation Dist., 30 F.E.R.C. ¶ 61,151, 61,320

(1985) (describing the Commission’s authority to issue stays as

deriving from Section 309 of the FPA, 16 U.S.C. § 825h, and

Section 705 of the Administrative Procedure Act, 5 U.S.C.

§ 705). The Commission stays the deadline only in these and

similar “narrowly circumscribed circumstances”; it will not

grant a stay “merely to relieve the licensee from the statutorily

prescribed commencement of construction deadline.” Ronald E.

Rulofson, 62 F.E.R.C. ¶ 61,268, 62,780 (1993); accord Elec.

Plant Bd. of the City of Augusta, Ky., 112 F.E.R.C. ¶ 61,342,

62,504 (2005).

Keating requested, and the Commission granted, an

extension of the commencement-of-construction deadline for

two additional years as permitted under Section 13. See Joseph

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M. Keating, Order Granting Stay Request in Part and Setting

Deadline for Required Filings, 77 F.E.R.C. ¶ 61,060, 61,224 n.4

(October 21, 1996) (noting that the Commission granted the

extension in an unreported order issued April 12, 1994). On his

last day to commence construction under the four-year deadline,

Keating asked the Commission to stay the deadline while he

sought the necessary water rights. The Commission granted a

stay of the commencement-of-construction deadline and ordered

Keating to file annual reports on the status of his efforts to

obtain water rights and satisfy the requirements of his Forest

Service permit. Id. at 61,225-26. The Commission did not,

however, stay the other requirements of Keating’s license and

advised Keating that within six months of the stay order he must

file a license amendment application (necessitated by his

proposed project redesigns) and eleven outstanding pre-

construction plans, addressing topics such as erosion control and

wildlife mitigation, some of which needed Forest Service

approval in addition to Commission approval. Id.

Seeking the water rights necessary to develop his project

and satisfy his Forest Service permit, Keating first argued to the

Forest Service that he already had riparian rights to use the

water. The Forest Service disagreed and directed Keating to

pursue appropriative water rights from the state or a special use

permit for use of federal riparian rights. Id. at 61,224 n.5.

Keating instead litigated against the Forest Service from 1997

through 1999 in an attempt to confirm the adequacy of his

riparian rights. Ultimately, the district court dismissed his suit,

holding the Forest Service entitled to sovereign immunity, and

the Ninth Circuit affirmed. See Keating v. U.S. Dep’t of Agric.,

178 F.3d 1300, 1999 WL 311353 (9th Cir. 1999) (unpub.).

In 2001, Keating began seeking appropriative water rights

by filing an application with the California State Water

Resources Control Board (Water Board). His application

5

elicited protests from twelve entities; all but one—Pine Creek

Mine—were eventually dismissed. Pine Creek Mine owned the

mine that discharged some of the water Keating’s Tungstar

Project proposed to use and also held its own FERC permit for

a proposed hydroelectric project. Of concern to the Water

Board was the fact that Pine Creek Mine owned the property

encompassing the proposed diversion point for Keating’s

project. In accordance with state regulations, the Water Board

required Keating to demonstrate his ability to secure the

necessary right of access over the land before it would approve

his application. See Cal. Admin. Code tit. 23, § 775 (“When the

owner will not consent, the board may require satisfactory

evidence of the applicant’s ability through condemnation

proceedings or otherwise to secure the necessary right of access

before the application will be approved.”). Keating argued that,

as a FERC licensee, the FPA gave him authority to condemn the

land and claim the diversion point property. See 16 U.S.C.

§ 814. However, because Keating had not attempted to acquire

the necessary property rights, the Water Board advised Keating

that it would not move forward with his application until he

provided information demonstrating that he had the ability to

acquire the property and was actively pursuing obtaining it.

Although Keating engaged in unsurprisingly unfruitful

negotiations with Pine Creek Mine, he has not taken any steps

to acquire access to the diversion point property through

condemnation.

During this time, Keating sought numerous extensions of

the six-month deadline for filing the required pre-construction

plans and license amendment application, which extensions the

Commission continued to grant from 1997 through 2003. In

August 2003, the Commission sent Keating a letter reminding

him of the most recent extended deadline for those requirements

coming up in November 2003. The Commission directed

Keating to respond and address why it should not lift the stay of

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the construction deadline in light of the fact that the stay had

been in effect for seven years, the fact that Keating had “ample

opportunity . . . to secure the necessary property rights for th[is]

project[] with no success,” and his “repeated failure to provide

timely status reports” as required by the stay order. Letter from

Joseph D. Morgan, Director of Division of Hydropower, FERC,

to Joseph M. Keating (August 26, 2003).

Keating missed the November 2003 deadline but requested

a further extension in March 2004, which the Commission again

granted. After corresponding with the Commission in April

2004, almost two years passed before Keating filed another

status report, in February 2006. This report included some but

not all of the required pre-construction plans. The report

included correspondence showing the Forest Service approved

the filed plans, but the Service later clarified that it believed its

approval was not necessary because of Keating’s “pending

FERC license amendment.” Keating, however, has not filed an

amendment application with the Commission. When, in April

2007, the Commission inquired why Keating continued to resist

filing the overdue amendment application to satisfy the

Commission’s requirement, he responded that his first priority

was to obtain water rights.

The Commission lifted the stay of the commencement-of-

construction deadline for the Tungstar Project by order of

September 20, 2007 and announced that, because the stay was

requested on the day of the deadline, the project license would

terminate immediately after the mandatory 90 days’ notice. See

Joseph M. Keating, Order Lifting Stay of Construction

Deadlines, Issuing Notice of Termination of License, and

Dismissing Intervention, 120 F.E.R.C. ¶ 61,246 (September 20,

2007). The Commission explained that Keating’s ability to

commence construction still depended on approval of his six-

year-old state water rights application, which in turn potentially

7

depended on Keating gaining access to the diversion site from

the protesting party and obtaining a “point of discharge” permit;

his yet-to-be-filed license amendment application; and Forest

Service approval of certain pre-construction plans. Id. at ¶¶ 19-

22. Because of these remaining hurdles, the Commission had

“no reasonable assurance” that Keating would be able to

commence construction “anytime in the foreseeable future.” Id.

at ¶ 22. Therefore, in light of Section 13’s purpose to provide

for prompt development of licensed projects, the Commission

lifted the over eleven year stay, fifteen years after it issued the

project license.

Keating sought rehearing of the order, arguing that he had

been diligent in working to fulfill the requirements of the

license. The Commission dismissed the request for rehearing as

deficient because it did not include a “Statement of Issues”

section separate from its arguments, as required by the

Commission’s Rules of Practice and Procedure. See Joseph M.

Keating, Notice Dismissing Request for Rehearing, 121

F.E.R.C. ¶ 61,192 (November 19, 2007). In the dismissal order,

however, the Commission went on to consider Keating’s

arguments and reject them as “without merit.” Id. The

Commission explained that, contrary to his argument in the

rehearing request, Keating’s diligence or lack thereof was not

the deciding factor in the Commission’s decision; rather, it was

the “prolonged, continuing, and indefinite delay” in obtaining

“water rights and other required pre-construction approvals.” Id.

(quoting Order Lifting Stay, 120 F.E.R.C. ¶ 61,246 at ¶ 1).

Keating now petitions for judicial review of the order lifting the

stay.

II

We must first address our jurisdiction to review this

petition. The Commission urges that Keating did not satisfy the

8

jurisdictional prerequisites for judicial review because the

Commission dismissed his rehearing request based on a

regulatory deficiency instead of denying it on the merits, and he

did not request rehearing of the dismissal order. See 16 U.S.C.

§ 825l(b). The Commission attempts to support its position with

arguments focusing on the terminology of the rehearing order

and characterizing its substantive content as unnecessary.

The reviewability of an administrative order, however,

“must be evaluated in pragmatic terms,” “by reference to its

practical function.” Papago Tribal Util. Auth. v. FERC, 628

F.2d 235, 239 (D.C. Cir. 1980) (quotation omitted). Section

313(b) of the FPA provides for judicial review of “orders of a

definitive character dealing with the merits of a proceeding

before the Commission . . . .” Id. (quoting FPC v. Metro.

Edison Co., 304 U.S. 375, 384 (1938)). That is what we have

here. In the rehearing order, the Commission considered the

merits of Keating’s objections to the order lifting the stay,

addressed those objections, and pronounced them “without

merit.” Notice Dismissing Request for Rehearing, 121 F.E.R.C.

¶ 61,192. Even if, as the Commission suggests, its discussion of

the merits of Keating’s objections was not the ultimate reason

for dismissal of his rehearing request, that discussion and the

consequent conclusion that the objections were “without merit”

assures the “certainty of an adverse decision” should Keating

undertake the “futil[e] [exercise] of seeking relief from the

agency” again on the basis of those objections. Tesoro Refining

& Mktg. Co. v. FERC, 552 F.3d 868, 873, 874 (D.C. Cir. 2009)

(quotations and emphasis omitted). Keating sought agency

rehearing based on objections to the aggrieving order, the

Commission discussed and denied the merits of those

objections, and Keating timely sought judicial review. We

therefore have jurisdiction over his petition.

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III

Turning to the merits of his petition, Keating argues that the

record does not support the Commission’s decision to lift the

stay of the construction deadline and that his reliance on the stay

should estop the Commission from lifting it. We will set aside

the agency’s order only if it is “arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A). We may not disturb the Commission’s decision

under this deferential standard if the agency “considered the

relevant factors and articulated a rational connection between

the facts found and the choice made.” Balt. Gas & Elec. Co. v.

Natural Res. Def. Council, Inc., 462 U.S. 87, 105 (1983).

A

Keating argues that the record does not support the

Commission’s conclusion that there is no reasonable basis to

expect that he will be able to commence construction in the

foreseeable future. The Commission reached this conclusion

because his ability to commence construction still depended on

(1) approval of his six-year-old state water rights application;

(2) filing and approval of his license amendment application;

and (3) filing and Forest Service approval of certain pre-

construction plans. Order Lifting Stay, 120 F.E.R.C. ¶ 61,246

at ¶ 22. Even if, as Keating asserts without support, the license

amendment and pre-construction plans would follow closely

after he obtains water rights, the Commission emphasized record

evidence demonstrating that, after six years before the Water

Board, resolution of Keating’s water rights application depended

on “still-unresolved requirements of the Water Board that could

require additional prolonged proceedings.” Id. at ¶ 19. Namely,

the Water Board had suggested that Keating might be required

to obtain a “point of discharge” permit for his application and

had instructed Keating that he must demonstrate he had the

10

ability to obtain, and was actively pursuing obtaining, the

diversion point property before the Water Board would give him

a hearing, which he had not taken steps to do. See id. at ¶¶ 19-

20.

Keating cannot dispute the Commission’s reasons for

reaching its conclusion. He does not deny that he has not filed

a license amendment application or the outstanding pre-

construction plans, or that he has not obtained water rights or

taken steps to acquire the diversion point property by

condemnation. He takes issue primarily with the actions and

decisions of the Water Board, in not yet clarifying whether a

point discharge permit is necessary and in refusing to accept

Keating’s condemnation authority under the FPA as dispositive

evidence of his ability and willingness to obtain the diversion

point property through condemnation. The Water Board’s

actions and decisions, however, were matters of fact affecting

Keating’s ability to obtain the necessary water rights, and the

Commission was entitled to consider them when assessing

whether Keating could obtain water rights and satisfy the license

requirements in the foreseeable future. We are not situated in

this proceeding to rule on the Water Board’s decisions. Because

the Commission considered the factors relevant to its decision

and articulated a rational connection between the facts found

and the choice made, its conclusion was not arbitrary or

capricious. See Balt. Gas & Elec. Co., 462 U.S. at 105.

Moreover, assuming without deciding that the Commission

may stay the statutory commencement-of-construction deadline,

it was entirely within the agency’s discretion to determine that

a stay of over eleven years was long enough. “FERC has wide

discretion to determine where to draw administrative lines,” and

“[w]e are generally unwilling to review line-drawing performed

by the Commission unless a petitioner can demonstrate that lines

drawn . . . are patently unreasonable, having no relationship to

11

the underlying regulatory problem.” ExxonMobil Gas Mktg. Co.

v. FERC, 297 F.3d 1071, 1085 (D.C. Cir. 2002) (quotations

omitted). In deciding to lift the stay, the Commission articulated

rational reasons related to its statutory responsibility to provide

for prompt development of licensed hydroelectric projects. See

16 U.S.C. § 806. Keating has not attempted to show that the

Commission’s line drawing in this case is inconsistent with its

precedent. See Elec. Plant Bd. of the City of Augusta, Ky., 112

F.E.R.C. ¶ 61,342, 61,504 (“After a licensee has held a license

for [ten years] without making substantial progress toward

project construction, the public interest requires that the license

be terminated, thus freeing the site for development by other

entities, or for other beneficial public uses.”). Keating has not

argued that the Commission treated him differently from others

who were similarly situated. See Burlington N. & Santa Fe Ry.

Co. v. STB, 403 F.3d 771, 776-77 (D.C. Cir. 2005). The

Commission’s decision therefore was not arbitrary or capricious,

and we have no reason to second-guess the Commission’s

exercise of its line-drawing discretion.

B

Although the Commission has discretion to lift stays of

construction deadlines and it gave rational reasons for doing so

here, Keating argues that the Commission should nevertheless

be estopped from lifting the stay. Even assuming principles of

equitable estoppel may be applied against the federal

government in these circumstances, see Office of Personnel

Mgmt. v. Richmond, 496 U.S. 414, 423 (1990), Keating’s

argument fails.

A party attempting to apply equitable estoppel against the

government must show that “(1) there was a definite

representation to the party claiming estoppel, (2) the party relied

on its adversary’s conduct in such a manner as to change his

12

position for the worse, (3) the party’s reliance was reasonable[,]

and (4) the government engaged in affirmative misconduct.”

Morris Commc’ns, Inc. v. FCC, ___ F.3d ___, 2009 WL

1288780, at *6 (D.C. Cir. May 12, 2009) (quotations omitted).

Keating has not shown that the Commission made a “definite

representation” to him that the stay of the construction deadline

would extend indefinitely until he obtained the necessary water

rights. The stay order stated only that the construction deadline

was stayed “pending further order of the Commission” and

instructed Keating to file annual reports “on the status of efforts

to obtain a Forest Service determination” that he had satisfied

the Service’s permit requirements. Order Granting Stay Request

in Part, 77 F.E.R.C. ¶ 61,060, 61,225-26. The order also made

clear that the deadlines for the license amendment application

and pre-construction plans were still in effect. Id. Nowhere did

the Commission represent to Keating that it would stay the

statutory construction deadline for as long as he might want or

need in order to obtain the water rights necessary to undertake

his hydroelectric project. Cf. Sierra Hydro, Inc., 116 F.E.R.C.

¶ 61,060, ¶ 7 (2006) (“While we are willing to make reasonable

accommodations to afford licensees the time need[ed] to resolve

issues with other agencies, we will not hold licenses in abeyance

indefinitely.”). Keating therefore cannot now estop the

Commission from lifting the stay on that basis.1

1

As Keating’s claim to estoppel fails at this first step, we

need not consider the remaining estoppel elements; our silence does

not imply that he would be any more successful on those elements.

13

IV

For the foregoing reasons, we deny Keating’s petition for

review. We have no difficulty concluding that the Commission

acted within its discretion in denying a further stay in light of its

findings concerning the pre-construction elements still lacking

after an over eleven year stay of the commencement-of-

construction deadline.

So ordered.