Seia v. Ferc

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SOLAR ENERGY INDUSTRIES No. 20-72788

ASSOCIATION,

FERC Nos.

Petitioner, RM19-15-000

AD16-16-000

NEWSUN ENERGY LLC; ONE

ENERGY ENTERPRISES LLC,

OPINION

Petitioners-Intervenors,

v.

FEDERAL ENERGY

REGULATORY COMMISSION,

Respondent,

NATIONAL RURAL ELECTRIC

COOPERATIVE ASSOCIATION

[NRECA]; AMERICAN PUBLIC

POWER ASSOCIATION; LARGE

PUBLIC POWER COUNCIL;

EDISON ELECTRIC INSTITUTE

INC.,

Respondents-Intervenors,

2 SEIA V. FERC

AMERICAN FOREST & PAPER

ASSOCIATION,

Intervenor.

MONTANA ENVIRONMENTAL No. 20-73375

INFORMATION CENTER; SIERRA

CLUB; CENTER FOR BIOLOGICAL FERC No.

DIVERSITY; VOTE SOLAR; RM19-15-000

COMMUNITY RENEWABLE

ENERGY ASSOCIATION;

APPALACHIAN VOICES;

ALABAMA CENTER FOR

SUSTAINABLE ENERGY, d/b/a

Energy Alabama; GEORGIA

INTERFAITH POWER & LIGHT

INC.; NORTH CAROLINA

SUSTAINABLE ENERGY

ASSOCIATION; UPSTATE

FOREVER,

Petitioners,

ONE ENERGY ENTERPRISES LLC,

Petitioner-Intervenor,

v.

FEDERAL ENERGY

REGULATORY COMMISSION,

SEIA V. FERC 3

Respondent,

NATIONAL RURAL ELECTRIC

COOPERATIVE ASSOCIATION

[NRECA]; EDISON ELECTRIC

INSTITUTE INC.; AMERICAN

PUBLIC POWER ASSOCIATION;

LARGE PUBLIC POWER

COUNCIL,

Respondents-Intervenors,

______________________________

AMERICAN FOREST & PAPER

ASSOCIATION,

Intervenor.

MONTANA ENVIRONMENTAL No. 21-70083

INFORMATION CENTER; SIERRA

CLUB; CENTER FOR BIOLOGICAL FERC No.

DIVERSITY; VOTE SOLAR; RM19-15-001

COMMUNITY RENEWABLE

ENERGY ASSOCIATION;

APPALACHIAN VOICES;

ALABAMA CENTER FOR

SUSTAINABLE ENERGY, d/b/a

Energy Alabama; GEORGIA

INTERFAITH POWER & LIGHT

INC.; NORTH CAROLINA

SUSTAINABLE ENERGY

ASSOCIATION; UPSTATE

4 SEIA V. FERC

FOREVER,

Petitioners,

ONE ENERGY ENTERPRISES LLC,

Petitioner-Intervenor,

v.

FEDERAL ENERGY

REGULATORY COMMISSION,

Respondent,

NATIONAL RURAL ELECTRIC

COOPERATIVE ASSOCIATION

[NRECA]; AMERICAN PUBLIC

POWER ASSOCIATION; EDISON

ELECTRIC INSTITUTE INC.;

LARGE PUBLIC POWER

COUNCIL,

Respondents-Intervenors.

SOLAR ENERGY INDUSTRIES No. 21-70113

ASSOCIATION,

FERC Nos.

Petitioner, RM19-15-001

AD16-16-001

ONE ENERGY ENTERPRISES LLC,

SEIA V. FERC 5

Petitioner-Intervenor,

v.

FEDERAL ENERGY

REGULATORY COMMISSION,

Respondent,

NATIONAL RURAL ELECTRIC

COOPERATIVE ASSOCIATION

[NRECA]; AMERICAN PUBLIC

POWER ASSOCIATION; EDISON

ELECTRIC INSTITUTE INC.;

LARGE PUBLIC POWER

COUNCIL,

Respondents-Intervenors.

On Petition for Review of an Order of the

Federal Energy Regulatory Commission

Argued and Submitted March 8, 2022

Seattle, Washington

Filed September 5, 2023

Before: Jacqueline H. Nguyen, Eric D. Miller, and Patrick

J. Bumatay, Circuit Judges.

Opinion by Judge Miller;

Concurrence by Judge Miller;

Partial Concurrence and Partial Dissent by Judge Bumatay

6 SEIA V. FERC

SUMMARY *

Federal Energy Regulatory Commission /

Environmental Law

The panel granted in part and denied in part a petition for

review brought by the Solar Energy Industries Association

and several environmental organizations challenging Orders

872 and 872-A (collectively, “Order 872”), rules adopted by

the Federal Energy Regulatory Commission (FERC) that

alter which facilities qualify for benefits under the Public

Utility Regulatory Policy Act (PURPA) and how those

facilities are compensated.

Congress enacted PURPA to encourage the development

of a new class of independent, non-utility-owned energy

producers known as “Qualifying Facilities,” or

“QFs.” Order 872 makes it more difficult for a facility to

qualify for treatment as a QF, and makes QF status less

advantageous.

The panel rejected petitioners’ argument that Order 872

as a whole is inconsistent with PURPA’s directive that

FERC “encourage” the development of QFs. Applying the

two-step framework of Chevron U.S.A. Inc. v. NRDC, Inc.,

467 U.S. 837 (1984), the panel held that (1) PURPA on its

face gives FERC broad discretion to evaluate which rules are

necessary to encourage QFs and which are not, and (2)

FERC’s interpretation was not unreasonable.

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

SEIA V. FERC 7

Next, the panel rejected petitioners’ challenges to four

specific provisions of Order 872. First, the panel held that

the modified Site Rule—which modified the rules for

determining when facilities are deemed to be located at the

same or separate sites—survives Chevron, is not arbitrary

and capricious under the Administrative Procedure Act

(APA), and is not unlawfully retroactive. Second, the panel

held that the modified Fixed-Rate Rule—which modified the

rates paid to QFs—survives Chevron and is not arbitrary or

capricious under the APA. Third, the panel held that the

provision allowing States to adopt a rebuttable presumption

that, for utilities located within certain organized energy

markets, the locational market price represents the

purchasing utility’s avoided costs, is not arbitrary or

capricious under the APA. Fourth, the panel held that the

provision reducing the threshold that terminates an electric

utility’s obligation to purchase from a QF if the QF has

nondiscriminatory access to certain organized markets is not

arbitrary or capricious under the APA.

Finally, the panel addressed the environmental

organizations’ claim that FERC violated the National

Environmental Policy Act (NEPA) by failing to prepare an

environmental assessment (EA) before issuing Order

872. The panel held that the environmental organizations

had Article III standing because they adequately

documented the concrete harms that Order 872 could cause

their members, and had prudential standing because they

demonstrated that the harms they fear fall within NEPA’s

zone of interests.

On the merits, the panel held that FERC violated NEPA

by failing to prepare, at minimum, an EA. First, the panel

held that the more substantive elements of Order 872 fall

outside NEPA’s categorical exclusion for rules that do not

8 SEIA V. FERC

substantially change the effect of the rules being

amended. Second, the panel rejected FERC’s argument that

it was not required to prepare an EA because any potential

environmental impacts from Order 872 are not reasonably

foreseeable. The panel stated that it was not aware of any

case approving an agency’s decision not to engage in any

environmental analysis for rulemaking of the magnitude of

Order 872, and held that the lack of reasonably foreseeable

environmental impacts cannot relieve an agency of its

obligation to prepare an EA.

The panel determined that the appropriate remedy for

FERC’s NEPA violation was to remand to the agency

without vacatur. Although FERC’s failure to prepare an EA

is a serious violation, Order 872 does not suffer from

fundamental flaws making it unlikely that FERC could adopt

the same rule on remand, and the disruptive consequences of

vacatur would be significant.

Concurring, Judge Miller, joined by Judge Nguyen,

joined the court’s opinion in full and wrote separately to

respond to Judge Bumatay’s discussion of Chevron in his

concurrence and dissent.

Concurring in part and dissenting in part, Judge Bumatay

concurred with denying the petition challenging the

enactment of FERC’s revised rules, but would rely on the

text of PURPA instead of on Chevron deference. With

respect to the NEPA claim, he would hold that the

environmental organizations lack standing because they

have not alleged that they will suffer an environmental harm

sufficient to confer NEPA standing.

SEIA V. FERC 9

COUNSEL

Fred A. Rowley, Jr (argued), Wilson Sonsini Goodrich &

Rosati, Los Angeles, California; John B. Kenney, Wilson

Sonsini Goodrich & Rosati PC, Washington, D.C.; Heather

Curlee and Todd G. Glass, Wilson Sonsini Goodrich &

Rosati PC, Seattle, Washington; for Petitioner Solar Energy

Industries Association.

David C. Bender (argued), Earthjustice, Washington, D.C

for Petitioners Montana Environmental Information Center,

Sierra Club, Center for Biological Diversity, and Vote Solar.

Matthew W.S. Estes (argued), Senior Attorney; Susanna Y.

Chu, Attorney; Joshua A. Kirstein, Attorney Advisor;

Robert H. Solomon, Solicitor; Matthew Christiansen,

General Counsel; Federal Energy Regulatory Commission,

Washington, D.C.; for Respondent Federal Energy

Regulatory Commission.

Jeremy C. Marwell (argued), Margaret E. Peloso, and James

T. Dawson, Vinson & Elkins LLP, Washington, D.C.; Emily

S. Fisher and Adam Benshoff, Edison Electric Institute,

Washington, D.C.; for Respondents-Intervenor Edison

Electric Institute.

Gregory M. Adams and Peter J. Richardson, Richardson

Adams PLLC, Boise, Idaho, for Petitioner Community and

Renewable Energy Association.

Lauren J. Bowen, Nicholas Jimenez, and Jillian Kysor,

Southern Environmental Law Center, Chapel Hill, North

Carolina, for Petitioners Appalachian Voices, Alabama

Center for Sustainable Energy, Georgia Interfaith Power &

Light, North Carolina Sustainable Energy Association, and

Upstate Forever.

10 SEIA V. FERC

Marie P. Barlow and Max Yoklic, NewSun Energy LLC,

Bend, Oregon, for Petitioner-Intervenor NewSun Energy

LLC.

Elizabeth W. Whittle, Nixon Peabody LLP, Washington,

D.C., for Petitioner-Intervenor One Energy Enterprises

LLC.

Randolph L. Elliot, McCarter & English LLP, Washington,

D.C., for Respondent-Intervenor, National Rural Electric

Cooperative Association.

John E. McCaffrey III, Stinson LLP, Washington, D.C., for

Respondent-Intervenor American Public Power Association.

Jonathan D. Schneider, Harvey Reiter, and Marie D. Zosa,

Stinson LLP, Washington, D.C., for Respondent-Intervenor

Large Public Power Counsel.

Robert A. Weishaar Jr., McNees Wallace & Nurick,

Harrisburg, Pennsylvania, for Intervenor (def/res)-

Intervenor American Forest & Paper Association.

Sarah N. Norcott, NorthWestern Corporation d/b/a

NorthWestern Energy, Helena, Montana, for Amicus Curiae

NorthWestern Corporation d/b/a NorthWestern Energy.

Andrew R. Varcoe and Stephanie A. Maloney, U.S.

Chamber Litigation Center, Washington, D.C.; Elbert Lin,

Hunton Andrews Kurth LLP, Richmond, Virginia; for

Amicus Curiae Chamber of Commerce of the United States

of America.

SEIA V. FERC 11

OPINION

MILLER, Circuit Judge:

This case involves rules adopted by the Federal Energy

Regulatory Commission to implement the Public Utility

Regulatory Policies Act of 1978 (PURPA), Pub. L. No. 95-

617, 92 Stat. 3117. Congress enacted PURPA to encourage

the development of a new class of independent, non-utility-

owned energy producers known as “Qualifying Facilities,”

or “QFs.” PURPA tasks FERC with promulgating rules to

implement the statute. In 2020, FERC revised its rules to

alter which facilities qualify for PURPA’s benefits and how

those facilities are compensated. The new rules make it more

difficult to qualify for treatment as a QF, and they also make

QF status less advantageous.

We are asked to decide whether FERC’s new rules are

consistent with PURPA and satisfy the requirements of the

Administrative Procedure Act. In resolving those questions,

we address challenges to discrete components of the new

rules as well as challenges to the lawfulness of the rules as a

whole. We must also decide whether FERC violated the

National Environmental Policy Act of 1969 (NEPA), Pub.

L. No. 91-190, 83 Stat. 852 (1970), by failing to prepare an

environmental assessment or environmental impact

statement. We hold that FERC’s revised rules are consistent

with both PURPA and the APA, but that FERC violated

NEPA by failing to prepare, at minimum, an environmental

assessment. In light of the extraordinary disruptive

consequences that would accompany vacatur, we decline to

vacate the rules. We grant the petition for review in part and

remand without vacatur.

12 SEIA V. FERC

I

A

In response to the energy crises of the 1970s, Congress

enacted PURPA to promote energy conservation, improve

energy efficiency, lower consumer costs, and decrease

reliance on foreign oil. See FERC v. Mississippi, 456 U.S.

742, 745–46, 756–57 (1982); Independent Energy

Producers Ass’n, Inc. v. California Pub. Utils. Comm’n, 36

F.3d 848, 850 (9th Cir. 1994). In enacting PURPA,

“Congress sought to eliminate two significant barriers to the

development of alternative energy sources: (1) the

reluctance of traditional electric utilities to purchase power

from and sell power to non-traditional facilities, and (2) the

financial burdens imposed upon alternative energy sources

by state and federal utility authorities.” Independent Energy

Producers Ass’n, 36 F.3d at 850.

PURPA directs FERC to “prescribe, and from time to

time thereafter revise, such rules as it determines necessary

to encourage” the development of Qualifying Facilities. 16

U.S.C. § 824a-3(a). There are two types of QFs. First, a

“small power production facility” uses an alternative energy

source—often a renewable source like solar or wind—to

produce electricity. 16 U.S.C. § 796(17). As its name

suggests, such a facility must be “small”: It cannot have a

power production capacity that, “together with any other

facilities located at the same site (as determined by the

Commission),” exceeds 80 megawatts. Id. § 796(17)(A)(ii).

Second, a “cogeneration facility” typically uses traditional

fossil fuels to produce both electric energy and a useful form

of thermal energy (like steam) in a manner that is more

efficient than producing each kind of energy separately. Id.

SEIA V. FERC 13

§ 796(18); 18 C.F.R. § 292.205; S. Rep. No. 95-442, at 21

(1977).

PURPA provides QFs with certain benefits. Of particular

relevance here, PURPA imposes a mandatory-purchase

obligation on electric utilities, which must purchase

electricity from QFs at rates established by FERC. 16 U.S.C.

§ 824a-3(a)(2), (b). Those rates must be “just and reasonable

to the electric consumers,” must be “in the public interest,”

and may not “discriminate against” QFs. Id. § 824a-3(b).

PURPA also sets an upper bound on rates: No rule “shall

provide for a rate which exceeds the incremental cost to the

electric utility of alternative electric energy.” Id. A utility’s

“incremental cost”—commonly referred to as its “avoided

cost”—is defined as “the cost to the electric utility of the

electric energy which, but for the purchase from [a QF], such

utility would generate or purchase from another source.” Id.

§ 824a-3(d); see also American Paper Inst., Inc. v. American

Elec. Power Serv. Corp., 461 U.S. 402, 406 (1983).

While PURPA tasks FERC with the development of

national rules and standards, States play a prominent role in

PURPA’s regulatory structure. Under PURPA, state

regulatory authorities are primarily responsible for

implementing FERC’s rules. 16 U.S.C. § 824a-3(f)(1). For

example, while FERC establishes, in broad terms, the rate to

be used in the mandatory transactions described above,

States are responsible for calculating and applying that rate

for individual utilities and QFs.

Some utilities are not subject to a state regulatory

authority, and PURPA requires those “nonregulated electric

utilit[ies]” to implement and apply FERC’s rules in the same

manner as States. 16 U.S.C. § 824a-3(f)(2). For our

14 SEIA V. FERC

purposes, the distinction does not matter, so we refer to

States and nonregulated utilities collectively as “States.”

B

In 1980, in accordance with its statutory mandate to

promulgate rules implementing PURPA, see 16 U.S.C.

§ 824a-3(a), FERC issued Orders 69 and 70 (collectively,

the 1980 Orders or 1980 Rules). Small Power Production

and Cogeneration Facilities; Regulations Implementing

Section 210 of the Public Utility Regulatory Policies Act of

1978, Order 69, 45 Fed. Reg. 12,214 (Feb. 25, 1980); Small

Power Production and Cogeneration Facilities—Qualifying

Status, Order 70, 45 Fed. Reg. 17,959 (Mar. 20, 1980).

The 1980 Orders clarified which facilities qualify as

“small power production facilit[ies],” which, together with

“any other facilities located at the same site (as determined

by the Commission),” may not have a power production

capacity of more than 80 megawatts. 16 U.S.C.

§ 796(17)(A). To determine whether two facilities were

“located at the same site,” FERC developed a one-mile rule.

If two facilities were “located within one mile of each other,”

“use[d] the same energy resource,” and were “owned by the

same person,” they were considered to be “located at the

same site.” Order 70, 45 Fed. Reg. at 17,965. And if two

facilities were located at the same site, their power outputs

had to be added together for purposes of the 80-megawatt

size cap. Id. By contrast, facilities located more than one

mile apart were considered separate sites, and thus did not

need to add together their power capacities. We refer to this

as the “1980 Site Rule.”

The 1980 Orders also established the rate that a utility

would pay a QF when purchasing energy under its

mandatory-purchase obligation. See 16 U.S.C. § 824a-3(b).

SEIA V. FERC 15

FERC set the rate for sales by QFs equal to the purchasing

utility’s full avoided costs—the maximum rate permitted by

PURPA. Order 69, 45 Fed. Reg. at 12,222–23; American

Paper, 461 U.S. at 406–07. FERC explained that a rate based

on a utility’s full avoided costs was appropriate to provide

adequate incentives for the development of QFs, and that any

lower rate would not provide significant savings for the

utilities’ ratepayers. See American Paper, 461 U.S. at 406–

07, 412–18 (upholding FERC’s avoided-cost rule); Order

69, 45 Fed. Reg. at 12,222–23.

The 1980 Orders offered QFs the choice of two rate-

calculation methods. See Winding Creek Solar LLC v.

Peterman, 932 F.3d 861, 863 (9th Cir. 2019). First, a QF

could elect to sell its energy at a rate calculated at the time

the energy was delivered (often referred to as the “as-

available” rate). Order 69, 45 Fed. Reg. at 12,224. Second, a

QF could elect to sell its energy using a rate based on the

utility’s avoided costs calculated and fixed at the time the

contractual obligation was incurred (commonly referred to

as the “Fixed-Rate Rule”). Id. Under the Fixed-Rate Rule, a

QF could receive a fixed rate for both the utility’s energy

costs (the variable costs associated with the production of

energy, such as the cost of fuel) as well as the utility’s

capacity costs (the “costs associated with providing the

capacity to deliver energy,” consisting “primarily of the

capital costs of facilities”). Order 69, 45 Fed. Reg. at 12,216.

In 2005, Congress enacted the Energy Policy Act of

2005, Pub. L. No. 109-58, 119 Stat. 594. In the Energy

Policy Act, “Congress acknowledged that QFs no longer

faced the same barriers that prompted PURPA.”

Californians for Renewable Energy v. California Pub. Utils.

Comm’n, 922 F.3d 929, 933 (9th Cir. 2019). It therefore

amended PURPA by limiting the scope of PURPA’s

16 SEIA V. FERC

mandatory-purchase requirement. Under the amended

statute, a utility is not required to purchase energy from a

given QF if the Commission finds that the QF has

“nondiscriminatory access” to one of several specified

energy markets. 16 U.S.C. § 824a-3(m)(1). Those markets

generally correspond to the markets operated by regional

transmission organizations and independent system

operators (known as “regional markets” or “organized

markets”).

To implement this new statutory language, FERC issued

Order 688. New PURPA Section 210(m) Regulations

Available to Small Power Production and Cogeneration

Facilities, Order 688, 71 Fed. Reg. 64,342 (Nov. 1, 2006);

New PURPA Section 210(m) Regulations Applicable to

Small Power Production and Cogeneration Facilities, Order

688-A, 72 Fed. Reg. 35,872 (June 29, 2007). Order 688

established a rebuttable presumption that “small”

facilities—defined as those with a power capacity less than

or equal to 20 megawatts—lack non-discriminatory market

access, whereas “large” facilities with a capacity exceeding

20 megawatts have adequate market access. Order 688, 71

Fed. Reg. at 64,343–44, 64,352–54. The Commission

acknowledged that no single threshold would perfectly

distinguish between those facilities with nondiscriminatory

access to markets and those without such access, but it

determined that a 20-megawatt threshold would be

“reasonable and administratively workable.” Id. at 64,352–

53; see also American Forest & Paper Ass’n v. FERC, 550

F.3d 1179, 1183 (D.C. Cir. 2008) (upholding Order 688’s

interpretation of the 2005 statutory amendment).

SEIA V. FERC 17

C

In 2016, FERC began to consider revising the PURPA

regulations. In 2019, after holding a technical conference

and soliciting public comments, it issued a notice of

proposed rulemaking. Qualifying Facility Rates and

Requirements; Implementation Issues Under the Public

Utility Regulatory Policies Act of 1978, 84 Fed. Reg. 53,246

(proposed Oct. 4, 2019) (2019 NPRM). The next year, a

divided Commission issued Order 872. Qualifying Facility

Rates and Requirements Implementation Issues Under the

Public Utility Regulatory Policies Act of 1978, Order 872,

85 Fed. Reg. 54,638 (Sept. 2, 2020). In response to requests

for rehearing, the Commission issued Order 872-A, largely

reaffirming the conclusions and reasoning of Order 872.

Qualifying Facility Rates and Requirements Implementation

Issues Under the Public Utility Regulatory Policies Act of

1978, Order 872-A, 85 Fed. Reg. 86,656 (Dec. 30, 2020)

(We refer to both orders collectively as “Order 872”). Then-

Commissioner Glick dissented in part, arguing that the

revised PURPA rules “gutted” PURPA and defied

Congress’s intent to encourage QFs. Order 872-A, 85 Fed.

Reg. at 86,750 (Glick, Cmm’r, dissenting in part).

FERC explained that revision of its PURPA regulations

was appropriate considering the dramatic changes that have

reshaped the energy industry since the Commission first

issued its regulations in 1980. Order 872, 85 Fed. Reg. at

54,647–48. For example, FERC found that technological

advances and the declining cost of facility development have

transformed the once-nascent renewable-energy sector into

a mature and growing industry. Id. The Commission also

observed that energy markets have become more

competitive and efficient, driven by the creation of new

market structures and the rise of competitive independent

18 SEIA V. FERC

power facilities. Id. at 54,648; see also FERC v. Electric

Power Supply Ass’n, 577 U.S. 260, 267 (2016) (observing

that market conditions have changed dramatically in the past

several decades, moving from a market dominated by local,

vertically integrated monopolies to a market where

“[i]ndependent power plants . . . abound” and energy flows

“through an interconnected ‘grid’ of near-nationwide scope”

(quoting New York v. FERC, 535 U.S. 1, 7 (2002))). In light

of those changes, the Commission concluded that the revised

regulations would better comply with PURPA’s statutory

requirements. Order 872, 85 Fed. Reg. at 54,643. And so,

consistent with PURPA’s requirement that FERC revise its

regulations “from time to time,” 16 U.S.C. § 824a-3(a), the

Commission amended its PURPA regulations. Order 872, 85

Fed. Reg. at 54,648.

Order 872 makes several significant changes to the

PURPA regulations, four of which are relevant here.

First, Order 872 modifies the 1980 Site Rule. Order 872

does not change the rule for affiliated facilities located

within one mile of each other: As before, there is an

irrebuttable presumption that affiliated facilities that are

within one mile of each other and that use the same energy

resource are “located at the same site.” 18 C.F.R.

§ 292.204(a)(2)(i)(A); Order 872, 85 Fed. Reg. at 54,696.

But Order 872 modifies the rule for facilities located more

than one mile apart. Under the new site rule, there is an

irrebuttable presumption of separateness only when

affiliated facilities using the same energy resource are

located ten miles or more apart. 18 C.F.R.

§ 292.204(a)(2)(i)(B); Order 872, 85 Fed. Reg. at 54,696.

When affiliated facilities using the same energy resource are

located more than one mile but less than ten miles apart,

there is a rebuttable presumption that those facilities are

SEIA V. FERC 19

located at separate sites. 18 C.F.R. § 292.204(a)(2)(i)(C);

Order 872, 85 Fed. Reg. at 54,696. The Commission

summarized its new rule as follows: Under the new rule,

“electric utilities, state regulatory authorities, and other

interested parties” may now demonstrate that “affiliated

small power production facilities that use the same energy

resource and are more than one mile apart and less than 10

miles apart actually are at the same site (with distances one

mile or less apart still irrebuttably at the same site and

distances 10 miles or more apart irrebuttably at separate

sites).” Order 872, 85 Fed. Reg. at 54,696.

The rule sets out a non-exhaustive list of factors that may

be used to rebut the presumption of separateness, such as

whether the facilities share common physical characteristics,

common ownership and control, and shared contracts. Order

872, 85 Fed. Reg. at 54,701. The new site rule applies to all

QFs that seek certification or recertification on or after

December 31, 2020, 18 C.F.R. § 292.204(a)(2), but an

existing QF’s recertification is not subject to protest unless

the QF undergoes “substantive changes,” Order 872, 85 Fed.

Reg. at 54,706–07. We refer to the new site requirements as

the “2020 Site Rule.”

Second, Order 872 modifies the Fixed-Rate Rule

applicable to power-sales contracts between QFs and electric

utilities. Under the 1980 Rules, a QF was entitled to receive

a rate equal to the electric utility’s full avoided costs, and it

could choose to receive either an as-available rate calculated

at the time of delivery, or a rate calculated and fixed at the

time that a contractual obligation was incurred. See Winding

Creek Solar, 932 F.3d at 863. Order 872 retains the

requirement that QFs receive a rate equal to the utility’s full

avoided costs. Order 872, 85 Fed. Reg. at 54,650. But Order

872 grants States the option, if they deem it appropriate, to

20 SEIA V. FERC

eliminate the Fixed-Rate Rule and instead require that the

avoided energy cost portion of a QF’s contract vary based on

the as-available rate calculated at the time of delivery. 18

C.F.R. § 292.304(d)(2); Order 872, 85 Fed. Reg. at 54,648.

Order 872 still requires that QFs be given the option to

receive avoided capacity costs at fixed rates. Id. These

capacity rates compensate a QF for the fact that its existence

spares the utility certain fixed costs, such as the cost of

building and financing generating plants of its own. Id. at

54,645–46, 54,655–56.

Third, Order 872 provides States additional flexibility to

use various market prices when calculating a utility’s

avoided costs. As relevant here, Order 872 allows States to

adopt a rebuttable presumption that, for utilities located

within certain organized energy markets, the “locational

marginal price,” or “LMP,” reflects the purchasing utility’s

avoided costs. See 18 C.F.R. § 292.304(b)(6). Within those

organized energy markets, LMP represents “the least-cost of

meeting an incremental megawatt-hour of demand at each

location on the grid, and thus prices vary based on location

and time.” Sacramento Mun. Util. Dist. v. FERC, 616 F.3d

520, 524 (D.C. Cir. 2010) (per curiam); see also Electric

Power Supply Ass’n, 577 U.S. at 268–69 (explaining how

LMP is calculated). The Commission concluded that LMP

“reflect[s] the true marginal cost of production of energy,

taking into account all physical system constraints,” and that

LMP “accurately represents the purchasing electric utility’s

avoided energy cost at the time the energy is delivered.”

Order 872, 85 Fed. Reg. at 54,660–61. But the Commission

also recognized that LMP may sometimes deviate from

actual avoided costs. Order 872 therefore rejects the

categorical rule that the Commission had considered in the

notice of proposed rulemaking—which would have allowed

SEIA V. FERC 21

States to use LMP as a per se appropriate measure of avoided

costs—and instead allows States to adopt a rebuttable

presumption that LMP reflects a utility’s avoided costs. Id.

at 54,659.

Fourth, Order 872 revises the provision of Order 688 that

terminates an electric utility’s obligation to purchase from a

QF if the QF has nondiscriminatory access to certain

organized markets. 16 U.S.C. § 824a-3(m). Order 688

established a rebuttable presumption that QFs with a net

power capacity of less than or equal to 20 megawatts do not

have adequate, nondiscriminatory access to markets. In the

2019 notice of proposed rulemaking, the Commission

considered reducing that threshold to one megawatt, but it

decided not to do so, noting that commenters had

demonstrated that market-access barriers are “more acute for

smaller QFs at or near the 1 MW threshold.” Order 872, 85

Fed. Reg. at 54,716. Instead, the Commission reduced the

threshold to five megawatts. 18 C.F.R. § 292.309(d)(2);

Order 872, 85 Fed. Reg. at 54,715. Under the new rule,

“small power production facilities with a net power

production capacity at or below 5 MW will be presumed not

to have nondiscriminatory access to markets, and,

conversely, small power production facilities with a net

power production capacity over 5 MW will be presumed to

have nondiscriminatory access to markets.” Order 872, 85

Fed. Reg. at 54,715.

FERC determined that it was not required to conduct an

environmental analysis of Order 872 under NEPA. Order

872, 85 Fed. Reg. at 54,725. It gave two justifications for its

conclusion. First, FERC determined that Order 872 fell

within a “categorical exclusion” to NEPA for rules that are

“clarifying, corrective, or procedural” in nature. Id. at 54,727

n.1090 (quoting 18 C.F.R. § 380.4(a)(2)(ii)). Second, FERC

22 SEIA V. FERC

stated that any downstream environmental effects of Order

872 were too uncertain and speculative to trigger NEPA

review. Id. at 54,727. For those reasons, FERC determined

that neither an environmental assessment nor an

environmental impact statement was required.

D

The Solar Energy Industries Association (Solar

Association) and a group of environmental organizations

(Environmental Organizations) petition for review of Order

872. Each party presents slightly different challenges, but for

the sake of simplicity, we refer to them collectively as

“petitioners” unless otherwise noted. FERC opposes the

petitions for review, and a group of electric utilities and

utility-related interest groups (Utility-Intervenors) have

intervened in support of FERC.

A renewable facility developer, NewSun Energy, LLC,

has also intervened in support of the petitioners. Utility-

Intervenors urge us not to consider several arguments raised

by NewSun. Utility-Intervenors correctly observe that we

typically will not consider issues raised exclusively by an

intervenor. See Washington Utils. & Transp. Comm’n v.

FERC, 26 F.3d 935, 941–42 (9th Cir. 1994). But here, the

issues raised in NewSun’s brief are, with just one exception,

coextensive with those addressed by the petitioners. The

exception is NewSun’s argument that it was arbitrary and

capricious for FERC to decline to establish a minimum

contract length for agreements between QFs and electric

utilities. Because no petitioner raised that issue, we strike

that portion of NewSun’s brief. See id.

We have jurisdiction to review the petitions under 16

U.S.C. § 825l(b). Although that provision gives us

jurisdiction to review final orders of the Commission, it

SEIA V. FERC 23

prohibits us from considering any objection “unless such

objection shall have been urged before the Commission in

the application for rehearing.” Id. Both the Environmental

Organizations and the Solar Association filed petitions for

rehearing, and although Utility-Intervenors (but not FERC)

question the sufficiency of those petitions, we conclude that

the petitions adequately raised the challenges to Order 872

that petitioners now advance. See Bangor Hydro-Elec. Co.

v. FERC, 925 F.2d 465, 467 n.* (D.C. Cir. 1991) (per

curiam).

II

Before addressing petitioners’ challenges to individual

provisions of Order 872, we consider their argument that the

order as a whole is inconsistent with PURPA’s directive that

FERC “encourage” the development of QFs.

We review an agency’s interpretation of a statute under

the framework of Chevron U.S.A. Inc. v. NRDC, Inc., 467

U.S. 837 (1984); see Pacific Choice Seafood Co. v. Ross,

976 F.3d 932, 940 (9th Cir. 2020). “[W]hen an agency is

authorized by Congress to issue regulations and promulgates

a regulation interpreting a statute it enforces, the

interpretation receives deference if the statute is ambiguous

and if the agency’s interpretation is reasonable.” Encino

Motorcars, LLC v. Navarro, 579 U.S. 211, 220 (2016).

Petitioners argue that Order 872 fails at step one of Chevron

because it is contrary to the unambiguous terms of PURPA

and at step two because it reflects an unreasonable

interpretation of the statute.

PURPA provides that FERC “shall prescribe, and from

time to time thereafter revise, such rules as it determines

necessary to encourage cogeneration and small power

production.” 16 U.S.C. § 824a-3(a). According to

24 SEIA V. FERC

petitioners, Order 872 “rescinded longstanding policies that

had enabled the development of Qualifying Facilities,”

replacing them with “new policies that were not designed to

encourage the development of Qualifying Facilities.”

Because Order 872 provides less support to QFs than the

status quo under the 1980 Rules—“discouraging” them

relative to that baseline—petitioners contend that Order 872

violates the statute.

The principal flaw in petitioners’ argument is that

PURPA does not simply task FERC with prescribing rules

“to encourage” QFs. Rather, it requires FERC to prescribe

“such rules as it determines necessary to encourage” QFs,

and it directs FERC to “from time to time thereafter revise”

those rules. 16 U.S.C. § 824a-3(a) (emphasis added). On its

face, the statute gives FERC broad discretion to evaluate

which rules are necessary to encourage QFs and which are

not. It also gives FERC discretion to reevaluate its rules and

alter them in light of experience. The encouragement

provision represents an “express delegation of authority to

the agency to elucidate a specific provision of the statute by

regulation.” Chevron, 467 U.S. at 843–44. It does not impose

a ratchet under which every FERC rule must encourage QFs

to a greater extent than the rule that came before it.

Nor is FERC’s interpretation unreasonable under step

two. FERC determined that the encouragement provision is

satisfied so long as FERC’s regulations—viewed as a

whole—continue to encourage QFs. Order 872, 85 Fed. Reg.

at 54,650. In Order 872, FERC found that that is exactly

what the regulations do. The Commission explained that

Order 872 “may end up encouraging QF development

differently from the current PURPA Regulations, but the

Commission’s regulations continue to encourage QF

development, as contemplated by PURPA.” Id. Most

SEIA V. FERC 25

importantly, the revised PURPA regulations “continue to

require that QF rates be set at full avoided costs, a provision

the Supreme Court described as ‘provid[ing] the maximum

incentive for the development of cogeneration and small

power production.’” Id. (quoting American Paper, 461 U.S.

at 418). FERC also observed that its new rules retain many

elements of the 1980 Rules that provided support for QFs

(such as the requirement that utilities provide

interconnection) and that Order 872 supports QFs in new

ways (by adding, for example, the competitive-solicitation

rules that renewable resource developers, like the Solar

Association, suggested). Id. at 54,644, 54,650–51.

Of course, it is easy to imagine ways in which FERC

could have provided even more encouragement to QFs. But

PURPA does not require FERC to encourage QFs to the

maximum extent possible, regardless of any countervailing

interests. To the contrary, the statute makes clear that FERC

must take into account at least some other considerations. To

take just one example, PURPA prohibits FERC from setting

a rate for power from QFs “which exceeds the incremental

cost to the electric utility of alternative electric energy.” 16

U.S.C. § 824a-3(b). The Commission’s exercise of

discretion was not unreasonable simply because it balanced

the need to encourage QFs against other competing interests.

III

We now turn to petitioners’ challenges to specific

provisions of Order 872. Petitioners challenge four

components of the order: (1) the modified Site Rule, (2) the

modified Fixed-Rate Rule, (3) the creation of the LMP

rebuttable presumption, and (4) the revised market-access

presumption. Petitioners argue that those components of

26 SEIA V. FERC

Order 872 conflict with PURPA or are arbitrary and

capricious, or both.

A

Under PURPA, a “small power production facility” (one

of the two types of QFs) must have a power production

capacity “which, together with any other facilities located at

the same site (as determined by the Commission), is not

greater than 80 megawatts.” 16 U.S.C. § 796(17)(A)(ii). The

1980 Site Rule provided that facilities were “located at the

same site” if they were within one mile of each other, “use[d]

the same energy resource,” and were “owned by the same

person.” Order 70, 45 Fed. Reg. at 17,965. Facilities that

were more than one mile apart were deemed to be located at

separate sites.

The 2020 Site Rule kept in place the rule for facilities

within one mile of each other, but it adopted a new approach

for facilities located more than one mile apart. Under the

new rule, there is an irrebuttable presumption that facilities

more than ten miles apart are located at separate sites, but

only a rebuttable presumption that affiliated facilities that

use the same energy resource and are located between one

and ten miles apart are at separate sites. Order 872, 85 Fed.

Reg. at 54,696. The presumption of separateness may be

rebutted using a non-exhaustive list of factors, such as

whether the facilities share common physical characteristics,

common ownership and control, and shared contracts. Id. at

54,701. The new rule makes it more likely that two facilities

will be deemed to be at the same site, and, accordingly, that

their production capacity will exceed the 80-megawatt

threshold, making them ineligible for QF status. Petitioners

advance several different challenges to the 2020 Site Rule,

but we find none persuasive.

SEIA V. FERC 27

1

Petitioners argue that Order 872’s new definition of “at

the same site” defies the plain meaning of the statutory text.

In their view, the term “site” is clear and unambiguous:

“Site” is a geographic term that refers to “[a] place or

location; esp., a piece of property set aside for a specific

use.” Black’s Law Dictionary 1667 (11th ed. 2019). The

geographic nature of the term is reinforced, they say, by the

prepositional phrase “located at.” Petitioners argue that by

relying on non-geographic factors (such as shared physical

characteristics and common ownership) to determine

whether facilities between one and ten miles apart are

located at the same site, the Commission adopted an

unreasonable interpretation of the statute.

Petitioners’ argument under Chevron step one fails

because Congress did not “directly address[] the precise

question” of how the Commission should determine whether

two facilities are located at the same site. Chevron, 467 U.S.

at 843. To the contrary, Congress expressly delegated that

task to FERC by requiring aggregation of power production

capacity for facilities “located at the same site (as

determined by the Commission).” 16 U.S.C. § 796(17)(A)(ii)

(emphasis added). That language gives FERC broad

discretion to define the meaning of the phrase “located at the

same site.” See Lindeen v. SEC, 825 F.3d 646, 653 (D.C. Cir.

2016) (“The explicit grant of definitional authority manifests

that the Congress intended the [agency] to enjoy broad

discretion.”). Accordingly, we move to step two to

determine whether the agency employed that discretion to

adopt a reasonable definition.

Congress’s use of the word “site” does not prohibit

FERC from considering factors other than location and

28 SEIA V. FERC

physical proximity. See Rush Univ. Med. Ctr. v. Burwell,

763 F.3d 754, 760 (7th Cir. 2014) (“When a statute

specifically authorizes an agency to define a term, there is

no need to consider whether the term is ambiguous and thus

left to agency delegation.”). Although we agree that the word

“site” typically carries some location-based connotation,

ordinary usage of the word often takes account of non-

locational factors as well. For example, one would not

normally refer to a zoo and a reservoir that are just over a

mile apart as being located at the same site. But if one were

referring to the Central Park Zoo and the Central Park

Reservoir in New York City, it would be natural to describe

them as located at a single site: Central Park. What

constitutes a “site” depends on more than simply physical

distance.

Because Congress did not unambiguously foreclose

FERC’s interpretation, we must defer to that interpretation

as long as it is reasonable. National Cable & Telecomms.

Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980 (2005).

Petitioners emphasize that the new rule disqualifies more

facilities than the prior rule, but the approach reflected in the

1980 Site Rule was not the only permissible interpretation of

the statute. In any event, even the 1980 Site Rule took

account of non-locational factors. Under the 1980 Site Rule,

FERC considered not only physical proximity, but also

whether the facilities were “owned by the same person” and

“use[d] the same energy resource,” to determine whether

two facilities within one mile of each other were located at

the same site. Order 70, 45 Fed. Reg. at 17,965. The 2020

Site Rule relies on similar non-locational factors to guide the

Commission’s classification of facilities between one and

ten miles apart. Although facilities located between one and

ten miles apart are presumed to be separate, the presumption

SEIA V. FERC 29

may be rebutted by showing, for example, that two facilities

share common physical characteristics, common ownership

and control, and shared contracts. Order 872, 85 Fed. Reg.

at 54,701. That is a permissible exercise of the discretion that

Congress granted the Commission.

2

Petitioners also challenge the 2020 Site Rule under the

APA. We will set aside the agency’s action if it is “arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. § 706(2)(A). For an agency’s

decision to survive review, “the agency must examine the

relevant data and articulate a satisfactory explanation for its

action including a ‘rational connection between the facts

found and the choice made.’” Motor Vehicle Mfrs. Ass’n of

U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983) (quoting Burlington Truck Lines v. United States, 371

U.S. 156, 168 (1962)). A “satisfactory explanation” need not

be the best possible explanation. Whether or not we would

have made the same choice as the agency, we must uphold

the agency’s action so long as it is “reasonable and

reasonably explained.” FCC v. Prometheus Radio Project,

141 S. Ct. 1150, 1158 (2021).

In Order 872, the Commission found “that some large

facilities were disaggregating into smaller facilities and

strategically spacing themselves slightly more than one mile

apart in order to be able to qualify as separate small power

production facilities.” Order 872-A, 85 Fed. Reg. at 86,690.

The Commission determined that this practice of strategic

disaggregation “contradict[ed] the spirit and purpose of

PURPA” because it allowed large facilities to skirt PURPA’s

80-megawatt size cap, and that the revised rule would help

combat this practice. Id. at 86,691. FERC recognized that

30 SEIA V. FERC

strategic circumvention of the prior site rule was not

necessarily an everyday occurrence. Order 872, 85 Fed. Reg.

at 54,697. But it provided specific examples of projects that,

in its view, had improperly taken advantage of the 1980 Site

Rule in order to avoid PURPA’s size limitation. Order 872-

A, 85 Fed. Reg. at 86,690. The revised rule addresses that

problem. Because FERC’s decision to modify the Site Rule

was “reasonable and reasonably explained,” it satisfies our

“deferential” standard of review under the APA. Prometheus

Radio Project, 141 S. Ct. at 1158.

Petitioners argue that the rule is nevertheless arbitrary

and capricious in three different ways.

First, petitioners argue that the choice of a ten-mile

threshold is arbitrary because FERC might just as well have

promulgated a three-mile rule, a five-mile rule, or a

seventeen-mile rule. In some sense of the word “arbitrary,”

petitioners have a point: As FERC acknowledged when

initially implementing its 1980 Site Rule, even the one-mile

rule was “essentially arbitrary.” Windfarms, Ltd., 13

F.E.R.C. ¶ 61,017, 61,032 (1980). But that does not make

the rule arbitrary in the sense contemplated by the APA.

The problem that FERC confronted is one that arises

frequently in administrative rulemaking. In order to design a

clear, manageable regulation, agencies often must select a

single quantitative threshold from among a range of

reasonable options. We have explained that when an agency

“‘had to choose some number from a broad range’ and

selected a ‘reasonable figure,’” its choice satisfies the

arbitrary-and-capricious standard even if there are other

reasonable values that the agency could have chosen. Pacific

Choice Seafood Co., 976 F.3d at 943 (quoting San Luis &

Delta-Mendota Water Auth. v. Jewell, 747 F.3d 581, 616

SEIA V. FERC 31

(9th Cir. 2014)). A 55-mile-per-hour speed limit is not

“arbitrary” just because 50 miles per hour, or 60 miles per

hour, would work equally well. See Air N. Am. v.

Department of Transp., 937 F.2d 1427, 1431–32 (9th Cir.

1991) (“[W]hen the language and policy of a statute permit

a range of alternative approaches to a particular problem, the

courts must allow the agency charged with implementing the

statute to choose the alternative that the agency prefers.”).

Here, FERC determined that a one-mile threshold

allowed large facilities to skirt PURPA’s size limitation. To

combat that practice, FERC needed to pick a greater

threshold. As FERC recognized, “[t]en miles need not be the

only possible choice under the statute in order for it to be

considered reasonable.” Order 872-A, 85 Fed. Reg. at

86,692. But FERC nevertheless concluded that a ten-mile

cutoff is “qualitatively a large enough distance to serve as

the inflection point beyond which it is safe to irrebuttably

presume separate sites.” Id. We see no reason to conclude

that its choice of a ten-mile threshold was arbitrary or

capricious.

Second, petitioners argue that the revised site rule

disregards FERC’s long-held preference for a bright-line

rule. Whereas the 1980 Site Rule relied on a bright-line, one-

mile threshold, the new rule relies on a rebuttable

presumption and case-by-case evaluation, which petitioners

say represents an unjustified departure from FERC’s

historical practice.

That argument misunderstands an administrative

agency’s authority to change policies over time. The APA

does not require “regulatory agencies [to] establish rules of

conduct to last forever,” and agencies may “adapt their rules

and policies to the demands of changing circumstances.’”

32 SEIA V. FERC

State Farm, 463 U.S. at 43 (first quoting American Trucking

Ass’ns v. Atchison, Topeka, & Santa Fe Ry. Co., 387 U.S.

397, 416 (1967); and then quoting Permian Basin Area Rate

Cases, 390 U.S. 747, 784 (1968)). An agency may change

its position for any number of reasons, such as a change in

factual circumstances or a shift in its policy priorities. See

Organized Vill. of Kake v. USDA, 795 F.3d 956, 968 (9th

Cir. 2015) (en banc). And when an agency changes course,

“it need not demonstrate to a court’s satisfaction that the

reasons for the new policy are better than the reasons for the

old one.” FCC v. Fox Television Stations, Inc., 556 U.S. 502,

515 (2009). Rather, as long as the agency “display[s]

awareness that it is changing position,” then “it suffices that

the new policy is permissible under the statute, that there are

good reasons for it, and that the agency believes it to be

better.” Id. (emphasis omitted).

Petitioners are correct that when it adopted the one-mile

rule, FERC stated that a rebuttable presumption would be

“burdensome and confusing.” Order 70, 45 Fed. Reg. at

17,965. And FERC repeatedly rejected proposals to modify

the rule, explaining that “[c]onstruing the one-mile rule as

merely a rebuttable presumption . . . and the litigation that

would inevitably follow, would hardly be consistent” with

the intent of Congress to encourage the development of QFs.

Northern Laramie Range All., 139 F.E.R.C. ¶ 61,190, 62,316

n.56 (2012).

But FERC was not required to maintain that position

forever. In Order 872, FERC provided “good reasons” for its

decision to abandon the bright-line, one-mile rule. Fox, 556

U.S. at 515. FERC recognized that the new site rule and

related certification procedures could produce additional

administrative burden and litigation risk for QFs. Order 872,

85 Fed. Reg. at 54,706. Nevertheless, it reasonably

SEIA V. FERC 33

concluded that the benefits of the new rule—ensuring that

PURPA’s benefits flow only to small facilities, not to large

facilities masquerading as small ones through strategic

facility placement—outweighed those costs. Id. FERC

determined that the revised site rule and its accompanying

regulatory requirements struck “an appropriate balance

between the need to address improper circumvention and the

need to avoid unduly burdening small power production

QFs.” Order 872-A, 85 Fed. Reg. at 86,701.

That explanation satisfies the APA. Even though FERC

had rejected this calculus when it opted to keep in place the

previous bright-line rule, FERC was entitled to prioritize its

concerns about improper aggregation over concerns about

administrative uncertainty, even if doing so represented a

departure from a long-held determination by the agency. See

Organized Vill. of Kake, 795 F.3d at 968 (explaining that an

agency may reprioritize some concerns over others it

previously deemed more important, “even on precisely the

same record”); State Farm, 463 U.S. at 57 (“An agency’s

view of what is in the public interest may change, either with

or without a change in circumstances.” (quoting Greater

Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C.

Cir. 1970))); accord National Ass’n of Home Builders v.

EPA, 682 F.3d 1032, 1038 (D.C. Cir. 2012).

Third, petitioners argue that FERC failed to consider the

reliance interests engendered by the prior rule. Since 1980,

developers relied on the prior one-mile rule when deciding

where to build a given facility—so long as the facility was

more than one mile apart from another affiliated facility,

developers could safely assume that the facilities would be

deemed separate sites. But under the new site rule, there is

no longer such a guarantee. And because the new rules apply

to recertifications filed by existing facilities, an existing QF

34 SEIA V. FERC

faces the risk that it will lose its eligibility for PURPA’s

benefits if it is deemed to be at the same site as another

facility.

As we have explained, an agency is generally free to

change policy without offering a more substantial

explanation than would be required if it were writing on a

blank slate. Sometimes, however, “a more detailed

justification” is required. Fox, 556 U.S. at 515. In particular,

when the prior policy “has engendered serious reliance

interests,” then “[i]t would be arbitrary or capricious to

ignore such matters.” Id.; accord Encino Motorcars, 579

U.S. at 221–22. In that situation, a “reasoned explanation is

needed” for disregarding the interests “engendered by the

prior policy.” Fox, 556 U.S. at 515. An agency must “assess

whether there were reliance interests” in the prior rule,

determine whether those interests “were significant,” and

weigh them “against competing policy concerns.”

Department of Homeland Sec. v. Regents of the Univ. of

Cal., 140 S. Ct. 1891, 1915 (2020).

In Order 872, FERC acknowledged the reliance interests

engendered by the 1980 Site Rule, recognizing that some

parties had relied on the prior rule when developing QFs.

See, e.g., Order 872-A, 85 Fed. Reg. at 86,698–99, 86,701–

03. But an agency “may determine, in the particular context

before it, that other interests and policy concerns outweigh

any reliance interests.” Regents of the Univ. of Cal., 140 S.

Ct. at 1914; see Encino Motorcars, 579 U.S. at 226

(Ginsburg, J., concurring) (“[R]eliance does not overwhelm

good reasons for a policy change.”). FERC reasoned that

preventing strategic circumvention of the site rule was more

important than any reliance interests, particularly when

many of the facilities that adversely relied on the old rule had

SEIA V. FERC 35

engaged in the very disaggregation practices that FERC now

seeks to prevent. Order 872-A, 85 Fed. Reg. at 86,702.

Importantly, FERC not only recognized the existence of

reliance interests but also took at least some measures to

mitigate the harm to relying parties. FERC emphasized that

“the new regulations do not apply to an existing facility

unless and until it makes substantive changes.” Order 872-

A, 85 Fed. Reg. at 86,702. FERC reasoned that “[w]hen the

existing QF makes a substantive change, it is no longer the

same facility it was before,” justifying application of the new

rule. Id. Order 872 provided examples of the kind of changes

that the Commission considers substantive: If, for example,

a facility’s power production capacity changes by at least

one megawatt or five percent, or its ownership changes by at

least ten percent, the new rules would apply. Order 872, 85

Fed. Reg. at 54,706. By acknowledging the existence of

reliance interests and incorporating measures to limit the

harm to the relying parties, FERC satisfied the APA.

3

Finally, petitioners contend that the 2020 Site Rule is

unlawfully retroactive. An administrative agency generally

may not promulgate retroactive regulations “unless that

power is conveyed by Congress in express terms.” Bowen v.

Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988). No

party contends that FERC is authorized by statute to engage

in retroactive rulemaking. The only question, then, is

whether FERC’s new site rule is retroactive.

A provision operates retroactively when it would “impair

rights a party possessed when he acted, increase a party’s

liability for past conduct, or impose new duties with respect

to transactions already completed.” Landgraf v. USI Film

Prods., 511 U.S. 244, 280 (1994); see Bahr v. Regan, 6 F.4th

36 SEIA V. FERC

1059, 1072 (9th Cir. 2021) (applying the principles of

Landgraf to the analysis of regulatory retroactivity);

National Mining Ass’n v. Department of Labor, 292 F.3d

849, 859 (D.C. Cir. 2002) (same). The critical question is

“whether the new provision attaches new legal consequences

to events completed before its enactment.” Landgraf, 511

U.S. at 270; see also Bowen, 488 U.S. at 219 (Scalia, J.,

concurring) (explaining that an administrative rule is

impermissible when it “alter[s] the past legal consequences

of past actions”).

The new site rule does not operate retroactively. It

applies to new facilities seeking initial certification and to

existing facilities seeking recertification, but only if that

certification or recertification is sought after the rule’s

effective date of December 31, 2020. 18 C.F.R.

§ 292.204(a)(2)(B)–(C); Order 872, 85 Fed. Reg. at 54,649.

The rule applies to recertification of an existing QF only

when there have been “substantive changes” to that facility,

such as when a facility’s power production capacity changes

by at least five percent, or its ownership changes by at least

ten percent. Order 872, 85 Fed. Reg. at 54,706. In other

words, so long as an already-certified facility does not

undergo a substantive change, the old rule applies, and the

new rule poses no threat to its qualifying status.

Petitioners do not take issue with the rule’s application

to initial certifications of new facilities. Instead, they focus

on the application of the rule to recertifications of already-

existing facilities. They argue that the new rule is retroactive

because it threatens to strip an already-qualified facility of

its PURPA eligibility based on what they consider to be

“minor” changes to the facility. But even if the triggering

event requiring recertification is “minor,” a previously

certified QF does not possess any sort of “vested rights” to

SEIA V. FERC 37

PURPA eligibility in perpetuity. Landgraf, 511 U.S. at 269

(quoting Society for the Propagation of the Gospel v.

Wheeler, 22 F. Cas. 756, 767 (C.C.N.H. 1814) (No. 13,156)).

Thus, even if a facility were to lose its PURPA eligibility in

the future under the new site rule, the rule would not “impair

rights a party possessed when [it] acted.” Id. at 280. Nor does

the rule “attach[] new legal consequences to events

completed before its enactment.” Id. at 270. Rather, it

potentially creates new legal consequences—the loss of

qualifying status—only for “events” that occur in the future:

recertifications that take place after the rule’s effective date,

and only if the facility undergoes a substantive change.

At bottom, petitioners’ theory is that the rule is

retroactive because QFs were built in reliance on the old site

rule, and the new rule could result in the loss of qualifying

status. But a rule is not retroactive merely because it “upsets

expectations based in prior law” or “is applied in a case

arising from conduct antedating the statute’s enactment.”

Landgraf, 511 U.S. at 269. “Even uncontroversially

prospective statutes” can do that. Id. at 269 n.24. For

example, “a new property tax or zoning regulation may upset

the reasonable expectations that prompted those affected to

acquire property; a new law banning gambling harms the

person who had begun to construct a casino before the law’s

enactment or spent his life learning to count cards.” Id. The

2020 Site Rule is not unlawfully retroactive under the APA.

B

We now turn to petitioners’ challenges to Order 872’s

revision of the Fixed-Rate Rule.

PURPA requires that the rates paid to QFs (1) “shall be

just and reasonable to the electric consumers of the electric

utility,” (2) shall be “in the public interest,” and (3) “shall

38 SEIA V. FERC

not discriminate against” QFs. 16 U.S.C. § 824a-3(b). Of

particular relevance here, it also states that no rule “shall

provide for a rate which exceeds the incremental cost to the

electric utility of alternative electric energy.” Id. Under that

provision, the rate paid to a QF may not exceed the cost to

the utility “of the electric energy which, but for the purchase

from [the QF], such utility would generate or purchase from

another source.” Id. § 824a-3(d).

In its 1980 Rules, FERC set the rate at the utility’s full

avoided cost. Order 69, 45 Fed. Reg. at 12,222–23. The 1980

Rules provided two methods for calculating avoided cost.

QFs could choose a rate determined by the utility’s avoided

cost calculated at the time of delivery, or, alternatively, a rate

calculated and fixed based on an estimate of the utility’s

avoided cost over the life of the contract. See Winding Creek

Solar, 932 F.3d at 863. FERC recognized in 1980 that “a

contract with avoided costs calculated at the time a [contract]

is incurred could exceed the electric utility’s avoided costs

at the time of delivery in the future, thereby seemingly

violating PURPA’s requirement that QFs not be paid more

than an electric utility’s avoided costs.” Order 872-A, 85

Fed. Reg. at 86,664. Nevertheless, FERC determined that

PURPA’s rate cap did not require a “minute-by-minute

evaluation of costs which would be checked against rates

established in long term contracts.” Order 69, 45 Fed. Reg.

at 12,224. FERC explained that “in the long run,

‘overestimations’ and ‘underestimations’ of avoided costs

will balance out,” and that allowing rates to be fixed in long-

term contracts was necessary to provide enough certainty to

allow QFs to obtain financing. Id.

Order 872 modifies the Fixed-Rate Rule by allowing (but

not requiring) States to eliminate fixed-contract energy rates.

18 C.F.R. § 292.304(d)(2). The rules require that States

SEIA V. FERC 39

maintain the right of QFs to elect fixed-contract capacity

rates. Id. § 292.304(d)(1)(ii).

Petitioners argue that FERC unreasonably interpreted

PURPA’s rate-related provisions and that the revised rule

violates PURPA’s “non-discrimination” provision. They

also argue that the new rule is arbitrary and capricious. We

find neither theory persuasive.

1

Petitioners argue that FERC’s modification of the Fixed-

Rate Rule reflects a misreading of PURPA. Petitioners

acknowledge, and FERC agrees, that Congress did not speak

to the precise question of how “avoided costs” should be

calculated, instead granting FERC broad discretion to set

rates, subject to the statute’s avoided-cost limitation. See 16

U.S.C. § 824a-3(b). And they correctly observe that PURPA

does not require that avoided cost be measured by reference

to short-run costs calculated at the time of delivery. The

Commission did not suggest otherwise. To the contrary, it

recognized that PURPA does not demand any particular

avoided-cost calculation method; as the Commission

observed, it “could have imposed a variable energy contract

requirement when it promulgated the PURPA Regulations in

1980 instead of requiring fixed energy contract rates.” Order

872-A, 85 Fed. Reg. at 86,672.

FERC’s position thus survives Chevron step one. Under

Chevron step two, it is a reasonable interpretation of the

statute. FERC determined that States should have the option

to require measurement of avoided costs at the time of

delivery because—in the Commission’s view—that

approach better comports with the principles of PURPA’s

avoided-cost provision: “[A] variable energy avoided cost

approach is a more accurate way to ensure that payments to

40 SEIA V. FERC

QFs equal, but do not exceed, avoided costs.” Order 872, 85

Fed. Reg. at 54,672. FERC was entitled to “justify its policy

choice by explaining why that policy ‘is more consistent

with statutory language’ than alternative policies.” Encino

Motorcars, 579 U.S. at 223 (quoting Long Island Care at

Home, Ltd. v. Coke, 551 U.S. 158, 175 (2007)).

Petitioners argue that the new rate rule violates PURPA’s

requirement that rates “shall not discriminate against” QFs.

16 U.S.C. § 824a-3(b)(2). They point out that QFs now must

accept a variable, uncertain rate (at least in those States that

choose to eliminate fixed rates), whereas utilities are

guaranteed the long-term recovery of their costs and a return

on investment, even when their costs exceed short-term

energy prices. Because QFs now face financial risks that

utilities do not, petitioners believe that the new rule sets a

rate that violates PURPA’s nondiscrimination requirement.

PURPA’s nondiscrimination provision cannot support

that interpretation. Under PURPA, the compensation regime

for QFs is fundamentally different from that used for

utilities. See American Paper, 461 U.S. at 414 (“Congress

did not intend to impose traditional ratemaking concepts

[used by utilities] on sales by qualifying facilities to

utilities.”). The Supreme Court explained in American Paper

that “the full-avoided-cost rule plainly satisfies the

nondiscrimination requirement.” Id. at 413; see Order 872,

85 Fed. Reg. at 54,651 (“If the purchasing utility is paying

the same rate to a QF for power that it otherwise would have

paid for incremental power, by definition such a rate could

not be discriminatory.”). Nothing in the Court’s analysis

suggests that the nondiscrimination requirement demands

fixed-rate, rather than variable-rate, assessment of avoided

costs. After all, the statute requires that “rates . . . shall not

discriminate” against QFs; it does not require that they be set

SEIA V. FERC 41

in such a way as to offset any other disadvantages that QFs

might face in the market. 16 U.S.C. § 824a-3(b)(2). Order

872 requires that QFs receive a rate equal to full avoided

costs, and that is sufficient to satisfy the nondiscrimination

requirement.

2

Petitioners argue that the Fixed-Rate Rule is arbitrary

and capricious for two reasons. First, they claim that FERC

changed its interpretation of PURPA without “display[ing]

awareness that it [was] changing position.” Fox, 556 U.S. at

515. Second, they argue that FERC lacked data to support its

conclusions and failed to recognize important elements of

the problem.

The parties debate whether FERC has changed its

interpretation of the statute to justify its rule change, but we

need not resolve that debate because FERC expressly and

unambiguously acknowledged that it was changing its policy

in partially eliminating the Fixed-Rate Rule. FERC stated

that “because the Commission’s revision to the fixed energy

rate requirement is based on changed circumstances since

the issuance of the PURPA Regulations in 1980, we must

provide ‘a reasoned explanation . . . for disregarding facts

and circumstances that underlay or were engendered by the

policy.’” Order 872-A, 85 Fed. Reg. at 86,672 (quoting Fox,

556 U.S. at 516). That satisfies the concern in Fox Television

that agencies not “depart from a prior policy sub silentio or

simply disregard rules that are still on the books.” 556 U.S.

at 515.

FERC also explained why it was changing policy. FERC

had initially justified the Fixed-Rate Rule on the theory that

“in the long run, ‘overestimations’ and ‘underestimations’ of

avoided costs will balance out.” Order 69, 45 Fed. Reg. at

42 SEIA V. FERC

12,224. But in Order 872, it determined, based on new

evidence, that “it is not necessarily the case that

overestimations and underestimations of avoided energy

costs will balance out.” Order 872, 85 Fed. Reg. at 54,677.

More specifically, it found that “[b]road price declines over

time throughout the energy industry show that long-term

fixed price QF contracts likely exceeded the avoided energy

costs at the time of delivery for extended periods of time.”

Order 872-A, 85 Fed. Reg. at 86,672. A finding of regular,

routine overestimations not balanced out by

underestimations would fully justify a change in policy.

Petitioners argue that there is no record evidence

suggesting that the prior Fixed-Rate Rule actually resulted

in contracts above market prices. They say that FERC

analyzed only a relatively short period during which energy

prices precipitously declined, calling into question the

conclusion that over- and under-estimations will not balance

out over time. Petitioners further argue that FERC relied on

unreliable reports of over-cost contracts—often from utility

companies themselves—without assessing the underlying

data.

But reliance on imperfect data is “not unusual in day-to-

day agency decisionmaking,” and an agency does not err by

making reasonable judgments “based on the evidence it

had.” Prometheus Radio Project, 141 S. Ct. at 1160; see

Myersville Citizens for a Rural Cmty., Inc. v. FERC, 783

F.3d 1301, 1308 (D.C. Cir. 2015) (recognizing that courts

must “afford FERC ‘an extreme degree of deference’” when

it makes judgments “within its technical expertise” (quoting

Washington Gas Light Co. v. FERC, 532 F.3d 928, 930

(D.C. Cir. 2008))). FERC reasonably relied on several

comments suggesting that PURPA contracts exceed avoided

costs somewhat often and by large margins. Order 872-A, 85

SEIA V. FERC 43

Fed. Reg. at 86,668 n.147. Those comments were not

facially unreliable, and even if the drop in prices represented

an anomalous circumstance, the anomaly supports the

Commission’s finding that, “at least in some circumstances,

long-term fixed avoided cost energy rates have been well

above the purchasing utility’s avoided costs for energy.”

Order 872, 85 Fed. Reg. at 54,676. The Commission could

reasonably conclude that the problem called for a remedy.

Petitioners object that FERC ignored concerns that state

commissions—which are granted new flexibility under the

new Fixed-Rate Rule—have previously violated the due

process rights of QFs in their implementation of PURPA

regulations. FERC did not ignore the concern; it explained

that the rule reflected “the expectation that the states will

fulfill their legal obligation to implement the Commission’s

PURPA Regulations as revised.” Order 872, 85 Fed. Reg. at

54,647. To the extent that any State fails to do so, the

Commission explained, Congress has provided a remedy in

16 U.S.C. § 824a-3(h). Id.

Petitioners also argue that FERC minimized concerns

about the ability of QFs to secure financing without the

certainty of a fixed rate, especially outside of organized

markets. FERC acknowledged that “fixed rates are

beneficial for obtaining financing for QF projects,” but it

determined that its reforms would not “materially affect[] the

ability of QFs to obtain financing.” Order 872, 85 Fed. Reg.

at 54,670. That determination was not arbitrary and

capricious.

First, FERC explained that because QFs are still entitled

to a fixed capacity rate, it believed that the potential receipt

of some steady cashflows will typically be sufficient to

encourage financing. As the Commission observed, “the

44 SEIA V. FERC

variable energy rate/fixed capacity rate construct . . . is the

standard rate structure used throughout the electric industry

for power sales agreements that include the sale of capacity.”

Order 872, 85 Fed. Reg. at 54,645. And it concluded that a

“fixed capacity rate . . . should typically be sufficient to

recover the QF’s financing costs and should therefore

continue to facilitate QF financing.” Id.

Second, FERC relied on data that non-PURPA

independent facilities have been successful—as

demonstrated by an almost 700 percent increase in

independent renewable generation between 2005 and 2018,

most of it outside of PURPA—and received adequate

financing without PURPA’s mandatory fixed rate. Order

872, 85 Fed. Reg. at 54,682. From this, FERC concluded that

QFs will similarly be able to obtain financing. FERC

reasonably relied on non-PURPA data to make “a reasonable

predictive judgment based on the evidence it had.”

Prometheus, 141 S. Ct. at 1160.

More importantly, FERC determined that the benefits of

its new approach—better compliance with the statutory

requirement that rates not exceed avoided costs—exceed the

harms that it may inflict on QFs. Order 872-A, 85 Fed. Reg.

at 86,672–73; see Encino Motorcars, 579 U.S. at 223–24

(“[A]n agency may justify its policy choice by explaining

why that policy ‘is more consistent with statutory language’

than alternative policies.” (quoting Long Island Care, 551

U.S. at 175)). Given the broad discretion that PURPA

provides FERC in setting rates, that was a permissible

judgment.

C

Order 872 permits (but does not require) States to adopt

a rebuttable presumption that locational marginal price

SEIA V. FERC 45

represents a utility’s avoided costs in certain organized

markets. 18 C.F.R. § 292.304(b)(6). Petitioners contend that

the LMP rebuttable presumption is arbitrary and capricious.

Relying on the two-part test articulated by the D.C. Circuit

in Cablevision Sys. Corp. v. FCC, 649 F.3d 695 (D.C. Cir.

2011), petitioners argue that the APA permits an agency to

adopt an evidentiary presumption only if the presumption

(1) is “rational,” and (2) “shift[s] the burden of production

and not the burden of persuasion.” Id. at 716. Petitioners

contend that the LMP presumption satisfies neither element

of the Cablevision test.

By its terms, the Cablevision test governs presumptions

adopted by a federal agency to govern its own proceedings.

But the LMP presumption does not govern proceedings

before the Commission; it is a presumption that States may

choose to apply (or not) in proceedings that they conduct.

We have not previously held that Cablevision applies in that

context. We need not explore that question further because

the parties agree that Cablevision applies, so we will assume,

without deciding, that they are correct. Under that test,

petitioners’ argument fails because the LMP presumption is

rational and does not impermissibly shift the burden of

persuasion.

First, the LMP presumption is rational. “[A]n evidentiary

presumption is only permissible if there is a sound and

rational connection between the proved and inferred facts,

and when proof of one fact renders the existence of another

fact so probable that it is sensible and timesaving to assume

the truth of [the inferred] fact . . . until the adversary

disproves it.” Cablevision, 649 F.3d at 716 (second

alteration in original) (quoting National Mining Ass’n v.

Department of Interior, 177 F.3d 1, 6 (D.C. Cir. 1999)). In

assessing that “rational connection,” we “defer to the

46 SEIA V. FERC

agency’s judgment.” Id. (quoting National Mining Ass’n,

177 F.3d at 6).

Petitioners argue that electric utilities purchasing from

QFs may have avoided costs that exceed LMP. For example,

utilities that obtain energy outside of the market auction—

whether from their own plants or through bilateral

contracts—might incur costs that exceed LMP. As

petitioners put it, LMP reflects a utility’s costs only “if the

utility’s own generation is bid at its full cost of production

and the utility’s marginal (most expensive) energy is

purchased through the market.”

Granting the point that LMP does not always describe

avoided costs, there is nevertheless a “sound and rational

connection” between the LMP presumption and a utility’s

avoided costs. Cablevision, 649 F.3d at 716. In an organized

market, LMP reflects the marginal cost of providing an

additional megawatt-hour of energy at a given time and

location within the grid, as determined by competitive

auctions. Order 872, 85 Fed. Reg. at 54,656; Federal Energy

Regulatory Comm’n, Energy Primer 60 (Nov. 2015);

Electric Power Supply Ass’n, 577 U.S. at 267–68. FERC

explained that this price often provides a reasonable proxy

for a utility’s avoided costs. LMP takes into account “all

physical system constraints” and thus “reflect[s] the true

marginal cost of production of energy.” Order 872, 85 Fed.

Reg. at 54,660. For a utility that purchases its marginal

energy through the market, then, LMP will, by definition,

equal the utility’s avoided energy costs. And because LMP

is location-specific, it more accurately measures a utility’s

avoided energy costs than would a system-wide cost

measure. Id. “Because LMP is likely to reflect the true

marginal cost of energy in the vast majority of cases,” FERC

said, “it is ‘so probable that it is sensible and timesaving to

SEIA V. FERC 47

assume’ that LMP for a particular utility is an appropriate

measure of the utility’s avoided costs for as-available

energy.” Order 872-A, 85 Fed. Reg. at 86,666 (footnote

omitted) (quoting National Mining Ass’n, 177 F.3d at 6).

FERC nevertheless recognized that LMP might “not

always reflect a purchasing utility’s actual avoided energy

costs.” Order 872, 85 Fed. Reg. at 54,659. For that reason,

FERC built flexibility into the rule. FERC’s notice of

proposed rulemaking had suggested adopting a per se rule,

which would have allowed States to adopt LMP as a measure

of avoided costs without providing QFs the opportunity to

demonstrate why LMP is inappropriate in a particular case.

2019 NPRM, 84 Fed. Reg. at 53,253. In response to

comments, FERC abandoned that approach and instead

adopted a rebuttable presumption. Order 872, 85 Fed. Reg.

at 54,659. If a utility’s actual avoided costs exceed LMP for

any of the reasons identified by petitioners, a QF can rebut

the presumption; at the end of the day, the QF is still entitled

to receive the utility’s full avoided costs. Moreover, no State

is obligated to adopt the rebuttable presumption if it

determines that LMP does not reflect actual avoided costs.

This alleviates concerns about the accuracy of LMP in

regional markets that are not sufficiently competitive.

Second, FERC did not impermissibly shift the burden of

persuasion. See Cablevision, 649 F.3d at 716. After a State

establishes a rate, that rate can be challenged before a state

regulatory authority, and then before the Commission or in

federal court. Order 872, 85 Fed. Reg. at 54,659–60; Pioneer

Wind Park I, LLC, 145 F.E.R.C. ¶ 61,215, 62,169 (2013)

(noting that if the QF objects to the State’s avoided-cost

rates, “it should first pursue such concerns at the [state]

Commission,” and then can file a petition before FERC or in

federal court); 16 U.S.C. § 824a-3(g), (h)(2). But in those

48 SEIA V. FERC

proceedings, the challenger always bears the burden of

persuasion—just as it did before the issuance of Order 872—

to demonstrate that the State’s rate choice does not

accurately reflect a utility’s actual avoided costs. As FERC

explained, nothing in Order 872 shifts the burden of

persuasion in that proceeding: “Requiring an entity

challenging the state’s use of the presumption in the first

instance to show why the state was wrong does not negate

the legal requirement that, unless the parties agree to another

rate, the rates for purchases in a QF contract must equal a

purchasing utility’s avoided costs.” Order 872-A, 85 Fed.

Reg. at 86,666. In such a proceeding, “a state would need to

address the challenging entity’s arguments in order to

demonstrate that LMP represents the purchasing utility’s

avoided costs,” and Order 872 does “not shift the burden of

persuasion, only the burden of production.” Id.

D

Petitioners argue that FERC’s adjustment of the market-

access presumption from 20 megawatts to five megawatts

was arbitrary and capricious.

As we have already explained, the APA ordinarily does

not demand that an agency justify a policy change with

reasons more substantial than would be required to adopt

that same policy in the first instance. See Fox, 556 U.S. at

514–15. But when a “new policy rests upon factual findings

that contradict those which underlay its prior policy,” an

agency must provide “a more detailed justification than what

would suffice for a new policy created on a blank slate.” Id.

at 515. In such cases, the agency must give a “reasoned

explanation” for “disregarding facts and circumstances that

underlay . . . the prior policy.” Id. at 516.

SEIA V. FERC 49

In Order 688, the Commission concluded that, as a

product of their size, “small” QFs may have difficulty

accessing markets. Order 688, 71 Fed. Reg. at 64,352; Order

688-A, 72 Fed. Reg. at 35,884. It therefore determined that

it was reasonable to adopt a rebuttable presumption that

small QFs lack nondiscriminatory market access. Faced with

competing comments about how to define a “small” QF, the

Commission acknowledged that “there is no unique and

distinct megawatt size that uniquely determines if a

generator is small.” Order 688-A, 72 Fed. Reg. at 35,884;

see Order 688, 71 Fed. Reg. at 64,353 (“[N]o single per-MW

demarcation is perfect.”). Nevertheless, the Commission

concluded that a 20-megawatt threshold would be

“reasonable and administratively workable.” Order 688, 71

Fed. Reg. at 64,352. The Commission noted that it had used

a 20-megawatt threshold in other rulemaking contexts, such

as its interconnection rules, which subjected small

generators of less than 20 megawatts to different rules than

large generators. Id. at 64,352–53. But because the

Commission recognized that there was no perfect

demarcation, it emphasized that it was creating only a

rebuttable presumption rather than a per se rule. Id.

In Order 872, FERC cited changed circumstances since

the issuance of Order 688 to justify its downward revision of

the market-access presumption from 20 megawatts to five

megawatts. Order 872, 85 Fed. Reg. at 54,715. Because

FERC’s revision of the presumption was based on “factual

findings that contradict those which underlay its prior

policy,” it was required to provide a “reasoned explanation”

for its policy change. Fox, 556 U.S. at 515–16.

The Commission did so by explaining that at the time it

issued Order 688, organized markets had been in existence

for only a few years. Order 872, 85 Fed. Reg. at 54,712. But

50 SEIA V. FERC

in the years since then, “markets have matured,” and “market

participants have gained a better understanding of the

mechanics of such markets,” enabling facilities with

capacities of less than 20 megawatts to participate in those

markets in ways that they could not before. Id. at 54,716.

Indeed, as FERC noted, the Commission’s own rules have

enabled greater market access for small QFs, such as its rule

requiring that regional markets use tariff schedules that

accommodate resources as small as 100 kilowatts. Order

872-A, 85 Fed. Reg. at 86,707. These rules “provide greater

opportunities for small power production facilities to

participate in wholesale organized markets” than were

available when FERC issued Order 688. Id. And in the years

since it issued Order 688, FERC observed “multiple

examples of small power production facilities under 20 MW

participating in . . . energy markets.” Order 872, 85 Fed. Reg.

at 54,715.

Taking this evidence into account, FERC found that it

was “reasonable to presume that access to the [regional

markets] has improved and that it is appropriate to update

the presumption for smaller production facilities.” Order

872, 85 Fed. Reg. at 54,716. As in Order 688, FERC

acknowledged in Order 872 that no single size threshold

would perfectly distinguish facilities that lack adequate

market access from those that have adequate market access.

Id. And just as it did when issuing Order 688, FERC looked

to the cutoffs used in other rules to guide its revision to the

market-access presumption, such as its rules requiring that

utilities increase the availability of “Fast-Track”

interconnection procedures for projects up to five megawatts

in size. Id. In the end, after considering an even lower

threshold of one megawatt, FERC settled on a five-megawatt

threshold. It concluded that “5 MW represents a reasonable

SEIA V. FERC 51

new threshold that accounts for the change of circumstances

indicating that 20 MW no longer is appropriate but also

accommodates commenters’ concerns that a 1 MW

threshold would be too low.” Id.

FERC provided a “reasoned explanation” for its revision

of the rebuttable presumption, and its decision survives

review under the APA. Fox, 556 U.S. at 516. The

Commission’s determination that market conditions have

improved considerably for small facilities since the issuance

of Order 688 implicates its “technical understanding and

policy judgment” about the state and operation of energy

markets, and thus we are particularly careful not to

“substitute our own judgment for that of the Commission.”

Electric Power Supply Ass’n, 577 U.S. at 295, 292. Given

FERC’s reasonable determination that market conditions

had changed, FERC’s choice of a five-megawatt threshold

was not arbitrary and capricious.

IV

That leaves the NEPA challenge, which is asserted only

by the Environmental Organizations. FERC provided two

independent grounds for its conclusion that it was not

required to prepare an environmental assessment (EA) or

environmental impact statement (EIS). First, FERC claimed

that Order 872 falls within a “categorical exclusion” to

NEPA. Order 872, 85 Fed. Reg. at 54,725–27. Second,

FERC asserted that any downstream environmental impacts

of Order 872 are too uncertain and unforeseeable to trigger

NEPA review. Id. Reviewing FERC’s NEPA conclusions

under the APA’s arbitrary-and-capricious standard, see

Environmental Def. Ctr. v. Bureau of Ocean Energy Mgmt.,

36 F.4th 850, 871–72 (9th Cir. 2022), we reject both

justifications. FERC was required to prepare an EA before

52 SEIA V. FERC

issuing Order 872. But because of the extraordinary

disruptive consequences of vacating the rules, we decline to

order vacatur.

A

Before we turn to the merits of the NEPA claims, we

consider whether we have jurisdiction. Utility-Intervenors

(but not FERC) contend that the Environmental

Organizations lack both Article III and prudential standing.

We disagree.

In order to establish Article III standing, “a plaintiff must

show (1) it has suffered an ‘injury in fact’ that is (a) concrete

and particularized and (b) actual or imminent, not

conjectural or hypothetical; (2) the injury is fairly traceable

to the challenged action of the defendant; and (3) it is likely,

as opposed to merely speculative, that the injury will be

redressed by a favorable decision.” Association of Irritated

Residents v. EPA, 10 F.4th 937, 943 (9th Cir. 2021) (quoting

Friends of the Earth, Inc. v. Laidlaw Env’t Servs. (TOC),

Inc., 528 U.S. 167, 180–81 (2000)). We have explained that

when a plaintiff alleges a “procedural injury”—such as the

failure to comply with NEPA—the “‘normal standards for

. . . [the] immediacy’ of the injury are relaxed.” Navajo

Nation v. Department of the Interior, 876 F.3d 1144, 1160

(9th Cir. 2017) (alterations in original) (quoting Lujan v.

Defenders of Wildlife, 504 U.S. 555, 572 n.7 (1992)).

Although “injury in fact requires a likelihood that the

challenged action, if ultimately taken, would threaten a

plaintiff’s interests,” id. at 1161, we do not require the

plaintiff to show that the agency would necessarily have

reached a different decision had it complied with NEPA.

Lujan, 504 U.S. at 572 n.7.

SEIA V. FERC 53

The Environmental Organizations have Article III

standing. In their briefing and supplemental declarations, the

Organizations adequately document the concrete harms that

Order 872 could cause their members. According to the

Organizations, Order 872 will reduce the incentives

provided to QFs, many of which use renewable energy

sources. This, in turn, could shift the mix of power

generation in the United States away from renewable

generation and toward fossil-fuel generation. This

undeniably harms the economic interests of the

Organizations’ members, many of which own QFs, and the

environmental interests of the Organizations’ members,

many of whose missions involve the promotion of renewable

energy development. The Organizations’ members also live

near facilities that burn fossil fuels, and if those facilities

burn more fossil fuels, members will suffer greater air

pollution. The threat of those concrete harms confers Article

III standing.

Utility-Intervenors suggest that the alleged harms “rest[]

on a speculative chain of future possibilities,” depriving the

Organizations of standing. (quoting Center for Biological

Diversity v. Bernhardt, 946 F.3d 553, 560 (9th Cir. 2019)).

But although Utility-Intervenors argue that the alleged

environmental harms of Order 872 are not foreseeable

because they depend on the subsequent, independent choices

made by each State, even “a contingent ‘chain of events’ can

create a ‘reasonably probable’ threat to a plaintiff’s

interests.” Navajo Nation, 876 F.3d at 1161; cf. California

ex rel. Lockyer v. United States Dep’t of Agric., 575 F.3d

999, 1010–11 (9th Cir. 2009) (concluding that a NEPA

challenge was ripe for adjudication, even though any alleged

harms from the challenged rule would not materialize

without subsequent action by individual States). And state

54 SEIA V. FERC

implementation of Order 872 is far from speculative. To the

contrary, multiple States in which the Organizations’

members live have already begun to implement the order.

We conclude that there is at least a “reasonable probability”

that FERC’s alleged NEPA violation will lead to concrete

harm to the Organizations’ members. Navajo Nation, 876

F.3d at 1161 (citation omitted).

To be sure, the harm will be caused by third parties rather

than directly by FERC itself. But that does not defeat the

Organizations’ standing. Although “speculation about the

decisions of independent actors” is not an adequate basis for

standing, the relevant actors here are not genuinely

independent. Clapper v. Amnesty Int’l, USA, 568 U.S. 398,

414 (2013). Rather, they are the entities directly regulated by

the regime established in Order 872, and as we have already

explained, their responses to that order are hardly a matter of

speculation. In the NEPA context, we have repeatedly held

that predictable “third-party responses to agency action [are]

sufficient to confer standing.” Idaho Conservation League v.

Mumma, 956 F.2d 1508, 1515 (9th Cir. 1992).

In addition to Article III standing, a plaintiff challenging

an agency’s compliance with NEPA must establish

prudential standing by demonstrating that its injury falls

“within the zone of interests to be protected by the statute.”

Ranchers Cattlemen Action Legal Fund United

Stockgrowers of Am. v. United States Dep’t of Agric., 415

F.3d 1078, 1103 (9th Cir. 2005) (quoting Nevada Land

Action Ass’n v. United States Forest Serv., 8 F.3d 713, 715–

16 (9th Cir. 1993)). As its name makes clear, NEPA is an

environmental statute, and thus “to assert a claim under

NEPA, a plaintiff must allege injury to the environment;

economic injury will not suffice.” Id. But although a purely

economic injury does not fall within NEPA’s zone of

SEIA V. FERC 55

interests, a plaintiff can nevertheless satisfy NEPA’s zone-

of-interests requirement even “if his or her interest is

primarily economic, as long as he or she also alleges an

environmental interest or economic injuries that are

‘causally related to an act within NEPA’s embrace.’” Id.

(quoting Port of Astoria, Or. v. Hodel, 595 F.2d 467, 476

(9th Cir. 1979)).

The Environmental Organizations satisfy NEPA’s zone-

of-interests test. The environmental harms that they fear—

namely, an increase in pollution and greenhouse-gas

emissions resulting from reduced incentives provided to

renewable sources—undoubtedly fall within NEPA’s zone

of interests. Given the specific renewable-energy-promoting

purposes of the Organizations, their interest is also clearly

“distinct from the interest held by the public at large.”

Navajo Nation, 876 F.3d at 1164 (quoting Cantrell v. City of

Long Beach, 241 F.3d 674, 681 (9th Cir. 2001)). Further, the

Organizations have expressly environmental missions, and

thus they have a “direct interest” in ensuring that FERC

complies with NEPA’s requirements. See Western

Watersheds Project, 632 F.3d at 485–86 (concluding that a

non-profit organization with a “direct interest” in seeing that

the agency adequately evaluates the environmental effects of

a proposed action fell within NEPA’s zone of interests).

Because that interest is sufficient for prudential standing, we

need not consider whether the economic harms that the

Organizations’ members fear also fall within NEPA’s zone

of interests.

B

NEPA “imposes procedural requirements designed to

force agencies to take a ‘hard look’ at environmental

consequences” of their actions. Center for Cmty. Action &

56 SEIA V. FERC

Env’t Just. v. FAA, 18 F.4th 592, 598 (9th Cir. 2021)

(quoting Earth Island Inst. v. United States Forest Serv., 351

F.3d 1291, 1300 (9th Cir. 2003)). To that end, NEPA

requires agencies to prepare a detailed EIS for any “major

Federal actions significantly affecting the quality of the

human environment.” 42 U.S.C. § 4332(C). The threshold

for NEPA analysis “is relatively low: ‘It is enough for the

plaintiff to raise substantial questions whether a project may

have a significant effect on the environment.’” Lockyer, 575

F.3d at 1012 (citation omitted).

Under NEPA’s implementing regulations, before an

agency decides to prepare an EIS, it may prepare an EA,

which is a “concise public document” designed to “provide

sufficient evidence and analysis for determining whether to

prepare an environmental impact statement or a finding of

no significant impact.” 40 C.F.R. § 1508.9(a) (2020). An EA

“is intended to help an agency decide if an EIS is warranted.”

Environmental Def. Ctr., 36 F.4th 850, 872 (9th Cir. 2022).

If, after the completion of an EA, there remain “‘substantial

questions’ about whether an agency action will have a

significant effect,” an EIS is required. Bark v. United States

Forest Serv., 958 F.3d 865, 868 (9th Cir. 2020) (citation

omitted). Otherwise, the agency “may issue a finding of no

significant impact (‘FONSI’) in lieu of preparing an EIS.”

Id. (citation omitted).

But an agency is not required to prepare an EA or EIS if

the proposed action falls within a “categorical exclusion.” 40

C.F.R. § 1508.4; see Save Our Skies LA v. FAA, 50 F.4th

854, 859–60 (9th Cir. 2022). Agencies may establish

categorical exclusions for “actions which do not individually

or cumulatively have a significant effect on the human

environment.” 40 C.F.R. § 1508.4; see id. § 1507.3(e)(2)(ii).

When a categorical exclusion applies, “neither an

SEIA V. FERC 57

environmental assessment nor an environmental impact

statement is required” unless “extraordinary circumstances”

are present. Id. § 1508.4.

C

We start with FERC’s contention that Order 872 falls

within a categorical exclusion to NEPA. FERC established a

categorical exclusion for rules that are “clarifying,

corrective, or procedural, or that do not substantially change

the effect of . . . regulations being amended.” 18 C.F.R.

§ 380.4(a)(2)(ii). When that categorical exclusion applies,

“neither an environmental assessment nor an environmental

impact statement” is required. Id. § 380.4(a).

We agree with FERC that some elements of Order 872,

considered on their own, might fall into the categorical

exclusion for clarifying, corrective, or procedural rules. For

example, Order 872’s update to Form 556—used by QFs

when applying for certification—can reasonably be

described as a “procedural” change. Order 872, 85 Fed. Reg.

at 54,728. Likewise, its revision to the definition of the term

“electrical generating equipment” can reasonably be

characterized as “clarifying” whether particular kinds of

equipment (such as wind turbines or solar panels) fall within

the term’s scope. Id. at 54,703.

We reject FERC’s contention, however, that the more

substantive elements of Order 872 fall within the categorical

exclusion. FERC interpreted the “corrective” portion of its

categorical exclusion as “including changes needed in order

to ensure that a regulation conforms to the requirements of

the statutory provisions being implemented by the

regulation.” Order 872, 85 Fed. Reg. at 54,728. FERC

characterized three of Order 872’s rule changes as

“corrective”: (1) modification of the Site Rule, (2)

58 SEIA V. FERC

modification of the Fixed-Rate Rule, and (3) modification of

the presumption of non-discriminatory access. Id. In FERC’s

view, because it adopted those changes in order to better

conform to PURPA’s statutory text, the revisions were

corrective in nature and thus fit within the categorical

exclusion. Id.

Although we owe some deference to FERC’s

interpretation of its own regulation, see Kisor v. Wilkie, 139

S. Ct. 2400 (2019), the “corrective” component of the

categorical exclusion cannot reasonably be read so broadly.

Agencies regularly adjust their policies to better comply with

a statute. See Encino Motorcars, 579 U.S. at 222–24. That is

especially so where, as here, a statute provides an agency

with broad discretion to fulfill its obligations in any number

of reasonable and permissible ways. See 16 U.S.C. § 824a-

3(a). But when an agency adopts broad, transformative, and

substantive changes to its regulations, it cannot sidestep

NEPA’s requirements by claiming that it was motivated by

its desire to better conform to the statute and then applying a

“corrective” label. A regulatory change as significant as

Order 872 is not corrective merely because the agency

expresses some interest in better statutory compliance. If it

were, nearly any regulatory change could evade NEPA

review. See Order 872-A, 85 Fed. Reg. at 86,754 (Glick,

Comm’r, dissenting in part).

FERC’s own NEPA implementing regulations provide

additional support for our conclusion. Even if Order 872

could reasonably be characterized as creating “corrective”

rules, and therefore as falling within a categorical exclusion,

FERC’s regulations state that when a rule would otherwise

fall within a categorical exclusion but “the environmental

effects are uncertain,” the Commission will generally

SEIA V. FERC 59

prepare an EA or EIS regardless. 18 C.F.R.

§§ 380.4(b)(1)(ii), (b)(2)(vii).

In support of its application of the categorical exclusion,

FERC relies on Department of Transportation v. Public

Citizen, 541 U.S. 752 (2004). In that case, the Supreme

Court rejected an argument that the Federal Motor Carrier

Safety Administration had violated NEPA because the EA

accompanying certain regulations failed to consider the

potential environmental effects of increased cross-border

travel by Mexican motor carriers. Id. at 755. The Court

observed that only the President, not the agency, “could

authorize (or not authorize) cross-border operations from

Mexican motor carriers.” Id. at 770. Thus, because the

agency had “no discretion to prevent the entry of Mexican

trucks, its EA did not need to consider the environmental

effects arising from the entry.” Id.

Drawing on Public Citizen, FERC argues that it had “no

discretion” to keep the prior rules in effect once it

determined that “certain of the 1980 PURPA Regulations

conflicted with PURPA’s statutory mandates.” And, FERC

says, because it had no option but to issue the “corrective”

rules of Order 872, it “did not need to consider the

environmental effects arising from” its revisions and could

therefore apply the categorical exclusion. Public Citizen,

541 U.S. at 770. In fact, as FERC emphasized throughout the

rulemaking process, PURPA provides FERC with broad

discretion. For example, as explained above, FERC

reasonably determined that its new Site Rule better served

the “spirit and purpose of PURPA.” Order 872-A, 85 Fed.

Reg. at 86,691. But that does not mean that the 2020 Site

Rule was the only permissible implementation of FERC’s

authority to define whether two facilities are located “at the

same the site,” or that such a change was mandated by the

60 SEIA V. FERC

statute. The same is true of FERC’s modification of the

market-access presumption. While FERC reasonably

concluded in Order 872 that facilities with a power

production capacity exceeding five megawatts could be

rebuttably presumed to possess non-discriminatory market

access, 85 Fed. Reg. at 54,716, we cannot say that this was

the only threshold that FERC could have chosen. Even if

FERC issued Order 872, in part, to better conform to its

interpretation of PURPA’s statutory language, FERC

nevertheless retained discretion in carrying out its statutory

mandate. That discretion distinguishes this case from Public

Citizen and makes FERC’s reliance on the categorical

exclusion unreasonable.

D

FERC also concluded that it was not required to prepare

an EA or EIS because “any potential environmental impacts

from the final rule are not reasonably foreseeable.” Order

872-A, 85 Fed. Reg. at 86,716. According to FERC, Order

872 “does not involve a particular project that define[s]

fairly precisely the scope and limits of the proposed

development.” Id. (citation and quotation marks omitted).

Rather, its rules merely provide state regulatory authorities

with expanded discretion in administering PURPA. Id. at

86,717. Thus, it was “impossible to know what the states

may choose to do in response to the final rule, whether they

will make changes in their current practices or not, and how

those state choices would impact QF development and the

environment.” Id.

FERC misunderstands NEPA’s requirements. Both the

applicable regulations and our case law make clear that, in

the ordinary course, an agency “shall . . . prepare an

environmental assessment” for a major agency action unless

SEIA V. FERC 61

the proposed action is one that “normally . . . do[es] not have

a significant effect on the human environment” and therefore

falls within a categorical exclusion. 40 C.F.R. § 1501.4

(emphasis added); see Klamath Siskiyou Wildlands Ctr. v.

Boody, 468 F.3d 549, 562 (9th Cir. 2006) (“[I]f the proposed

action does not categorically require the preparation of an

EIS, the agency must prepare an EA to determine whether

the action will have a significant effect on the

environment.”) (alteration in original) (emphasis added)

(quoting Kern v. Bureau of Land Mgmt., 284 F.3d 1062,

1066 (9th Cir. 2002)); Lockyer, 575 F.3d at 1012 (requiring

an EIS, EA, or categorical exclusion to comply with NEPA);

Steamboaters v. FERC, 759 F.2d 1382, 1393 (9th Cir. 1985)

(noting that the “only exception” to the requirement that an

agency prepare at least an EA is when the proposed action

falls within a categorical exclusion). And FERC’s own

regulations state that “[a]n environmental assessment will

normally be prepared” for regulations not covered by a

categorical exclusion. 18 C.F.R. §§ 380.5(a), (b)(12).

Relying on Center for Biological Diversity v. Ilano, 928

F.3d 774 (9th Cir. 2019), FERC argues that Order 872 did

not authorize “a particular project” requiring environmental

analysis. Id. at 780. In Ilano, we upheld the United States

Forest Service’s determination that no EA or EIS was

required before the Service designated forest land as a

“landscape-scale area” under the Healthy Forests

Restoration Act because such a designation did not “‘change

the status quo,’” authorize a “particular project,” or

“foreseeably impact the environment,” but instead merely

identified forest areas suffering from threats like insect

infestation and disease. Id. at 774, 780–81 (quoting

Northcoast Env’t Ctr. v. Glickman, 136 F.3d 660, 668 (9th

Cir. 1998)). We explained that no NEPA analysis was

62 SEIA V. FERC

necessary because NEPA does not require an agency to

“consider the environmental effects that speculative or

future projects might have.” Id. at 781 (quoting Northcoast

Env’t Ctr., 136 F.3d at 668).

FERC suggests that any environmental assessment of

Order 872 would be similarly speculative. Order 872, it says,

merely provides States with new policy options, which they

can choose to embrace or not; it does not authorize any

particular project. But while the designation in Ilano did not

“change the status quo” or “foreseeably impact the

environment,” the same cannot be said of FERC’s overhaul

of its longstanding PURPA regulations. Even if Order 872

did not authorize any particular project, it was eminently

foreseeable that a regulatory change of this magnitude could

produce significant environmental effects. It was a near-

certainty, for example, that at least some QFs could lose their

status under the 2020 Site Rule, or that at least some States

would eliminate the fixed-rate option for the calculation of

avoided costs. Cf. Lockyer, 575 F.3d 999 (requiring NEPA

analysis when replacing a nationwide rule with a varied,

state-by-state rule).

The effects of those actions differ from the

environmental harms in Ilano, which were necessarily

location- and project-specific. At the designation stage, it

was impossible for the Forest Service to predict the relevant

environmental concerns—for instance, the effect of the

designation on the California spotted owl—without knowing

the location and type of the forest-treatment projects that

would later be implemented. We agree with FERC that it

could not reasonably consider the local effects of Order 872

on, say, vegetation, water quality, and wildlife because it

could not predict which States would adopt which

components of Order 872. Order 872-A, 85 Fed. Reg. at

SEIA V. FERC 63

86,717. But unlike in Ilano, the most significant

environmental impact of Order 872 is the possible effect on

greenhouse-gas emissions, which does not require any

location- or project-specific analysis.

FERC also contends that it had no meaningful way to

model or predict the effects of Order 872. Order 872, 85 Fed.

Reg. at 54,728–29. As FERC put it in the order, “any

consideration of whether the final rule could potentially have

significant environmental impacts would be so speculative

as to render meaningless any environmental analysis of these

hypothetical impacts.” Order 872-A, 85 Fed. Reg. at 86,718.

We acknowledge that NEPA does not require an agency

to “peer into a crystal ball,” “engage in speculative analysis,”

or “‘do the impractical, if not enough information is

available to permit meaningful consideration.’” Northern

Plains Res. Council v. Surface Transp. Bd., 668 F.3d 1067,

1078–79 (9th Cir. 2011) (quoting Environmental Prot. Info.

Ctr. v. United States Forest Serv., 451 F.3d 1005, 1014 (9th

Cir. 2006)). At the same time, we have recognized that the

“effects [of a proposed action] may be difficult to measure

and may be determined ultimately to be too imprecise to

influence the [action], but this is precisely the type of

determination that only can be intelligently made after the

preparation of at least an EA.” California Wilderness Coal.

v. United States Dep’t of Energy, 631 F.3d 1072, 1103 (9th

Cir. 2011). Thus, when an agency is uncertain about the

possible environmental effects of a proposed action, the

proper course is to prepare an EA to the best of the agency’s

ability, not to avoid environmental analysis altogether.

Because at least some degree of “speculation . . . is implicit

in NEPA,” agencies may not “shirk their responsibilities

under NEPA by labeling any and all discussion of future

environmental effects as crystal ball inquiry.” Northern

64 SEIA V. FERC

Plains Res. Council, 668 F.3d at 1079 (quoting Selkirk

Conservation All. v. Forsgren, 336 F.3d 944, 962 (9th Cir.

2003) (omission in original)); see also Sierra Club v. FERC,

867 F.3d 1357, 1374 (D.C. Cir. 2017) (“NEPA analysis

necessarily involves some ‘reasonable forecasting,’ and . . .

agencies may sometimes need to make educated

assumptions about an uncertain future.” (quoting Delaware

Riverkeeper Network v. FERC, 753 F.3d 1304, 1310 (D.C.

Cir. 2014))).

Here, the public raised “substantial questions” as to

whether Order 872 would produce significant environmental

impacts. Lockyer, 575 F.3d at 1018. Commenters pointed out

that FERC’s sweeping overhaul of its PURPA rules would

reduce the incentives provided to QFs—a consequence of

Order 872 that no one seriously disputes. See, e.g., Order

872-A, 85 Fed. Reg. at 86,753 (Glick, Comm’r, dissenting

in part). And because many QFs rely on renewable power

sources, it takes little imagination to see that a reduction in

the incentives provided to QFs could, in turn, alter the mix

of energy production, shifting production away from

renewable production and toward fossil-fuel production. See

2019 NPRM, 84 Fed. Reg. at 53,249 (noting that even after

the expanded development of non-PURPA renewable

facilities since 2005, QFs have accounted for “10 to 20

percent of all renewable resource capacity in service in the

United States”).

Those effects were “reasonably foreseeable” in that they

were “sufficiently likely to occur that a person of ordinary

prudence would take [them] into account in reaching a

decision.” Sierra Club, 867 F.3d at 1371 (alteration in

original) (quoting EarthReports, Inc. v. FERC, 828 F.3d 949,

955 (D.C. Cir. 2016)). They were enough to trigger FERC’s

obligation to conduct, or at least attempt to conduct,

SEIA V. FERC 65

environmental analysis in the form of an EA. The possibility

of environmental effects was not so remote that the

Commission was entitled to throw up its hands and forgo

environmental analysis altogether. Cf. California Wilderness

Coal., 631 F.3d at 1097 (“[A]n agency cannot merely assert

that its decision will have an insignificant effect on the

environment, but ‘must adequately explain its decision.’”

(quoting Alaska Ctr. for Env’t v. United States Forest Serv.,

189 F.3d 851, 859 (9th Cir. 1999))).

Significantly, FERC has previously modeled the

potential environmental effects of other major rules affecting

electricity markets. See, e.g., Promoting Wholesale

Competition Through Open Access Non-Discriminatory

Transmission Services by Public Utilities, Order 888, 61

Fed. Reg. 21,540, 21,542 (May 10, 1996) (noting that the

Commission prepared an EIS). Most relevantly, before it

adopted its original PURPA rules in 1980, the Commission

produced an EA using “market penetration analyses.” Order

70, 45 Fed. Reg. at 17,964. Even though the EA concluded

that the 1980 Rules, as a whole, would not significantly

affect the environment, FERC nevertheless prepared a full

EIS to evaluate the effects of certain diesel cogeneration

QFs. Id. at 17,965. In preparing its 1980 NEPA review, the

Commission confronted—and overcame—the very same

analytical obstacles that it now claims prevent it from

conducting environmental review. The 1980 NEPA analysis,

for example, noted that the Commission’s rules did not

“authorize or fund any particular projects” or “authorize or

forbid the use of certain fuels,” but rather “provide[d] certain

economic incentives to, and remove[d] other disincentives,

. . . from certain classes of technologies.” Id. at 17,964.

FERC also observed that “identifying the levels of the

environmental effects associated with the programmatic

66 SEIA V. FERC

encouragement and deregulation of various types of

technologies” is difficult, and that any environmental

analysis would necessarily contain “a great number of

uncertainties.” Id. at 17,965.

FERC argues that the simplifying assumptions that

enabled the 1980 EA are not replicable here. For example,

the 1980 analysis could assume a simpler market structure

than could be used today (because there was virtually no

independent power development in 1980), and could assume

that the States would implement the 1980 Rules uniformly

(without the many optional elements provided by Order

872). Order 872-A, 85 Fed. Reg. at 86,722–23. We share the

dissenting Commissioner’s skepticism that FERC’s

modeling capabilities “have not improved dramatically over

the course of the last four decades” such that at least some

environmental review would nevertheless be possible. Id. at

86,753 (Glick, Comm’r, dissenting in part); see also Sierra

Club, 867 F.3d at 1374 (noting that an agency’s inability to

provide precise quantitative estimates of downstream

greenhouse-gas emissions did not excuse its wholesale

failure to discuss them, even though any such analysis

“depend[ed] on several uncertain variables”).

But we need not evaluate FERC’s various explanations

for its inability to model the environmental impacts of Order

872. When an agency has concerns about its technical ability

to evaluate the environmental effects of a rule, it must fully

explore those concerns in an EA. See California Wilderness

Coal., 631 F.3d at 1103. Perhaps more fundamentally,

FERC’s explanation in Order 872 is flawed because it does

not indicate that the agency took the “hard look” that NEPA

requires. Whatever can be said of FERC’s various

arguments, the dissenting Commissioner was correct to

observe that “the Commission’s assertion that Order No.

SEIA V. FERC 67

872’s effects are overly speculative is tough to square with

the fact that it has not undertaken any effort whatsoever to

assess those effects.” Order 872-A, 85 Fed. Reg. at 86,753

(Glick, Comm’r, dissenting in part). FERC did not produce

a single sentence of environmental analysis before issuing

sweeping changes to its PURPA regulations. Nor did FERC

attempt—in even the most rudimentary or non-quantitative

manner—to predict the environmental consequences of

Order 872.

This is not a case in which the agency “engaged in

significant environmental analysis before reaching a

decision but failed to comply precisely with NEPA

procedures.” See Nevada v. Department of Energy, 457 F.3d

78, 90 (D.C. Cir. 2006) (noting that the court had previously

excused an agency’s failure to prepare an EA because the

agency had thoroughly considered the environmental

consequences during the rulemaking). Indeed, we are aware

of no case approving an agency’s decision not to engage in

any environmental analysis for a rulemaking of this

magnitude. And while the lack of reasonably foreseeable

environmental impacts may justify an agency’s decision not

to complete an EIS, it cannot relieve an agency of its

obligation to produce an EA.

E

Having concluded that FERC violated NEPA by failing

to prepare an EA, we must determine the appropriate

remedy. When an agency violates NEPA, the presumptive

remedy is vacatur of the deficient action. Alliance for the

Wild Rockies v. United States Forest Serv., 907 F.3d 1105,

1121 (9th Cir. 2018). But we are not without discretion:

“When equity demands,” we may leave the action in place

on remand while the agency reconsiders the action or cures

68 SEIA V. FERC

a procedural defect. Id.; see California Cmtys. Against

Toxics v. EPA, 688 F.3d 989, 992 (9th Cir. 2012) (per

curiam) (“A flawed rule need not be vacated.”).

In deciding whether to vacate a defective agency action,

we apply the two-factor balancing test prescribed in Allied-

Signal, Inc. v. United States Nuclear Regulatory

Commission, 988 F.2d 146 (D.C. Cir. 1993). Under that test,

“[w]e weigh the seriousness of the agency’s errors against

‘the disruptive consequences of an interim change that may

itself be changed.’” Center for Food Safety v. Regan, 56

F.4th 648, 663 (9th Cir. 2022) (quoting Allied-Signal, 988

F.2d at 150–51). Here, although the agency’s errors are

significant, the disruptive consequences are great enough to

warrant remand without vacatur.

As to the seriousness of the error, we recognize that the

failure to produce an EA is a serious omission. NEPA makes

producing an EA “fundamental” to the decision-making

process because an EA helps the agency determine whether

an EIS is necessary. Klamath Siskiyou Wildlands Ctr., 468

F.3d at 562 (quoting Metcalf v. Daley, 214 F.3d 1135, 1143

(9th Cir. 2000)). But when considering whether to vacate an

order, we do not evaluate the seriousness of the agency’s

error in the abstract. Instead, we ask “whether the agency

would likely be able to offer better reasoning or whether by

complying with procedural rules, it could adopt the same

rule on remand, or whether such fundamental flaws in the

agency’s decision make it unlikely that the same rule would

be adopted on remand.” Pollinator Stewardship Council v.

EPA, 806 F.3d 520, 532 (9th Cir. 2015).

We do not believe that Order 872 suffers from

“fundamental flaws” making it unlikely that FERC could

adopt the same rule on remand. While FERC’s

SEIA V. FERC 69

environmental analysis was deficient, we have been given

no reason to believe that the agency would be unable to cure

those deficiencies on remand. Although we hold that FERC

should have conducted an EA—and must do so on remand—

we acknowledge that, given the manner in which Order 872

operates, any environmental analysis may well determine

that the effects of the order are difficult to forecast and

subject to considerable uncertainty. And if FERC were to

conduct an EA, its understanding of its own modeling

capability would be entitled to deference. See Sierra Club,

867 F.3d at 199 (D.C. Cir. 2017). So while we are skeptical

of FERC’s current unsupported claim that the impacts of

Order 872 are impossible to forecast, it is possible that FERC

could reach the same conclusion about its forecasting

limitations in a NEPA-compliant EA.

On the other hand, the disruptive consequences of

vacatur would be significant. See California Cmtys. Against

Toxics, 688 F.3d at 993 (remanding without vacatur because

the “delay and trouble vacatur would cause are severe”).

Order 872 has been in effect since December 31, 2020. Since

then, FERC, various States, and regulated parties have all

begun to implement it. For example, the Commission has

already relied upon Order 872 to determine whether a given

facility qualifies as a small power production facility under

the revised site rule. Several States have initiated

proceedings to modify their PURPA rules in response to

Order 872. And using the revised market-access

presumption, several utilities have already applied for—and

received—relief from their mandatory-purchase obligations

when dealing with facilities between five and 20 megawatts

in size. Were we to vacate Order 872, the investments that

States and the regulated community have made in complying

with the rules could not easily be undone—and if they were,

70 SEIA V. FERC

they might then need to be repeated if FERC were to readopt

the rules after completing its NEPA analysis. Our decision

not to vacate the rules thus avoids “the disruptive

consequences of an interim change that may itself be

changed.” Center for Food Safety, 56 F.4th at 663 (quoting

California Cmtys. Against Toxics, 688 F.3d at 992); see also

American Great Lakes Ports Ass’n v. Schultz, 962 F.3d 510,

519 (D.C. Cir. 2020) (“[A] quintessential disruptive

consequence arises when an agency cannot easily unravel a

past transaction in order to impose a new outcome.”); Sugar

Cane Growers Co-op. of Fla. v. Veneman, 289 F.3d 89, 97

(D.C. Cir. 2002) (“The egg has been scrambled and there is

no apparent way to restore the status quo ante.”).

We recognize that because NEPA is a “purely procedural

statute,” routinely excusing an agency’s deficient NEPA

analysis would “vitiate” the statute. Oglala Sioux Tribe v.

United States Nuclear Regul. Comm’n, 896 F.3d 520, 536

(D.C. Cir. 2018). In many cases—indeed, in most cases—an

agency’s failure to prepare an EA or attempt environmental

analysis will require vacatur. But in light of the significant

disruptive consequences of vacatur—affecting not only

FERC, but also state agencies and regulated entities—we

remand to FERC without vacating Order 872. See, e.g., id.

at 538 (remanding without vacatur despite a “significant

deficiency” in the agency’s NEPA compliance); Vecinos

para el Bienestar de la Comunidad Costera v. FERC, 6 F.4th

1321, 1332 (D.C. Cir. 2021) (remanding without vacatur).

PETITION GRANTED in part and DENIED in part;

REMANDED.

SEIA V. FERC 71

MILLER, Circuit Judge, with whom NGUYEN, Circuit

Judge, joins, concurring:

I join the court’s opinion in full and write separately to

respond to Judge Bumatay’s concurrence and dissent.

Judge Bumatay observes that Chevron “has been

criticized”—by critics with whom he evidently agrees—“as

ahistorical and violative of the separation of powers.” The

relevance of that observation to this case is unclear, for as

Judge Bumatay recognizes, “[w]hether the Chevron project

continues is up to the Supreme Court and falls outside of our

court’s purview.” Quite so. The Supreme Court has

repeatedly instructed us that “[i]f a precedent of [the

Supreme] Court has direct application in a case, yet appears

to rest on reasons rejected in some other line of decisions,

the Court of Appeals should follow the case which directly

controls.” Rodriguez de Quijas v. Shearson/Am. Express,

Inc., 490 U.S. 477, 484 (1989); accord Tenet v. Doe, 544

U.S. 1, 10–11 (2005); State Oil Co. v. Khan, 522 U.S. 3, 20

(1997).

According to Judge Bumatay, “[t]his case should not be

about Chevron deference,” and we should instead “rely on

PURPA’s plain language in evaluating whether FERC’s

rules complied with the law.” But that is precisely what the

court’s opinion does. At step one of Chevron, a court must

ask whether Congress “directly addressed the precise

question” presented. Chevron U.S.A. Inc. v. NRDC, Inc., 467

U.S. 837, 843 (1984). With respect to each of the statutory

issues that Judge Bumatay mentions, the court’s opinion

examines the plain text of the statute and concludes that

Congress did not directly address the questions but instead

left their resolution to FERC’s discretion.

72 SEIA V. FERC

For example, in considering the “encouragement”

provision of 16 U.S.C. § 824a-3(a), the court’s opinion

concludes, at Chevron step one, that “the statute gives FERC

broad discretion to evaluate which rules are necessary to

encourage QFs and which are not.” Judge Bumatay says

almost exactly the same thing: He describes the statute as “a

broad delegation of authority to FERC to make rules that

‘encourage’ Qualifying Facilities as it sees fit.” Then, at

Chevron step two, the court’s opinion confirms that FERC’s

interpretation of that broad discretion is not unreasonable.

Judge Bumatay does the same analysis without naming it,

explaining how FERC’s approach is not “contrary to this

statutory guidance.” So why the complaint that “circuit

courts have been over eager to reach Chevron’s second step”

by “glid[ing] past step one too readily”? Whether or not that

is true in general, on Judge Bumatay’s own view, it does not

seem to be true in this case.

In short, Judge Bumatay would reach the same

conclusion as the court, and for essentially the same reasons.

The only difference in approach is that he would do so

without admitting that he is following Chevron, instead

treating that decision—which, it bears repeating, remains

binding Supreme Court precedent—as the Case-That-Must-

Not-Be-Named. The Supreme Court has “the prerogative of

overruling its own decisions,” whether expressly or sub

silentio. Rodriguez de Quijas, 490 U.S. at 484. We do not.

SEIA V. FERC 73

BUMATAY, J., concurring in part and dissenting in part:

Because the Federal Energy Regulatory Commission

was well within its statutory authority to revise its rules for

encouraging independent energy producers under the Public

Utility Regulatory Policies Act of 1978 (“PURPA”), I

concur with denying the petition challenging the enactment

of those revised rules. But given PURPA’s clear text, I

would not rely on Chevron deference to reach this

conclusion. I write separately to show why we should have

applied the traditional tools of statutory interpretation to

resolve the challenges to FERC’s rules.

As for the claim that FERC violated the National

Environmental Policy Act of 1969 (“NEPA”) in enacting

these rules without an environmental assessment, I would

hold that no petitioner has standing to bring a NEPA claim.

I thus would deny the petition on NEPA grounds as well.

I join the majority opinion in all other respects.

I.

This case should not be about Chevron deference. By

now, most legal observers are familiar with the Chevron

framework—although not necessarily for positive reasons.

Under that doctrine, courts conduct a two-step inquiry to

determine whether to defer to an agency’s interpretation of a

federal statute. At step one, we ask “whether Congress has

directly spoken to the precise question at issue.” Chevron,

U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837, 842

(1984). If so, “that is the end of the matter” and we apply

the law as written. Id. If, however, we find that “the statute

is silent or ambiguous with respect to the specific issue,” we

proceed to step two and ask whether the agency’s

interpretation of the text is a “permissible” one. Id. at 843.

74 SEIA V. FERC

So long as an agency’s reading of a statute is “reasonable,”

we are told that we should defer to the agency’s position. Id.

at 845. At its most extreme, we are even told that Chevron

requires courts to treat the agency as “speak[ing] with the

force of law when it addresses ambiguity in the statute or

fills a space in the enacted law.” United States v. Mead

Corp., 533 U.S. 218, 229 (2001).

In more recent times, the Chevron framework has been

criticized as ahistorical and violative of the separation of

powers. See, e.g., Buffington v. McDonough, 143 S. Ct. 14,

16–22 (2022) (Gorsuch, J., dissenting from the denial of

certiorari); Aditya Bamzai, The Origins of Judicial

Deference to Executive Interpretation, 126 Yale L. J. 908,

987–90 (2017); Douglas H. Ginsburg & Steven Menashi,

Our Illiberal Administrative Law, 10 N.Y.U. J.L. & Liberty

475, 491–95 (2016). Whether the Chevron project continues

is up to the Supreme Court and falls outside of our court’s

purview.

But before resorting to Chevron deference, we should

pay close attention to how the Supreme Court has told us to

apply it. The Court has repeatedly instructed us not to glide

past step one too readily—accepting any hint of possible

ambiguity as a way to defer to an agency. Deference is

“called for only when the devices of judicial construction

have been tried and yield no clear sense of congressional

intent.” Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S.

581, 600 (2004). Thus, “we must ‘exhaust all the traditional

tools of construction’ before we ‘wave the ambiguity flag.’”

Medina Tovar v. Zuchowski, 982 F.3d 631, 634 (9th Cir.

2020) (en banc) (quoting Kisor v. Wilkie, 139 S. Ct. 2400,

2415 (2019)).

SEIA V. FERC 75

Unfortunately, circuit courts have been over-eager to

reach Chevron’s second step. According to one study, from

2003 to 2013, circuit courts jumped to Chevron step two in

70.0% of cases applying the Chevron framework. Kent H.

Barnett & Christopher J. Walker, Chevron in the Circuit

Courts, 116 Mich. L. Rev. 1, 5–6 (2017). And the

consequence of that interpretive move is significant. The

government prevailed 93.8% of the time at Chevron step

two—compared to the government’s win rate of only 39.0%

at Chevron step one. Id. These numbers, I’m certain, do not

align with the Supreme Court’s percentages over the last few

years. All this suggests that we should pause before

embracing the Chevron framework. If the traditional tools

of statutory interpretation resolve the case, that should end

the analysis.

Here, PURPA’s text is relatively straightforward, and we

need not apply Chevron to decide this case. Instead, under

our Article III authority and our duty under the

Administrative Procedure Act to “decide all relevant

questions of law” and “interpret . . . statutory provisions,” 5

U.S.C. § 706, I would rely on PURPA’s plain language in

evaluating whether FERC’s rules complied with the law.

Because the majority relied on Chevron deference to uphold

(1) Order 872’s compliance with PURPA’s

“encouragement” provision, (2) the 2020 Site Rule, and (3)

the modified Fixed-Rate Rule, I analyze them separately

here.

A.

To start, Petitioners generally challenge the four rules

FERC promulgated through Order 872, claiming that they

conflict with FERC’s statutory obligation to “encourage” the

development of independent energy producers, known as

76 SEIA V. FERC

“Qualifying Facilities.” 16 U.S.C. § 824a-3(a). Qualifying

Facilities include cogeneration and small power production

facilities. See 16 U.S.C. § 796(17)-(18). Petitioners assert

that Order 872 reduces incentives for Qualifying Facilities

and thus “discourages” them compared to the status quo.

But PURPA’s plain text forecloses this argument. In

PURPA, Congress granted FERC broad authority to

“prescribe . . . rules as it determines necessary to encourage

cogeneration and small power production.” 16 U.S.C.

§ 824a-3(a) (emphasis added). Congress also instructed

FERC to “revise” such rules “from time to time.” Id.

This language is a broad delegation of authority to FERC

to make rules that “encourage” Qualifying Facilities as it

sees fit. In this context, “encourage” is a capacious term.

Around the time of PURPA’s enactment in 1978,

“encourage” was defined to mean “to spur on.” Webster’s

New Collegiate Dictionary 375 (1977); Webster’s Third

New International Dictionary 747 (1971). It also meant “[t]o

stimulate” and “[t]o allow or promote the growth of[.]”

Shorter Oxford English Dictionary 653 (1973). Armed with

express authority to apply this expansive term, FERC may

make any rules that aren’t contrary to this statutory guidance.

Nothing in the plain text of the encouragement provision

requires that FERC “spur on,” “stimulate,” or “promote” the

development of Qualifying Facilities to the maximum extent

possible.

Imagine parents seeking to “encourage” their children to

do their weekly chores. A $10-a-week allowance would be

a good encouragement. But say, after several years, when

the children get older and more responsible, the parents

reduce the weekly allowance to $5 a week. Would anyone

say that the new allowance discourages the children from

SEIA V. FERC 77

completing their chores? Of course not. While the children

might be accustomed to a $10 reward, any allowance would

be an encouragement compared to the baseline of receiving

nothing.

So too with Qualifying Facilities. A simple statutory

directive to “encourage” the development of Qualifying

Facilities is not a one-way ratchet. That prior FERC rules

might have offered more encouragement than current ones

doesn’t mean that FERC’s new rules violate PURPA. While

FERC may not choose to discourage Qualifying Facilities,

nothing in PURPA’s text prevents FERC from tweaking its

rules in response to changes in the energy sector, as

Congress told them to do.

B.

Next, the plain language of PURPA also authorizes

FERC’s 2020 Site Rule. PURPA specifies that a “small

power production facility” must have a power production

capacity “which, together with any other facilities located at

the same site (as determined by the Commission), is not

greater than 80 megawatts.” 16 U.S.C. § 796(17)(A)(ii).

The 2020 Site Rule modified FERC’s old test for

determining when facilities within close proximity

constitute the “same site” or separate sites. Under the old

approach, facilities located more than one mile apart were

considered separate sites. Small Power Production and

Cogeneration Facilities—Qualifying Status, 45 Fed. Reg.

17959, 17965 (March 20, 1980). The 2020 Site Rule applies

a rebuttable presumption that facilities located more than one

but less than ten miles apart are separate sites. Qualifying

Facility Rates and Requirements Implementation Issues

Under the Public Utility Regulatory Policies Act of 1978, 85

Fed. Reg. 54638, 54696 (Sept. 2, 2020) (“Order 872”). This

78 SEIA V. FERC

presumption may be overcome based on a list of non-

exhaustive factors that support treating the facilities as part

of the same site. Id. at 54701.

Petitioners argue that the 2020 Site Rule conflicts with

the plain meaning of “site” by allowing FERC to treat

facilities located miles apart as the “same site” based on non-

geographic factors. But once again, Congress expressly

granted FERC the authority to “determine” what counts as

the “same site” for purposes of the 80-megawatt limit. Id.

Indeed, Congress didn’t use “same site” in the ordinary sense

here; otherwise, it would not be necessary to specify that

FERC got to choose what it means. See Am. Bankers Ass’n

v. Nat’l Credit Union Admin., 934 F.3d 649, 663 (D.C. Cir.

2019) (“An express delegation of definitional power

necessarily suggests that Congress did not intend the terms

to be applied in their plain meaning sense[.]”) (simplified)).

And Petitioners haven’t shown that FERC acted

inconsistently with the technical meaning of “same site” in

PURPA, which doesn’t foreclose non-geographic

considerations.

C.

Lastly, PURPA’s plain language authorizes FERC’s

modified Fixed-Rate Rule. PURPA requires utilities to buy

electricity from Qualifying Facilities at FERC’s established

prices. 16 U.S.C. § 824a-3(b). PURPA mandates that the

purchase rate not “exceed[] the incremental cost to the

electric utility of alternative electric energy.” Id. FERC

regulations call this the utility’s “avoided cost”—the cost

that the utility would otherwise pay to produce the power

itself or purchase it from another source. See 18 C.F.R.

§ 292.304. FERC’s old 1980 rule allowed Qualifying

Facilities to choose between two methods of calculating the

SEIA V. FERC 79

purchase price: a rate calculated at the time of energy

delivery or a rate fixed at the time the contract is signed with

the utility. See Winding Creek Solar LLC v. Peterman, 932

F.3d 861, 863 (9th Cir. 2019). Under the modified rule,

States may eliminate the fixed-rate option. 18 C.F.R.

§ 292.304(d)(2); Order 872, 85 Fed. Reg. at 54648. FERC

contends that this modified rule more closely adheres to

utilities’ actual avoided costs.

Applying traditional tools of statutory construction, I

would hold that the modified Fixed-Rate Rule aligns with

the best reading of PURPA’s text. PURPA defines

“incremental cost of alternative electric energy” to mean

“the cost to the electric utility of the electric energy which,

but for the purchase from such cogenerator or small power

producer, such utility would generate or purchase from

another source.” 16 U.S.C. 824a-3(d). Because PURPA

doesn’t supply a technical meaning for “cost,” the ordinary

meaning of the term applies. See Asgrow Seed Co. v.

Winterboer, 513 U.S. 179, 187 (1995) (“When terms used in

a statute are undefined, we give them their ordinary

meaning.”). At the time of PURPA’s passage, “cost” meant

“the amount or equivalent paid or charged for something.”

Webster’s New Collegiate Dictionary 257 (1977); see also

Webster’s Third New International Dictionary 515 (1971)

(“[T]he amount or equivalent paid or given or charged or

engaged to be paid or given for anything bought or taken in

barter or for service rendered[.]”); The Shorter Oxford

English Dictionary 434 (1973) (“That which must be given

in order to acquire, produce, or effect something; the price

paid for a thing.”).

Putting these definitions together, FERC is correct that

the most natural reading of the text requires that Qualifying

Facilities receive payments that do not exceed the actual cost

80 SEIA V. FERC

that a utility would otherwise pay for the same quantity of

energy. We’ve already upheld FERC’s interpretation of

“PURPA to require an examination of the costs that a utility

is actually avoiding.” Californians for Renewable Energy v.

Cal. Pub. Util. Comm’n, 922 F.3d 929, 938 (9th Cir. 2019)

(approving rule that established that a Qualifying Facility

“would not be entitled to capacity costs unless it actually

displaced the utility’s need for additional capacity”). And

FERC’s revised rule is more faithful to this statutory

directive than the previous fixed-rate option. A pre-

determined contractual price might approximate what a

utility would pay for energy from another source, but the

most accurate measure of that cost is the price at the time of

delivery.

We also previously acknowledged the shortcomings of

the fixed-rate approach as an estimate of avoided costs.

Nearly thirty years ago, we confronted a case in which the

fixed contractual rates paid to Qualifying Facilities “were

higher than the actual avoided cost rates” because fuel prices

had declined unexpectedly. Indep. Energy Producers Ass’n,

Inc. v. California Pub. Utilities Comm’n, 36 F.3d 848, 852

(9th Cir. 1994). While the disparity between the contractual

rate and the utilities’ actual costs wasn’t enough to justify

unilateral modification of the standard offer contract, we

understood the tension with PURPA’s requirements and

observed that the “proper remedy for such a situation is to

ensure that future . . . contracts contain more flexible pricing

mechanisms.” Id. at 858–59.

Here, FERC’s revisions accomplish just that—affording

States the latitude to require the “more flexible” method of

calculating avoided cost at the time of delivery so that

utilities don’t get locked into overpriced fixed rates. This

change brings the rule into closer alignment with PURPA’s

SEIA V. FERC 81

text. I would thus uphold the revised rule based on PURPA’s

plain language.

D.

The majority in concurrence faults me for reaching the

same conclusions as they do in approving of FERC’s

regulatory changes without relying on Chevron deference.

It’s true we reach the same conclusions—that’s why this part

of my writing is a concurrence. But our approaches are

fundamentally different—while the majority defers to

FERC’s interpretation, I defer to the words that Congress

wrote.

II.

Moving on to the NEPA claim. Simply, Petitioners

haven’t alleged that they will suffer an environmental harm

sufficient to confer NEPA standing.

“NEPA establishes a ‘national policy [to] encourage

productive and enjoyable harmony between man and his

environment,’ and was intended to reduce or eliminate

environmental damage and to promote ‘the understanding of

the ecological systems and natural resources important to’

the United States.” Dep’t of Transp. v. Pub. Citizen, 541

U.S. 752, 756 (2004) (quoting 42 U.S.C. § 4321). Because

NEPA does not provide a private right of action, petitioners

seeking to enforce its provisions must meet the APA’s

statutory standing requirements. See Ranchers Cattlemen

Action Legal Fund United Stockgrowers of Am. v. U.S. Dep’t

of Agric., 415 F.3d 1078, 1102 (9th Cir. 2005). To do so,

petitioners “must allege that [their] injury is within the zone

of interests protected by NEPA.” Nev. Land Action Ass’n v.

U.S. Forest Serv., 8 F.3d 713, 716 (9th Cir. 1993); see also

Lexmark Int’l, Inc. v. Static Control Components, Inc., 572

82 SEIA V. FERC

U.S. 118, 126 (2014) (holding that a plaintiff seeking to

bring suit under a federal statute must show not only that he

has standing under Article III, but also that his “complaint

fall[s] within the zone of interests protected by the law”

invoked) (simplified)).

Given that the “purpose of NEPA is to protect the

environment, not the economic interests of those adversely

affected by agency decisions,” a petitioner who asserts only

“purely economic injuries” lacks standing to bring a NEPA

challenge. Nev. Land Ass’n, 8 F.3d at 716 (simplified); see

also Ashley Creek Phosphate Co. v. Norton, 420 F.3d 934,

939–40 (9th Cir. 2005) (“[P]urely economic interests do not

fall within NEPA’s zone of interests.”). Rather, to bring a

NEPA claim, a petitioner “must allege injury to the

environment” that is sufficiently concrete and

individualized. See Ranchers Cattlemen Action, 415 F.3d at

1103. In other words, a petitioner must show by a

“reasonable probability” that the petitioner will personally

suffer an environmental injury from the challenged agency

action. Citizens for Better Forestry v. U.S. Dep’t of Agric.,

341 F.3d 961, 972 (9th Cir. 2003) (simplified). And “mere

speculation or subjective apprehension about future harm

[does not] support [NEPA] standing.” Navajo Nation v.

Dep’t of the Interior, 876 F.3d 1144, 1163 (9th Cir. 2017)

(simplified).

Here, Petitioners are a mix of environmental

organizations, intergovernmental groups, and coalitions of

owners and operators of Qualifying Facilities. Petitioners

readily admit that FERC’s rulemaking may hit their

pocketbooks—reducing revenue from their renewable

energy sales. Perhaps acknowledging that this doesn’t

confer NEPA standing, they also broadly proclaim that they

have “environmental interests [in] transitioning away from

SEIA V. FERC 83

fossil fuels to less polluting forms of electricity generation.”

Yet NEPA standing requires an interest “distinct from the

interest held by the public at large.” Navajo Nation, 876 F.3d

at 1164 (simplified). Probably realizing that this interest

isn’t particularized enough, Petitioners try to assert a

concrete injury by alleging that FERC’s rule changes “will

reduce renewable generation development, leading to an

increase in fossil-fuel generation that produces pollution that

harms Petitioners’ members.”

But we aren’t obliged to accept speculative injuries to

bring the Petitioners within NEPA’s zone of interests. And

to accept the Petitioners’ claim of injury here requires

stacking speculation upon speculation. Their theory of

injury goes something like this:

To traverse the gap between FERC’s rule changes and

their asserted injury, Petitioners layer conjecture on top of

speculation on top of guesswork about how State

84 SEIA V. FERC

governments, individual Qualifying Facilities, the broader

energy market, and emissions will react to the rule changes.

To credit their claim, we must accept that FERC’s new rules

will lead to greater fossil-fuel consumption in some

unspecified manner, in some unspecified location, to some

unspecified degree, by the independent actions of third

parties—all leading to an unspecified harm to Petitioners’

members.

One problem is that their theory only considers FERC’s

rules in a vacuum. Energy markets are complex. FERC’s

rules are not the only forces influencing the development of

new renewable facilities. Take Montana’s energy market.

Renewable energy projects are thriving in Montana even

without PURPA’s incentives. As amicus NorthWestern

Corporation notes, out of 40 wind and solar projects

currently underway in Montana, nearly half of them are

larger than 80 megawatts—too big to be Qualifying

Facilities. Br. of Amicus Curiae Nw. Corp. 9–10. One

proposal involves a 750-megawatt wind farm, nearly ten

times PURPA’s upper limit for Qualifying Facility output.

Id. at 9. In other words, a significant swath of the wind and

solar energy boom in Montana is happening without any

direct help from PURPA’s incentives. This shows that

FERC’s regulations are just one component of a much larger

web of market forces influencing the supply and demand of

renewable energy nationwide—making any concrete injury

to Petitioners purely speculative.

Another major weakness in Petitioners’ theory is that

most of FERC’s rule changes are permissive—allowing

independent parties to respond to them as they wish. States

can freely choose whether to adopt the new fixed-rate rule or

locational marginal price presumption. See, e.g., 18 C.F.R.

§§ 292.304(b)(6), 292.304(d)(2). And the new

SEIA V. FERC 85

nondiscriminatory access presumption only grants utilities

greater flexibility in purchasing energy from Qualifying

Facilities. See 18 C.F.R. § 292.309(d)(2). As the Supreme

Court has warned, we shouldn’t “endorse standing theories

that rest on speculation about the decisions of independent

actors.” Clapper v. Amnesty Int’l, USA, 568 U.S. 398, 414

(2013). Petitioners have identified only Georgia, Idaho, and

Montana as making any moves in response to FERC’s rule

changes. But that doesn’t establish a “reasonable

probability” that this will lead to harm at Petitioners’

members’ homes.

While Petitioners “need not provide smoking-gun

allegations of harm,” Navajo Nation, 876 F.3d at 1163

(simplified), their theory of injury is too speculative to give

rise to NEPA standing. In Navajo Nation, an Indian tribe

brought a NEPA claim against the Department of the

Interior’s guidelines for access to the Colorado River. Id. at

1152. To assert standing, the tribe alleged that the guidelines

would impair their water rights by “creat[ing] a complex and

difficult-to-reverse combination of third-party reliance and

political inertia” that would hamper the tribe’s future efforts

to access water. Id. at 1162. In short, the tribe posited a

“chain of events” by which Interior’s actions would cause

surrounding States to rely on Colorado River water, which

in turn may disincline the federal government from

protecting the tribe’s interest in the river. Id. at 1163. We

held that the tribe’s “realpolitik predictions”—predicated on

a “string of contingencies” and “conjecture,” unsupported by

“facts, figures, or data”—was “too speculative to confer

standing.” Id. (simplified).

We should have done the same here. Much like the

tribe’s theory of injury, Petitioners here assert an

unquantified future harm that will purportedly result from a

86 SEIA V. FERC

chain reaction of third-party decisions and market forces.

With scant evidence suggesting that the harm will occur or

that it will be attributable to FERC’s modified rules, we

should not have entertained Petitioners’ NEPA claim.

Based on all this, I would hold that Petitioners have

failed to meet their burden of alleging an injury within

NEPA’s zone of interests. I would thus not reach the merits

of their claim nor grant the petition to order an

environmental assessment.

III.

For these reasons, I respectfully dissent in part.