Petition — Arizona Power Authority v. Andrus

Supreme Court of tie Buit

OCTOBER TERM, 1976

Supreme Court, U. S.

ARIZONA POWER AUTHORITY, ELECTRICAL DISTRICT No.

3, PINAL COUNTY, ARIZONA; ELECTRICAL DISTRICT No. 4,

PINAL COUNTY, ARIZONA; ELECTRICAL DISTRICT No. 5,

PINAL COUNTY, ARIZONA; ELECTRICAL DISTRICT No. 6,

PINAL COUNTY, ARIZONA; WELLTON-MOHAWK

IRRIGATION and DRAINAGE DISTRICT; ROOSEVELT

IRRIGATION DISTRICT; CITY OF SAFFORD; and

ELECTRICAL DISTRICT No. 2, PINAL COUNTY, ARIZONA

Petitioners,

ROGERS C. B. MORTON, et ai,.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

RONALD J. ELLIS

ROBERT S. LYNCH

Attorneys for Electrical

Districts No. 3, 4 and 6,

Pinal County, Arizona

2300 Valley Center

Phoenix, Arizona 85073

G. THOMAS CHOULES

Attorney for Wellton-Mohawk

Irrigation and Drainage

District

P.O. Box 551

Yuma, Arizona 85364

MICHAEL A. CURTIS

Attorney for Electrical

District No. 2, Pinal

County, Arizona

3003 North Central Avenue

Phoenix, Arizona 85012

June 24, 1977

MELVIN RICHTER

DALE E. DOTY

Counsel for Arizona Power Authority

1050 17th Street, N.W. Suite 600

Washington, D.C. 20036

JAMES P. BARTLETT

Attorney for Arizona Power Authority;

Electrical District No. 5, Pinal

County, Arizona; Rooseveit Irrigation

District; and the City of Safford

830 North First Avenue

Phoenix, Arizona 85003

TABLE OF CONTENTS

Page

O's dog od we ae a eo 2

SIE <3 6 4c 456 9-6 6a de ee ee el Oe ee 2

Se rae eee 2

CPE e PUMEU NEP gw ete ee eee wee 3

PSH. ON, Eg. Se 6 2k. a a ae On ee 3

REASONS FOR GRANTING THE WRIT ........ 7

NED. «Ss 2 ee bE oe 9 6 sky be ee Oe a 18

APPENDIX A

Opinion of Court of Appeals for the Ninth Circuit .. la

APPENDIX B

er sean Ge kk cs kk ss be ee 40a

APPENDIX C

Opinion of the District Court for the District of

SN Pe ne are. 6 ae Ee ee pleat ea 4la

APPENDIX D

Excerpt from 20th Annual Report, Colorado River

Storage Project, Fiscal Year 1976 ........... 55a

STATUTES

Pages

Colorado River Storage Project Act, 70 Stat. 105, 43

ee A Ps koe 3 ee oes ee passim

Federal Power Act, 16 U.S.C. 824d(aXb) ....... 11

Federal Reclamation Laws, Act of June 17, 1902, 32

ge ea eee i ee passim

MISCELLANEOUS

Hearings before Irrigation and Reclamation Sub-

committee of the House Committee on Interior

and Insular Affairs on H.R. 4449, et al., 83rd

i ee a a gee ee eo ee 11,13

H. Doc. No. 364, 83rd Cong., 2d Sess ......... 13

H. Rep. No. 1774, 83rd Cong. ............. 10, i]

H. Rep. No. 1087, 84th Cong., Ist Sess ........ 12

S. Rep. No. 128, 84th Cong., Ist Sess. ........ 10, 13

A te, Se a ee gir 16

CASES CITED

Barlow v. Collins, 397 U.S. 159 (1970) ........

Califano v. Sanders, 97 S.Ct. 980 (February 23, 1977)

Citizens to Preserve Overton Park Inc. v. Volpe, 401

oe 8g, eer ee eer eae

City of Fresno v. California, 372 U.S. 627 (1963)

F.P.C. v. New England Power Co., 415 U.S. 345 (1974)

Heikkila v. Barber, 345 U.S. 229 (1953) .......

Lichter v. United States, 334 U.S. 742 (1948)

National Cable Television Ass'n. v. United States, 415

MR EN er ae a eee

Oestereich v. Selective Service System-Locai Board No.

i E ."s 6 4 yp ad 6 6 oe o %

Panama Oil Co. v. Ryan, 293 U.S. 388 (1935)

Ralpho v. Bell, D.C. Cir. No. 75-2088 (decided March

ED a Grae ee ge eG a ey ee ew

Rusk v. Cort, 369 U.S. 367 (1962) ..........

Schechter Corp. v. U.S., 295 U.S. 495 (1935)... ..

Shaughnessy v. Pedreiro, 349 U.S. 48 (1955) .....

Yakus v. United States, 321 U.S. 414 (1944) .....

7,9

10

10

IN THE

Supreme Court of the Mnited States

OCTOBER TERM, 1976

are

ARIZONA POWER AUTHORITY, ELECTRICAL DISTRICT

No. 3, PINAL COUNTY, ARIZONA; ELECTRICAL

DISTRICT No. 4, PINAL COUNTY, ARIZONA;

ELECTRICAL DISTRICT No. 5, PINAL COUNTY,

ARIZONA; ELECTRICAL DISTRICT No. 6, PINAL

COUNTY, ARIZONA; WELLTON-MOHAWK IRRIGATION

and DRAINAGE DISTRICT; ROOSEVELT IRRIGATION

DISTRICT; CITY OF SAFFORD; and ELECTRICAL

DISTRICT No. 2, PINAL COUNTY, ARIZONA

Petitioners,

Ve

ROGERS C. B. MORTON, er ai,.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

Arizona Power Authority, Electrical District No. 3, Pinal

County, Arizona; Electrical District No. 4, Pinal County,

Arizona; Electrical District No. 5, Pinal County, Arizona;

Electrical District No. 6, Pinal County, Arizona;

Wellton-Mohawk Irrigation and Drainage Distric!; Roosevelt

Irrigation District; City of Safford; and Electrical District No.

2, Pinal County, Arizona,' hereby petition for a writ of

certiorari to review the judgment of the United States Court

of Appeals for the Ninth Circuit in this case.

‘Hereinafter collectively referred to as “petitioners.”

OPINIONS BELOW

The opinion of the Court of Appeals (App. A, pp.

la-39a) is reported at 549 F.2d 1231. The opinion of the

district court (App. C, pp. 41a-54a) is not reported.

JURISDICTION

The judgment of the Court of Appeals was entered

January 17, 1977 (App. A, p. 39a). Petitioners’ timely

application for rehearing was denied on March 28, 1977 (App.

B, p. 40a). The jurisdiction of this Court is invoked under 28

U.S.C. 1254(1).

STATUTES INVOLVED

1. The Colorado River Storage Project Act, 70 Stat. 105,

43 U.S.C. 620, et seqg., provides in pertinent part:

“Section 4. Except as otherwise provided in this

Act, in constructing, operating, and maintaining the

units of the Colorado River storage project and the

participating projects listed in section | of this Act,

the Secretary shall be governed by the Federal recla-

mation laws (Act of June 17, 1902, 32 Stat. 388,

and Acts amendatory thereof or supplementary

thereto) * * *.

* * *

“Section 7. The hydroelectric powerplants and

transmission lines authorized by this Act to be

constructed, operated, and maintained by the Secre-

tary shall be operated in ccnjunction with other

Federal powerplants, present and potential, so as to

produce the greatest practicable amount of power

and energy that can be sold at firm power and

additional energy rates * * *.”

2. The Federal Reclamation Laws, Act of June 17, 1902,

32 Stat. 388, and Acts amendatory thereof or supplementary

thereto, provide in pertinent part (43 U.S.C. 485Sh(c)):

“* * * Any sale of electric power or lease of power

privileges, made by the Secretary in connection with

the operation of any project or division of a pro-

a nay

ject, shall be for such periods, not to exceed forty

years, and at such rates as in his judgment will

produce power revenues at least sufficient to cover

an appropriate share of the annual operation and

maintenance cost, interest on an appropriate share

of the construction investment at not less than 3

per centum per annum, and such other fixed

charges as the Secretary deems proper: Provided

further, That in said sales or leases preference shall

be given to municipalities and other public corpora-

tions or agencies; and also to cooperatives and other

nonprofit organizations financed in whole or in part

by loans made pursuant to the Rural Electrification

Act of 1936. * * *”

QUESTION PRESENTED

Whether, under the Colorado River Storage Project Act

and the Federal Reclamation Laws, as amended, the Secretary

of the Interior has the unreviewable discretion, in marketing

electric power and energy generated at federal facilities, to

establish a geographic preference favoring preference cus-

tomers in certain states within the economic marketing area

to the detriment of preference customers in other states in

that marketing area.”

STATEMENT

Petitioner, Arizona Power Authority, is an agency of the

State of Arizona, charged with the responsibility, among

others, of purchasing electric power at wholesale for resale,

inter alia, to municipalities, electric cooperatives, electrical

districts and irrigation districts within the State of Arizona.

All of the other petitioners are public bodies entitled to

preference under the Federal Reclamation Laws in the

purchase of power sold by the Secretary of the Interior and

all of them are located within the Southem Division as

defined in the General Power Marketing Criteria summarized

below.

listieesastiemmmnetaetl

Should certiorari be granted, petitioners reserve the right further

to argue that the Secretary had exceeded his authority in undertaking to

establish such a geographic preference with respect to the power and

energy generated at the CRSP project.

4

On December 27, 1971, petitioners? filed a complaint

against the Secretary of the Interior and the Commissioner of

Reclamation, seeking a declaratory judgment and injunctive

relief with reference to the General Power Marketing Criteria

issued by the Secretary under the date of March 9, 1962 for

the marketing of power generated ai hydroelectric plants

constructed and operated by the Bureau of Reclamation

under the Colorado River Storage Project Act (CRSP), 70

Stat. 105, 43 U.S.C. 620, et seq.*

Basically, the CRSP Act authorized several projects for

flood control and reclamation, irrigation and various other

water resource developments, a number of which have already

been constructed. As an incident to such water resource

developments, the CRSP Act also authorized the Secretary to

construct and operate certain facilities for the generation of

hydroelectric power. Four such hydroelectric facilities have

already been constructed having a combined firm electric

power generating capacity of about 1,260,000 kilowatts, with

Glen Canyon which is located in the Colorado River in

Arizona below the Arizona-Utah border, having a capacity of

900,000 kilowatts.5

The Marketing Criteria divided the areas in which CRSP

power was to be marketed into (1) a Northern Division

>The complaint of Petitioner Electrical District No. 2, Pinal

County, Arizona was filed on May 4, 1973 and tracks that of the other

petitioners. See R. 268, ef seq.

4The non-government respondent is the Northern Division Power

Association, Inc., a Utah non-profit corporation comprised of 58 rural

electric cooperatives, municipalities and public corporations or agencies,

located in the Norther Division as defined in the General Power

Marketing Criteria, all of which are purchasing CRSP power as preference

customers under the Federal Reclamation Laws.

5Some idea of the magnitude of the CRSP project is available from

the project reports prepared each year by the Bureau of Reclamation.

Appendix D (p. 52a). is a reproduction of page 11 of the 20th Annual

Report for the project for the fiscal year 1976, setting out a map of the

marketing area, together with the location of the several CRSP plants,

transmission lines and delivery points. In addition, it shows that during

fiscal 1976 the Secretary’s revenues from the CRSP project aggregated

nearly $58 million from the sale of 7.3 billion kilowatt hours.

consisting of all of the states of Colorado, New Mexico, Utah

and Wyoming and (2) a Southern Division consisting of all of

the state of Arizona and those portions of the states of

California and Nevada which generally may be reached by the

Federal Parker-Davis transmission grid.© Further, the

Marketing Criteria provided for a permanent allocation to

Northern Division preference customers of 80% of the

summer CRSP power and 93% of the winter CRSP power and

a permanent allocation of the remaining 20% of summer

CRSP power and 7% of the winter CRSP power to the

Southern Division preference customers.

Since the power which the Marketing Criteria would thus

allocate permanently to the Northern Division preference cus-

tomers was in excess of their then requirements, the Market-

ing Criteria went on to provide that such excess power would

be made available to Southern Division preference customers

temporarily and subject to withdrawal, on three years’ notice,

as needed to meet increases in the requirements of the

Northern Division preference customers.

While the Secretary declined to make an allotment of

CRSP power to the Arizona Power Authority because the

Authority had expressly declined to accept the geographic

preference prescribed in the Marketing Criteria for the

Northern Division, the Secretary did enter contracts for CRSP

power with the other petitioners over the period from 1965

to 1970, making “permanent” allocations to these petitioners.

In addition, after these petitioners signed their contracts, the

Secretary had available and sold to them on a “‘withdrawable”

basis, in accordance with the Marketing Criteria and the pro-

visions of their contracts required by the Secretary, all the

power they could use in addition to their “permanent”

allotments.

In addition to the foregoing, the complaint alleged that

by letter dated December 11, 1970, the Secretary advised

petitioners and the other Southern Division preference

®For the purposes of this petition, the terms Upper Basin and

Lower Basin are used interchangeably with Northern and Southem

Division, respectively.

Se Te A

customers of his intent no later than March, 1973, to give

notice that the “excess” CRSP power would be withdrawn

beginning with the 1976 summer season. After the Secretary

rejected their protests, petitioners filed on December 27, 1971

their complaint claiming that the establishment of a geo-

graphic preference in favor of the Northern Division prefer-

ence customers both in the Marketing Criteria and in their

contracts with the Secretary was arbitrary, an abuse of

discretion and beyond the Secretary’s authority under the

CRSP Act.

Following the filing of the Secretary’s answer, in which

he admitted many of the basic facts alleged in the complaint,

the Secretary filed a motion for summary judgment urging,

inter alia, that the complaint failed to state a cause of action

and that the action was an unconsented suit against the

Government. By opinion and order issued March 10, 1975, as

amended on May 2, 1975 (App. C, pp. 4la-54a), the District

Court granted the Government’s motion for summary judg-

ment on the grounds that the Secretary’s action was within

the scope of his authority, and was not arbitrary, capricious

or an abuse of his discretion.

In its opinion issued January 17, 1977, the Court of

Appeals purported to review the pertinent statutory provisions

and their extensive legislative history (App. A, p. 36a).

Based on its reading of these materials, the Court concluded

that, as urged by the Government for the first time on appeal,

the establishment of a geographic preference in favor of the

Northern Division preference customers does not violate any

legal standard prescribed by the Congress, either in the CRSP

Act or the Reclamation Laws generally, but rather was left to

the Secretary’s unreviewable discretion (App. A, pp. 36a).

Accordingly, ruling that the instant proceeding was one of

“these rare instances where ‘statutes are drawn in such broad

terms that * * * there is no law to apply.’ Citizens to Preserve

Overton Park Inc. v. Volpe, 401 U.S. 4€2,, 410 (1970).” (App.

A, pp. 14a-15a, 36a-37a), the court vacated the District

Court’s judgment and remanded the case to that Court for

consideration of a motion to dismiss (App. A, p. 39a).

REASONS FOR GRANTING THE WRIT

The holding of the Ninth Circuit that the Secretary of

Interior has unreviewable discretion to establish a geographic

preference for power in favor of Northern Division preference

customers to the detriment of the Southern Division

preference customers flaunts “Congress’ intention and under

standing that judicial review should be widely available to

challenge the actions of federal administrative officials.”

Califano v. Sanders, 97 S.Ct. 980, 983 (February 23, 1977).

In addition, it grossly distorts the unusually clear legislative

history of the CRSP Act by rejecting as “too vague” Con-

gress’ explicit directives requiring all preference customers

within the CRSP marketing area to be treated on the same

basis, with equal treatment and without discrimination in any

respect based on geographic location.

As a result, if not reversed, the decision below may have

important and far-reaching consequences. CRSP power consti-

tutes a substantive and extremely valuable block of power in

the CRSP marketing area. Even the Secretary’s opposition to

the stay requested by petitioners in the court below recog-

nized that withdrawal of the relatively small quantity of

power there involved (i.e., 41,000 kilowatts) would subject

petitioners to increased costs in excess of $1,000,000 over a

single six-month period. In contrast, CRSP has a present

generating capability in excess of 1,260,000 kilowatts with

additional generating facilities still to be constructed, and a

probable remaining service life in the order of at least 40 to

50 years.

In light of the energy shortage (particularly low cost

energy) now confronting the several states in the CRSP

marketing area’ (along with the rest of the Nation), and the

imp." . te of low cost energy to the development of the still

evol: «5. :conomies of these states, the holding below, even if

umite .o CR® power, in effect vests the Secretary with a

power strongly to influence the direction, extent, and rate of

7As noted supra, p. 5, the CRSP marketing area includes all of

the states of Colorado, Wyoming, Utah, New Mexico, Arizona and parts

of the states of California and Nevada.

development of the economies of these areas, with “the sole

check on bureaucratic activity [being] ‘the self-restraint of

the executive branch.’”” Ralpho vy. Bell, D.C. Cir. No. 75-2088

(decided March 29, 1977), slip opinion, p. 158

The holding below extends, moreover, beyond CRSP

power and embraces as well the power generated at the

numerous major projects located throughout much of the

Nation which is marketed by the Secretary under the Recla-

mation Laws. Not only does the holding below in effect

license the Secretary to operate as a “free-wheeling agencly]

meting {his} own brand of justice” in marketing that power

(Oestereich v. Selective Service System-Local Board No. 1!

393 U.S. 233, 237 (1968)), but it sanctions the establishment

of geographic preferences under the Secretary’s general

marketing authority for the first time in the extensive history

of the Reclamation Laws dating back to 1902. Prior to the

holding below, the Secretary had established geographic

preferences in the marketing of particular blocks of power

only pursuant to explicit statutory authority. Accordingly,

review by this Court is fully warranted.

1. The holding below ignores the repeated rulings of this

Court that in light of the Administrative Procedure Act’s?

“purpose to remove obstacles to judicial review,” its

“senerous review provisions” must be given a “hospitable”

interpretation. Shaughnessy v. Pedreiro, 349 U.S. 48, 51

84 result of thus immunizing the Secretary from judicial review is

to make him more vulnerable to political pressures. One of the issues

raised by petitioners was that the Secretary had yielded to such

pressures from Northern Division representatives in establishing the

geographic preference. The Secretary appears to have so acknowledged

in a letter dated December 18, 1969 to Congressman Harold Johnson:

“It was at the insistence of potential preference customers of

the Northern Division that the withdrawal provision in the

marketing criteria for the Southern Division was

established. * * *”

9The complaint alleged jurisdiction under 28 U.S.C. 1331, as well

as the Administrative Procedure Act. Cf. Ralpho vy. Bell, supra, slip

opinion, pp. 11-13, fn. 51.

(1955). See, also, e.g., Heikkila v. Barber, 345 U.S. 229,

232-33 (1953); Rusk v. Cort, 369 U.S. 367, 379-80 (1962):

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S.

402. 410 (1971); cf. Califano v. Sanders, supra, at 984. As

summarized in Barlow y. Collins, 397 U.S. 159, 166-67

(1970):!°

“* * * As we said in Data Processing Service, pre-

clusion of judicial review of administrative action

adjudicating private rights is not lightly to be in-

ferred. * * * Indeed, judicial review of such adminis-

trative action is the rule, and non-reviewability an

exception which must be demonstrated. In Abbott

Laboratories v. Gardner, 387 U.S. 136, 140, we

held that ‘judicial review of a final agency action by

an aggrieved person will not be cut off unless there

is persuasive reason to believe that such was the

purpose of Congress.’ * * * It is * * * ‘only upon a

showing of “clear and convincing evidence” of a

contrary legislative intent’ that the courts should

restrict access to judicial review. Abbott Labora-

tories v. Gardner, supra, at 141.* * ”

Contrary to the holding of the court below (App. A, p. 36a),

here, as in Overton Park (at p. 410):

“* * * [T] here is no indication that Congress sought

to prohibit judicial review and there is most

certainly no ‘showing of “clear and convincing

evidence” of a * * * legislative intent’ to restrict

access to judicial review.”

The Court of Appeals cites no evidence, let alone clear

and convincing evidence, in support of its conclusion that

10 Rarlow also negates the implication of the Court below (App.

A, p. 10a), that the reference in the general preference provision in 43

U.S.C. 485h(c), supra, p>”, to “in his judgment” in connection with

the fixing of rates, is sufficient of itself to vest unreviewable discretion

in the Secretary under that statute.

In City of Fresno v. California, 372 U.S. 627 (1963)\App. A.

p. 16a), this Court upheld the Secretary’s action, not because that

action was unreviewable, but rather because upon review the Court

found the Secretary’s action to be within his discretion.

10

Congress intended to preclude judicial review. Instead,

asserting that the test of reviewability was “whether Congress

had provided a legal standard” for reviewing the Secretary’s

acticn (App. A, p. 1ISa‘ the court held that the directive

provided in H. Rep. No. 1774, 83rd Cong., requiring that “all

states of the Colorado River Basin * * * be placed on the

same basis”'' with respect to CRSP power was “so vague as

to be meaningless,” and accordingly, it rejected that directive

as providing “no genuine limitation On the Secretary’s discre-

tion” (App. A, p. 36a).

But even if the “same basis” standard were in fact too

vague, it might be a reason at most for questioning the

validity of the delegation to the Secretary (e.g., Panama Oil

Co. v. Ryan, 293 U.S. 388 (1935); Schechter Corp. v. U.S.,

295 U.S. 495 (1935); National Cable Television Ass’ n. v.

United States, 415 U.S. 336, 342 (1974)). It would not,

however, support the conclusion below. To the contrary, even

if the directive provided by Congress were too vague, it

nevertheless remains the fact that Congress attempted to pre-

scribe a standard and such Congressional action—even if it fell

short of its objective—patently negates any inference that

Congress intended to preclude judicial review. The fact of the

matter is that a “same basis” standard is not unduly vague,

‘particularly when read in the context of the House Commit-

tee’s discussion of the problem generally. See infra, pp. 11-12.

Not only have the courts consistently approved far less

definitive standards as not unduly vague (see, e.g, Yakus vy.

United States, 321 U.S. 414, 423-27 (1944); Lichter v. United

States, 334 U.S. 742, 753-86 (1948); F.P.C. v. New England

Power Co., 415 U.S. 345, 353-54 (1974) (Marshall, J. concur-

ring)), but here the “same basis” standard does not stand

alone. In addition to the House Committee’s directives, the

Senate Committee in its Report No. 128, 84th Cong., dealing

with the same problem, admonished (at p. 14) (1) that it

“intends that full equality of treatment be accorded both

Upper and Lower Basin preference customers” and (2) that

“it is not intended that Lower Basin customers should be

'1 Emphasis supplied throughout unless otherwise indicated.

1]

discriminated against in any respect.” See also infra. pp. 13-14.

The “equality” and “non-discrimination” standards thus

provided by the Senate Committee have a long history of

utilization in connection, inter alia, with regulation of public

utilities (see, e.g., Section 205(a)(b) of the Federal Power Act.

16 U.S.C. 824d(a)(b)). Since their adequacy is firmly estab-

lished even for constitutional purposes, such standards

patently are not “so vague as to be meaningless” so as to

preclude review of the geographic preference established in

the Secretary’s CRSP Marketing Criteria.

2. In addition to providing adequate standards for review

of the Secretary’s decision to establish a geographic pre-

ference, the extensive history of the CRSP legislation encom-

passing the 83rd and 84th Congresses is unusually explicit in

providing a Congressional directive affirmatively to prohibit

such preference. Since the limitations of a petition preclude

discussion of all of the several evidences of such a directive

and of all the distortions thereof by the Court of Appeals,

reference is made to only certain highlights.

(a) To begin with, as the court recognized (App. A, pp.

23a-24a), the House Committee deliberately deleted pro-

posals in the original CRSP bills'? sponsored by Upper Basin

representatives and by Interior to reserve permanently all

CRSP power for the Upper Basin and to permit such power

to be sold outside the Upper Basin only temporarily until

needed by the Upper Basin. See H. Rep. No. 1774, 83rd

Cong., 2d Sess., p. 22. While the striking of these preference

provisions by itself implicitly evidences a rejection of a geo-

graphic preference for the Upper Basin states, the Committee

did not leave the matter to implication. Instead, the Com-

mittee explicitly stated (Ihid.):

“By this amendment ai/ States of the Colorado

River Basin would be placed on the same basis with

respect to acquiring electric power for the project.”

12 S06 Hearings before Irrigation and Reclamation Subcommittee

of the House Committee on Interior and Insular Affairs on H.R. 4449,

et al, 83rd Cong., 2d Sess. at pp. 2-3, 6-7, and 10; H.Rep. No. 1774,

83rd Cong., 2d Sess., p. 26 er seq.

12

The House Committee adhered ‘to this view throughout

the course of the legislative process. In its report on the

proposed legislation in the 84th Cong., the House Committee

again reiterated (H. Rep. No. 1087, 84th Cong., Ist Sess., Part

I at p. 18):

“* * * All Colorado River Basin States are on

the same basis with respect to acquiring electric

power and energy for the project.”

The House Committee thus reaffirmed that it had deleted the

geographic preference provided in the original bills in order to

assure that all the Basin States—Lower Basin as well as Upper

Basin—be treated on an equal basis with regard to purchasing

CRSP power.

The court below tried to minimize the force of these

Committee statements by claiming that the House Committee

deleted the proposed preference

“* * * because it feared that they might unduly

fetter the Secretary’s discretion and hamper his

efforts to achieve CKSP’s underlying objectives. But

the Committee did not prohibit the Secretary from

adopting a geographic preference if at some time in

the future he determined that such a preference was

consistent with the policies of maximizing revenue

and adhering to reclamation law preferences.” (App.

A, p. 25a).!3

But the Court’s rationalization erroneously injects a qualifica-

tion upon the Committee’s admonition that such deletion was

intended to place all states in the Colorado River Basin on the

same basis even though that admonition is unqualified, i.e.,

13Contrary to the court’s implication (App. A, p. 24a), petitioners

make no claim that Arizona preference customers are entitled to a

preference to CRSP power vis a vis the Upper Basin customers. Rather,

their position is that Congress intended to place Arizona preference

customers on a parity with—not at a disadvantage vis a vis—Northern

Division preference customers with respect to the purchase of CRSP

power.

13

permanent, on its face. In addition, it postulates for the

House Committee the anomalous intent, sua sponte, to vest

the Secretary with a discretion far broader than that sought

by him in his proposed version of the legislation.

Finally, it ignores the Congressional - understanding,

clearly evidenced in the legislative history, that the proposed

geographic preference would stand in the way of achieving

Congress’ dual objectives of “generating maximum power

revenues while adhering to the reclamation law preference for

public utilities’ (App. A, p. 24a). As noted by the court

below, the Bureau of Reclamation Regional Director Larson

testified that preference customers in the Northern Division

then had need for only ten percent of the CRSP power (App.

A, p. 21a). Moreover, not only had the market studies made

by the Federal Power Commission at the Secretary’s request

showed a ready market for much of the CRSP power in

Arizona (H. Doc. No. 364, 83rd Cong., 2d Sess., pp. 21-22),

but Representative Hosmer of California expressed fears, con-

firmed by Mr. Larson, that the purchasers in the Lower Basin

would not pay as much for withdrawable power as they could

for permanent power (Hearings on H.R. 4449 at p. 170).

(b) Far from questioning the House Committee’s deietion

of the geographic preference, the Senate Committee approved

that deletion in clear and unambiguous language (S. Rep. No.

128, 84th Cong., Ist Sess., at p. 14):

“The committee’s position on power marketing

of the project is that the area to be served shall be

governed only by economical transmission distance

direct or through interconnections with other plants

either in the Upper or Lower Basin. This policy is

necessary to the economic and financial health of

the project. This policy in the Committee’s opinion

accords with established practice and policies of

reclamation power operations. The committee in-

tends that full equality of treatment be accorded to

both Upper and Lower Basin power customers.

Established preferences and sound business _prin-

ciples in accordance with existing reclamation law

are intended to be applicu in the marketing of

power from the project, and it is not intended that

14

Lower Basin customers should be discriminated

against in any respect.”

Again the court attempts to explain away this Senate

report (App. A, pp. 28a-29a). But, again it is the court which

“misses the point” (App. A, p. 28a). Note, first, the explicit

statements (1) that “the committee intends that full equality

of treatment be accorded to both Upper and Lower Basin

power customers,” and (2) that “it is not intended that

Lower Basin customers should be discriminated against in any

respect.” These statements are sufficiently clear, even by

themselves, to demonstrate the Serate’s agreement with the

House that there should be no geographic preference in

marketing CRSP power. Read in the context of the remainder

of the legislative history, particularly the express rejection of

the efforts of tne Upper Basin and the Secretary to

incorporate such a preference in the statute, there can be no

doubt of the Congressional intent to prohibit the inclusion of

such a preference.

Note, further, the Coimmittee’s observation that “this

policy is necessary to the economic and financial health of

the project” and its . reference “to sound business principles.”

These obviously were directed both to the comments and

testimony discussed supra, p.14 , pointing out (1) that the

Upper Basin preference markets could not possibly utilize all

the CRSP power; and (2) that while there is a preference

market for the CRSP power in the Lower Basin including

Arizona, it is unlikely that that market would either take as

much of or pay as high a price for, power on a withdrawable

basis as it would on a permanent basis.

Read in the context of the above legislative history, the

CRSP Act, and in particular Sections 4 and 7 thereof, clearly

reflect a Congressional intent to prohibit the creat.o.i o!

geographic preference to CRSP power for the Upper “sin. %

the court below recognizes (App. A, pp. 15-17) ‘ection «

(supra, p. 2) makes applicable the preference provisions of

the Reclamation Laws, and Section 7 (supra, p. 2) provides

in pertinent part:

“The hydroelectric power plants and trans-

mission lines authorized by this chapter to be

15

constructed, operated, and maintained by the

Secretary shall be operated in conjunction with

other Federal powerplants, present and potential, so

as to produce the greatest practicable amount of

power and energy that can be sold at firm power

and energy rates. * * *”

Thus, these two provisions reflect the dual objectives of maxi-

mizing the revenues while adhering to the preference

provisions. In accordance with the understanding manifested

in the legislative history, a prohibition against geographic

preference is a necessary component to the attainment of

these objectives.

In sum, although, as the court below points out (App. A,

p. 35a), the CRSP Act was intended to promote the Upper

Basin, it was only with respect to the development of water.

In contrast, the Upper Basin preference market for power was

very limited. Accordingly, since power revenues were critical

to support the water aspects of the project, Congress intended

for water and power to be treated separately with the water

benefits being directed primarily to the Upper Basin but the

power to be marketed permanently—not on a withdrawable

basis—throughout the entire marketing area without geo-

graphic preference in order to obtain the maximum revenues

for the sale of CRSP power and energy.!4

3. Finally, contrary to the court’s implication (App. A,

pp. 16a-17a), the Secretary does not. have unreviewable

authority under the Reclamations Laws generally to create

geographic preferences such as that here involved,'5 much less

14 Contrary to the court’s assertion (App. A, p. 25a), petitioners

expressly pointed to and relied on the recognition in the Bureau’s

memorandum underlying the Marketing Criteria that even on the limited

basis there studied, a Northern Division preterence would reduce the

revenues.

IS as noted supra,p.9, fn. 10, Section 485h{c)’s reference to “in his

judgment” in connection with the fixing or rates, does not operate of

itself to vest unreviewable discretion in the Secretary.

16

to establish such preferences free of judicial review. The fact

is that although the Reclamations Laws date back to 1902,

neither the Secretary nor the court has come forward with a

single instance in which the Secretary has undertaken to

prescribe a geographic preference to Interior-generated power

without express statutory authority, much less any instances

where such action has been held to be unreviewable.

Each of the few instances in which the Secretary has

adopted such a geographic preference was pursuant to express

statutory authority. For example, the geographic preference

established with respect to the power generated by the Trinity

River Division of the Central Valley Project was prescribed by

Section 4 of the relevant statute (69 Stat. 719, 720), which

expressly provides for “a first preference to the extent of 25

per centum of such additional energy * * * [for] preference

customers in Trinity County, California, for use in that

county.”

Moreover, the Secretary’s effort to include an express

authorization in the CRSP Act itself reflects a recognition of

the need for such specific authorization before such a prefer-

ence could be established. This is the more so when viewed in

light of the fact that the Trinity River statute was enacted in

August 1955, less than a year before the enactment of the

CRSP Act in April 1956, and accordingly, demonstrates a

Congressional understanding as to the need to provide

statutory authority when it desired to provide a geographic

preference among preference customers.

As stated in the report of the special Consulting Board

convened by the Secretary with regard to the marketing of

certain Missouri River Basin power:'®

“There are, of course, many formulas that could be

devised to make an allocation.

* * *

164 copy of this report is attached to the affidavit submitted by

the Commissioner of Reclamation Stamm in support of the Government

motion for summary judgment in the District Court.

17

“* * * your Committee finds no Congressional in-

tent to justify an allocation by states of the firm

power now under consideration.

“(The Congress has provided, by the Flood Control

and Water Supply Act of 1958, that on new dams

not yet started a reasonable amount of power shall

be made available for use within the state in which

the dam is constructed. See Public Law 85-500,

85th Congress — July 3, 1958. This.amendment

does not apply to the pewer here under considera-

tion.)

“Your Committee believes that in this allocation all

preference customers in the marketing area should

be treated alike, insofar as possible, irrespective of

their geographical location.”!7

So, also here, there is no “Congressional intent [under

the Reclamation Laws generally] to justify an allocation by

States” of the CRSP power, and hence the Reclamation Laws

generally, like the CRSP Act itself, require that “‘all prefer-

ence customers in the marketing area be treated alike.

* * * irrespective of their geographic location” with respect to

CRSP power.

'7The reservation of power for the states in which the dam is

constructed, provided in Public Law 85-500, referenced by the special

Consulting Board, is still another illustration of our point that the

general marketing provision is insufficient and specific legislation is

needed before a geographic preference among preference customers may

validly be established.

eee

18

CONCLUSION

For the foregoing reasons, it is respectfully submitted

that the petition for a writ of certiorari should be granted.

Respectfully submitted,

MELVIN RICHTER

DALE E. DOTY

Counsel for Arizona

Power Authority

oo APPENDICES

Washington, D.C. 20036

JAMES P. BARTLETT

Attorney for Arizona

Power Authority;

Electrical District No. 5,

RONALD J. ELLIS Pinal County, Arizona;

ROBERT S. LYNCH Roosevelt Irrigation District;

Attorneys for Electrical and the City of Safford

Districts No. 3,4, and 6, 830 North First Avenue

Pinal County, Arizona Phoenix, Arizona 85003

2300 Valley Center

Phoenix, Arizona 85073

G. THOMAS CHOULES

Attorney for Wellton-

Mohawk Irrigation and

Drainage District

P.O. Box 551

Yuma, Arizona 85364

MICHAEL A. CURTIS

Attorney for Electrical

District No. 2, Pinal

County, Arizona

3003 North Central Avenue

Phoenix, Arizona 85012

June 24, 1977

ee

APPENDIX A

la

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

:

Arwona Power Autuoriry; ELectricat Dis-

trict No. 3, Prva, County, Arizona; ELEc-

TRIcAL District No. 4, Pina County, ARI-

ZONA; ExectricaL Districr No. 5, Prva

County, Arizona; E.uectricat DIstTRIct

vo. 6, Prva County, Arimona; WELLTON-

Mowawk IRRIGATION AND DrarNaGE DISTRICT;

RoosEveE.tT Irrication District; and Crry or

SaFFORD,

Plaintiffs-Appellants,

EvectricaL District No. 2, Prva. County,

ARIZONA, ”

Intervenor-Plaintiff-Appellant, ( N° 75-2141

vs.

Rogers C. B. Morton, individually and as SrEc-

RETARY OF THE UniTep States DEPARTMENT

OF THE INTERIOR; and Exuis L. ARMSTRONG,

individually and as COMMISSIONER OF THE

BUREAU OF a: UNITED StTaTEs )

DEPARTMENT OF THE INTERIOK, ‘

Defendants-Appellees. OPINION

NORTHERN Drvision Power Association. Ivc.,

Intervenor-Defendant-Appellee. j

{ January 17, 1977]

Appeal from the United States District Court

for the District of Arizona

Before: BROWNING and WALLACE, Circuit Judges,

and FERGUSON,® District Judge

WALLACE, Circuit Judge:

Water is the precious lifeblood of the Southwest.! In reeogni-

tion of this fact, Congress has authorized several extensive proj-

*Honorable Warren J. Ferguson, United States District Judge, Central

District of California, sitting by designation.

13ee Colorado River Water Conservation Dist. v. United States,

U.S. . (Mareh 24, 1976) (siip op. at 2); Lichtenstein, Fight for

Water in West Grows, N.Y. Times, Aug. 22, 1976, 61, at 1, eol. 2; ef.

United States v. Tulare Lake Cana] Co., ... F.2d —. (9th Cir. April 5,

1976).

2a

ects for the development of the water resources of the Colorado

River Basin, the principal drainage system of the region. One

of these projects is authorized by the Colorado River Storage

Project Act (CRSP), ch. 203, 70 Stat. 105 (1956), as amended,

43 U.S.C. §§ 620 et seg. A critically important incident of the

damining and construction of storage reservoirs along the upper

Colorado River pursuant to CRSP is the generation of hydro-

electric power. We are called upon in this case to determine if

and when the exercise of the Secretary of the Interior’s author-

ity under CRSP to contract for the sale of hydroelectric power

is judicially reviewable.

On March 9, 1962, the Seeretary of the Interior (Secretary)

issued General Power Marketing Criteria (Marketing Criteria)

which allocated the greater part of the power generated at CRSP

hydroelectric plants to public utilities in the states ot Colorado,

Utah, New Mexico and Wyoming. Arizona Power Authority and

eight other Arizona publie utilities (referred to jointly as Ari-

zona Power) brought suit against the Secretary? challenging this

geographic preference. Both Arizona Power and the Secretary

moved for summary judgment. In support of its motion and in

opposition to the Secretary, Arizona Power contended first that

the implementation of the geographic preference was beyond the

Seeretary’s authority and, second, assuming that it was within

his authority, that the Marketing Criteria were arbitrary and

unreasonable as a matter of law. Arizona Power also argued that

there were material issues of fact in dispute on its second con-

tention that precluded granting the Secretary’s motion for sum-

mary judgment. The district court rejected these arguments and

granted summary judgment in favor of the Secretary.’

On appeal, the Secretary specifically articulates a new argu-

ment: the issuance of the Marketing Criteria was agency action

2The Commissioner of the Bureau of Reclamation was also named a

party defendant. The suit seught declaratory and injunctive relief.

°The Secretary initially argued that the action was barred under the

doctrines of laches and estoppel. but withdrew these issues from con-

sideration for purposes of deciding the ecross-motions for summary

judgment. The Seeretary had also argued that the United States had not

waived its sovereign immunity with respect to this action, but this

jurisdictional defense was apparently withdrawn before the grant ot

summary judgment and the district court did not reach the issue. Neither

were these issues raised on this appeal.

.3a

Rogers C. B. Morton, et al.

committed to agency diseretion by law and thus not judicially

reviewable under the Administrative Procedure Act § 10, 5 U.S.C.

§701(a) (2). We agree and therefore vacate the judgment of

the district court.

I. Factual Background

CRSP was enacted with reference to several interstate com-

pacts and federal reclamation projects which involve the Colo-

rado River Basin. As a result, CRSP is complex and its inter-

pretation presents difficult issues that can be highlighted by

briefly outlining federal and multi-state activity in the basin.

A. The Law of the Colorado River

Comprehensive development of the Colorado River Basin

requires the cooperation of seven states. The Colorado River

begins in the mountains of Colorado and flow southwesterly for

approximately 1,400 miles through Colorado, Utah, Arizona, along

the Arizona-Nevada and Arizona-California boundaries before

entering Mexico and emptying into the Gulf of California. Trib-

utaries originating in Wyoming, Colorado, Utah, Nevada, New

Mexico and Arizona define the boundaries of the basin, which

comprises an area about 900 miles long from north to south and

300 to 500 miles wide from east to west—approximately one-

twelfth the area of the contiguous United States. The basin is

arid and has historically been dependent upon water manage-

ment practices in order to be productive and inhabitable. H.R.

Rep. No. 1312, 90th Cong., 2d Sess. 5-6 (1968), reprinted in

1968 U.S.C. Cong. & Admin. News 3666, 3671-72: Arizona v-.

California, 373 U.S. 546, 552 (1963).

With the rapid settlement and development of the basin at the

end of the nineteenth century it became clear that smal! scale

diversion works would not be sufficient to provide a dependsbie

year-round water supply. The erratic nature of the river flows

which could bring either drought or flood, the problem of land

erosion and silt deposits, and the physical impediments of deep

canyons and long distances from river to community were bar-

riers too great for small groups of farmers or even individual

states to surmount. It was soon recognized that the task of con-

structing storage dams, canals and various irrigation and power

' 4a

Arizona Power Authority, et al. vs.

works required the economic and engineering resources of the

federal government.

While the prospect of federal intervention and funding was

appealing to all of the basin states, it brought to the forefront

the competition between the upper and lower basin states for

the beneficial use of Colorado River water. Because the prevail-

ing water law of the western states was prior appropriation,

rather than riparian rights or equitable allotment, rights to Colo-

rado River water would likely be based on a “first in time, first

in right” principle.» The upper basin states thus feared that the

surplus waters stored by federal projects would initially be

diverted to the more rapidly growing lower basin states, prin-

cipally California, and thereby permanently appropriated to the

exclusion of any future use to meet increased demands in the

upper basin states. The states therefore agreed to negotiate an

interstate compact for allocation of the water.® Congress con-

sented to the negotiations, Act of August 19, 1921, ch. 72, 42

Stat. 171, and in 1922 the states completed an agreement termed

the Colorado River Compact. 70 Cong. Rec. 324 (1928) (text of

agreement).

The Compact failed to allocate the waters on a state-by-state

basis but did achieve a compromise position, The basin was

divided into two parts at Lee’s Ferry, a point on the Colorado

River in northernmost Arizona. Art. II(e)-(g). What is referred

to as the upper basin is drained by the Colorado River and its

tributaries above Lee’s Ferry and includes parts of Wyoming,

Colorado, Utah, New Mexico and the northeast corner of Arizona.

The Compact defines the lower basin as parts of Nevada, Cali-

4A report on irrigation possibilities in the Imperial Valley stated:

“The control of the floods and development of the resources of the

Colorado River are peculiarly national problems .. . .” S. Doe. No. 142,

67th Cons:., 2d Sess. 1 (1922). The report concluded that these “problems

are of such magnitude as to be beyond the reach of other than national

solution.” Id.

5See Wyoming v. Colorado, 259 U.S. 419 (1922) (prior appropria-

tion rule given interstate effect); Nebraska v. Wyoming, 325 U.S. 589

(1945) (same).

6An interstate compact had not previously been used for the apportion-

ment of waters of an interstate stream. H.R. Rep. No. 1312, supra, at 7,

reprinted in 1968 U.S.C. Cong. & Admin. News 3673.

5a

Rogers C. B. Morton, et al.

fornia, New Mexico, Utah and substantially all of Arizona.? The

upper and the lower basin were each apportioned the exclusive

beneficial consumptive use of 7,500,000 acre-feet of water a year.

Art. III (a).

The Compact did not at first achieve the required unanimous

ratification by the seven states because of -Arizona’s failure for-

mally to approve.® Congress nevertheless consented to the Colo-

rado River Compact and waived the seven-state approval require-

ment ot the Compact when it enacted the Boulder Canyon Proj-

ect Act (BCPA). Cr. 42, §§ 4a & 13, 45 Stat. 1058, 1064 (1928),

42 U.S.C. §§$ 617e(a) & 617l(a). California and five states

approved the Compact pursuant to the conditions of the BCPA,

*The Compact also divided the basin into two other parts: states of

the upper division—Colorado, Utah, Wyoming and New Mexico—and

states of the lower division—Arizona, California and Nevada. Art. II(e)

& (d). Arizona lies within both the upper and lower basins but is a

state of only the lower division. This distinction in terminology is the

cause of considerable confusion in the legislative history of CRSP.

The Marketing Criteria allocated the power on a geographic basis,

using a northern and southern division terminology that is similar to the

upper and lower division scheme of the Compact. The Marketing Criteria

treat Arizona as a southern division state. The text of CRSP adopts

both the upper basin and upper division terminology of the Compact,

§ 16, 70 Stat. 111, but at the same time refers to the development of

water resources for the benefit of “States of the Upper Basin,” § 1,

70 Stat. 106, while defining that term to include Arizona, §16, 70 Stat.

111. As described infra, we think that CRSP was designed principally

for the benefit of four upper basin states—Colorado, Utah, Wyoming

and New Mexico, i.e., the upper (northern) division states—and not for

the benefit of the fifth upper basin state, Arizona.

S8Because the annual volume of Colorado water varies significantly,

Art. III(d) prohibited the upper division states from causing the

water at Lee’s Ferry to be depleted below an aggregate of 75,000,000

acre-feet for any period of ten consecutive years.

®The allocation of water between the lower basin states of California

and Arizona remained a disputed issue, as did Arizona's claim that its

tributaries (principally the Gila River) should not be required to

contribute to water obligations the United States owed to Mexico.

Hearings on H.R. 5773 Before the Subcomm. on Irrigation and Recla-

mation of the House Comm. on Interior and Insular Affairs, 70th Cong.,

[st Sess. 30-31, 402-05 (1928). These issues were eventually resolved

in Arizona’s favor in the Boulder Canyon Project Act, ch. 42, § 4(a),

45 Stat. 1058 (1928), 43 U.S.C. § 617e(a).

6a

Arizona Power Authority, et al. vs.

and the BCPA thereafter became effective by presidential proc-

lamation. 46 Stat. 3000 (1929) .1°

Section 1 of the BCPA, 43 U.S.C. § 617, authorized the Secre-

tary to construct a Boulder or Black Canyon Dam? and other

projects in the lower basin for flood control, reclamation and

production of hydroelectric power. Importantly, the BCPA re-

sulted in an allocation of mainstream waters among the lower

basin states of Nevada, California and Arizona.!* This allocation

had the effect of facilitating development of lower basin water

resources by removing an issue of controversy among the lower

basin states.'3

Lower basin development proceeded at a rapid pace. The lakes

behind Parker Dam and Davis Dam'* on the lower Colorado

River joined Lake Mead behind Hoover (Boulder) Dam!® as

major storage reservoirs. These projects provide water and power

for large metropolitan areas (such as Los Angeles and San

10The Colorado River Compact was subsequently ratified by Arizona

in 1944. H.R. Rep. No. 1312, supra, at 10, reprinted in 1968 U.S.C.

Cong. & Admin. News, at 3676.

1iThe dam was at one time called Boulder Dam but is now titled

Hoover Dam, Act of April 30, 1947, ch. 46, 61 Stat. 56.

12The provisions of §4(a) of the BCPA authorized Arizona, Cali-

fornia and Nevada to enter into a compact to divide the lower basin

share of 7,500,000 acre-feet of mainstream waters so that California

would receive 4,400,000 acre-feet a year, Arizona 2,800,000, and Nevada

300,000, with Califurmia and Arizona each getting one-half of any sur-

plus. 43 U.S.C. § 6l7e(a). Although the three states never agreed to

such a compact, the Supreme Court construed §4(a), together with

§5 which grants the Secretary authority to contract for the sale of

water, as indicating a congressional intent to apportion the lower

mainstream waters in the same ratio as that described in the authorized,

but never executed, tri-state compact. Arizona v. Colorado, supra, 373

U.S. at 564-65.

13While certain provisions of the BCPA remained to be interpreted

in the Arizona v. California litigation, supra, California had already

agreed to be limited to a minimum of 4,490,000 acre-feet a vear. Cali-

fornia Limitation Act, Cal. Stat. 1929, ch. 16. at 33. The Supreme

Court in Arizona v. California decided how any surplus waters would

be measured and apportioned.

14See Act of May 28, 1954, ch. 241, 68 Stat. 143 (consolidation of

the two dam projects).

15See alxo Boulder Canyon Project Adjustment Act, ch. 643. 54 Stat.

774 (1940), us amended, 43 U.S.C. $§ 61S et seq.

7a

Rogers C. B. Morton, et al.

Diego) and extensive agricultural districts in southern California

and Arizona. S. Rep. No. 1983, 83d Cong., 2d Sess. 2 (1954).

Development in the upper basin, however, moved more slowly.

The erratic flow of the river, fluctuating between periods

of drought and flood, made it impractical to meet the annual

7,500,000 acre-feet obligation to the lower basin states without

river control on a long-term holdover basis. The necessity of

holdover storage reservoirs was accentuated by the fact that the

periods of high flows do not occur when the demands for the

water are greatest. Without such reservoirs, development in the

upper basin was limited to small irrigation projects usually

constructed by private groups. H.R. Rep. No. 1774, 83d Cong.,

2d Sess. 10-11 (1954).

A significant barrier to comprehensive upper basin develop-

ment was overcome by ratification of the Upper Colorado River

Basin Compact in 1948.16 This compact apportioned among the

states of Arizona, Colorado, New Mexico, Utah and Wyoming

the consumptive use of waters allocated to the upper basin by

the Colorado River Compact. Over 99 per cent of the upper

basin allotment was divided among the so-called upper division

states!? of Colorado, New Mexico, Utah and Wvroming.'’ This

apportionment made possible the Colorado River Storage Project

Act in 1956. See Friends of the Earth v. Armstrong, 485 F.2d

1, +6 (10th Cir. 1973), cert. denied, 414 U.S. 1171 (1974).

CRSP provided a plan for long-term development. It author-

ized construction of a number of projects for flood control, recla-

mation and extended irrigation, municipal and industrial water

needs, and hydroelectric power. A series of holdover storage res-

ervoirs with hydroelectric plants, transmission facilities, and inci-

dental works were authorized. The legislation also established

priorities for planning and constructing additional reclamation

works that would serve as participating projects. §§ 1-2, 43 U.S.C.

°$ 620-620a. In regulating the flow of the upper Colorado for

16Congress consented to the Upper Basin Compact. Act of April 6,

1949, ch. 48, 63 Stat. 31.

17See note 7, supra.

i8Under the Upper Basin Compact, Arizona receives 50,000 acre-feet

annually. The excess is apportioned among the other states as follows:

Colorado, 51.75 per cent; Utah, 23 per cent; Wyoming, 14 per cent;

and New Mexico, 11.25 per cent. Art. III(a), 63 Stat. 32.

8a

Arizona Power Authority, et al. vs.

beneficial consumptive uses and for the generation of hydroelec-

trie power,!® all authorized projects were to be operated in con-

formity with the law of the Colorado River—i.e., the Colorado

River Compact, Upper Colorado River Basin Compact, Boulder

Canyon Project Act, Boulder Canyon Project Adjustment Act,

and certain other agreements. §§1, 7, 9, 14, 43 U.S.C. §§ 620,

620f, 620h, 620m.

Four hydroelectric facilities subject to the CRSP Marketing

Criteria have already been constructed. The largest is Glen

Canyon Dam on the Colorado River just below the Utah-Arizona

border and north of Lee’s Ferry. Flaming Gorge Dam in Utah

is located on the Green River just below the Wvroming-Utah

border. The Cureeanti unit is composed of three dams and res-

ervoirs on the Gunnison River in Colorado: Blue Mesa and Mor-

row Point Dams, both completed, and Crystal Dam, presently

under construction. The Glen Canyon and Flaming Gorge dams

and the Curecanti units will have a combined firm electric power?°®

generating capacity of about 1,260,000 kilowatts, with Glen

Canyon having the largest capacity, 900,000 kilowatts. The Bon-

neville unit of the Central Utah participating project, which is

yet to be constructed, is also included in the CRSP Marketing

Criteria.*!

Although CRSP cieseribes the generation of hydroelectric power

as “an incident” of the storing of water for flood control, recla-

mation and other consumptive uses, § 1, 43 U.S.C. § 620, power

production is nevertheless a principal purpose of the legislation.

H.R. Rep. No. 1774, supra, at 11; cf. Friends of the Earth v.

19Consumptive usage of water is usually measured by the amount of

diversion less return. In the generation of electrical energy the water

used is returned to the river and therefore is not considered a con-

sumptive use.

20Firm energy is dependable energy and is calculated on the basis

of anticipated stream flow. Secondary or dump energy is undependable

energy that is created by waters in excess of the anticipated stream

flow.

21Congress has enacted additional legislation for the further develop-

ment of the upper basin. See, e.g., Nevajo Indian Irngation Project,

Pub. L. 87-483, 76 Stat. 96 (1962), 43 U.S.C. §§ 615i et seq.;

Fryingpan-Arkansas Project, Pub. L. 87-590, 76 Stat. 389 (1962), 43

U.S.C. §§ 616 et seq.; Colorado River Basin Project, Pub. L. 90-537,

82 Stat. 886 (1968), 43 U.S.C. §§ 1501 et seq.

9a

Rogers C. B. Morton, et al.

Armstrong, supra, 485 F.2d at 4, 6. Congress intended CRSP

hydroelectric power to serve not only as an energy source for

the ever-increasing demands of the upper basin area but also as

a revenue producer that would repay the federal investment in

the power features of the project. Indeed, surplus power reve-

nues were projected to help reimburse the costs of CRSP attribu-

table to irrigation features and to aid in funding an Upper

Colorado River Basin Fund that would defray the costs of basic

units and participating projects of CRSP. §§ 5, 6, 13, 43 U.S.C.

§§ 620d, 620e, 6201. Congress considered power revenues to be the

most important financial aspect of CRSP.22

Power generated by CRSP facilities is sold by the Bureau of

Reclamation to power utilities who in turn wheel and sell the

power to the ultimate consumers. CRSP provides two general

guidelines for the sale of power. The first is set out explicitly in

Section 7 of the Act: CRSP plants are to be operated “so as to

produce the greatest practicable amount of power and energy that

can be sold at firm power and energy rates” consistent with thé

law of the Colorado River. 43 U.S.C. § 620f. The second guide-

line is referred to in Section 4 of the Act: absent exculpatory

provisions, CRSP plants are to be operated in conformity with

22Power revenues over a fifty-year period were projected to reach

a total of $1,075 million. This sum would return the $442.7 million

capital investment in power facilities and the interest on that invest-

ment, about $320 million. It would also repay the non-interest-bearing

eost attributable to the construction of irrigation works that wouid

not be repaid by irrigation users’ fees (282.8 million minus $36.6

million). Interest on the construction charges for irrigation features

are not reimbursable as a general policy of federal reclamation law.

Cf. Act of May 25, 1926, ch. 383, § 46, 44 Stat. 649, as amended,

43 U.S.C. §423e; Act of Aug. 4, 1939, ch. 418, § 9(d)-(e), 53 Stat.

1193, as amended, 43 U.S.C. § 485) d)-(e); H.R. Rep. No. 1774, supra,

at 11-12. CRSP likewise adopts this policy. See §5(d), 43 U.S.C.

§ 620d(d).

Congress thought municipal water revenues sufficient to return the

municipal water allocation of $41 million with interest. After the CRSP

cost outlay of $760 million, §12, 43 U.S.C. § 620k, has been com-

pletely reimbursed, net power revenues are expected to total $15 million

to $20 million annually. Thus, in the long run, power revenues will

not only ensure the return of the federal investment, but will also

return a profit that can fund other works in the upper basin. H.R.

Rep. No. 1087, 84th Cong., Ist Sess., pt. 1, 8-13 (1956), reprinted in

1956 U.S.C. Cong. & Admin. News 2346, 2354-59.

10a

Arizona Power Authority, et al. vs.

federal reclamation law. 43 U.S.C. §620e. Section 4 therefore

incorporates Section 9 of the Reclamation Project Act of 1939,

eh. 418, 53 Stat. 1193, 43 U.S.C. § 485h(e).

This section of the Reclamation Project Act (§485h(c)) im-

poses a number of restrictions on the marketing of power. It

defines a class of “preference” customers who shall have the first

opportunity to purchase hydroelectric power generated by federal

reclamation projects. This class of preference customers com-

prises:

municipalities and other public corporations or agencies and

. cooperatives and other nonprofit organizations financed

in whole or in part by loans made pursuant to the Rural

Electrification Act of 1936.

Id. The priority accorded to public utilities (preference custom-

ers) is by now an important aspect of federal reclamation proj-

ects. Section 485h(c) also sets a maximum term of forty years

for contracts for the sale of power or lease of power privileges

and sets out criteria for rate-making. Furthermore, Section 485h

(c) forbids the making of any contract relating to electric power

or power privileges “unless, in the judgment of the Secretary, it

will not impair the efficiency of the project for irrigation pur-

poses.” Neither Section 7 of CRSP nor Seetion 485h(c) makes

any reference to the impermissibility of geographic preferences

in the sale of power.

B. Formulation of the Marketing Criteria

Shortly after the enactment of CRSP, the Federal Power

Commission began survey of markets and transmission facilities

for CRSP hydroelectric power. The region selected for study

included Colorado, New Mexico, Utah, Wyoming, Arizona, the

southern part of Nevada, and small portions of Idaho and

Texas. Representatives of preference customers in Colorado, New

Mexico, Utah, Wyoming and Arizona assisted in supplying data.

The survey, entitled “Power Market Survey—Colorado River

Storage Project’’ (Market Survey), was completed in June 1958.

The Bureau of Reelamation submitted recommendations based

upon Market Survey data to the Secretary in a May 1960 mem-

orandum. Bureau of Reclamation, Memorandum to Secretary

of the Interior re Colorado River Storage Project (May 3,

lla

Rogers C. B. Morton, et al.

1960) (1960 Memorandum). This memorandum proposed that

the primary marketing area for CRSP power be in the “north-

ern division” states of Wyoming, Colorado, Utah and New Mex-

ico. Because preference customers in these states did not need

all of the CRSP power, however, the memorandum recommended

that the excess be sold to preference customers in the “southern

division” states of Arizona, California and Nevada.2% Power

sold in this secondary marketing area was to be withdrawn as

needed by preference customers in the northern division. The

memorandum proposed, however, that the southern division re-

ceive a minimum allocation of 7 per cent of CRSP output in the

winter months and 20 per cent in the summer.

In recommending this geographic preference, the memorandum

took into account those portions of the legislative history of

CRSP which declared that all Colorado River Basin states should

be on the ‘‘same basis’’ with respect to acquiring power. See

Section II, D infra. It noted, however, “that no definite instruc-

tions as to the market area were specified by the Congress in

the legislation itself.” It also gave “considerable weight” to the

fact that power from the large Hoover Dam and Parker-Davis

Projects was already committed to the lower basin states. The

memorandum coneluded that “the over-all, closer balance among

the states of the Colorado River Basin, that would result [from

the recommended geographic preference], would achieve a more

desirable result [than pro rata division among all the states|.”

1960 Memorandum, supra, at 13.

The Marketing Criteria announced on March 9, 1962, by Secre-

tary Stewart Udall follow generally the policy set forth in the

1960 Memorandum. Preference customers in the southern division

states are guaranteed a minimum of 20 per cent of summer

23Supplying power from CRSP projects to the lower basin states

would require an intertie between CRSP transmission lines and the

transmission lines of the Hoover Dam and Parker-Davis projects in

the lower basin. In addition to facilitating interim use of CRSP power,

the interties would increase overall efficiency of Colorado River Basin

power marketing because the peak load in the southern division occurs

in the summer (July) while the peak load in the northern division

oceurs in the winter (December). Thus, power from lower and upper

basin projects could be marketed to meet the peak loads of the

respective divisions on a year-round basis. 1960 Memorandum, supra.

at 10-12.

l2a

Arizona Power Authority, et al. vs.

CRSP power and 7 per cent of the winter supply. Until the

northern division preference customers need their full allot-

ments, the excess power is to be marketed in the southern divi-

sion, subject to withdrawal on three years’ notice.24 As a condi-

tion for acquiring CRSP power, southern division customers

must acknowledge the principle of withdrawal.*5

The Secretary sent application forms for the purchase of

CRSP power to all prospective preference customers in both

24The Marketing Criteria provide in part:

Recapture, at any time, after not less than three vears advance

notice, of firm power and energy under contract to preference

eustomers in the Southern Division; provided that recapture will

cease when commitments of firm power and energy in the Southern

Division have been reduced to amounts not exceeding in the aggre-

gate 7 per cent of project capability during the winter season

and 20 per cent of project capability during the summer season,

or such respective amounts as determined by the following adjust-

ment procedure. The winter maximum of 7 per cent of project

eapability may be adjusted downward, and the summer maximum

of 20 per cent may be adjusted upward by an amount equal to the

downward adjustment, as the difference between the summer and

winter peak loads of the Northern Division increases above 13

per cent of project capability. There will be no adjustment to

increase the Southern Division winter minimum of 7 per cent or

reduce the Southern Division summer maximum of 20 per cent if

the difference between winter and summer loads of the Northern

Division decreases below 13 per cent of project capability. The

total amount of the recapture will be spread proportionately among

all preference customers of the Southern Division unless the cus-

tomers themselves agree in advance on some other methods not

adverse to the interests of the United States .... Project capa-

bility is defined for the purposes of withdrawal as the dependable

capacity (reduced by transmission losses to ¢clivery points) of

storage project powerplants as determined by the Bureau from

reservoir elevations.

Id., §4(D) (3).

*5The Marketing Criteria provide in part:

Prior to initiation of construction of transmission lines into the

Southern Division, or in the alternative, of arrangements for

delivery of power to customers in that Division by other means,

specitic assurances shal] be obtained from prospective customers

in the Southern Division that the principle of withdrawal set out

in subsection D(3) of this Seetion 4 will be applicable to allot-

ments to, and contracts for, the sale of power to such customers.

Id. §4(D) (4).

13a

Rogers C. B. Morton, et al.

divisions. The forms contained a clause acknowledging the Sec-

retary’s discretionary authority to withdraw power allotments.

Arizona Power Authority returned its forms with this clause

stricken and was refused power allotments. Subsequent nego-

tiations to allot power to the Authority as a pooling agent for

the ultimate customers terminated after the Bureau negotiated

contracts directly with the Authority’s customers. Eight of the

nine plaintiffs subsequently entered into contracts acknowledging

the principle of withdrawal. A total of 27 southern division

customers and 58 northern division customers entered into con-

tracts with the Bureau of Reclamation.*®

After execution of the contracts, the Bureau offered to sell

to the eight plaintiffs all the power needed to satisfy their

customers’ requirements. In December 1970, however, the Bureau

notified all of its southern division customers that it would

give notice not later than March 1973 that power in excess of

the summer 20 per cent minimum would likely be withdrawn

beginning with the 1976 summer season. The withdrawal would

decrease the power allocated to the southern division from ap-

proximately 335,058 to 252,000 kilowatts.

C. The Trial Court Proceedings

In June 1971 Arizona Power Authority met with the other

plaintiffs and they jointly decided to protect the proposed with-

drawal as illegal and beyond the Secretary’s authority. Seven

of the plaintiffs who had contracted with the Bureau then noti-

fied the Secretary that they would contest any withdrawal of

power. Arizona Power Authority, on behalf of the contracting

customer plaintiffs, also informed the Secretary of its intention

to contest the legality of the geographic preference policy of the

Markeing Criteria.

This suit was filed by Arizona Power®? in December 1971

seeking an injunction and declaratory judgment against the

26The number of utilities receiving power is actually higher since

some of the contracting customers are pooling associations which

represent a number of other preference customers.

27Seven of the plaintiffs joined the Authority in filing the complaint.

On August 3, 1973, the district court filed an order granting the

motion of Electrical District No. 2, Pinal County, to intervene.

‘14a

Arizona Power Authority, et al. vs.

Secretary and the Commissioner of the Bureau of Reclamation.*®

The district court granted summary judgment for the Secretary

in May 1975. This appeal followed.?®

Il. Jurisdiction

A. Judicial Review of Administrative Action

The first question before us is whether we have jurisdiction

to review the action of the Secretary in this case. The Secretary

contends on appeal that the formulation of the geographic prefer-

ence in the Marketing Criteria is unreviewable agency action.

He relies on the Administrative Procedure Act, 5 U.S.C. § 701

(a) (2), which precludes judicial review of “agency action. . .

committed to agency discretion by law.” In short, the Secretary

contends that the courts are without jurisdiction to interfere

with his decision.

The provision upon which the Secretary relies, § 701(a) (2),

states a narrow exception to judicial review applicable only “in

those rare instances where ‘statutes are drawn in* such broad

terms that in a given case there is no law to apply.’” Citizens

to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410

(1970). If “there is no law to apply,” there are no issues sus-

ceptible of judicial resolution, and accordingly the courts are

denied jurisdiction over tne matter. See K. Davis, Administrative

Law Text § 28.05, at 515-16 (3d ed. 1972). Im deciding whether

egency action is committed to agency discretion by law, it is not

significant that there may be law, in the abstract, that could

possibly be applied. Strickland v. Morton, 519 F.2d 467, 470 &

n.4 (9th Cir. 1975). Instead, we must determine whether in this

particular case there is any specific law to apply. Citizens to

Preserve Overton Park, Inc. v. Volpe, supra, 401 U.S. at 410.

As we stated in Strickland v. Morton, supra, 519 F.2d at 470,

another case examining the scope of § 701(a) (2):

When a court is asked to review agency action in instances

where considerable discretion is committed by statute to an

official, the court lacks jurisdiction due to the provisions

of §701(a) (2) only when the agency action of which

28The district court granted Northern Division Power Association,

Inc., representing 58 preference customers in the northern division,

leave to intervene as a defendant.

29We ordered the Secretary to maintain the status quo of CRSP

power deliveries to Arizona Power peuding completion of our review.

15a

Rogers C. B. Morton, et al.

plaintiff complains fails to raise a legal issue which can be

reviewed by the court by reference to statutory standards

and legislative intent. Where a statute grants broad discre-

tion to an administrative official, absent some action clearly

contradictory to a statutory provision or legislative intent . . .

a plaintiff challenging an exercise of that discretion may

find it an all but insurmountable task to be able to bring

his case within this standard, but unless he does so § 701(a)

(2) deprives the courts of jurisdiction to entertain his cases.

(emphasis in original, citations omitted). See also Ness Invest-

ment Corp. v. United States Department of Agriculture, 512

F.2d 706, 714-15 (9th Cir. 1975); Bronken v. Morton, 473 F.2d

790, 794, 797 (9th Cir. 1973); Ferry v. Udall, 336 F.2d 706, 712

(9th Cir. 1964), cert. denied, 381 U.S. 904 (1965).

Thus, the issue before us is whether Congress has provided a

legal standard that we may apply in reviewing the Secretary’s

formulation of the geographic preference in the Marketing Cri-

teria. If Congress has not provided such a standard but has

rather granted broad discretion to the Secretary, the Secretary’s

action, unless “clearly contradictory to a statutory provision of

legislative intent,” is not reviewable by us.

B. Scope of the Secretary’s Discretion

It is apparent that Congress has imposed some restrictions

on the Seeretary’s diseretion to market hydroelectric power. Sec-

tion 7 of CRSP requires that plants be operated with other fed-

eral power plants “to produce the greatest practicable amount

of power ... that ean be sold at firm power... rates.’’3°

3°We note that we have construed the phrase “the most feasible

plan,” in a grant of authority to the Secretary to plan a project for

the acquisition of power needed for irrigation pumping, as endowing

the Secretary “with almost unlimited authority in orchestrating all

phases of the project.” Arizona Power Pooling Ass’n v. Morton, 527

F.2d 721, 727 (9th Cir. 1975), cert. denied, ... U.S. .. (April 5,

1976). However, there the Secretary had the option of recommending

the construction of power plants and purchase of hydroelectric and

thermal power from non-federal interests. Colorado River Basin Project

Act, Pub. L. 90-537, § 303(a)-(b), 82 Stat. 889 (1968), 43 U.S.C.

) 1523(a)-(b). Here the Secretary is delegated only the authority to

operate the already constructed federal power plants so as to produce

the greatest possible amount of firm power; accordingly, his discretion

may be somewhat narrower.

l6a

Arizona Power Authority, et al. vs.

Section 7 also requires the Secretary to observe the compacts

and statutes comprising the “law of the Colorado River.” Fur-

ther, the use of water for generating hydroelectric power “shall

[not] preclude or impair the appropriation of water for

domestic or agricultural purposes pursuant to applicable State

law.’’ In addition, Section 485h(c) of the Reclamation Act sets

@ minimum rate and defines a class of preference customers who

have priority in purchasing power. Arizona Power Pooling As-

sociation v. Morton, 527 F.2d 721, 726-28 (9th Cir. 1975).

Had Arizona Power alleged that the Secretary violated any

of these restrictions, we would have jurisdiction to review his

action. See Arizona Power Pooling Association v. Morton, supra,

527 F.2d at 726-28. But Arizona Power makes no such allega-

tion.$!

Within the restrictions just outlined, it appears that the

Secretary has considerable discretion. For example, the Supreme

Court has held that rates for the sale of power above a defined

minimum (see 43 U.S.C. § 485h(c)) are to be set “in the Secre-

tary’s judgment” and contracts for sale may be made for any

term less than 40 years. City of Fresno v. California, 372 US.

627, 631-32 (1963). Also, although it is true that Section

485h(c) forbids the Secretary from making any contract for the

sale of power that would “in [his] judgment . . . impair the

efficiency of the project for irrigation purposes,” id. at 630, we

have held that this grant of discretion is broad enough to permit

the Secretary to bypass the preference customer priority when

sales to preference customers would impair project efficiency.

Arizona Power Pooling Association v. Morton, supra, 527 F.2d

at 727. Further, the Supreme Court has also said that the ‘‘gen-

eral authority to make contracts normally includes the power

31Arizona Power suggests that the Secretary has not contracted for

the sale of the greatest practical amount of firm power. It alleges that

102,070 of the 1,007,000 kilowatts of power allocated to the northern

division has not been contracted for sale. This suggestion is groundless.

The 102,070 kilowatts of power have not been sold because it is to be

generated from Crystal Dam and Morrow Point power plant facilities

which are not yet generating power.

17a

Rogers C. B. Morton, et al.

to choose with whom .. . the contracts will be made.’’ Arizona v.

California, supra, 373 U.S. at 580.32

Unless Arizona Power can establish its contention that Con-

gress has prohibited the Secretary from taking a customer’s

location into account in marketing CRSP power, it would ap-

pear in light of his broad discretion that the Secretary may adopt

whatever geographic preference he desires and that we have no

jurisdiction to review his action.

C. Text of CRSP

Turning first to the text of CRSP, we find no prohibition of

geographic preferences. It is clear that if Congress wanted to

specify a geographic basis for disposition of hydroelectric power

it knew how to do so. The same Congress that enacted CRSP

also authorized the Seeretary to construct a Trinity River Divi-

sion of the Central Valley Project of California. Act of Aug. 12,

1955, ch. 872, 69 Stat. 719. Section 4 of that act specifically

requires that preference customers in Trinity County receive

25 per cent of the power generated by the Trinity River Divi-

sion.*3 Thus, if Congress had desired in the text of CRSP to

allot Arizona or the lower basin states a specified amount of

power, it had a recent precedent to guide it.** No such explicit

prohibition of geographic preferences appears, however, nor does

Arizona Power allege that the geographic preference is inconsis-

32The Court stated further:

When Congress in an Act grants authority to contract [for the

sale of Colorado River water], that authority is no less than the

general authority, unless Congress has placed some limit on it.

Arizona v. California, supra, 373 U.S. at 580.

33Section 4 states in part:

Contracts for the sale and delivery of .. . electric energy...

shall be made in aceordance with preferences expressed in the

Federal reclamation laws: Provided, That a first preference, to the

extent of 25 per centum of such . . . energy, shall be given, under

reclamation law, to preference customers in Trinity County, Cali-

fornia, for use in that county... .

69 Stat. 720.

34Congress also had precedents in areas other than hydroelectric

power. Statutes enacted at earlier dates included specific allocations of

Colorado River water among the basin states. See. ¢.g., Boulder Canyon

Project Act, ch. 48, 45 Stat. 1058 (1928), 43 U.S.C. §§ 617 et seq.

18a

Arizona Power Authority, et al. vs.

tent with any of the explicit statutory restrictions on the Secre-

tary’s discretion. We do not find in the text of CRSP, therefore.

any legal standard to apply to the Secretary’s action.

D. Legislative History of CRSP

Arizona Power strenuously argues that a congressional intent

to prohibit geographic preferences is clearly stated in the legisla-

tive history of CRSP. It relies most heavily on a statement of

the House Committee on Interior and Insular Affairs analyziing

Section 7 of CRSP: “All Colorado River Basin States are on

the same basis with respect to acquiring eleetrie power and en-

ergy trom the project.” H.R. Rep. No. 1087, 84th Cong., Ist

Sess. 16 (1955), reprinted in 1956 U.S.C. Cong. & Admin. News

2346, 2362.35 Arizona Power contends that the Secretary is thus

required to treat each basin state on the “same basis” and that

this is the standard we are to apply in reviewing the Secretary's

action in this case. When the quoted statement is read out of

context, Arizona Power’s contention has some force. But after

examining the legislative history as a whole, we conclude that

Arizona Power has failed to carry its burden of demonstrating

that the Marketing Criteria are “clearly contradictory to leqis-

lative intent.” Strickland v. Morton, supra, 519 F.2d at 470.

1. Political and Economic Context of the

Congressional Debates

The debates on CRSP in general and Section 7 in particular

focused on two major issues: the feasibility of marketing hydro-

electric power and the application of reclamation law preferences.

The first issue was highlighted by an economic struggle between

the upper basin states on the one hand, and, on the other, south-

ern California interests and representatives of various non-

western states. The non-western states were concerned about

the utility and fairness of appropriating $750 million in federal

35CRSP was an enactment of S. 500, 84th Cong., Ist Sess. (1955).

The Senate bill, however, was passed in lieu of H.R. 3383, 84th Cong.,

Ist Sess. (1955), after substituting for its language the text of the

House bill. See H.R. Conf. Rep. No. 1950, 84th Cong., 2d Sess. 3

(1956), reprinted im 1956 U.S.C. Cong. & Admin. News 2422, 2425.

Thus, the report of the House committee is, in a sense, the most

definitive statement of legislative intent among the various committee

reports on CRSP.

19a

Rogers C. B. Morton, et al.

funds for another project designed only for the benefit of the

states of the Colorado River Basin. It was argued that the cost

per unit of irrigable land to be reclaimed was particularly

high. CRSP advocates responded that power revenues would

return most of the federal investment, and, therefore, the feasi-

bility of marketing hydroelectric power became a crucial issue.

The southern California interests joined in attacking the feasi-

bility of marketing hydroelectric power in the region. See 102

Cong. Ree. 3736 (1956) (remarks of Rep. Udall). Southern

California had been the prime beneficiary of the upper basin

states’ failure to consume the water allocated to them under the

Colorado River Compact and Boulder Canyon Project Act.

See id. at 3506-07 (reprint of Holmes article). This unconsumed

water was flowing intc projects on the lower Colorado River

and being used to generate cheap secondary or “dump” power.

This power was being sold to southern California utilities at

rates much lower than those for firm _power generated at Colo-

rado River projects. If the upper basin states were to have

projects consuming their share of Colorado River water, southern

California would be deprived in large part of its access to less

expensive dump power. H.R. Rep. No. 1087, supra, at 2, re-

printed in 1956 U.S.C. Cong. & Admin. News, at 2347.

The southern California interests attacked the feasibility of

marketing CRSP power by contending that it would have to be

sold at relatively high rates which would not be competitive with

rates for alternative energy sources. They also argued against

investing in public projects when the upper basin was endowed

with vast deposits of thermal energy resources, such as coal

and oil shale, that could be developed by the private sector.

Finally, they contended that potentially low-cost nuclear power

developments in the uranium-rich upper basin wouid provide

serious long-term competition. See, e.g., H.R. Rep. No. 1087

(minority reports), supra, at 37-41, 53, 58-59, reprinted in 1956

U.S.C. Cong. & Admin. News, at 2383-87, 2399, 2404-05.

The issue pertaining to reclamation law preferences arose

from the assumption that preference customers would be able to

purchase only a small percentage of CRSP power. CRSP was

thus attacked as a federal subsidy for the private utilities which

would purchase the bulk of the power. This fear of a private

windfall was exacerbated by language in the early CRSP bills

20a

Arizona Power Authority, et al. vs.

that appeared to give nonpreference private customers in the

upper basin priority over preference customers outside the upper

basin. The result of this controversy was a strong declaration

of support for the public utility preference under the reclama-

tion laws.

We find nothing in the legislative history—when viewed in

the context of the two major issues or policies of maximization

of power revenues and adherence to reclamation law preferences

—indicating that Congress intended to prohibit a geographic

preference in the marketing of CRSP hydroelectric power.

2. The 83rd Congress

The legislative history of CRSP encompasses hearings and de-

bates in the 83rd and 84th Congresses. We review the history

chronologically.

a. The House of Representatives

On April 2, 1953, three bills to authorize storage projects on

the Colorado River were introduced in the House by representa-

tives from the upper basin states of Utah and Colorado.*® These

bills each provided a type of geographic preference for market-

ing power. Arizona Power places great emphasis on the fact that

these mandatory geographic preferences were deleted by the

House Committee on Interior and Insular Affairs. Because this

is the most crucial aspect of Arizona Power’s argument, we ex-

amine this episode in detail.

The bills were similarly worded in their directions for mar-

keting hydroelectric power. Each required the Secretary to in-

elude in contracts with customers outside the upper basin states

a provision for termination or modification to the extent “deemed

necessary by the Secretary” to meet power demands in the upper

basin states.37 The implication of these provisions for the finan-

36H. R. 4443, 83d Cong., Ist Sess. (1953) (Rep. Aspinall of Colo-

rado); H.R. 4449 (Rep. Dawson of Utah); H.R. 4463 (Rep. String-

fellow of Utah).

37For example, }4 of H.R. 4463 stated in part:

The Secretary is hereby authorized to enter into such contracts or

agreements as, in his opinion, are feasible based upon a recognition

and evaluation of the benefits arising from integrated operation of

other hydroelectric power plants and of the works herein authorized.

2la

Rogers C. B. Morton, et al.

cial suecess of the projects were hotly debated. Bureau of Ree-

lamation Regional Director Larson testified that preference cus-

tomers in the upper basin states would initially ues only ten

per cent of the electric power. He estimated that it would take

20 years after the construction of the two largest proposed dams

before the upper basin would develop a demand for all CRSP

power. Representative Hosmer of southern California feared

that the difficulty in finding purchasers willing to invest in

expensive transmission lines for withdrawable power threatened

the economic feasibility of the project. Hearings on H.R. 4449

et al. Before the Subcom. on Irrigation and Reclamation of the

House Comm. on Interior and Insular Affairs, 83d Cong., 2d

Sess. 167-70 (1954) .3

Moffat, a representative of ten upper basin private utilities,

proposed one solution. He expressed a desire that CRSP power

Electric power generated at plants authorized by this Act and

disposed of for use outside the States of the Upper Colorado

River Basin shall be replaced from other sources, as determined

by the Secretary, when required to satisfy needs in the States of

the Upper Colorado River Basin, at rates not to exceed those in

effect for power generated at plants authorized by this Act. Con-

tracts for the sale of power for use outside the States of the

Upper Colorado River Basin shall contain such provisions as the

Seeretary shall determine to be necessary to effectuate the pur-

poses of this Act, including the provision that if and when the

Secretary tinds (a) that such power cannot practicably be replaced

from other sourees at rates not exceeding those in effect for

power generated by plants authorized by this Act, and (b) that

such power is required to satisfy needs in the States of the Upper

Colorado River Basin, then such contracts shall be subject to ter-

mination or to modification to the extent deemed necessary by the

Secretary to meet power requirements in the States of the Upper

Colorado River Basin.

38Part of the Larson-Hosmer dialogue reads:

Mr. Larson. ... If we should build all 9 dams now, there is not

sufficient present market for the output of all 9 dams in the

upper basin. But there is sufficient market for the Glen Canyon

and Echo Park. That does not mean that some will not go

downstream.

Mr. Hosmer. That brings up a point here in this specifie piece of

legislation that is before the House that requires the Secretary of

the Interior to insert a termination clause in any contract for

power going outside of the Upper Colorado Basin. It ean be ter-

minated when and if the power is needed up there. With that in

22a

«lrizona Power Authority, et al. vs.

be marketed to private utilities in the upper basin states rather

than preference customers outside of the area. He also proposed

that long-term contracts be entered into so that the private utili-

““y could afford to invest in transmission facilities. Jd. at 570-

1.

Preference customers vigorously attacked these proposals. The

National Rural Electrie Cooperative Association prepared a state-

— charging that the mandatory geographic preference might

ea

to modification and perhaps abrogation of the preference pro-

vision of the reclamation laws .... In other words, were the

rural electie [sie] systems and other preference agencies in

the upper Colorado River Basin States unable to initially

or ultimately utilize all of the firm energy available from

the projects, the remaining portion of the energy would

be sold to nonpreference customers within these States, if

they desired it, rather than to preference customers lying

[even slightiy] cutside of the upper Colorado River Basin

area, even though the power could be made available to

the preference customers over the existing or proposed

facilities of the Federal Government that were electrically

integrated with the upper Colorado River Basin project.

In general, neither State lines nor the peripheries of river

basins bear any relation in distance from a project to

economical transmission distances from a project.

Id. at 897 (emphasis added). The rural electric cooperatives also

criticized the private utilities for advocating that any marketing

mind, do you think that anybody outside of the upper basin would

buy the power subject to having it cut off?

Mr. Larson. I could not speak for those power purchasers.

Mr. Hosmer. Is it not a fact that the purchasers of power con-

sider the continuation of the supply over a definite period of time

an essential?

Mr. Hosmer. Is it not a fact that it would be risky for any power

consumer to attempt to rely upon such a source of power under

those conditions?

Mr. Larson. They could not build expensive transmission lines for

them.

Mr. Hosmer. You have to have transmission lines to move it.

Hearings on H.R. 4449, supra, at 169-70.

23a

Rogers C. B. Morton, et al.

plan be incorporated in the text of legislation. They argued that

the Secretary's broad cliseretion in contracting with power cus-

tomers should be bounded only by the traditiona! limitations

imposed by the reclamation law preferences of Section 485h(c)

and the requirement of economic stability. The ccoperatives

feared that participation by private utilties might deprive them

of the full benefits of the project. Jd. at 895.3%

In light of these points of contention the House Committee

on Interior and Insular Affairs made two successive amendments.

The Committee first substituted for the three proposed bills the

language of a draft bill from the Interior Department. H.R.

Rep. No. 1774, supra, at 19. In place of the mandatory with-

drawal clauses of the original bills, Section 6 of the new version

placed a ten-year limit on contracts to customers outside of the

upper basin states unless the Secretary determined that the

power sold was in excess of the probable needs in the upper basin

states.49 The Committee then amended Section 6 by deleting

the time limitation on contracts with lower basin customers. It

explained the purpose of its amendment as follows:

By this amendment all States of the Colorado River Basin

would be placed on the same basis with respect to acquiring

electric power from the project. In discussing section 6,

the committee considered writing into this legislation a power

preference provision similar to those in existing reclamation

law. Such a provision was not specifically written in because

the provisions in general reclamation law, including the

39The Attorney General subsequently construed the preference pro-

vision in §5 of the Flood Control Act of 1944, ch. 665, 58 Stat. 890,

16 U.S.C. § 825s, as not contemplating the “disposition [of power] to

a private company under an arrangement whereby the latter obligates

itself to sell an equivalent amount of power to preference customers

to be designated by the Secretary.” 41 Up. Atty. Gen. 236, 244 (1955).

49Section 6 of the Interior Department’s bill stated in part:

No contract or agreement for the sale of electric power generated

at plants authorized by this Act shall be made for a period of

more than 10 years when such power is disposed of for use out-

side the States of the Upper Colorado River Basin, unless the

Seeretary of the Interior shall have determined that such power is

surplus to the probable needs in such States. All other contracts

for the sale of electric power pursuant to this Act shall be for

periods not to exceed forty years.

H.R. Rep. No. 1774, supra, at 29.

24a

-Lrizona Power Authority, et al. vs.

Reclamation Project Act of 1939 [Section 485h(¢e)] and the

Flood Control Act of 1944, would be applicable to this

project under section 3. The committee wishes to make it

clearly understood that, although a power preference provi-

sion is not specifically written into this legislation, the com-

mittee fully supports the application of existing power pref-

erence provisions to this project.

Id. at 22 (emphasis added).

This is the first point in the legislative history where the

phrase “same basis” is used by a committee. Arizona Power

interprets this statement as prohibiting geographic preferences.

But reading the statement in the context of the hearings on the

mandatory geographic preferences in the original bills, we cannot

agree. No one at the hearings objected to the original preferences

on the ground that the lower division states would be deprived

of their fair share of CRSP power.*! Instead the critics of the

provisions were concerned solely with generating maximum power

revenues while adhering to the reclamation law preference for

public utilities. The Committee report expressed similar con-

cerns. We believe that when the committee stated that all

states would be “on the same basis,” it meant that the Secretary

should have discretion to market CRSP power wherever he thinks

best to maximize revenues consistent with reclamation law pref-

*1Arizona Power can point to only one instance where any argument

has ever been made specifically on benalf of Arizona’s interest in CRSP

power. A 1950 Bureau of Reclamation report on CRSP analyzed the

marketing area solely in terms of the states of Colorado, Utah, Wyoming

and New Mexico. See H.R. Doe. No. 364, 83d Cong., 2d Sess. 156

et seg. (1954). Governor Pyle of Arizona objected *o the exclusion of

his state from the proposed marketing area, particularly since Glen

Canyon was within Arizona territory. The Governor gave no indication,

however, of what percentage of CRSP power he thought Arizona should

have. Thus, his statement provides no help in establishing a standard

to review for reasonableness the 20 percent allocated to the southern

division in the Marketing Criteria. See also H.R. Doe. No. 364, supra,

at 8-9 (letter from Governor Pyle).

42See H.R. Rep. No. 1774, supra, at 23-24 (emphasis added) :

[T}he committee expects the proposal by the private power com-

panies for cooperation in the development to be carefully con-

sidered by the Department of the Interior and the electric power

and energy of the project to be marketed, so far as possible,

through the facilities of the electric utilities operating in the area,

snell bate,

25a

Rogers C. B. Morton, et al.

erences. The (omumittee deleted maudatory preferences because

it feared that they might unduly fetter the Secretary's discretion

and hamper his efforts to achieve CRSP’s underlying objectives.

But the Committee did not prohibit the Secretary from adopting

a geographic preference if at some time in the future he deter-

mined that such a preference was consistent with the policies

of maximizing revenue and adhering to reclamation law prefer-

ences.

Significantly, Arizona Power does not argue that the Marketing

Criteria~will lead to a loss of potentially recognizable power rev-

enues or a decrease in the firm power rates. Nor does it argue

that the Marketing Criteria are inconsistent with reclamation

law preferences. Arizona Power argues only that it was “the

congressional understanding” that maximum revenues could be

achieved under the reclamation law preferences only if CRSP

power were sold to Arizona preference customers on a permanent

basis.

This argument would have some substance if Arizona Power

could point to clear evidence that the Committee desired a

certain portion of CRSP power allocated to the lower division

states and to Arizona in particular. It does not, nor could it.

The Committee states that a major purpose of the bill was to

provide hydroelectric power for the expanding economy “of the

area,” referring to the upper basin. H.R. Rep. No. 1774, supra,

at 11.43 The Committee did note that there was an increasing

need for electric energy “{wlithin and adjacent to the Upper

Bosin.” Id. at 13. But it does not appear that any significant

provided, of course. that the power preference laws are complied

with and project repayment and consumer power rates are not

adversely affected.

The Secretary argues that the insertion of Section 6 was designed

merely to remedy the previous inapplicability of Seetion 485h(c)

preferences. This is erroneous. Section 2 ~f each of the three bills sub-

mitted provided that all of the statutory law of reclamation was ap-

plieable to CRSP, except as otherwise provided. The bills did not,

therefore, except application of Section 485h(e) from CRSP. The

Committee explanation of Seetion 6 should be viewed as a statement

of clarifieation only.

43The President’s statement of approval of the legislation transmitted

to the Committee also referred to the =, oer basin’s “much-needed

electrie power.” H.R. Rep. No. 1774, supru, at 25.

26a

-lrizona Po:er Authority, et al. vs.

portion of Arizona was encompassed under this latter descrip-

tion.*#

We therefore conclude that it was not the House Committee’s

understanding that CRSP success depended on any given geo-

graphic allocation of power. The understanding was that success

required only that the Secretary have discretion to market CRSP

power in the best interests of the government.

b. The Senate

Proceedings in the Senate closely paralleled those in the

House. A bill was introduced there similar to those introduced

in the House, S. 1555, 835d Cong., 1st Sess. (1953), and hearings

were held on the measure. Hearings on S. 1555 Before the

Subcomm. on Irrigation and Reclamation of the Senate Comm.

on Interior and Insular Affairs, 83d Cong., 2d Sess. (1954).

Many of the same witnesses presented similar testimony. See, e.g.,

id. at 575 (statement of private utilities), 687 (National Rural

Eleetrie Cooperative Association). Southern California interests

again opposed the proposed legislation. See S. Rep. No. 1983,

83d Cong., 2d Sess. 25-30 (1954) (minority views of Sen. Ku-

chel). The House Committee's amended bill and report were

before the full Senate Committee. See id. at 20-24.

Section 4 of the Senate bill contained a mandatory geographic

preference in favor of the upper basin states identical to that

44The National Rural Electric Cooperative Association referred to a

group ot 18 member systems that were “within or directly adjacent”

to the primary marketing area described by Bureau officials before the

Subcommittee. The systems were located in Idaho and in the northern

division states of Colorado, Utah, Wyoming and New Mexico. Hearings

on H.R. 4449, et al., supra, at 895. The Association was informed by

Bureau Regional Director Larson that some power would be marketed

in northeastern Arizona. See id.

We note that the large power load centers of Denver, Salt Lake City

and Albuquerque are within upper basin states, but are outside the

upper basin proper. They would therefore be “adjacent” to the upper

basin.

The group of ten private utilities which was represented before the

Subcommittee included Amzona Publie Service Company. Jd. at 556.

We cannot tell from the record, however, whether Arizona Public

Service Company was primarily interested in marketing power to

central and southern Arizona.

Be Naame

27a

Rogers C. B. Morton, et al.

contained in the House bills. There was little diseussion of the

marketing problem. The Committee deleted the mandatory pref-

erence but did not detail its reasons in its report. Arizona Power

points to broad language in the report that “there is a ready

market [for hydroelectric power] throughout all the Colorado

River Basin States.” S. Rep. No. 1983, at 2-3. This statement,

however, is ambiguous at best. The preceding paragraph spe-

cifically noted that the upper basin states anticipated rapid

growth with a resulting “urgent need for water and power,”

particularly in the Albuquerque, Denver and Salt Lake City met-

ropolitan areas. Id. at 2.45 The legislative history, therefore, pre-

sents no clear evidence that the Senate Committee in the 83rd

Congress intended to prohibit all types of geographic preferences.

3. The 84th Congress

The House and Senate bills did not reach a vote in their re-

spective chambers during the 83rd Congress and were left as

unfinished business with the adjournment of Congress. Successor

bills were introduced in the 84th Congress and one. S. 500,

was eventually enacted as CRSP.

a. The Senate

Senator Anderson of New Mexico, chairman of the Senate

Subcommittee on Irrigation and Reclamation, introduced S. 500

and presided over the hearings on the bill. He deseribed S. 500

as identical to 5. 1555 reported out of the Committee to the last

Congress. Hearings on 8. 500 Before the Subcomm. on Irriga-

tion and Reclamation of the Senate Comm. on Interior and In-

sular Affairs, 84th Cong., Ist Sess. 1 (1955). Therefore he re-

quested the witnesses to view the hearings as supplemental

to the previous hearings and to emphasize new material only. 7d.

Testimony presented at these hearings further supports our

view that not all geographic preferences are contrary to the leg-

islative intent. Several witnesses emphasize the benefits of the

45Testimony of Senators presenting statements on the bill aiso

reflected an intent to market power in the four upper division states

of the upper basin. See, e¢.g., Hearings on S. 1555, supra, at 20 (state-

ment of Sen. Barrett, member of the Committee); id. at 178 ‘state-

ment of Sen. Chavez).

ey

28a

Arizona Power Authority, et al. vs.

oroject to the upper basin states.*¢ Senator Hayden of Arizona

jenied that Arizona had any special claim to CRSP power from

che Glen Canyon Dam to be built in Arizona.47

Arizona Power contends that the Senate Committee’s report

yn the hearings on S. 500 reemphasized its prior position oppos-

ing preferential treatment of the upper basin. S. Rep. No. 128,

34th Cong., Ist Sess. (1955). It quotes the following paragraph

from the report.

The committee’s position on power marketing of the proj-

ect is that the area to be served shall be governed only by

economical transmission distance direct or through intercon-

nections with other plants either in the Upper or Lower

Basin. This policy is necessary to the economic and finan-

cial health of the project. This policy in the committee’s

opinion accords with established practice and policies of

reclamation power operations. The committee intends that

full equality of treatment be accorded to both Upper and

Lower Basin power customers. Established preferences and

sound business principles in accordance with existing rec-

lamation law are intended to be applied in the marketing

of power from the project, and it is not intended that Lower

Basin customers should be discriminated against in any

respect.

Id. at 14. We believe that Arizona Power’s argument misses

the mark.

We note first that the Committee described the power markct-

ing area in much the same terms as it had in the 83rd Congress.

See Section II, D, 2, b supra. It stated generally and by way of

summation that “there is a ready market throughout all the Colo

rado River Basin States.” S. Rep. No. 128, supra, at 3. But it

also described S. 500 as designed to provide hydroelectric power

to meet the projected rapidly increasing demand for power in

46Hearings on S. 500. supra, at 18-19 (testimony of Bureau of

Reclamation Commissioner Dexheimer); id. at 47 (testimony of Regional

Director Larson); id. at 524-25 (statement of Sen. Watkins): id. at

330 (testimony of National Rural Electrie Cooperative Association

representative).

477d. at 719-20. Senator Goldwater of Arizona also made a statement

on the project, but did not refer to power marketing problems of

CRSP. Id. at 565-70.

—

Pe ee ee ee

ee ee

29a

Rogers C. B. Morton, et al.

the upper basin.** Seeond, we note that the hearings on S. 500

shed no additional light on the power marketing problem.

We therefore conclude that the anti-discriminatory language in

the Senate Committee's report merely reflects two policy deci-

sions: first, that the reclamation law preferences be adhered to

and second, that power not be marketed in favor of upper basin

customers in such a way as to return less than the maximum

recognizable power revenues. Arizona Power candidly admits

that these two policies are articulated. When the anti-diserimina-

tion language of the last clause is construed in light of all that

preceded it in the paragraph, it conforms precisely to our

view.

Arizona Power does not argue that northern division customers

served pursuant to the Marketing Criteria are outside economical

transmission distanees. Nor does it contend that implementation

of the Marketing Criteria will impair the financial health of

CRSP. Furthermore, Arizona Power fails to convince us that

the “established practice and poliev” of federal power marketing

forbids all types of geographic preferences. We reject Arizona

Power’s theory that the Marketing Criteria clearly violate the

legislative intent of the Senate Committee in the 84th Congress.

b. The House of Representatives

After the Senate Committee on Interior and Insular Affairs

had issued its report and during the time that S. 500 was

debated on the floor of the Senate, the House Subcommittee

on Irrigation and Reclamation held hearings on five CRSP bills

introduced by upper division congressmen.*® Hearings on H.R.

270 et al Before the Subcomm. on Irrigation and Reclamation

48The report stated:

On its [Upper Basin] fringes lie such large centers of population

as Albuquerque, Denver, and Salt Lake City and their environs,

each of which has experienced rapid growth in recent years; each

of which anticipates additional significant growth with ever more

urgent need for water and power... . The Upper Basin proper

. stands . . . on the verge of great industrial growth, with

consequent increase in need for water for . . . power.

Id. at 2-3.

49H.R. 270, S4th Cong., Ist Sess. (1955) (Rep. Dawson of Utah);

H.R. 2836 (Rep. Fernandez of New Mexico); H.R. 3383 & 3384 (Rep.

Aspinall of Colorado); H.R. 4488 (Rep. Rogers of Colorsda)

30a

Arizona Power Authority, et al. vs.

of the House Comm. on Interior and Insular Affairs, 84th Cong.,

Ist Sess., pts. 1 & 2 (1955). Subeommittee Chairman Aspinall

of Colorado indicated, as Senate Subcommittee Chairman An-

derson had done earlier, that the hearings on the 84th Congress

were to be a continuation of the hearings on CRSP bills in the

83rd Congress. Id., pt. 1, at 1.

Despite Arizona Power's argument that the House Committee

in the 83rd Congress had rejected all geographic preferences,

witnesses before the Subcommittee repeatedly assumed that the

upper basin (upper division) states would be the principal bene-

ficiaries of CRSP power.®® Arizona Power concedes as much.

Yet the report of the House Committee omitted any clarification

of what Arizona Power would consider an erroneous assumption.

H.R. Rep. No. 1087, supra, at 1, reprinted in 1956 U.S.C. Cong.

& Admin. News 2346. Indeed, the Committee recognized the

merit of the testimony submitted by representatives of the upper

basin states advocating the enactment of CRSP to meet growing

energy demands in their region. H.R. Rep. No. 1087, supra, at

4-5, reprinted in 1956 U.S.C. Code Cong. & Admin. News

2350-51. This serves as persuasive evidence that the Committee

intended that the upper basin states be the primary beneficiaries

of the legislation.*! Therefore, the “same basis” standard of

treatment for Colorado River Basin states advocated by the

Committee cannot reasonably be interpreted to prohibit all types

of geographic preferences.

50Hearings on H.R. 270 et al., supra, pt. 1, at 48, 52 (testimony of

Bureau of Reclamation Commissioner Dexheimer); id. at 54 (testimony

of Regional Director Larson); id. at 720-21 (statement of Senator

Watkins); see id. at 482-83 (statement of Senator Bennett).

51Minority reports filed by members of the Committee from southern

California and Eastern states provide further evidence. A leading argu-

ment against CRSP was that it would burden the states of Wyoming,

Colorado, Utah and New Mexico with high-cost hydroelectric power.

It was urged by the dissenters that the coal, oil shale and uranium

deposits in the four-state region be exploited instead as more economical

in the long run. H.R. Rep. No. 1087, supra, at 38-39, reprinted in

1956 U.S.C. Cong. & Admin. News 2384-85 (minority views of Reps.

Saylor, Pillion, Hosmer, Utt, Haley & Shuford); id. at 2399 (minority

report of Reps. Haley & Shuford); id. at 2405 (adverse report of

Rep. Pillion); id. at 2414 (supplemental minority views). See Hearings

on H.R. 270 et al., supra, pt. 2, at 486 (statement of Rep. Hosmer

advocating atomic energy plants in upper basin).

en

eee ee aT) vee ee

Vd de CR lee we pe bdr

waite

Se the heeds

ol ns Oe hare oe ele

3la

Rogers C. B. Morton, et al.

Arizona Power's response to this evidence is to quote a

discussion between Representative Rhodes of Arizona and Com-

missioner Dexheimer.5? Arizona Power argues that the conversa-

tion reflects an understanding that the deletion of the mandatory

preferences from the bills in the 83rd Congress was intended to

bar all geographic preferences. This argument is not persuasive.

The discussion in fact can more easily be interpreted as grant-

ing the Secretary broad diseretion in marketing power as long

as he complies with the reclamation law preferences and obtains

optimum power revenues.

We therefore conclude that the House Committee's requirement

that all basin states be “on the same basis with respect to

acquiring electric power,’’ when viewed in light of the preceding

52The discussion was as follows:

Mr. Rhodes. . You will reeali in the hearings in the 83rd

Congress there were provisions for power preference to the States

of the upper basin.

I note in the report from the Department and in the bills now,

there is no such power preference for any State.

Is it the thought of the Department that the power from Glen

Canyon would be marketed on a free and open market, or is

there some other thought behind the Department's plans?

Mr. Dexheimer. Of course, we are bound to the present preference

laws and the 1937 act. But at the present time we do not know,

and we probably won't until we are ready to enter into negotiations

for those contracts, who the customers will be nor how much

power they will take nor how long a period of time the contract

should be made for.

Mr. Rhodes. Is it the thought of the Department, then, that the

marketing of power from Glen Canyon will be to those customers,

first, which have a preference under the reclamation law, and,

second, to those customers to whom sales can be made that are

determined to be most advantageous to the Federal Government

and the economy of the West?

Mr. Dexheimer. Normally that would be the case unless there should

be some provision in the authorization that would be controlling.

Mr. Rhodes. But for the present time there is no such provision,

as I read it.

Mr. Dexheimer. Nothing in these bills that I know of.

Mr. Dawson [fof Utah). If I recall in the bills that were intro-

duced last year, there were provisions wmtten into the bills them-

selves which would limit the marketing of power to the upper

basin. And those restrictious are not in the bill this year.

Mr. Rhodes. That is correct.

Hearings on H.R. 270, et ai., supra, pt. 1, at 298.

32 a

Arizona Power Authority, et al. vs.

legislative history, does not prohibit all geographic preferences

in power marketing.

4. Floor Debates

The floor debates in both legislative bodies support this con-

clusion. It was unquestionably the understanding in both cham-

bers that the upper basin was eventually to receive the lion’s

share of CRSP power. While CRSP §16, 43 U.S.C. § 6200

defines the term ‘‘States of the Upper Basin’’ as including Ari-

zona, it is quite clear that Congress, like the committees, did

not have Arizona in mind when it referred to the upper basin

in the context of power marketing.5%

a. The Senate

Several groups opposed CRSP in lengthy debates on the Senate

floor in 1955. Senator Douglas led the eastern interests opposed

to appropriating money for projects of no direct benefit to them.

Senator Kuchel represented the California interests who did not

want their cheap source of secondary power diminished. Both

groups phrased their arguments in terms of the adequacy of

power revenues to reimburse most of the CRSP outlay. They

also took advantage of the successful nationwide opposition to

the large Echo Park project based on scenic and conservationist

grounds.

One of Senator Douglas’ arguments was that the CRSP irri-

gation benefits in the upper basin were high-cost and would be

reimbursed only to a limited extent. 101 Cong. Ree. 4576 (1955).

Subcommittee member Senator Watkins of Utah, floor manager

and cosponsor of S. 500, pointed out that the landowners of the

upper basin would also be in the same community as the power

users. The power users would reimburse a large portion of the

project through payment for power. Thus members of the same

community would cooperate in paying for CRSP. Id. Senator

Douglas’ later comments indicated that both he and Senator

Watkins were referring to power users in the four upper divi-

53See note 7 supra. Arizona Power does not dispute this. Nor would

it help Arizona Power to argue that Arizona was considered part of

the upper basin for power marketing purposes. To do so would mean

that Arizona would then lose the broad protections against discrimina-

tory treatment of lower basin customers that Arizona Power claims is

in the legislative history.

Se er

33a

Rogers C. B. Morton, et al.

sion states. Id. at 4578. Subsequent exchanges further clarified

this understanding.>+

We recognize that the remarks of opponents of a bill may

not always be authoritative. Schwegmann Brothers v. Calvert

Distillers Corp., 341 U.S. 384, 394-95 (1951). But Senator

Douglas’ inferences are certainly relevant aud helpful, particu-

iarly when Senator Watkins made no response w Senator Doug-

las’ deseription of the states to be benefited by CKSP. Arizona

v. California, supra, 373 U.S. at 583 n.85. More importantly,

the statements of Senator Watkins, as cosponsor and floor mana-

ger, are entitled to substantial weight in construing the power

marketing provisions of CRSP. National Woodwork Manufac-

turers Ass’n v. NLRB, 386 U.S. 612, 640 (1967). Senator Wat-

kin’s representation of Utah, which stood to benefit from his in-

terpretation of the primary power marketing area, does not di-

minish the probative value of that interpretation. Federal En-

ergy Administration v. Algonquin SNG. Inc., .......... TE wcinhien

(June 17, 1976) (‘slip op. at 16 n.17).%5

b. The House of Representatives

Arizona Power’s position does not fare any better when mea-

sured against the House debates of 1956. They demonstrate

without question that the intent of the House in passing H.R.

3383 was to favor the upper basin states.

Representative Miller, a member of the Subcommittee, gave an

introductory speech on the need for water and power in the

growing upper basin. 102 Cong. Ree. 3471 (1956). He referred

to the Colorado River Compact which allocated 7.500,000 acre-

feet of water a vear to both lower and upper basins and stated

that CRSP would enable the upper basin to utilize effectively

54101 Cong. Rec. 4575-79, 4635; see note 55 infra.

55Senator Watkins repeatedly assumed that CRSP power would

be marketed in the upper division states. 101 Cong. Ree. 4666-68,

4800-01 (1955). More importantly for our purposes, however, he

clearly stated that the Bureau of Reclamation would be vested with the

discretion to determine where the power would be sold, the duration

of the contracts to be negotiated and the rates to be charged. Zd. at

4666-67. This reference to agency discretion is in harmony with an

earlier comment by Representative Rhodes that “the Bureau will have

..ore or less a free hand in marketing power.” Hearings on H.R.

4459, et al., supra, at 163.

34a

Arizona Power Authority, et al. vs.

its share of water and the electric energy that could be gener-

ated from i‘s water.5* Id.; see id. at 3299 (remarks of Committee

Chairman lIingle). Subcommittee Chairman Aspinall, author of

H.R. 3383, specifically stated that the area intended to receive

CRSP benefits was composed of Colorado, Utah, Wyoming and

New Mexico. Jd. at 3510; see id. at 3610 (remarks of Subcomit-

tee Member Dawson.5?

Opponents of the bill did not dispute this basic proposition,

repeatedly reaffirmed throughout the course of the debates. As in

the Senate, they attacked the power aspect of CRSP as not

competitive with alternative energy sources in the upper basin

area. During the lengthy debates not one member argued in

favor of a position similar to that advocated by Arizona Power.

We think what Arizona’s representatives did advocate is signifi-

cant. Immediately after ridiculing an argument against the

power aspects of CRSP, Representative Stewart Udall remarked:

I want to tell you why my Republican colleague from Ari-

zona {Mr. Rhodes] and I have supported this bill. We

regard the Colorado River Basin as a community. This

community sat down many years ago to work out a devel-

opment plan. Unfortunately, southern California got ahead

of us when work began. Why, then, are we here supporting

this measure? Not because our State benefits from it but

because we are keeping the agreement that our State made

at that time.

Id. at 3736 (emphasis added).

In some cases a “committee’s unambiguous and unaltered treat-

ment” of an issue “is more probative of congressional intent than

the casual remark of a single Senator {or Representative] in the

floor debate.” Chandler v. Roudebush, —.... U.S. ........ n.36

56See Colorado River Compact Art. IV(b), reprinted in 70 Cong.

Ree. 325 (1928) (“. . . water of the Colorado River system may be

impounded and used for the generation of electrical power... .”).

See also 102 Cong. Ree. 3478 (1956).

57Representative Dawson did refer to Arizona on one occasion. But

it is obvious from the context of his remarks that Arizona would be a

secondary marketirg area. 102 Cong. Rec. 3610 (1956).

See also 102 Cong. Rec. 3713 (remarks of Reps. Dawson and Rogers) ;

id. at 3750 (remarks of Rep. Miller); id. at 3753 (remarks of Rep.

Vanik); id. at 3624 (remarks of Rep. Dempsey).

Ne ee ee

{

i

i

35a

Rogers C. B. Morton, et al.

(June 1, 1976) (slip op. at 19 n.36). Our review of the exten-

sive floor debates on CRSP convinces us, however, that in the

present case those debates are highly probative of congressional

intent.53 Further, the message of those debates is clear: both

legislative bodies intended the upper (northern) division states to

be eventually the primary beneficiaries of the legislation. Our

review of the floor debates leads us to believe that Congress

intended some type of geographic preferences in favor of the

states of the upper division.

5. Summary of Legislative History

Arizona Power has failed to carrv its burden of demonstrat-

ing that the Marketing Criteria clearly violate the legislative

intent behind CRSP. The deletion of the mandatory geographic

preferences in the bills introduced in the 83rd Congress does not

indicate an intent to invalidate all geographic preferences. In

our view, that deletion had two purposes: (1) to ensure compli-

ance with the Section 485h(c) reclamation law preferences by

not permitting nonpreference customers in the upper division

states a priority over preference customers outside that area;

and (2) to ensure that power be marketed at firm power rates

that would maximize power revenues needed to reimburse the

government.

The geographic preference of the Marketing Criteria does not

contravene these policies. First, the existence of some sort of

wtihdrawal program was certainly contemplated by Congress.

The history consistently evidenced an intent to promote primarily

the development of the upper division states. This intent is ef-

fectively accomplished by a scheme to market eventually the bulk

of CRSP power to the upper division states while generating

power revenues in the interim by selling significant blocks of

power to lower division customers. Withdrawal is the only means

58The conference committee adopted the language of the House

approved bill (H.R. 3383) where it differed from the Senate version

of S. 500. Conf. Rep. No. 1950, supra, at 3, reprinted in 1956 U.S.C.

Cong. & Admin. News 2422, 2425. In amending Section 7 of H.R.

3383 on power marketing no pertinent changes were made in response

to the floor debates on a preference for the upper division states.

Id. at 2-3, reprinted in 1956 U.S.C. Cong. & Admin. News 2425-24.

36a

Arizona Power Authority, et al. vs.

of reconciling these two goals®® Second, the Marketing Criteria

do not permit nonpreference customers to have a priority over

preference customers.

We conclude, therefore, that Arizona Power has failed to

establish from the legislative history that the Secretary’s action

falls outside the realm of his discretion and conflicts with con-

gressional purposes. Equally significant, in our view, is Arizona

Power’s failure to identify in the legislative history a standard

for administrative conduct against which we can measure the

Secretary’s action. It must be remembered that our task, or at

least a part of our task, in this rewiew is to determine whether

“there is [a] law to apply.” Citizens to Preserve Overton Park,

Inc. v. Volpe, supra, 401 U.S. at 410. Arizona Power has al-

leged, unsuccessfully, that the geographic preferences violate con-

gressiona! intent, but it has failed to articulate what law we

should apply; ie., it did not demonstrate what the congression-

ally devised standard for power distribution is.

Perhaps Arizona Power is suggesting that the applicable law

is a “same basis’ standard. But we find this standard so vague

as to be meaningless and hence no genuine limitation on the

Secretary's discretion. For example, a “same basis” standard

could be construed as requiring each of the seven basin states

to receive one-seventh of the power. It should be noted that

Arizona now receives more than a one-seventh share. Alterna-

tively, the “same basis” standard could require allocation on

the basis of each state’s population, number of preference cus-

tomers, past or projected energy needs, or the amount of Colorado

River water allocated to each state under the Colorado River or

59Tt cannot be argued persuasively that the CRSP projects were

scheduled to be constructed so as to avoid withdrawal. The Glen Canyon

power plant, the project closest to the lower basin customers, was

scheduled to be the first in operation in 1963. Because the Glen Canyon

project is to contribute 900,000 kilowatts of the approximately 1,260,000

kilowatts projected by CRSP, the bulk of the CRSP power to be

marketed eventually to the upper basin must come from Glen Canyon.

This necessitates withdrawal of allotments of power from lower basin

customers purchasing Glen Canyon power in the early years of the

project.

37a

Rogers C. B. Morton, et al.

Upper Colorado River Basin Compacts.“ But the ‘egislative

history provides no basis for adopting any of th:: interpreta-

tions as the controlling standard for CRSP po. distribution.

Rather, that history points to a congressional corzmitment of the

decision—within certain express limitations not applicable here

—to the discretion of the Secretary.

E. Administrative Interpretation

The Seeretary also counters Arizona Power's argument by al-

leging a long-standing administrative interpretation of his statu-

tory authority which is contrary to Arizona Power's theory.

The Secretary argues that the formulation of the Marketing

Criteria in 1960 and their subsequent insertion into contracts

for the sale of CRSP power is a long-standing and reasonable

construction entitled to deference. Udall v. Tallman, 380 U.S. 1,

16-18 (1965). In this context, we note that Secretary Seaton

approved and announced the Marketing Criteria in 1960. After

the change in administrations, the Marketing Criteria were reis-

sued in similar form with respect to the issue presented here.

Secretary Stewart Udall approved and announced the reissued

Marketing Critera in 1962. Secretary Udall had been an Arizona

representative on the House Subcommittee which held hearings

on CRSP, a member of the Committee which issued the ma-

jority report and an advocate on the floor of the House for

CRSP. We think it would be difficult to conceive of a situation

where “the interpretation given the statute by the officers or

60Seection 5(e) of CRSP, as amended, 43 U.S.C. § 620d(e) provides

another possible basis for power allocation. CRSP revenues, composed

predominantly of power revenues, in excess of certain repayment and

operating costs would be paid out of the Upper Colorado River Basin

Fund to upper basin states for further development. The apportion-

ment is as follows: Cvlorado, 46 per cent; Utah, 21.5 per cent;

Wyoming, 15.5 per cent; end New Mexico, 17 per cent. Amzona is not

mentioned at all. Arizona, on the other hand, does benefit from the

Lower Colorado River Basin Development Fund which eontains surplus

revenues from lower basin projects such as Hoover Dam, the Parker-

Davis project and the Central Arizona project. Colorado River Basin

Project Act, Pub. L. 90-537, ) 403, 52 Stat. 594 (1985), as amended,

43 U.S.C. § 1543.

38a

Arizona Power Authority, et al. vs.

agency charged with its administration” is entitled to more def-

erence. Udall v. Tallman, supra, 380 U.S. at 16.%!

Arizona Power responds to the administrative interpretation

argument by describing the Marketing Criteria as unreasonable

and directly contrary to the legislative will. We have already

rejected its legislative intent argument.

Arizona Power also contends that the asserted administrative

interpretation is not long-standing. Its argument is that the

Marketing Criteria were not applied until the 1970 notice of

withdrawal of power; prior to that time the administrative inter-

pretation had no detrimental impact because CRSP power for

southern division customers was ample. Thus, the duration of

the interpretation should be measured only from the time it

adversely affected lower ‘vision utilities.

We disagree with th. . rument. Severe detrimental impact of

an administrative inierp:ctation is only one factor to be consid-

ered in 2ppiving Tallman. Udall v. Tallman, supra, 380 U.S. at

18. Here the Secretary’s interpretation was “notorious” and a

“matter of public record” since 1960. 7d. at 16-1. Its notoriety

was heightened by insertion of withdrawal provisions into 87

binding contracts with power customers. The interpretation may

properly be treated, therefore, as a “long-standing rule” for pur-

poses of Tallman.

61The Secretary also contends that Congress has ratified the adminis-

trative interpretation. He first points to the circulation of the Market-

ing Criteria to concerned congressmen and then notes that Congress

annually approves appropriations to finance the construction, operation

and maintenance of CRSP. But he fails to point to sutlicient evidence

of a congressional intent to ratify by means of appropriating funds.

See Arizona Power Pooling Association y. Morton, supra, 527 F.2d at

725-26.

The Secretary’s second argument is that Section 602 of the Colorado

River Basin Project, requiring Section 7 of CRSP, 43 U.S.C. (6 620f,

to be administered in accordance with its criteria, constitutes ratitica-

tion of the Marketing Criteria. Pub. L. 90-537, 82 Stat. 900 (1968),

43 U.S.C. § 1552(c). Arizona Power contends, however, that Section 602

on its face deals only with criteria for coordination of water releases

from reservoirs constructed under the CRSP and Boulder Canyon

Project Acts. But the legislative history reveals quite clearly that

Section 602 was directed to the coordination of the power operations

of all the projects. H.R. Rep. No. 1311, supra, reprinted in 1968 U.S.C.

Cong. & Admin. News 3729.

ee oe Y

39a

Rogers C. B. Morton, et al.

We believe that the administrative interpretation of the See-

retary’s authority is entitled to deference. That interpretation

serves as additional evidence that the intent of Congress has not

been violated by the Secretary's proposal to withdraw power

pursuant to contracts and entered into under the Marketing

Criteria.

III. Conclusion

Having decided the jurisdictional issues againt Arizona Power,

we do not need to reach the remaining issues argued by the

parties.

We are without jurisdiction to review this case. 5 U.S.C.

§701(a) (2). The order staying the Secretary's implementation

of his marketing plan is vacated. The judgment of the district

court is vacated and the case remanded for consideration of a

motion to dismiss the action.

VACATED AND REMANDED.

PERNAU-WALSH PRINTING CO., SAN FRANCISCO 1-26-77—410

a

sosoeseouee.ees +» &@ Ww

S$BBHRKRKRBSHB

S &

et al.,

Defendants-Appellees,

NORTHERN DIVISION POWER ASSOCIATION,

40a

UNITED STATES COURT OF APPEALS “>? ,

POR THE NINTH CIRCUIT ~ = F)

PE ye,

“7 Qy r

ARIZONA POWER AUTHORITY; ) afte z "erp

et al.,° Tower a

Plaintiffs-Appellants, )

)

ELECTRICAL DISTRICT NO. 2, )

PINAL COUNTY, ARIZONA, .

Intervenor-Plaintiff- ) No. 75-2141

Appellant, :

-vs- )

)

ROGERS C. B. MORTCN, individually )

and as SECRETARY OF THE UNITED )

STATES DEPARTMENT OF THE INTERIOR; ) ORDER

)

)

)

)

)

)

)

)

)

)

INC.,

Intervenor-De fendant-

Appellee.

Before: BROWNING and WALLACE, Circuit Judges,

and FERGUSON,* District Judge

The panel as constituted above has voted to deny

the petition for rehearing; Judges Browning and Wallace have

voted to reject the suggestion for rehearing en banc and

Judge Ferguson has recommended rejection of the same.

The full court has been advised of the suggestion

for rehearing en banc and no judge of the court has Sew |

a vote on the suggestion for rehearing en banc. Fed. R.

App. P. 35(b).

The petition for rehearing is denied and the suc-

gestion for rehearing en banc is rejected

*Honorable Warren J. Ferguson, United States District Judge,

Central District of California, sitting by designation.

a a te

o oO 4 a wo > eo. w

eet Te gees Smee Sree

ee

~

°o

4la APPENDIX C

FILED

MAY 2 1975

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

ARIZONA POWER AUTHORITY;

ELECTRICAL DISTRICT NO. 3,

PINAL COUNTY, ARIZONA;

ELECTRICAL DISTRICT NO. 4,

PINAL COUNTY, ARIZONA;

ELECTRICAL DISTRICT NO. 5,

PINAL COUNTY, ARIZONA;

ELECTRICAL DISTRICT NO. 6,

PINAL COUNTY, ARIZONA;

WELLTON-MOHAWK IRRIGATION

and DRAINAGE DISTRICT;

ROOSEVELT IRRIGATION DISTRICT;

and CITY OF SAFFORD;

No. CIV 71-683 PHX - CAM

)

)

‘

Plaintiffs, ;

ELECTRICAL DIST. NO. TWO, )

PINAL CO., ARIZ., )

Intervenor-Plaintiff,

)

)

)

)

)

)

)

)

)

)

)

)

)

)

vs.

AMENDED

OPINION

ROGERS C. B. MORTON, individuatly

and as SECRETARY OF THE UNITED

STATES DEPARTMENT OF THE INTERIOR;

and ELLIS L. ARMSTRONG, individually

and as COMMISSIONER OF THE BUREAU OF

RECLAMATION, UNITED STATES DEPARTMENT

OF THE INTERIOR;

* and

ORDER

Defendants.

= DIVISION POWER ASSOCIATION,

NC

Intervenor-Defendant.

This case concerns a dispute, here sought to be

esolved by motions for summary judgment, over the allocation

f hydroelectric power by the United States Secretary of the

MAY 9 1975

a a ee en ee ee ee

S$SBRBI FRESE B

Tl -@andstone

62 -70- Tis 4003

42a

Interior from the Colorado River Storage Projects, as between

the plaintiffs and the defendants.

Plaintiffs in this case are the Arizona Power

Authority, an agency of the State of Arizona, which purchases

and supplies power to preference customers (pursuant to

43 U.S.C.A. 485h) such as municipalities, electric coopera-

tives, electric and irrigation districts (which categories

include the other plaintiffs) within the State of Arizona.

Defendants are the Secretary of the Interior,

individually and as Secretary, and the Commissioner of the

Bureau of Reclamation, United States Department of the

Interior, individually and as Commissioner.

The intervenor-defendant is the Northern Division

Power Association, Inc., a non-profit corporation of the

State of Utah, constituted by over fifty-eight members

including rural electric cooperatives, municipalities and

public corporations or agencies.

The Bureau of Reclamation o£ the United States

Department of the Interior has the responsibility under the

direction of the Secretary of the Interior for the construc-

tion, operation, and maintenance of all federal hydro-

electric projects on the Colorado River, including the

Colorado River Storage Project (Act of April 11, 1956,

43 U.S.C. 620); the Boulder Canyon Project (Act of December 21,

928, 43 U.S.C. 617); and — Canyon Adjustment (Act of

uly 19, 1940, 43 U.S.C. 618); and the Parker-Davis Project

Act of May 28, 1954, 68 Stat. 143: see note preceding

Sub-chapter I of Chapter 12A of 43 U.S.C.).

The power produced by these projects is sold by the

Bureau of Reclamation to other entities, who in turn distri-

bute and sell such power to the ultimate consumer. Unless

ooesesesrk wr * 8«e© Ne

~

co)

ae

—

_- —-

Se

~

a

6 Bes kB EeBRB

PR aL Cc aalaticeialee pail Retedlaallia dt bielbenee ns teed talon tlans Pe vni tiabe vA ann ba hers tttee Llbi”s eat a Ns Ol Ts ta ibiibiiteiase Sih emai 2

s

MERE on te ce are eee

*

43a

otherwise expressly provided by statute, power is marketed

pursuant to Section 9(c) of the Reclamation Project Act of

1939 [43 U.S.C. 485h(c)] which provides that "preference"

agencies ("Municipalities and other public corporations or

agencies; . . . corporations and other non-profit organiza-

tions financed in whole or in part by loans made pursuant to

the Rural Electrification Act of 1936 and any amendments

thereof") shall have first call on the available supply. A

similar provision appears in Section 5 of the Act of

February 24, 1911 (43 U.S.C. 522). In marketing such power,

the Bureau of Reclamation asserts that it assumes no respon-

sibility for supplying any of its customers’ needs beyond the

power specifically contracted for.

The first electric-power generating unit of the

Boulder Canyon Project (Hoover Dam) became operational in

October 1936. Installed generation capacity is 1,345 megawatts.

Al’ of this power has been allotted to contractors in the

Lower Basin States of California, -Arizona, and Nevada. Plain-

tiff Arizona Power Authority (APA) has a permanent allocat‘on

of more than 17% of the firm energy at Hoover Dam. This

preference for the Lower Basin States is made pursuant to

Section 5(c) of the Boulder Canyon Project Act [43 U.S.C. :

617d(c)]}.

The first electric-power generating unit at the

Parker-Davis Project became operational in Deceuber 1942.

Installed generating capacity of the entire project is

345 megawatts. All of the available power has been allotted

to contractors in the Lower Basin States of California,

Arizona, and Nevada.

Facilities of the Colorado River Storage Project

for the generation of electric power have been constructed at

Glen Canyon Dam, located on the Colorado River in Arizona

ses e fF + 4 &

BAPCRESA NARS RACES Ys

44a

below the Utah-Arizona border; Blue Mesa and Morrow Point

Dams on the Gunnison River in Colorado; and Flaming Gorge Dam

in Utah on the Green River below the Wyoming-Utah border.

Crystal Dam on the Gunnison River in Colorade is presently

under construction. The first electric-power generating

unit became operational in November 1963. Installed generat-

ing capacity of the foregoing projects is 1,266 megawatts.

The Bonneville Unit of the Central Utah Project was author-

ized by the CRSP Act but is yet to be constructed. The

CRSP marketing criteria apply to the power generated from

these facilities.

Prior to making the allotments of Colorado River

Storage Project Power, the Bureau of Reclamation undertook

a series of market studies. The Bureau of Reclamation

requested the Federal Power Commission to prepare a power

market survey for the Project. The survey, which was

completed in June 1958, was to aid the Bureau of Reclamation

in planning for marketing the power output of the Colorado

River Storage Project by identifying potential markets for

the power. In addition, studies were made of transmission

facilities to move the power to markets. Assistance and

cooperation was received from representatives of preference

customers in New Mexico, Colorado, Utah, and Wyoming, as well

as from Arizona Municipal Power Users Association and the

Salt River Project, two Arizona preference customer agencies.

As a result of the studies, the Bureau of

Reclamation submitted its recommendations to the Secretary

of the Interior in a May 3, 1960 memorandum. The Bureau's

recommendations pertaining to the Colorado River Storage

Project marketing criteria followed substantially the

recommendations of the Colorado River Basin Consumers Power

Inc. That organization has as its members preference

a

Oi tr bn vied te OAV tote & Gree) Re ae. eee A) hk ape ob all BOO matt, he WS wide.

oe he tee

Tata Seio As ¢

rr er ee |

“1

a

o

Ai pli aiiaie vite al

45a

customers from the Upper Basin as weli as Arizona Municipal

Power Users Association” and the Salt River Project, two

Arizona preference customer agencies. .

On May 17, 1960, the Acting Secretary of the

Interior, Elmer Bennett, approved the recommendation contained

in the May 3, 1960 memorandum. On May 18, 1960, Secretary of

the Interior Seaton announced the approval of the Colorado

River Storage Project Power marketing area and criteria.

In 1961, there was a change in administrations and

Stewart Udall became Secretary of the Interior. Thereafter,

in 1961, APA met with Secretary Udall to present its views in

opposition to the marketing criteria announced by Secretary

Seaton in 1960. A similar meeting was also held with

Commissioner Dominy of the Bureau of Reclamation.

On March 9, 1962, Secretary Udall announced the

Colorado River Storage Project General Power Marketing

Criteria. The criteria provided for a Northern Division con-

sisting of the Upper Rasin States (Wyoming, Colorado, New

Mexico and Utah) and a Southern Division consisting of the

Lower Basin State of Arizona and parts of the Lower Basin

Sences of California and eves. The criteria provided for

the permanent allotment of 80% of the Colorado River Storage

Project power in the summer service season and 937% in the

winter service season to preference customers in the Northern

Division. The remaining power, ‘20% in the summer service

season, and 7% in the winter service season, was permanently

allocated to preference customers in the Southerh Division.

The Upper Basin States were expected to be slower

to develop in population and economic growth than the Lower

Basin States ond were expected to be unable for some years to

make use of their permanent allotments. Until such time as

the Northern Division customers were in a position to use the

power permanently allotted to them, power was marketed in the

ok MES Ee

~~ Doe

_

Sees‘’ere w*s

—

7

—

ca

i BEeFESB@B Rt RRREBRREBEE SBE TSE SG

46a

Southern Division in excess of the permanent allotment made to

Southern Division customers, subject to withdrawal when needed

by the Northern Division customers. The criteria provides as

follows.

"(4) Prior: to initiation of construction of

transmission lines into the Southern Division,

or in the alternative, of arrangements for

delivery of power to customers in the Southern

Division that the principle of withdrawal set

out in subsection D(3) of this Section 4 will

be applicable to allotments to and contracts

for, the sale of power to such customers."

Colorado River power is generated from facilities at

Hoover and Parker-Davis in the Lower Colorado River Basin and

from facilities constructed pursuant to the Colorado River

Storage Project, Colorado-Big Thompson Frying Pan-Arkansas and

Colbran Projects in the Upper Colorado River Basin. The dis-

tribution of 3,109 megawatts of summer power and the 3,020

megawatts of the winter power from those facilities were

made as permanent allotments after the issuance of the CRSP

marketing criteria among the states of the Colorado River

Basin. =! .

Even after the allocation of CRSP power as provided

in the Marketing Criteria, the Lower Basin States had allotted

to them 58.3% of the total power during the sumbher service

season and 52.8% of the power during the winter service

season. These allocations do not reflect withdrawable CRSP

ee now being eccheved in the Lower Basin.

Application forms to purchase CRSP power were sent

to all prospective preference customers in the Northern and

Southern Divisions, including the plaintiff, APA. The

application form contained a clause acknowledging the

oS er | -s oe hab , pow

Bnet adit teetcrtrnnnst it inion. ee ee ee 2 ee

47a

defendant's right of withdrawal. The application submitted

by APA, received by defendants on April 30, 1962, requested

an allotment of a substantial amount of power, but APA

deleted from the application form prescribed by defendants,

the language: ;

“I have read the General Power Marketing Criteria

attached hereto and agree any contract entered into

tm connection with this application may include

such provisions as are required to fully implement

such criteria, specifically Sections 4d(3),

4d(4) and 6."

Because APA struck this reference to the withdrawal

provisions of the Marketing Criteria from its application

for CRSP power, Regional Director Clinton of the defendants’

Salt Lake City Office informed APA by letter dated May 23,

1962:

“Although we see no basis on which to allocate

power under the exceptions you have indicated,

we would be happy to discuss this matter with

you at your earliest convenience."

Such discussions thereafter took place in Denver, Colorado

on June 14, 1962, with various APA representatives participat-

ing. However, no allotment of CRSP power was subsequently

made to APA.

Twenty-seven Southern Division preference customers

and fifty-eight Northern Division preference customers have

entered into contracts with the United States, represented

by officials of the Bureau of Reclamation for the purchase of

CRSP power. Some of the contracting entities are actually

associations, é¢ach of which represents a number of other

preference agencies. The plaintiffs (other than APA) have

entered into contracts for CRSP power 2 By these contracts

oexee@esgvweseere 8

f PE ee ES ERE BREE

48a

defendants undertook to make permanent allotments of CRSP

power to the plaintiffs (other than APA), and also undertook

to make such power available, until needed by the Northern

Division. However, defendants required as a condition of

delivery of any CRSP power to these plaintiffs that they

execute contracts agreeing to withdrawal of any power in

excess of their permanent allocation when needed by the

Northern Division.

From the dates that the customer plaintiffs signed

their contracts for CRSP power, defendants had available for

sale and offered to sell to plaintiffs on a withdrawable

basis, all the power plaintiffs could use (in addition to

their "permanent" allotments) to meet the requirements of

their customers.

This situation lasted until December 1970 when the

Bureau of Reclamation notified Southern Division customers,

which included the plaintiffs, that not later than March 31,

1973, the Bureau would give notice that CRSP power would be

withdrawn beginning with the 1976 summer season. Following

the receipt of this letter, APA announced, at a meeting held

on April 2, 1971 (at which representatives of defendants

were present), that it had retained attorneys to examine APA's

position with respect to the proposed withdrawal. Thereafter,

on June 22, 1971, APA held a meeting with the other plain-

tiffs at which it was decided to submit letters to the defend-

ants protesting the proposed withdrawal as illegal and beyond

their authority, and if the protests were denied, to

institute litigation to protect the rights of the various

entities. _

The plaintiffs, other than APA and Electric District

No. 5, thereafter sent letters to defendants asserting,

— aa aetna ——

ee eee ft wt a ee ee Se

ee

oe eee or ey

=

rr ee ee ee ee ee |

s 5

@2 701i toan

49a

inter alia, that the geographic preference for the Northern

Division preference customers and the withdrawal provision

implementing that preference as set out in the marketing

criteria and the contracts were illegal and beyond defendants’

authority to require and hence that such plaintiffs would

resist and contest any withdrawal of power. APA, on behalf of

the preference customer, plaintiffs, on July 27, .1971

also notified the defendants of the plaintiffs’ opposition

to the proposed withdrawal on the ground that the preference

for the Northern Division preference customers, which the

withdrawal was intended to implement, was illegal and beyond

the defendants" authority. On August 31, 1971, the Secretary

of the Interior, Rogers C. B. Morton, by his Deputy Assistant,

advised APA that CRSP power was being marketed pursuant to

the provisions of the General Power Marketing Criteria, that

APA's customers had accepted the terms of those criteria and

that prior contractual commitments with those customers based

on the approved and accepted marketing criteria would not be

altered. ;

The instant action was filed in December 197l.seeeking

an injunction and declaratory judgment against the Secretary

of the Interior and the Commissioner of the Bureau of

Reclamation, both individually and in their official capaci-

ties, concerning marketing of power from the facilities of

the Colorado River Storage Project.

Specifically, plaintiffs ask that the criteria and the

contracts that have been entered into pursuant thereto be °

declared invalid, and that the defendants be enjoined from

using the criteria and that an order be entered prohibiting

the withdra»:1 of power as provided in the contracts, and

finally, that the Court order the defendants to negotiate new

contracts for then.

Bc Bb eta ad ed tek oll eee el eae

50a

The defendants urge that their motion for summary

judgment be granted on the grounds: (1) that the complaint

fails to state a claim upon which relief can be granted;

(2) that the suit is an unconsented suit against the United

States; and (3) that there are no issues of material fact and

the defendants are entitled to judgment as a matter of law.

_ Intervenor-defendant Northern Division Power

Association, Inc. joins defendants in moving for summary

judgment .

To determine whether either motion for summary

judgment can be granted, two issues must be decided. first,

whether the United States Secretary of Interior acted within

the scope of his authority, and secondly, whether or not the

action of the Secretary in issuing the criteria was arbitrary,

capricious, or unreasonable as a matter of law.

Both plaintiffs and defendants agree that the first

issue is ready for determination by the Court. Plaintiffs,

however, argue that there are material issues of fact which

prevent a determination by the Court of the second issue.

This Court is not convinced that plaintiffs have made a show-

ing that any material issue of fact prevents disposition of

this case on both grounds by the granting of the defendants’

motion for summary judgment. .

Therefore, the Court finds that the defendants’

motion, including the intervenor's, should be granted, and

it is so ordered. ,

The action of the United States Secretary of the

Interior in promulgating the Colorado River Storage Projects

Marketing Criteria for the allocation of power were within his

statutory authority. The criteria issued by him are reason-

able, and not arbitrary or in abuse of his discretion. |

ieee an eal il site ae iain tb ta Ts aap sealing th Menino sy Pi tt Ny BO ths Beinn 9 Ki te Mae eve Seca te Pee: inthe ni WUE a0 idle

scenes eoeemlmUermlmUhmCMHUCDSUCU

—- =

- ©

i Se seuss RRS RERERSE ES ee EES

Sla

As already noted in the recitation of the factual

background of this case, the delegation of power to the

Secretary by the Congress is found in the following statutes:

43 U.S.C. 620, 43 U.S.C. 620f, and 43 U.S.C. 485h(c).

Furthermore, Congressional authorization of the

Secretary's action is clear. In 43 U.S.C. 1552, Congress

requires the Secretary to prepare a long range plan for

operation of the reservoirs of the Colorado River Storage

Project. Congress in subsection (C) required that scetion

620(£) of Title 43 would be included in the long range plan.

Congressional intent by reference to legislative

history such as committee reports is inconclusive and con-

tradictory and therefore of little value in resolving the

issues here involved.

In any case, the clear wording of the applicable

statutes rather than inconclusive legislative history controla

Gemsco v. Walling, 324 U.S. 24h (1945).

Not only did the Secretary have the statutory power

to establish the criteria, but the criteria was based on

extensive studies and reports prepared over a period of

several years in the 1950's and 1960's. These studies and

reports, initially prepared by the Federal Power Commissfon

at the request of the Bureau of Reclamation, were finally

completed by the Bureau and approved by two Secretaries of

Interior (with some modifications).

As previously pointed out in ne factual background,

most preference customers from the upper and lower basin

states participated in the studies. The criteria were given

wide publicity, were made available to power users, and were

given to Congress and governors and state officials. The

criteria and the interpretation of the Secretary's authority

~ ol

oees#8qsee“iit « Ww

{ S2# S$ Bepes BRRBBREBSE ES BS

52a

explicit therein have been in effect since March of 1962 and

constitute a long-standing administrative interpretation.

Since the criteria approved by two Secretaries of

Interior, were based on careful, prolonged studies by experts

in the field pursuant to known and fixed guidel‘nes and in

accord with statutory authority, the criteria as decided upon

by the Secretary and here under attack cannot be said to be

arbitrary, capricious, or unreasonable.

Great deference should be given to the interpretatior

given to the statute by the officeis or agency charged with

its administration so long as such interpretation is not

unreasonable. Udall v. Tallman, 380 U.S. (1965); Citizens to

Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971).

The Court should not in the absence of abuse, substitute it

judgment for that of the Administrator, the Secretary of

Interior, in this case.

Under reclamation law, and specifically 43 U.S.C.

§ 485h(c), the Secretary is directed to enter into contracts

for the sale of power which shall not exceed forty years.

He is directed that the rates must "in his judgment” produce

power revenues sufficient to cover an appropriate share of

the annual operation and maintenance costs of the project and

interest on the share of the construction investment of not

less than three percent per annum.

Further the Act provides that in the sale or lease

of power, preference shall be given to municipalities and

other public corporations or agencies and to cooperatives or

other non-profit organizations financed with loans made pur-

suant to the Rural Electrification Act of 1936. 43 U.S.C.

§ 485h(c).

No other limitations are imposed upon the

osoesxsefemUemlmUOermlC SECU

— ———

Se ee cot. eas ernest ne ose

S$ 5

53a

Secretary's authority to dispose of power generated from

facilities constructed under the Colorado River Storage

Project.

In addition to the specific authority set forth in

43 U.S.C. § 485h(c), the Secretary under reclamation law is

also given broad general authority "to perform any and all

acts and to make such rules and regulations as may be necess-

ary and proper for the purpose of carrying out the provisions

of sections . . . 485(d) to 485(h)" [43 U.S.C. § 485(i)]}.

As the Supreme Court stated in Arizona v. California,

373 U.S. 546, 580, 590 (1963), when Congress in an Act grants

authority to the Secretary to contract, that authority

includes the power to choose with whom and upon what terms

contracts will be made, unless Congress has placed some limit

on that authority. Therefore, within the limitations noted

above, those dealing with preference customers, the Secretary

was authorized to allocate and distribute the available

CRSP power in the same way the Supreme Court found him

authorized with respect to the allocation of Colorado River

water, and judgment is entered herewith in accordance with thi

order and opinion.

DATED; May _,1975.

r mana och

United States District Judge

S eewnwt eoeeetweee

Ca

a

f SHES eRBXRERRERBRAS SE

CIV 71-683 PHX - CAM

54a

FOOTNOTES

1/ {Reference on page 5]

Arizona Municipal Power Users Association had as members at

this time, the following plaintiffs: The City of Safford and

Electrical Districts Nos. 2, 3, 4, 5, and 6.

2/ [Reference on page 6]

Mw % of Mw Z of

Basin Summer Total Winter Total

California lower 1019 32.8 1006 33.3

Arizona lower 496 15.9 319 10.6

Nevada lower 272 8.8 244 8.1

U.S. lower ‘25 : oe 25 .8

LOWER BASIN 1812 58.3 1594. 52.8

Utah upper 347 11.1 405 13.4

Wyomi _ upper 153 4.9 129 4.3

elevate upper 645 20.8 598 23.1

New Mexico upper 152 4.9 194 6.4

UPPER BASIN 1297 41.7 1426 47.2

TOTALS 3109 100.0 3020 100.0

3/ [Reference on page 7]

Electrical District Number Six-Pinal County 3-12-65

Electrical District Number Three-Pinal County 5-17-65

Wellton-Mohawk Irrigation and Dra e District 4-4-66

Electrical District Number Five-Pinal County 5-1i-57

Electrical District Number Four-Pinal County 5-1-67

Roosevelt Irrigation District a A

City of Safford

ek eR be SEE. a Chie QL

es

Income from the sale of storage project

power in fiscal year 1976 amounted to almost

$58.0 million, an increase of more than $11

million over fiscal year 1975. The highest monthly

revenue during the year was $7.2 million in May

1976. In addition to normal generation and sales,

the project purchased and resold 2,259,969,837

kilowatt-hours (kWh). Energy sales in fiscal year

1976 were in excess of 7.3 billion kWh.

55a

APPENDIX D

Fiscal Year 1976 Seles and- Revenue by Stetes

kWh Dollars

Arizona 1,891,235,.531 17,758,668

California 529.935.707 5.811,432

Colorado 2.298,855.029 15.374,666

Nevada 235.780.295 3.112.536

New Mexico 1,024,415,457 7,343,224

Utah 1.345.858.8658 8,238,801

Wyoming 32,765,215 217,2t7

Total 7.358.866.0902 57.856.544

\

\

\

\

\

\

\