# Appendix — Montana Power Co. v. Federal Power Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1971
- **Citation:** 400 U.S. 1013

## Text

TABLE OF CONTENTS

Page

En Banc Opinion of the United States Court of Appeals
for the District of Columbia Circuit la

Order of the United States Court of Appeals for the
District of Columbia Cireuit ................55. dia

7 Opinion of the Panel of the United States Court of
2 Appeals for the District of Columbia l 4.

Opinion and Order of the Federal Power Commission. 76a

mae secarmunrccauemmnmnen sectenncteon

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—

„ Ne, 21,908
Tus Mortaxa Power Courary, Petitioner
v.

Tun Coxvepsaatep Sausm axp Kooraxar Tunes or ran
Naarn Reservation, Montana, u
or lx ron, Intervenors :

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ment of an arbitrator. That court dismissed, holding that
it would not have jurisdiction unless it was held in the
proceeding pending before the Commission, subject to
review in a court of appeals, that the arbitration provision
in the license controlled. :

The proceeding before the Commission went fo
in 1965, with extensive evidence presented by the Tri
the Company, the Secretary of the Interior, and

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not controlling, and readjusted the annual charges
by Montana Power to the Tribes from $238,375 to
with the increase retroactive to *

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court with respect to one portion of the order (No. 21767).
The Company’s petition to review (No. 21904) objected
to the level of readjusted charges set by the Commission,

and also presented a threshold contention that the Com-
mission was without jurisdiction to en in the pro-
i ivision of this court

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1135 . 11115 112
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Artiele 30(D) further set forth as the governing criterion
—‘‘such readjusted annual charges to be reasonable charges
fixed upon the basis provided in Section 5 of i
14 of the Commission, to wit, upon the commercial
of the tribal lands involved, for the most profitable
purpose for which suitable, including power development.

When Congress passed the Public Utility Holding Com-
pany Act of 1935, it retained the Federal Water Power

* Act of August 26, 1935, 49 Stat. 838; see 16 U.S.C. §791a
et seq. (1964), as amended (Supp. IV, 1969).

7a

or tribal lands within reservations, was amended, as in-
dicated in the footnote, so as to read that—

* As amended in 1935, the law provides:

See. 10. All licenses issued under this Part shall be on the
following conditions: ;

(e) That the licensee shall pay to the United States rea-
sonable annnal charges in an amount to be fixed by the Com-
mission for the purpose of reimbursing the United States for n
the costs of the administration of this Part; for recompenaing it ‘
for the use, oceupancy, and enjoyment of its lands or other
property ; and for the expropriation to the Government of ex-
cessive profits until the respective States shall make provision
for preventing excessive profits or for the expropriation thereof
to themselves, or until the period of amortization as herein
provided is reached, and in fixing such charges the Commis-
sion shall seek to avoid increasing the price to the consumers
of power by such charges, and any such charges may be ad-
justed from time to time by the Commission as conditions
may require: Provided, That when licenses are issued involving
the use of Government dams or other structures owned by the
United States or tribal lands embraced within Indian reserva-
tions the Commission shall, subject to the approval of the
Seeretary of the Interior in the case of such dams or structures
in reclamation projects and, in the ease of such tribal lands,
subject to the approval of the Indian tribe having jurisdiction
of such lands as provided in section 16 of the Act of June 18,
1934 (48 Stat. 984), fixed a reasonable annual charge for the
use thereof, and such charges may with like approval be re-
adjusted by the Commission at the end of twenty years after
the project is available for service and at periods of not less
than ten years thereafter upon notice and opportunity for
hearing: Provided further, That licenses for the development,
transmission, or distribution of power by States or municipali-
ties shall be issued and enjoved without charge to the extent
such power is sold to the publie without profit or is used by
such State or municipality for State or municipal purposes,
except that as to projects constructed or to be constructed by
States or municipalities primarily designed to provide or im-
prove navigation, licenses therefor shall be issued without
charge; and that licenses for the development, transmission,
or distribution of power for domestic, mining, or other bene-
ficial use in projects of not more than two thousand horse-

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Act.“ which was not changed, provides:

Section 28 of the

of any licensee thereunder.

III. Consmwezrations Usper.yine run Courr’s Coxcivssiox

10

ine 1
fit

11115

— — (1964).

plementation. And so changes were made in
1935. Niagara Mohawk Power Co. v. FPC, 126 U.S. App.
D.C. 376, 378, 379 F.2d 153, 155. The 1930 change was

Several minor changes are made in section 10(e),
relating to the charges to be paid by licensees. The

1 Act of June 23, 1930, 46 Stat. 797.

8. Rep. No. 621, 74th Cong., Ist Seas. 45 (1935).

The subsequent House Report, H.R. Rep. No. 1318, 74th Cong.
Ist Seas. 24 (1935) is virtually identical. The pertinent paragraph
reads:

‘There are several minor changes in section 10(e) relating to
the charges to be paid by licensees. The amount to be fixed
for the purpose of reimbursing the United States for the
by the

cost
of administration is limited to the present amount pro-

1111

HORNE 12

ij

241
35111

iH

3°

_ Licenses involving use of tribal lands

proviso, of course, as licenses in

ernment structures.

So far as can now be gleaned, from

uf It,
iil 10

\
\

SS
ole), providing for Commission readjustment, to\ the

problem of a pre-existing license containing a procedure
for readjustment solely by agreement or arbitration. The
court is unable, then, to discern any specific legislative
intent, one way or the other, as to the precise issue now
before us.

That being the case, the court must discern the applica-
ble legislative intent by what is necessarily an act of
projection—starting from the areas where the legislative
intent is readily discernible, and projecting to fair and
reasonable corollaries of that intent for the specific issue
before us.“

The question is by no means an easy one. We must
consider what basic pattern of administration of f 10(e)
was likely to have been foreglimpsed by the legislature.
We must take into account that the legislature described its
changes as minor, and that the Company considers the
replacement of a court-selected arbitrator by a federal
commission as a change that is far from minor and ad-
versely affects its ‘‘rights’’ undet the license which § 28
of the act solemnly protects. We must consider the con-
stitutional aura of the Company's contentions, and funda-
mental considerations of fairness.

Taking these various elements into account, our effort
W Sere teleat Saad ae to ew
conclusions :

First, §28 protects the licensee from any change in,
and the legislature did not intend to authorize any change
in, either the substantive duties or rights of the licensee
as already determined, or any of the criteria or standards

® See City of Chicago v. FPC, 128 U.S. App. D. C. 107, 113, 385
F.2d 629, 635 (1967) ; Eastern Airlines, Inc. v. CAB, 122 U.S. App.
D.C. 375, 379, 354 F.2d 507, 511 (1965) ; see also Gray, The Nature
and Sources of the Law 173 (1963 ed.); Cordozo, Nature of Judicial
Procea 15 (1921). 8

—

raised problems of fairness. We do not find this kind of

specific exception available in the case before us.
Fourth, we think this view of the statute fully preserves

the Company’s constitutional rights and guarantees.
We proceed now to a fuller diseussion of these manifestly

inter-related propositions. sk Sires 0
Our view of both the statutory and constitutional

requirements is supported by Pennsylvania Power & Light
Co. v. FPC, 139 F.2d 445 (3d Cir. 1943), cert. denied, 321
U.S. 798 (1944). There the company contended that the
_ Federal Water Power Act, under which the license was
_ granted, did not entrust the Commission with.c@trol of
the licensee’s capital accounts, but merely of the projeet
accounts and that even, as to project accounts final de-
termination of project cost or net investment was entrusted
by the original to the district court rather than to the
Commission.“ The court disagreed and in its opinion,
written by Judge Maris, said (at 453):
We see no merit in these contentions. * * * [T]he
licensee had no vested right to have its investment

insofar as the contention of Pennsylvania Power 4 Licht
—that, there was a prohibition against use of the new
forum (Commission rather than District, Court) and pro- :
Act as well as constitutional considerations. os
Pertinent precedents include,Crane v. Hahlo, 288 US.

142 (1928), cited by Judge Maris, and Hardware Dealers
Mutual Fire Ins. Co. v. Glidden Co., 284 US. 151, 159

‘Berkovitz v. Arbib & Houlberg, pe geen
N.E. 288, 290 (1921) wherein Judge, later Mr.
Cardozo said: - :

- Arbitration is a form of procedure whereby differences, ;

may be settled. If is not. a definition of the rights

In § 28 Congress gave assurance that it would not make
any amendment that shall affect any dicense theretofore
insued . . . or the rights of any licensee thereunder.”
We do not think § 28 was intended to preclude change in

‘remedy and procedure on the ground that they necessarily

affect“ the vindication of the license, even though, as

every lawyer knows, available procedure may make a dif-
ference in result, ¢.g., whether he has pre-trial or pre-
hearing discovery. We do not think it is the fair intend-
ment of Congressional will to read § 28 so broadly as to

or , te ¢ 0 0 5
As to\liebnses involving use of either Government dams
or lands of Indian tribes we think that the 1935 insertion

46a

in §10(e), expressly putting the function of readjustment
of rentals in the hands of the commission, applies to the
generality of -all such licenses outstanding.“ The only
effect of § 28 is to carve out an exception for those cases
where the prior-established procedure had the quality of
a substantive right,“ e.g. in instances where specifically
bargained for by the licensee, a matter that we shall sep-
arately consider under part III, C of this opinion.

Reverting to the general interpretation of §10(e) we
must bear in mind that any of the constructions presently
contended for by the parties before us still leaves § 10(¢)
as involving only a minor“ change—as compared with
the context of the far-reaching changes in national power
policy wrought by this law, the Publie Utility Act of 1935.
The construction we think proper for §§ 10(e) and 28 gives
application to this statute of the general principle that a
prescription of procedure or machinery (and here the ex-
plicit designation of the tribunal assigned with decisional
responsibility), is to apply across the board to all matters
later set for decision, whether under new or existing li-
censes, We see no basis for concluding that the applica-
bility of this general rule is negatived by either express
language or the power of an inference from ‘context.

Montana Power says that the substitution of a tnmmis-
sion for an arbitrator can hardly be called ‘‘minor.’’ The
word must be considered in context. The Publie Utility
Act of 1935 wrought far-reaching changes in national elec-
tric power policy, not only the famous ‘‘death sentence’

u During fiscal year 1935 the Government collected fees from
licensees for the use of federal dams and lands of Indian tribes
totaling $218,185.39. (This is exelusive of fees paid by licensees
who used public lands and national forests.) These amounts were
paid pursuant to 36 outstanding licenses involving either land of
Indian tribes or Government dams; seven of these licenses involved
payments in excess of $1,000.00 (the amount payable under Project
5 during the construction period). Fifteenth Annual Report of the
Federal Power Commission 37-45 (1935).

17a

for public utility holding companies, but also in Title II,
a substantial extension of the Commission's jurisdiction.
Instead of limitation to hydroelectric projects in navigable
~, Streams (and Federal lands} the Commission was given
" regulatory control over interstate activities of operating
electric utilities, and Congress also set up machinery for
Federal assistance to State regulatory commissions, It is
in this context that we must consider the change made in
§ 10(e), which had previously provided that charges be set
by the commission and ‘readjusted in a manner described
in the license.“ This language had been stretched to pro-
vide not only a manner for readjustment of charges (which
would have included, say, a readjustment formula) but
also a change in locus of responsibility for prescribing
charges, to a person or agency other than the commission.

Whatever reasons may have impelled use of another
agency prior to 1930 when the commission consisted of
“three busy cabinet officers and had confliet-of-interest type
problems,” in 1930 the Congress reorganized the com-
mission as an independent regulatory agency. The statu-
tory revision made clear that the decisional responsibility
assigned to the commission embraced not only the original
charge but the readjustment of charges, In another context
this change might have prompted more elaborate consid-
eration and discussion. In the context of the far-reaching
changes in the 1935 legislation it is not hard to see why
the change was described as a minor clarification.

The context of the present statute gives further support
to the general presumption for across-the-board applica-

1 The Secretary of Interior was not only guardian of the Tribes
affected by projects on Indian reservations, but was also head of
the department that contained the Bureau of Reelamation interested
in projects using Government dams, The Secretary of Agriculture
headed a department containing the Forestry Service responsible
for lands used in electric projects. The administration of Commis-

Ssion licenses involved problems of irrigation and reclamation.

18a

tion of procedures by virtue of the fact that otherwise
different procedures and tribunals would be required for
different aspects of the same project, or for plainly inter-

from the Tribes The Commission does not necessarily
license all the project works of a given project at one
time. Montana Power Company v. FPC, 112 U.S. App.
D.C. 7. 11, 298 F.2d 335, 339 (1962). The Company
coneeded, and could hardly deny, that as to the new post-
1935 license which it obtained from the Commission (see
note 13, supra), responsibility for adjustments rests solely
in the Commission. There is no reasonable basis for sup-
posing that the legislature would have intended to assign
responsibility in part to the Commission and in part
to an arbitrator. As appears from the experience in 1929
and 1930, the caleulation of user charges and determination
of the value of the site comes to involve, e. g., calculating
cost of horsepower produced there and making compari-
son with alternatives, determination of the share properly
applicable to the land owned by the Indians and to the
Lake waters, and determining the extent of Lake water
value to be attributed to the Indians (the Lake waters
being owned in part by the Indians and in part by the
State). In these and other matters it cannot fairly be
presumed that the legislature contemplated responsibility
assigned in part to the Commission and in part elsewhere,
with the possibility of conflicting approaches tending to
hamper rather than attain a fair result.

1 That case involved the circumstance that the 1930 license
was amended to provide for two units. After construction of these
was completed, in 1949, Montana Power constructed and in 1954
‘began operating a Third Unit, albeit it had not obtained requisite
licensing authorization. The Commission amended the Kerr
license nune pro tune in 1961, and required annual payments of
$63,375 for additional use of Tribal lands from 1954.

19a

Uniformity of administration of federal water power
permissions was, after all, the reason why in 1920 there
was gathered in a single (eabinet-level) commission the
different jurisdictions therétofore exercised by the War
Department, which controlled the developments in navi-
gable waters, the Department of Agriculture, which con-
trolled the power sites located in the extensive mountain-
ous regions in the national forests, and the Department
of the Interior; which administered the projects on Indian
reservations and public lands. It would be an anomaly
indeed if the 1930 transfer of functions to an independent
commission, as the increasing number of projects and
problems demanded excessive time of cabinet members,
followed by the 1935 enlargement of functions entrusted
to that commission, were to be interpreted to require a
dispersion rather than a centralization of responsibility
for those functions. :

A

Our approach does not assume for a moment that the
availability of arbitration is a matter of only trivial con-
sequence, It is important enough to be unaffected by the
accident of diversity of residence of the parties and the
fact that diversity permits removal from an ordinary state
court to a federal court (which is treated in diversity
cases as a particular kind of state“ court). Bernhardt
v. Polygraphic Co., 350 U.S. 198 (1956). But this con-
clusion, as is plain from Bernhardt, does not depend on
whether the right to arbitration is labeled as either a
substantive ‘‘right’’ or a matter of procedure,

While the availability of arbitration may not turn on
an accident of forum within a state, it certainly may
properly be affected by the legislature’s subsequent es-
tablishment of a different and appropriate procedure as
exclusive. We refer again to Judge Cardozo’s opinion
in Berkovite v. Arbib & Houlberg, Inc., supra.

20a
We have carefully considered, and we reject, Montana

Power's alternative contention that in this particular li-

cense the arbitration provision had been ‘‘bargained for
as a major element in the agreement, and [is] hence a
vested right’’ which Congress could not and did not take
away.

The materials cited to us reveal that there was con-
siderable study and negotiation over the amount of annual
rentals that would be fair to the Tribes, and whether
they should be on a flat basis or-depend on actual use
of facilities. A flat schedule was finally agreed to.

There is no showing by the Company that arbitration
was ‘‘bargained for’’, or that this was anything more than

a convenient way of providing for readjustment of rentals

by an objective tribunal in case the parties could not agree,

The record contains, and we have examined, Flathead
Power Development, Memorandum on the Development
of Flathead River Power Sites, Montana, Sen, Doe, 153,
71st Cong. 2d Sess, (1930) (hereafter referred to as Sen.
Doc.). The Senate Document contains a memorandum
dated December 30, 1929, by J. Henry Seattergood," As-
sistant Commissioner, Bureau of Indian Affairs, addressed
to Seeretary of Interior Wilbur and the Federal Power
Commission pertaining to the two pending applications
for development of Flathead River Power sites—one from
Rocky Mountain Power Company, and one from Walter H.

‘Wheeler, This memorandum concluded that both appli-

cants had made inadequate offers of Indian rentals—a
view later supported by a separate Army study made at
the request of Secretary Wilbur and of the Commission,"

This memorandum appears in Sen. Doc. 1-47. Our review alao
draws on his supplemental memorandum dated May 14, 1930 ad-
dressed to Secretary Wilbur, Sen. Doc. 49.

* gen. Doo. -p..49.

21a

The context of further negotiations is focused by observa-
tions in this memorandum, which may be set forth as
follows: |

The Flathead case was of great importance to the Indians
in establishing principles, The Federal Power Commis-
sion, Secretaries of War, Agriculture and Interior, had a °
new executive secretary and new general counsel. Two
Senators and two Congressmen addressed the Commis-
sion at its hearings, Special care had to be taken because
in addition to the interests of the licensee and the „general
consuming publie,“ the only two parties normally involved
in power site leases under the Federal Water Power Act,
consideration had to be given to the interest of “‘the Indian
tribe, which is entitled to a fair rental for the use of the
power sites,’’

A license to Mr. Wheeler, a civil engineer of good stand-
ing and excellent record of accomplishment would provide
„development advantages of attracting new industries to
the region, which would be in competition with the Ana-
conda Copper interests closely allied with Montana Power.
(Sen. Doc. pp. 3, 46-47.)

Wheeler offered 61.125 per horsepower-year, which would
yield $118,125 annual rental for Site 1 on an estimate of
105,000 hp., a high efficiency ratio and a 100% utilization
factor, The Company offered $1 per horsepower-year, It
estimated 20,000 hp. for Site 1, and a utilization factor of
only 85% reducing hp. produced to only 68,000 hp., and
average ‘‘spot’’ rental of only $68,000,"*

However, Mr, Wheeler’s payments were seen to be limited
by the fact that his costs were in the same range as those of
the Company (close to $14 per horsepower year). More-
over, Wheeler 's selling price could not exceed $15 to at-
tract new industry (perhaps $16.34 to Mountain States
Power), and this could leave no room for the Indians to

Sen. Doe. pp. 12-13, 14 (table), 50,

22a

seek a higher rental (pp. 29, 32). Rocky Mountain Power
on the other hand had an intercompany price of $18, an
advantage to the Indians (p. 32). The Montana Power
System had an immediate need for capacity (indeed had
had a shutdown due to a recent dry season), and the Flat-
head site represented the optimum site available to the
Company, with the cheapest power at the powerhouse and
largest volumes (pp. 4-5).

Accordingly the Indian Bureau put forward the view
that the economic rental value of the site should be ex-
pressed as the difference between the generating cost of
‘service (including fair return to the Company), and the
inter-company pee, and this amount should be divided
between the fins and the general public in proportion
to their respective interests, the Indians owning the land
sites and the part of the Lake within the reservation, and
the State of Montana owning the rest of the Lake and the
right of water use. Assuming the Indians’ interest as
50% (rounding out a calculated 46.5%), this would yield
the Indians $2.25 per horsepower, on an annual average of
80,500 hp. (Sen. Doc. 9, 34). And the possibility of in-
creased rentals was heightened by the Company’s state-
ments at the hearing that the $1 offer was a nominal“
and arbitrary“ offer, based on the fact that this was the
customary charge of the Forest Service—which had no
trust obligations to the Indians (Sen. Doc. 37).

So much for Scattergood’s memorandum dated Dec. 30,
1929. The Senate Document reveals that there then en-
sued four months of discussion in 1930 on the basis of a
different approach—a combination of fixed charge and
energy charge. Mr. Scattergood’s May 14, 1930 supple-
mental memorandum to Secretary Wilbur u notes that
several plans were put forward with this type of schedule:

17 Sen. Doc. p. 49 et seq.

one by the Commission in its schedule of January 2, 1930;
one by the Army engineers, on an independent study re-
quested by Secretary Wilbur, submitted February 27, 1930,

and revised March 20, 1930; and one by the Indian Bureau,

in its Schedule 2, dated April 1, 1930, discussed by the
Secretary with the Montana delegation, The approach of
minimum fixed rental to a given horsepower development,
plus an energy charge above that point, amounted to a
_ profit-sharing contract that gave the Indians large revenues
at high output and the risk. af too little at low brackets.
Mr. Seattergood’s analysis continues (Sen. Doe, p. 51):

Furthermore a number of difficulties were encountered

in all these profit-sharing plans in providing against
any possibility of the use of the Flathead plant for
peaking purposes only or in dull times the giving to it
of only a reduced proportion of the entire system load,
and in general the avoiding of the temptation to starve
this plan in order to reduce the Indian rental, Four
months of negotiations were consumed in discussing

those various plans and the variables upon which they

were based and we were never able to reach an agree-
ment. Several deadlocks actually developed with the
breaking off of negotiations, Finally efforts on these
lines were abandoned and a new approach was entered
upon with the plan of a flat rental,

And so a flat rental basis was finally agreed to. It re-
duced risks te the Indians. And it avoided involvement -by
the Indians with having to monitor the management of the
' hydroelectric project. As Mr. Seattergood puts it, the flat
rental approach ‘‘avoids the difficulties of assuring to the
Flathead plant its fair proportion of system load“ and
‘favoids any inducement that Flathead be used for peak-
ing purposes, or that it be starved unduly at high water
periods when other plants of the system could carry an
increased share of the load.“ (Doc. pp. 51-52.) f

24a

With this change in approach to a flat rental schedule
the problem of readjustment of rentals, which had previ-
ously been visualized as in the nature of implementation of
a predetermined formula with new operating data, now
became an open-end agreement to negotiate and submit to
arbitration. The Company's brief notes (pp. 15-16) that
this proposal was made by the Secretary of the Interior
and promptly agreed to by the Company and the Com-
mission. This recourse to arbitration was in the context of
an open-end agreement, with the parties simply unable to
agrée on n formula approach for rentals that would not
excessively monitor or trammel corporate management, .
would be fair to the Indians.“ The readjustment of flat

1 The whedule agreed on 5 the parties and * in the

license is:
ö For the first two years . „ eer | 60,000 per year
, ORE EET TS 75,000 per year
For the fourth year 100,000 per year
22 6 vc cccbdocccccccesecves 125,000 per year
For the next five years /++++ 150,000 per year
For the next five years .........0....0005 ++ 160,000 per year

For the next five years and/or until read just -
ment of the ual charges payable here-
under shall have been effected pursuant

——— — (D) of this
SE abcde dscibaduidinesicsivess: 175,000 per year

10 The Company 8 brief is skillful but wholly unwarranted inso-
far an it makes, and seeks to gain some support. from, this state-
ment (at Br. 18): ‘‘The Commission's proposal included a provi-
sion that would have given it somewhat the same jurisdiction over
pc na “Ga Report, p. 63, R. ref. 8291. Its
proposal was not f

These are the facts 5 in the record. pirat, both applicants
put forward a rental schedule of a specified fixed rate per horse-
power produced, which had been estimated at a ‘‘spot’’ of produc-
tion, (Sen. Doc. p. 49.) This approach was rejected.

Next, a number of rental plans were put forward, which -con-
tained a Combination of a fixed rental plus an energy charge.
324 and a plan

9

* *

25a

tee rentals could not be left either to the Company, or to

the Secretary of the Interior, or to the Commission of
which he was a member.

After the issuance of the license in 1930, however, Con-
gress reorganized the Commission. * It no longer had the

initiated i in the Indian Bureau. The first proposal for such a plan
appears in a memorandum dated January 2, 1930, prepared by
F. E. Bonner, executive secretary of the Commission. (a) This

' was a personal memorandum, as appears from his reference to

my judgment of development cost (Sen. Doe. p. 60). (b) The
memorandum was tentative, to stimulate discussion of the fixed
rental plus energy charge approach. In the event the Commis-
sion decides to authorize a license for site 1 in the ve case, it
appears that the following may offer a rough outline of a logical
method for determining the reasonable charge to be fixed for the

use of the Indian land.“ While merely tentative and probably
. embracing some defects, it should at least be helpful in offering

something tangible for further study and 4 (Sen. Doe.
pp. 50, 61.)

The fixed rental plus energy charge was 0 because of
the problems of encroachment on the Company's managerial dis-
eretion, and fluctuation in income for the Tribes. It was because
of these difficulties that four months negotiations led to deadlock,
with negotiations broken off, and then a decision to embark on the
new approach of flat rental. Sen. Doe. p. 51, quoted in opinion,
supra at pp. 24-25.

This solidly documented history shows that the parties simply
could not agree on. initial rentals, for the first 20 * on 4 wanes
rental plus energy charge’ approach.

There is absolutely no. basis for conjecturing whether, if the
parties could have gotten together on the initial approach for
the first 20 years they would have been unable to agree on the
subsidiary concept, also proposed by Mr. Bonner, but without any
discussion, of entrusting to the Commission the task of making the
readjustment to apply the basic approach agreed on for the Tirst
20 years to the subsequent period. There is certainly not the
slightest basis for hinting that such Commission venijustment © was
not acceptable to the Company.

Act of June 23, 1930, 46 Stat. 797.

2

Secretary of the Interior or any other Cabinet officer as a
member, They, it appeared, had been ‘‘so burdened with

the tasks of their immediate depdrtments that they have
not had the time necessary for the work of the commis-
sion. Indeed the Commission was no longer confined

to the partisan membership of the appointees of one Presi-
dential administration, It was established as a conven-
tional independent regulatory five-map commission, bi- par-

\ isan, with staggered terms, It was organized as.a full-
’ time commission with full-time, expert staff. By the time.
of the amendments to f 10¢e) as part of the Pablic Utility

ond 1935, the Federal Power Commission 's status as
an independent regulatory ‘commission with expertise was
a of some years’ duration, and its standing was ro-
flected in the 1935 law which significantly enlarged its
jurisdiction. ay

The record does not provide the affirmative showing nec-

essary to support a claim that the interposition of the
Commission in this case would violate § 28, as taking away

the essence of a bargained-for right. What the parties

° bargained about for months was the attempt to reach a
-demand-plus-energy schedule, and this was abandoned.

With the adoption of a flat rental echedule, all parties were

in agreement on the need for an objective means of de-
termining readjustment charges if the parties were unable

to agree, The device of providing for agreement, and ar-
bitration in the event of inability to agree, was simply the
conventional device used by business contractors to obtain

"an on-going agreement and the assurance of an objective
tribunal without a special economic interest. As such it

does not differ significantly from the device of setting a
reasonably definite standard, as the parties did in this

in gen. Rep. 878, 71st Cong., 2d Seas. p. 2.

27a

case,” and leaving application of the standard tf the courts
if the parties themselves could not later on its
application.“ g ae ee) en

We see nothing in the negotiations, or in the license it-
self, to suggest that the arbitration provision was more

than simply a means of achievi goal of impartial ap-
' plication of the general standard embodied in the license.
This was the goal, too, of § 10(e), and whether the change
of forum was from the District Court to the Commission,
as in Pennsylvania Light & Power, supra, or from an arbi-
trator appointed by the District Court to the Commission,
as in the case at bar, the essential purpose of both Congress
and the parties to the license agreement is satisfied by our
interpretation. All that is changed is the tribunal: from
a court-appointed arbitrator under this license (perhaps
from a court itself under another license) to an independ-
ent, bi-partisan expert commission subject to judicial re-
view. The Commissioners were by law precluded from
‘engaging in any other business or employment, or from
holding any official relation to any license or any pecuniary
interest therein. 16 U.S.C. $792 (1964). a

There is no specific indication in the record why the
parties preferred an-arbitrator appointed by the court to
decigion directly by a court. Traditional reasons would in-
clude the greater speed, informality, and flexibility of the
arbitral process. The same factors were generally con-
sidered in 1935 to attach to the expert independent com-
mission. Perhaps there was a disinclination to take the
risk that the readjustment language might be thought too

The license provides that the ‘‘ readjusted annual charges [are]
to be reasonable charges fixed upon. . . the commercial value of
the tribal lands involved, for the most profitable purpose for which
suitable, including power development.

n See Corbin on Contracts § 99 (1963). There are decisions
that may be read as indicating that such a standard is too indefinite
for judicial enforcement, but they apparently constitute a minority
view.

28a

indefinite to be enforceable by a court (compare note 23,
supra); this risk would not be applicable either to an arbi-
trator or the Commission. These traditional reasons for
arbitration certainly provide no basis for interposing § 28
as a mandate to carve an exeeption out of the across-the-
board procedure set forth in §10(e). And that disposes
of the case before us in view of the absence of a showing
of any other reason why the parties chose arbitration—the
kind of reason that would be significant enough to warrant
application of the kind of protection afforded by § 28 to
substantive rights and would be frustrated by the pro-
cedure specified in § 10(e).

So far as this case ix concerned the members of the Com-
mission did not have the disqualification formerly attach-
ing to the Secretary of the Interior as special guardians of
the Indian tribes, The Commission was established as an
agency with broad stewardship over various aspects of the
publie interest—ineluding sound development of water re-
sources, and concern for the general consuming publice—as
well as the function and capacity for fair treatment of indi-
vidual parties before it, whether licensees or Indian land-
lords, Looking to the essence of the situation, we see no
showing that the designation of this commission as the
body to determine readjustment of rentals under the out-
standing licenses derogates from rights safeguarded by
§ 28 of the act.

IV. Orner Matters

1, To avoid misunderstanding we emphasize that we are
not casting doubt on the authority of this commission, or
other regulatory agencies, to take account of efforts of
parties to settle differences by agreement or arbitration.

The flexibility that is part of the genius of administra-
tive law and procedure may warrant an agency’s staying
its proceeding while the parties negotiate toward a settle-
ment agreement, or while their arbitrators grapple with the

matter. The award would have the same legal significance
as an agreement between the parties, Compare Brother-
hood of Railroad Trainmen v. Akron d B. B. N. Co., 128
U.S. App. D. C. 59, 74, 385 F. 2d 581, 596 (1967), cert. denied,
390 U.S. 923 (1968). This would at the very least be a
strong advisory“ effect, and in practical terms it might
permit the commission to grapple much better with its
prodigious work load,

This kind of flexibility, like the commission's use of nego-
tinted settlements, takes account of the significant differ-
ence between these two approaches in the settlement of
controversies, An administrative agency, like a court, de-
pends on reasoned disposition, on application of general
rules and standards to the facts of a particular matter.
Arbitration may proceed by that judicial type of disposi-
tion, but it may also partake of the kind of consensual dis-
position which prevails among businessmen, or in the re-
lations between business and labor, and for that matter
even in the halls of the legislature, Arbitrators do not
have to give reasons. In some types of matters that may
be an advantage, It is commonplace that parties may be
able to agree on a particular result more readily than they
can agree on a statement of the general approach that
harmonizes with the particular result. “The parties may

be disposed to avoid the expense and distractions of liti--

gation if the various rates reached in a settlement do not
constitute a binding admission or ruling on principle,”’
City of Chicago v. VO, supra, 128 U.S. App. D.C. at 119,
385 F. ad at 641.

These considerations point to the possibility that a com-
mission might properly conclude that for certain issues the
public interest is better served by limiting devotion of the
time, staff, and resources of an adjudicatory independent

United Steelworkers v. Enterprise Wheel & Car Corp., 363
U.S, 593, 598 (1960) ; ef. Intl. Asan. of Machinista v. Natl. Media-
tion Board | National Airlines], U.8.App.D.C, ——, F.2d
— (Jan. 30, 1970),

30a

>

regulatory commission, and by providing more scope for
agreement of the parties (including arbitration).™ But
such a judgment made by a commission on assessing all the
factors when the matter is presented for decision, is far
different from the Company’s claim that the proceeding
was never properly before the Commission for decision—
and this by virtue of an agreement made before the Con-
gressional amendments specified readjustment as a function
for the commission.

2. The view we have taken of the legal issues makes it
unnecessary to consider the contention that the Company’s
ability to claim ‘‘rights’’ secure against Congressional
alteration on August 26, 1935, is undereyt by its default at
that time under the license then outstanding.

* Company counsel has lodged an exhibit that reveals that the
license issued by the Commission to the Portland General Electric
Company for a project involving the use of lands of the Warm
Springs Indians provided for readjustment of Indian rentals by
arbitration, pursuant to the agreement of the parties made in 1955
and amended in 1961. 26 F. P. C. 192. We are not called upon
to consider whether this complies with §10(e). In any event, we
are not aware of any instances in which an independent regulatory
agency deferred its decision-making to an arbitration proceeding
where it was considered as one of the parties to the arbitration.

Rocky Mountain Power had failed to complete construction
within the 3-year period provided in the 1930 license, even as
extended for an additional two years by Amendment 1 in 1932.
The Company's motion of February 16, 1935, for an extension
from May 1935 to 1938 failed to obtain the approval of the See-
retary of Interior, and was denied by the Commission on April 1,
1935. The Commission ordered the matter referred ‘‘for appro-
priate legal action“ to the Attorney General who had authority
to institute proceedings for revocation of a license, Fifteenth
Annual ‘Report of the Federal Power Commission 178-79 (1935).
These facts are all set forth in the recitals to Amendment No, 2,
issued by the Commission July 17, 1936, after approval by the
Secretary and acceptance by the Company.

The record shows that one of the reasons why the Interior De-
‘partment preferred the Company's proposal over Mr. Wheeler's

3la

3. The Company contends that this court cannot have
jurisdiction if, as the Secretary contended before the Com-
mission, he has a ‘‘veto’’ power permitting him to withhold
approval of either the Board’s order or this court’s order
on review, See Chicago d Southern Air Lines v. Waterman
Steamship Corp., 333 U.S. 103 (1948). To avoid dismissal
of its petition to review, the Company refers to the veto
as a reason for requiring the arbitration remedy. There
are difficulties with the company’s contention, including the
point that it is difficult to square with this court’s 1962
exercise of jurisdiction in the Third Unit case (supra,
note 13),

As the case comes to us it contains the Secretary’s
acceptance of the Commission’s Opinion and Order. 529,
notwithstanding its rejection of contentions put forward
by the Secretary, but without prejudice to the Tribes’ con-
tinuing to urge their contentions. Before this court the
Secretary has disclaimed any right to disapprove the ruling
of this court.

Tn our view this disclaimer is only what the law requires,
The Secretary will be bound whether we affirm the Com-
mission’s ruling on the merits, or hold in favor of the
Company’s contention on the merits, in whole or in part.

The Secretary’s approval under the 1928 law (supra,
note 3), like the approval of the Secretary and of the Indian

was the earlier date in which the Company would be able to begin
construction and service. Sen. Doc. pp. 37-38.

Amendment 2 reduced the project to two generating units, and
provided for a new schedule of payments the Company had worked
out in an agreement reached with the Tribes, which had in 1935
been organized as a self-governing tribe under the Indian Reor-
ganization Act of 1934. 48 Stat. 984, 25 U.S.C..8§ 461-479 (1964).
Annual rental payable, originally limited by a peak rent of
$175,000, was increased to figures exceeding $175,000 for each of
thirteen years. Also the Company agreed to give preference to
members of the Tribe in hiring of employees for both construction
and operation of the power project.

0
—

32a

Tribes referred to in §10(e) of the Act, is manifested
initially by the concurrence with the licensee which must
exist in order for the application for the original license
(either as filed, or as modified to take account of objections
found in the original filing) to be approved by the Commis-
sion, It is manifested as to readjustment of rentals by the
filing with the Commission, or acquiescing in presentation
to the Commission, of an application requesting rendjust-
ment, The readjustment decision is made by the independ-
ent regulatory agency assigned this function by Congress,
subject to review by the court of appeals, After approval
of the presentation of the application for readjustment the
only further recourse of the Secretary or the Tribes is
the right of appeal provided by law for the correction of
errors made by the commission.”

The case will now proceed to the merits, Since a member
of the original division, Honorable Warren K. Burger, is
no longer a member of this court, his place will be taken
by another member of the court selected by lot in accord-
ance with the long-standing procedure prescribed by rexo-
lution of the Judicial Council. The case will be reargued
on the merits to the division thus constituted,

So ordered.

Bani, Chief Judge, concurring: I admit to substantial
doubt whether Congress in 1935 ever considered the pre-
cise situation we face today. Likewise, I cannot say that a,
change in forum might not, in other circumstances, give rise
to constitutional problems at least of such magnitude that

It cannot sensibly be contended that the approval“ required
under the 1928 law required the Secretary to approve each read-
justment of rentals. If that were so, the Secretary could not
validly have entered into the arbitration agreement in 1930.

The ‘‘approval’’ of the original license, either under the 1928
law or under the provision to § 10 (e), carries with it approval of
the procedure for readjuatment that has been either prescribed
by, or established in accordance with, the Congressional enactment.

33a

we would be constrained to interpret ambiguous statutory
language so as to avoid the constitutional question. I agree,
however, that § 28 of the Act was not intended to preserve
the particular forum in which a given dispute is to be
adjudicated ; and that the 1935 amendment may be applied
to the present case without constitutional difficulty. On
that basis I join Judge Leventhal’s opinion,

Tama, Circuit Judge, with whom Circuit Judges Mo-
(GiowAN and MacKinnon join, dissenting: My views con-
cerning the proper disposition of this case require a more
complete statement of the historical buckground und factual
context of this controversy than ix contained in the majority
opinion,

Prior to 1920, the development of water resources A a
potential source of electric power was governed
visions of the General Dam Acts, 34 Stat. ), 36
Stat. 593 (1910). Under these Acts, the right{to alter or
amend the licenses of power projects was
Congress, and no rights vested in licensees, This policy
rendered investments in power projects quite speculative,
thereby deterring public investors from providing the
capital needed to develop the nation’s water power re-
sources, Congress soon became aware of these short-

coming in the existing law and undertook an-exploration
of alternative solutions to the problem. One of these new
proposals was S. 1419, which ultimately became the Federal
Water Power Act of 1920. In the Senate Report accom-
panying this bill, the existing statutory scheme was sharply
criticized because it provided for the imposition of ‘‘condi-
tions upon which the permit may be granted that render the
terms of the investment so uncertain and ... 80 defeasible
that those having capital can not safely and will not make
investments under them.“ S. Rep. No. 179, 65th Cong., 2d
Sess, 3 (1917). A proponent of the eral Water Power
Act noted that the new approach taken in the 1920 Act was
designed to provide a ‘‘method by which the water powers

34a

of the country... can be developed * public or private
agencies under conditions which will give the necessary
security to the capital invested and at the same time protect
. . . [the] public interest.“ H.R, Rur. No. 61, 66th Cong.,
Ist Sess. 5 (1919).

The primary method that Congress chose for safeguard-
ing the security of investments under the Federal Water
Power Act was embodied in section 28 of that legislation,
which provided:

(T]he right to alter, amend, or repeal this Act is hereby
expressly reserved ; but no such alteration, amendment,
or repeal shall affect any license theretofore issued
under the provisions of this Act, or the rights of any
licensee thereunder.

41 Stat. at 1077 (emphasis added). The 1920 Act also
contained provisions which stated that licenses could be
issued for a term of not more than fifty years, and that
„when licenses are issued involving the use of. .. tribal
lands. .. within Indian reservations the [Federal Power]
commission shall fix a reasonable annual charge for the use
thereof, and such charges shall be readjusted at the end of
twenty years thereafter in a manner to be described in each
license. . . 41 Stat. at ——. The Commission had ocen-
sion to review the effect of these provisions and the Con-

~gressional intent underlying them in Annual Charges Pre-
scribed for Licensees Under the Federal Power Act, 31
F. P. C. 1555, 1557-58 (1964) :

The legislative history of the Federal Water Power
Act reveals several important efforts to include a
provision enabling the Commission to adjust annual
charges. Initially, Rep. Sherley of Kentucky succeeded |
in amending H. R. 16053, 63rd Cong., 2d Sess, (1914)
to provide:

The Secretary of War may provide as a condition
of such approval for the payments to the United

—

35a

States of reasonable annual charges for the benefits
that accrue to the grantee ... and at the end of
twenty years, and every ten years thereafter, the
Secretary of War may readjust the annual charges
as may then be just and reasonable. [Citing 51 Cona.,
Rec, 12,759 (1914); (emphasis added by the Com-
mission ),] ee

When the House was considering H.R. 3184 which, as
amended, became the Federal Water Power Act, the

F Sherley Amendment had its sequel in the unsuccessful
Little Amendment 0 „ 0 *

Representatives Small of North Carolina and Mo- »y
Arthur of Oregon opposed the Little Amendment in

[the floor] debate on the ground that it would discour-

age investment in the hydro-electric industry. Repre-
sentatives Ferris of Oklahoma and Sims of Tennessee

argued that since the Commiasion could /provide for
adjusting annual charges in the licensés, the Little
Amendment was unnecessary, | Representative Sims

made it abundantly clear that adjustment was not ~
possible without a license provision allowing it:

Mr. Little. But they have to do it when they issue
“the license or they forever forfeit any chance to ad-
:

e charges to changing conditions,

Mr. Sims. They have to put it in the license, [Cit-
ing 58 Cona. Rec, 2223 (1919) (emphasis added) .]

The Little Amendment was rejected, and II. R. 3186
was passed and sent to the Senate.

The Senate report on the bill proposed an amend-
ment which, while it would have confined the purposes
for which annual charges could be flxed, would have
permitted their periodic adjustment [by the Commis-
sion].... The Senate in approving H.R, 3184 adopted

36a

this amendment. The House being in disagreement
with the Senate Amendments, the bill was referred to
conference committee, in which ... the language as
finally enacted in subsection 10(e) was worked out

The legislative history thus shows that Congress re-
jected the two proposals which would have expressly
authorized the Commission to adjust annual charges,
even though both proposals contained a minimum
period for successive adjustments.

It would be difficult indeed to imagine a clearer or more
specific expression of congressional intent to immunize
license provisions, particularly those relating to readjust-
ment, from unilateral governmental action beyond the ambit
‘of the methods and criteria specified in the individual
license.

In the same year that the Federal Water Power Act
was passed by Congress, the Montana Power Company ap-
proached the Government regarding the possibility of ob-
taining a license to construct and operate a hydroelectric
project on the Flathead Reservation. (See S. Dog, No. 153,
71st Cong., 2d Sess. 3 (1930).) The lengthy negotiations
described in the majority opinion ensued, and the record
of these negotiations leaves no question that the problem of
finding a workable method to determine a fair rental charge
for use of the Flathead site was one of the hardest issues
confronting the parties. The Commission, the Army Corps
of Engineers, and the Bureau of. Indifn Affairs all made
various proposals during the period from January 2, 1930
to April 1, 1930; in all, ‘‘[f]our months of negotiations were
consumed in discussing those various plans .. and [the
parties] were never able to reach an agreement. Several
deadlocks actually developed with the breaking off of nego-
tiations.’’ (J.A. 183-84.) Finally, the parties agreed upon
a flat rental system because this method assured the Tribes

37a

of a stable income throughout the fifty-year term of the
license, The rental was set at levels which increased at the
end of the second, third, fourth, and fifth years of the
project, then increased again at two intervals of five years
each, and finally reached the sum of $175,000 per year
„lor the next five years and/or until readjustment of the
annual charges’’ required by the Federal Water Power Act
after twenty years of operation. (J.A. 184-85.)

The readjustment provision ultimately incorporated into
Article 30(D) of the license stated that the readjustments
in the rental amount mandated by the Federal Water Power
Act would be effected ‘‘by mutual agreement between the
commission and the licensee, with the approval of the Seo-
retary of the Interior. In case the licensee, the commis-
sion, and the Secretary of the Interior can not agree upon
the readjustment of such charges, it is hereby agreed
that the fixing of readjusted charges shall be submitted to
arbitration in the manner provided for in the United States
arbitration at. (J. A. 186.) This provision sup-
planted an earlier Commission proposal under which re-
adjustment would have been made upon the facts as found
by the commission at such times of readjustment.’’ (J.A.
203; emphasis added.)

When the Federal Water Power Act was amended to
become part of the Federal Power Act in 1935, section 28
of the former Act, guaranteeing the preservation of rights
vested in existing licensees, was carried forward into the
new legislation without any change. At the same time,
section 10(e) of the 1920 Act, which had provided that
readjustments were to be made in a manner to be de-
‘scribed in each license, was amended to state that read-
justments of the annual charges were to be made by the
Commission, The amendatory language on its face is
wholly prospective, and, as I read it, reflects no Congres-
sional intent to abridge inconsistent readjustment provi-

=

sions contained in otitstanding licenses.' Both the House“
and the Senate“ Reports accompanying the amendments de-
scribe the changes as ‘‘minor’’ and ‘‘elarifying”’—language
that is surely a classic understatement if it is designed to
convey an intent to let the Commission rewrite readjust-

ment provisions in all existing licenses, In fact, I think

it is fair to say that the available evidence indicates that
Congress did not intend to affect license provisions like the
one in question, and that the majority’s interpretation f
the legislative history rests upon questionable or erronegus
inferences,

On its face, * 28 of the 1920 Act is designed to
protect all rights granted in licenses issued under that legis-
lation, not just those provisions which a court or a different
Congress might later deem ‘‘important’’; this section uses
careful disjunctive phrasing to provide that subsequent
legislative action will not affect any license theretofore
issued . . or the rights of any licensee thereunder.’’ The
lengthy summary of the legislative history of the 1920 Act

' Section 10 of the Act, which is now codified in 16 U.S.C, § 803
(1964), states:

All licenses issued under. . this title shall be on the follow-
ing conditions:

(e). » [When licenses are issucd.involving . . . tribal lands
embraced within Indian reservations the Commiasion shall .
fix a reasonable annual charge for the use thereof, and such
charges may. . . be readjusted by the Commission . . . upon
notice and opportunity for hearing... (Emphasis added.)

Ses also 16 U.8.C. f 799 (1964) :

Licenses under . . . this title shall be issued for a period not
exceeding fifty years, Each such license shall be conditioned
upon acceptance by the licensee of all of the terms and con-
ditions of this chapter and such further conditions, if any, as
the Commission shall prescribe in conformity with this chapter

H.R. Rur. No, 1318, 74th Cong., Ist Sess. 7, 24 (1985).
8. Rur. No. 621, 74th Cong., Ist Seas. 17, 45 (1935).

quoted above clearly indicates that the Congress which first
* enacted section 28 would not have believed or intended that
the present result could be reached under that legislation.
The majority ‘concludes, however—by inferring Congres-
sional intent from evidence that is admittedly equivocal—
that Congress apparently meant something quite different
by the language of section 28 when it reenacted‘this provi-
sion in 1935: now the Commission would be permitted to
readjust all rental amounts even though a different method
had been specified in the license,

Even if I could accept the theory that (1) after 1935 sec-
tion 28 was limited to protecting only those license provi-
sions which the Commission and the courts would deem
‘substantive’? or important,“ and (2) rental readjust-
ment provisions in licenses issued under the 1920 Act are
not prima facie within this category by virtue of the strong
legislative history of the 1920 Act and the congressional
silence in 1935, I still would not be able to agree with the
majority’s analysis of the interests at stake in this case.

The majority asserts that the arbitration clause is ‘“reme-
dial,“ which renders it procedural and hence defeasible,
absent some exceptions which will be discussed below. I
believe that this characterization misconceives the function
of the arbitration clause in Montana Power’s license,
Clearly, such an inquiry into the purpose and functional
role of the provision is necessary here; for, as Judge (later
Justice) Cardozo said in Berkovite v. Arbib & Houlberg,
Inc., 230 N.Y. 261, 271, 130 N. E. 288, 290 (1921) :

The word ‘‘remedy’’ itself conceals at times an am-
biguity, since changes of the form are often closely
bound up with changes of the substance... The prob-
lem does not permit us to ignore gradations of impor-
tance and other differences of degree. In the end, it is
in considerations of good sense and justice that the
solution must be found.

See also Guaranty Trust Co. v. York, 326 US. 99, 108
(1945): „Neither ‘substance’ nor- procedure’ represents

40a

the same invariants, Each implies different variables de-
pending upon the particular problem for which it is used.“

At the outset, it is clear from the Erie doctrine cases and
the majority opinion that even where arbitration ix clearly
being used as a remedial device—most familiarly, in ro-
solving disputes over the construction or performance of
contracts by recourse to an impartial third party—it ‘sub-
stantially affects the cause of action’? and ‘‘may make a
radical difference in ultimate result.“ Bernhardt v. Poly-
graphic Co, of America, Inc., 350 U.S. 198, 203 (1956) ; see
also Byrd v. Blue Ridge Rural Elec, Cooperative, Inc., 356
U.S. 525, 539 (1959). Thus, even under the majority’s anal-
ysis, it is clear that the company may well be forced to pay
substantially greater rentals for thirty years out of the
fifty-year term of the license than it would be if the arbi-
tration clause were given effect. This fact, standing alone,
should make us extremely Wiry of the Commission 's facile
attempts to dismiss the clause as merely“ procedural.”

However, I think it is perfectly clear that the arbitration
clause in Montana Power’s license is different in fact and
function from the majority’s characterization of it. Unlike
the typical arbitration clause that is used to resolve contract
disputes, this provision is not triggered by one party’s claim
of breach; rather, it is used as a method of defining a key
term in the license at a specified future time, as mandated
by the Federal Water Power Act of 1920. The Supreme
Court has observed the validity of a similar distinction,
while nat making it determinative, in cases involving alleged
impairments of the obligations of contracts:

The provisions [of the contract] dealing with for-
feiture, which is one of the State’s remedies in case of
breach, and reinstatement, which is the purchaser’s
remedy to cure his breach, both operate on the rights
of a party after breach and thus concern the enforce-
ment of the contract, In this sense they are remedial
and the statute of repose challenged here is an altera-
tion of remedy rather than obligation,

41a

City of El Paso v. Simmons, 379 U.S. 497, 506 n.9 (1965)
(emphasis added), As a term-fixing mechanism, the arbi-
tration provision was not intended to be used only for ex-
traordinary contingencies such as a claim of breach, but
rather was designed to be employed during the normal
course of performance in the not-unlikely event that the
parties were unable to agree upon an adjusted rental
amount, One need look no further than the hornbooks to be
reminded that this is a familiar practice in contract law:

In the process of negotiating an agreement, a term
that is most frequently left indefinite and to be settled
by future agreement, or by some other specified meth-
od, is the price in money.. If the parties provide a
practicable, objective method for determining this price
or compensation, not leaving it to the future will of the
parties themselves, there is no such indefiniteness or
uncertainty as will prevent the agreement from being
an enforceable contract.

It is sufficient if the agreement provides that the
price shall be the antount that arbitrators or that | 4
a specific third person, shall fix as a fair price.

1 Connix on Contracts 423-25, 435-36 (1963). Additionally,
the inquiry which would be made pursuant to Montana
Power's arbitration clause is sighificantly different from
having an arbitrator determine how a disputed contract
term should be interpreted or what damages should be as-
sessed for breach. In the latter situation, there is typically
a relatively narrow question, and a relatively large body of
principle to guide the decision, Here, although the major-
ity leaves intact the license provision stating that read-
justed rentals are to be based upon **the commercial value
of the tribal lands involved, for the most profitable purpose
for which suitable,“ it is clear that valuation problems for
hydroclectric projects of this kind are extremely vague and
complex and that the foregoing standard offers little help

42a

in resolving them. This is amply demonstrated by the na-
ture and volume of the arguments which the parties have
addressed to the merits of the Commission’s rental read-
justment, and, unforunately, I suspect that it will also be
reflected in any opinion rerfdered by the division of this
court which is assigned to pass upon the merits, Because
of this lack of readily ascertainable standards guiding the
inquiry, the qualities and characteristics: of the tribunal
making the decision become pro tanto more important to
the parties; and in this regard it must be remembered that
the Commission was a party to the original agreement,
albeit in somewhat different form. .

Therefore, I believe that it is clear on the face of the
license and the legislative history that the arbitration clause
is ‘‘important’’ enough, even under a narrow reading of
section 28, to survive the 1935. amendments; and I think
that this conclusion is supported, rather than controverted,
by the record of license negotiations. Before examining
this question in detail, however, I think it should be empha-
sized that the preliminary negotiations provide a much less
reliable indicator of the substantive importance of a license
provision than an appraisal of the provision’s functional
role in the license. Experience teaches that parties fre-
quently agree upon some of the most important terms of
contracts without a lot of bickering or negotiation; and fair-
ness dictates that Montana Power should not be penalized
for agreeing too readily to the proffer of arbitration as a
term-fixing mechanism. Moreover, it should be remembered
that the published records of the license negotiations are
not by any means verbatim transcripts; rather, they are
summaries prepared for the use of the Government in its
capacity as potential negotiator of similar licenses in the
future. Thus, relying upon these records is a rather specu-
lative enterprise, particularly when making the kind of im-
plication from silence that the majority is asserting on this
point. However, to the extent that the history of negotia-
tions may be useful to elucidate the present inquiry, I think
it points as strongly to the conclusion that the arbitration

43a

clause was considered substantively important and inde-

te

feasible,

As the majority points out, the parties to this license,
particularly the Government, approached the task of nego-
tiation and drafting with acute awareness that their acts
would have great precedential significance ; the Scattergood
Report states that „it would seem unusually appropriate
that special care be taken to develop the factors for regu-
lation under the Federal water power act... and for the
preparation of a model leuse.“ (J. A. 137.) This care by
the parties extended to the task of making sure that the
precise instances and scope of future governmental regula-
tion would be specified in the license, in accord with the
usages of the 1920 Act. This was done with many sections
of the license, both in the negotiations (see S. Doc. No. 153,
71st Cong., 2d Sess. 7-9 (1930)) and in the license itself
(see J. A. 237-258) ; yet, provision for possible government
regulation is notably absent from the readjustment section
contained in the license. Moreover, as noted above, the
urbitration clause was allowed to become part of Montana
Power’s license only after the company had rejected the
government’s proposal to have rentals readjusted ‘‘upon
the facts as found by the commission.“ (J.A. 203). Finally,
when the license was renegotiated shortly after the passage
of the 1935 amendments, the parties themselves provided
a practical construction of the license which showed that
they believed the arbitration clause to be important enough
to remain fully effective. During these renegotiations, the
Tribes and the Commission were in a very advantageous
bargaining position—and Montana Power was in a very

poor one—by virtue of the company’s default on its con-
~ struction obligations; however, the parties ineluded lan-
gunge in the amended license which reflects their belief that
the arbitration clause remained in full effect. In the Sched-
ule of Annual Charges contained in Amendment No. 2, the
parties stipulated that the rental for the year 1954 would
be $205,000, and that ‘“‘[t]hereafter, until adjustment of
the annual charges payable hereunder shall have been ef-

v)

— — — ... a eS ren Eee
«

44a

~

fected pursuant to the provisions of paragraph (D) of this
Article 30 [the arbitration clause],’’? the annual rental
amount would be $175,000. (J. X. 271; emphasis added.)

Against this background, I find the majority’s analysis
of the negotiations extremely artificial. The majority eon—
cedes—as it must—that there was initially a period of hard
bargaining over the price term of the lease, When arbitra-
tion entered the picture, however, these negotiations appar-
ently underwent some strange variety of legal mitosis: sud-
denly, the first twenty-year period of the price term’s ef-
fectiveness became ‘bargained for,’? while the remaining
thirty years of the price term became, not ‘bargained for’?
but rather an “open-end agreement’? or an ‘on-going
agreement’’—phrases which apparently have no legal sig-
Nificance, and unt relationship to what I perceive as the
thrust of the negotiations, Suflice it to say that, in con—
trast the relatively simple and expeditious processes of
arbitration, this readjustment proceeding certainly has
proved to be ‘fopen-ended’’; there is not even an end to
litigation in sight. Other problems remain in the majority
opinion, but none seems substantial enough to warrant ex-
tending these already lengthy opinions any further, or de-

- laying their issuance any longer. I would require that this

controversy be submitted to arbitration forthwith.

MacKinnon, Circuit Judge, with whom Hui, Ludge
McGowan joins dissenting: I concur in Judge Tamm’s dis-
senting opinion, The majority opinion relies uponsthe fact
that the 1920 statute, which provided that the readjustment
in the annual charge was to be made

(oe) ... by the Commission. ee in a manner to be de-
scribed in each license... .”” (Kmphasis added) (41
Stat. 1069)

was amended in 1935 to state:

**(e)... by the Commission ... subjeet to the approval
— of the Indian tribe .. upon notice and opportunity for
hearing.’’ (Emphasis added) (49 Stat. 843)

45a

From this it concludes that the 1935 amendment operated
retroactively to amend the terms and provisions of the
license issued to petitioner in 1930 so as to change the man-
ner of readjusting the annual charges that is specifically
described in petitioner's license, i. e., in thé last analysis,
arbitration,

In reaching such conclusion the majority opinion over-
looks the opening sentence of section 10 which is introduc-
tory to subsection (e) and the other subsections thereof, It
provides:

See, 10. All licenses issiiéd under this part shall be
on the following conditions: ete. (49 Stat. 842),

The intent of Congress in this clause is clearly to prescribe
the conditions upon which licenses “shall be”? issued, not to
amend licenses already issued, If Congress had intended
to amend existing licenses they would have said ‘thereto-
fore or hereafter issued.’? It is also important to note that
the prefatory clause of section 10 was part of the original
1920 Act and so the congressional intent manifest therein
was for a completely prospective application. The re-enact-
ment of the same language would not change the original
intent. And when this introductory clause of section 10 is
read in conjunction with section 28 which provides that
. .. no alteration, amendment . . . shall affect any license
theretofore issued under the provisions of this act, or the
rights of licensees thereunder”? (emphasis added) (41 Stat.
1077; 49 Stat. 847), it seems abundantly clear that Con-
gress in the 1935 amendment only intended to affect licenses
issued thereafter. This interpretation is buttressed by the
well-established rule that a retrospective application of
legislation is not to be implied.

**TA] retrospective operation will not be given to a statute
which interferes with antecedent rights, or by which human action
is regulated, unless such be ‘the unequivocal and inflexible import
of the terms, and the manifest intention of the legislature.’ ’’

46a

If there were any doubt about such interpretation it is
put at rest by noting that the 1985 amendment providing
for notice and opportunity for hearing is not by its terms
inconsistent with readjusting the annual charges here in-
volved in the manner prescribed in petitioner’s license and
doing so upon notice and hearing. It is not necessary to
strike down a material provision of petitioner's license in
order to give prospective effect to the 1935 Act since it only
adds a requirement for notice and hearing, Thus the terms
of petitioner’s license and a prospective operation of the
1935 amendment can both be applied. Statutes are not to
be applied retrospectively unless such legislative purpose
is clearly expressed? There is no support in the legislation
for the suggestion that the quoted provisions of the 1935
Aet were intended to affect existing licenses or to be given
a retrospective operation, Such evidence of legislative in-
tention as does appear in section 28 is expressly to the con-
trary.

— ——— — — h
Union P. R. Co. v. Laramie Stock Yards Co., 231 U.S. 190, 199
(1913).

In the absence of a clearly expressed legislative intent to the
contrary, the court will presume that the law-making power is
acting for the future, and does not intend to impair obligations
incurred or rights relied upon in the past conduct of men when

other legislation was in force.“ Cameron v. United States, 231
U.S. 710, 720 (1914).

Where it is claimed that law is to have a retrospective opera-
tion, such. must be clearly the intention, evidenced in the law and
its purposes, or the court will presume that the lawmaking power
is acting for the future only and not for the past; that it is enact-
ing a rule of, conduct which shall control the future rights and
dealings of men, rather than review and affix-new obligations to
that which has been done in the past.“ White v. d’nited States, 191
U.S, 545, 552 (1903).

® Tlassett v. Welch, 303 U.S. 303. 314 (1938); Miller v. United
States, 294 U.S. 435, 439 (1935); Brewster v. Gage, 280 U.S. 327,
337 (1930).

7 Fa

UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1969

No. 21,904

Tux Montana Power Compan Y, Petitioner —
v.
FreperaL Power Commission, Respondent

Tue Conreperatep Sais AND Kootenat TRIBES OF THE
Fatueap Reservation, Monta NA, SECRETARY OF
Interior, Intervenors

No. 21,767

Tun Conreperatep Satish AND Koorenat TRIBES OF THE
FLATHEAD Reservation, Mox TAN A, Petitioners
v.
FrperaL Power Com Mission, Respondent

Tur Montana Power Com PANY, Intervenor

Before: BAAH N, Chief Judge, and Wnianr, McGowan,
Tam, Leventuar, Roni xsox and MacKinnon, Circuit
Judges, sitting en bane.

Order .

These cases came on to be reheard before the Court sit-
ling en bane on the jurisdictional issue presented, and were
reargued by counsel.

On Consiperation Tuerror, and the determination by
this Court en bane that the Federal-Power Commission had
jurisdiction over the proceeding to readjust charges pay-
able by Montana Power to the Tribes, and that this Court

-has jurisdiction to consider on the merits the petitions to

review the order and decision of the Federal Power Com-

mission, it is

Orperep by this Court en banc that these cases shall bo
referred to a division of this Court for consideration of the
merits, in accordance with the opinion of this Court filed
herein this date.

Per Curiam

48a
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 21,904
Tur Montana Powgr Company, Petitioner
v.
Freperau Power Commission, Respondent

Tur ConFrEeDERATED SALISH AND KooTenal TRIBES OF THE
FLATHEAD Reservation, MonTANA, SECRETARY OF
Interior, /ntervenors

No. 21,767

Tue CONFEDERATED SALISH AND KoorENAI TRIBES OF THE
FLATHEAD ResERvATION, Montana, Petitioners

v.
FreperaL Power Commission, Respondent
Tur Montana Power Company, Intervenor

Petitions for Review of Orders of the
Federal Power Commission

Decided June 26, 1969

Before Burcer,* Tamm and Leventuat, Circuit Judges.
Tau u, Circuit Judge: We herein consider, review, re-
verse and remand certain orders of the Federal Power
Commission.

The Commission proceeding below was initiated by peti—
tion of the Confederated Salish and Kootenai Tribes of the
Flathead Reservation, Montana (hereinafter ‘‘Tribes’’),

seeking readjustment of annual charges or rentals paid by
the Montana Power Company (hereinafter ‘‘Company”’ or

„ Concurrence in this decision was received from Judge Burger
prior to May 21, 1969—the date on which his nomination for Chief
Justice of the United States was announced,

— — —

49a

„Montana Power’’) pursuant to its license permitting the
use and development of certain lands within the tribal re-
serves in the Company’s production, transmission and sale
of electric power. It is the decision of the Commission that
these annual charges are to be appraised and assessed uni-
laterally by the Commission pursuant to a 1935 amendment
to the Federal Water Power Act.’ It is the position of the
Company that any readjustment must be determined by
resort to arbitration as provided in its lease. These two
positions conflict and their resolution is necessitated. The
Tribes, while agreeing with the Commission’s determina-
tion of method, disagree with its award as to amount. For
reasons hereafter developed, we need not reach that point.

On March 7, 1928,? the Commission was given the author-
ity by Congress to issue licenses involving lands within the
Flathead reservation. The terms of the license were to be
subject to approval by the Secretary of the Interior and
rentals thereunder were to be credited to the Tribes. Sub-
sequently, in 1929, after some informal communications,
the Sceretary of the Interior, the Commission and the Mon-
tana Power Company entered into negotiations for a license
to construct and operate a power project within the reser-
vation. The parties entered into the negotiations under the
controlling statutory authority of the Federal Water Power
Act, of 1920, ch. 285, 41 Stat. 1063. That Act provided for
the issuance of licenses for a term not to exceed 50 years,
and ‘‘when licenses are issued involving the use of . . . tribal
lands embraced within Indian reservations the commission
shall fix a reasonable annual charge for the use thereof, and
such charges may be readjusted at the end of twenty years
after the beginning of operations and at periods of not less
than ten years thereafter in a manner to be described in
each license.. . Federal Water Power Act of 1920,
S 10(e), 41 Stat. 1069. Thereafter, on May 23, 1930, a li-

Federal Power Act, 16 U.S.C. §§ 791 et seg. (1964).
2 Act of March 7, 1928, ch. 137, 45 Stat. 200, 212.

50a

conse for the power project was ixsued for a term of 50
years to a wholly owned subsidiary of the Montana Power
Company, ‘The Commission agreed upon and set en“ ren
sonable’? charge and, in compliance with Section 1000) of
the Act, included in Article 30(d) of the license a provision
requiring that the annual charges could be readjusted by
mutual consent of the parties with approval of the Seere-
tary of the Interior, but that, in the event of disagreement
thereon, the rental amount would be submitted to arbitration
in the manner provided in ‘The United States Arbitration
esse :

Thereafter, in 1985, the Federal Water Power Act of 1920
was amended te provide that the authorization of Licenses
on tribal hinds would be subject to approval by the ‘Tribes
and any readjustment of the annual charges would be un-
dertaken. by the Commission” Following this enactment
the Company took over from its subsidiary (in a manner
not here relevant) and completed the proposed units.“ In
“1939 the first unit became funetional,

„he annual charges payable under this license may be read-
justed_ ut the end of twenty (20) years after the beginning of op-
eration... and at periods of not less than ten (10) years thereafter
by mutual agreement between the Commission and the Licensee,
with the approval of the Seeretary of the Interior. In case the
Licensee, the Commission and the Seeretary ... ean not agree upon
the readjustment of such charges, it is hereby agreed that the
fixing of readjusted charges shall be submitted to arbitration in the
manner provided for in The United States Arbitration Act,
such readjusted annual charges to be reasonable charges fixed upon
the basis provided in Section 5 of Regulation 14 of the Commission,
to wit, upon the commercial value of the tribal lands involved, for
the most profitable — for which suitable, including power
development.“ (J. A. 249-50)

416 U.S.C. 8 8OR(e) (1964).

Originally the license had called for the construction and op-
eration of three power units. That provision was subsequently
modified to require only two units. The second unit was operable
in 1949. It was not until 1954 that a third unit became operational.

5la

_Upon the expiration of twenty years from that date, the
Tribes, in 1959, petitioned the Commission for readjust-
ment of the annual charges. Phe Jompany thereupon
brought suit in the II. S. District Court in Montana to com-
pel arbitration, That court held that a determination of
jurisdiction must first be contested before the Commission
and then tested on appeal under 16 U.S.C. § 825/(b) (1964).
In the meantime, however, the Commission had been hold-
ing hearings on the Tribes? petition with participation of
all concerned parties. On October 4, 1967, the Commission
held that it had jurisdiction and that the annual rentals
would be inereased to $956,000 per year and included the
so-called Third Unit in their determination, Both the Com-
pany and the Tribes petitioned for rehearing and each peti-
tion was finally denied on March 21, 1968. Each, as before
noted, petitioned this court for review.

The basie and controlling question in this dispute is sim-
ply whether the readjustment of the annual charges is sub-
ject to unilateral action by the Commission under the
amended statute or whether the language of the original

license commands arbitration. 55

The Commission admits that when Montana Power’s li-
cense was first issued, Section 10(e) of the Federal Water
Power Act of 1920 was controlling. It also agrees that this
statute authorized readjustment “in a manner to be de-
scribed in each license .. .. It is not disputed that at the
time this license was issued that“ manner“ was to be by
mutual consent among the parties or, failing that, submittal
of the question to arbitration. The Commission urges, how-
ever, that Section 10(e) of that Act was later amended by
the Federal Power Act in 1935 to accord uniformity in all
readjustment procedures in that the annual charges would
thereafter be readjusted “by the Commission“ after notice
and hearing, 16 U.S.C. § 803(e) (1964). It argues that this
language was merely corrective of certain problems exist-
ing in the earlier Act and that Congress was empowered to
vest the Commission with „broad new jurisdiction’’ over

owe

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clarifying the purpose of the See.
tion 10 of the Act, the Report noted that this “‘section

issued,” Shall be,“ and “‘shall fix”’ are phrases express-
img an unambiguous intent to command future rt.

H.R. Rep. No. 1318, 74th Cong., lst Seas. 24 (1935). 5

? Py

0
1111 0 l

“new approach” which was adopted was Article 30 of the

the dollar over that period gave rise to the spetem of an
nual change inthe rental with readjustment at the end of

say
readjustment amount? The Secretary's proposal, Ar-

ids Sh, an ————— That
answer was an arbitrator. It was then, and only then, that

11210 ee aH
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* City of El Paso v. Simmons, 379 0.8. 497, 515 (1965)..

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iF

The other alternative argument, advanced principally by
the Secretary, is that Montana Power’s acceptance of the

1936 amendment to its license expressly indicated its will.

ingness to be governed b¢ the provisions of “the Federal

Water Power Act of June 10, 1920 (41 Stat. 1063); as

amended . ..”” (emphasis supplied). (J. A. 274.) However,
that same instrument contained the proviso that ‘‘the license
issued to the Licensee . . . is hereby amended as follows
upon the express condition, however, that such amendment
shall not operate to_alter or amend said license in any other
respect than as herein specified, and shal! not in any way
constitute a waiver of any other part, provision, or condi-

tion of said license.”” (Emphasis supplied.) (J. A. 283).

Again, we cannot imply from the instrument, as written,
any intention by the Company to waive its rights under the
earlier Act except as expressly outlined in the document.

To the contrary, we find express reservation of those —

rights. | 0
f Absent any explicit statutory intent to the eontrary and
absent waiver on the part of the Company, we hold: the

©

&

di i il i Hi 0
Hf
t e 145 at

The license was issued under the Federal Water Power
Act of 1920,' which, amended, became Title I of the Federal
Power Act in 1935. The “Act authorizes the Commission
to issue licenses for the purpose, inter alia, of constructing
dams, power houses, or other project works, for the utiliza-
tion of power from bodies of water over which Congress
has jurisdiction (§4). Section 6 of the Act provides that
licenses shall be issued for a period not exceeding 50 years,
and each license shall be conditioned on acceptance by the
licensee of all terms and conditions of the Act and such
further conditions as the Commission — preseribe in eun-
formity with the Act.

Our particular attention goes to section 10 whieh provides
that all licenses shall be on certain prescribed conditions.
Subsection (d) sets forth the condition requiring the licensee
to establish amortization reserves from excess profits
earned after the project has been in operation for 20 years.
Other provisions give the Commission power to apply these
reserves to reduce net investment in the project, and also
(see § 14) give the Government the right to take over the
project on expiration of the license on payment of net
investment. See Niagara Mohawk Power Corp. v. FPC,
126 U.S.App.D.C. 376, 379 F. ad 153 (1967).

Section 10(e) contains certain general provisions—that
the licensee shall pay the United States reasonable annual
charges, as fixed by the Commission, as reimbursement for
the cost of administration and to recompense it for the use
of its lands or other property, that charges for the expropri-
ation of excessive profits may be 23 from time to
time as conditions may require.

* Act of June 10, 1920, 41 Stat. 1063.
216 U.S.C. § 791a et seg. (1964), as amended (Supp. IV, 1969).

to be described in each license. As amended in 1935 the
statutory provision sets forth that: ö

able annual charge for the use thereof, and such charges
may with like approval be readjusted by the Commis.
sion at the end of twenty years after the project is
available for service and at periods of not leas than ten
years thereafter upon notice and opportunity for hear-
ing. |

It is this 1935 provision for readjustment of annual
charges that was invoked by the petition of the Tribes filed
with the Commission in 1959, and by the Commission in
its order of readjustment of charges that is brought here on
petition to renew. Montana Power claims the 1935 read-
justment provision is inapplicable because, when the origi-
nal license was issued in 1930, the statute provided only
for readjustment of charges “in a manner to be described
in each license.
Montana Power elaims that since the 1930 license pro-
vided for readjustment only by agreement or arbitration,
the Commission is without jurisdiction to readjust charges. |

| Power Co. v. FPC, supra, 126 U.S. Ap. D.C. at 378, 379
F. ad at 155. The 1930 change was one whereby the Com-

*

l " * * 2 " lofa itt of hi ' offi-

Licenses involving use of tribal lands are in the same pro-
viso, of course, as licenses involving the use of government
structures.

In my opinion the intent of Congress is furthered, and
constitutional guarantees are safeguarded, by a general

* Act of June 23, 1930, 46 Stat. 77.

8. Rep. No. 621, 74th Cong., Ist Seas. (1935), at 45.

a

We see no merit in these contentions, * * Tine
licensee had no vested right to have its investment
determined by one procedure rather than by another
and an 80 long as it was accorded a right to be heard

only for lack of jurisdiction, fraud, or wilful misconduct
of members of the board. The Supreme Court found no
constitutional inhibition, saying, in a unanimous opinion de-
livered by Justice Clarke (258 U.S. at 147-48, citations
omitted) : :

No one has a vested right in any given mode of pro-
cedure and so long as a substantial and efficient remedy
remains or is provided due process of law is not denied
by a legislative change... . [The amendment] afforded
ample protection for the fundamental rights’ of the
— in error, and the taking away of the right to

ve examined mere elaims of honest error in the con-
duct of the proceeding by the Board did not invade any
federal constitutional right.- Even courts have been

known to make rulings thought by counsel to be er-

roneous.

As for the complaint that the board was composed of
three city officials appointed by the mayor, the Court ap-
proved the opinion below which noted that the city’s pay-
ment of any claim would be covered by an assessment, and
continued : ‘‘Officials acting really as an auditing board are
not condemned because they have been selected by the mu-
nicipality or other division against which the claim is
made. Crane was cited with approval in Hardware Dealers
Mut. Fire Ins. Co. v. Glidden, 284 U.S. 151 (1931), which
considered a law that ‘‘substitutes a determination by arbi-
tration for trial in courts of the single issue of the amount
of loss suffered under a fire insurance policy’’ (p. 158).
The Court, per Justice Stone, held that ‘‘the requirements
of the Fourteenth Amendment, so far as now inwoked, are

ox
67a

satisfied if the substitute-remedy is substantial and .

cient.”’ See Crane v. Hallo, %8 U.. 142, 147 (1922).

rine Precedents underetf any claim that the legislature's

substitution of arbitration for a commission, or viee versa,

The same kind of consideration is pertinent to determina.
tion of the sound construction given the 1935 act, as estab.
lishing uniformity of decisi responsibility, so long as
there is no alteration of accrued substantive rights. Penn-
sylvania Power & Light Co. v. FPC, supra. This view ‘is

179 F.2d 179 (3d Cir. 1949), cert. denied, 339 U.8. 957
(1950). The legislative history already cited supports the
conelusion that the 1935 act intended the Commission to
have the responsibility for fixing annual charges, in all li-
censes thereafter issued, and to have jurisdiction over any

The discussion of precedents should also take note of
oBerkovitz v. Arbib 4 Houlberg, Inc., 230 N.Y. 267, 130

“law could be applied to contracts entered into before its
enactment. Judge Cardozo’s opinion said (230 N.Y. at
262, 130 N.E. at 290): =

»_____ Atbitration is a formof procedure whereby dif.
ferences may be settled. It is not a definition of the
rights and wrongs out of which differences grow. This
statute did not attach a new obligation to sales already

a

made. It vindicated by a new method the obligation
then existing.

Montana Power points to Bernhardt v. Polygraphic Co.,
350 U.S. 198 (1956), where the Supreme Court held that
in diversity actions federal district courts must apply the
law concerning availability of the arbitration) remedy that
would have applied if the suit action had brought in
the state court. The Court said, through Justice Douglas
(350 U.S. at 202-03) :

The federal court enforces the state-created right by
rules of procedure which it has acquired from the
Federal Government and which therefore are not iden-
tical with those of the state courts. Yet, in spite of
that difference in procedure, the federal court enforcing
a state-created right in a diversity case is, as we said in
Guaranty Trust Co. v. York, 326 U.S. 99, 108, in sub-
stance ‘only another court of the State.’ The federal
court therefore may not ‘substantially affect the en-
forcement of the right as given by the State.’ Id.,
109. If the federal court allows arbitration where the
state court would disallow it, the outcome of litigation
might depend on the courthouse where suit is brought.
For the remedy by arbitration, whatever its merits or
shortcomings, substantially affects the cause of action
created by the State. The nature of-the tribunal where
suits are tried is an important part of the parcel of
rights behind a cause of action.’’

The limited significance of Polygraphic for present pur-
poses is illuminated by the case it cites, Guaranty Trust Co.
v. York, 326 U.S. 99 (1945). The Court there held that
a federal court could not maintain a diversity action that
would have been barred by the statute of limitations if
brought in a state court. Justice Frankfurter pointed out
that the issue is not resolved by inquiring whether a statute
of limitations ‘‘is deemed a matter of ‘procedure’ in some

that alone is relevant to our namely, does it
significantly affect the result of a litigation.” (326 U.S. at
109.) The need to focus on context is by

“Matters of ‘substance’ and matters of ‘procedure’
defined u gra about in the books as though they

of law. But, of course, ‘substance’ and “procedure? gre
the same keywords to very different problems. Neither
‘substance’ nor ‘procedure’ represents the same invari-

sented by constitution=] clajfas like ex post facto legislation
or impairment of contract obligations, or the related issue
of statutory intent involved in determining whether a new
remedy applies to outstanding matters, For that purpose

by the Court to bear on cajun fl different problems pre-

the pre-Polggraphic precedents, and their analysis discussed
above, stand unshaken.

Montana Power makes an alternative contention that in
this particular license ‘‘the arbitration provision is a sub-
stantive provision, bargained for as a major element in the
agreement, and hence a vested right which Congress could
not and did not take away. The materials cited to us reveal
amount of annual rentals that would be fair to the Tribes,
and whether they should be on a flat basis or depend on
actual use of facilities. A flat sehedule was finally agreed
to. But there is nothing to indicate a deep concern over the
method of readjustment. Whoever proposed readjustment
be decided through arbitration in the event of inability to
agree, it seems ta,have won general acceptance, no doubt
because of the potentially conflicting responsibilities of the
Secretary of the Interior, who was then both a member of
the Commission and a trustee for the Indians. But after
the license was issued the Commission was reorganized from
a Cabinet committee to a five-member independent con-
mission. When Congress placed readjustment responsibil-
ity in the Commission in 1935, the arbitration provision was
vo longer necessary in order to provide a disinterested
agency for the readjustment function. Compare Crane v.
Hale, supra.

Indeed consideration of the particular situation of Mon-

.

71

amended two generating units (instead of three), °

and for a e of 154,000 hp (instead of a minimum of

charges no higher than $175,000, the amended license called
ae ae

for rents rising to $205,000, | |
These spatters were all negotiated directly with the Tribe,

but it is hard to reconeile this 1936 activity, resulting in
substantial amendments of the license, thus avoiding the

But there is more to be said about post-1930 develop-
ments, Montana Power, which had succeeded to the license
in 1938, completed the second unit i .
and began operating a third unit in $054, alleit (ryt

The new license for the third unit is an illuminating aspect
of this case, in my mind. Montana Power would have to

.
9 72a |
agree that it has no vested right of arbitration which could
preclude Commission jurisdiction to engage in readjustment

of rental charges as to the third unit. But it seems to me

manifest. good sense that the same tribunal should have

_, Teadjustment jurisdiction for the different units of this
Kerr projeet putting aside for the moment the differences

between the parties as to when this readjustment authority
may be exercised so far as the third unit is concerned. This
also bears on legislative intent. Can it be supposed that the

1935 legislature, reconstructing as best we can what it

would have said about the problem if its attention had
been expressly directed to it, would rule that arbitration .
would govern as to units atready authorized but the Com-
mission would exercise readjustment jurisdiction as to units
thereafter authorized? This seems patently unlikely, quite
apart from the point already noted that the construction of
the two units eventually constructed was not authorized
until 1936. . :

This leads me into an aspect of this case in which I take
issue with the position of the Commission, the Secretary
and the Tribes. They seem to feel that § 10(2) as amended
in 1935 requires the Commission to fix readjustment of
charges. But § 10(e) only says that the charges „may be
readjusted’’ by the C ission after twenty years. I think
the Congress has given the Commission the jurisdiction and
responsibility, But I think the Commission would have dis-

cretion to abstain from taking on this assignment, and con-
ducting the requisite hearing, if the parties agreed among

themselves to the readjusted rentals. And even if they did
not come to an agreement as to the amount of the read-
justed rentals, the Commission might respect their agree-
ment to submit the matter to arbitration. There is scope
for settlement agreements, subject to approval by the Com-
mission, even in the setting of rates for the public. City of
Chicago v. FPC, 128 U.S. App. D. C. 107, 116-19, 385 F. 2d 629,
638-41 (1967). Here what is involved is allocation of costs
between parties, Although/the subject-matter is quite dif-

9

ferent it may not be entirely irrelevant to lie the absten-

— ‘
» !

not be a total abstention. There. is room for flexibility in

agency either all or an important part of the
controversy. Similarly an agency may stay its

jurisdiction, But the award would have the sa: sig-
nificance as an agreement ee lg in —
Brotherhood of Railroad Trainmen v. Akron @ B. B. N. Co.,

9

74a

128 U.S. App. D. C. 59, 74, 385 F.2d 581, 596 (1967), cert.
denied, 390 U.S. 923 (1968). This would at the very least
be a strong ‘‘advisory effect, and in practical terms it
might permit the commission to grapple much better with
its prodigious work load. ;
This kind of flexibility, like the commission’s use of
negotiated settlements, takes account of the significant dif-
ference between these two approaches in the settlement of
controversies. Disposition by an administrative agency, like
disposition by a court, depends on reasoned disposition, on
application of general rules and standards to the facts of a
particular matter. Arbitration may proceed by that judicial
type of disposition, but it may also partake of the kind of
consensual disposition which prevails among businessmen,
or in the relations between business and labor, and for that
matter even in the halls of the legislature. Arbitrators do
not have to give reasons and in some types of matters that
may be an advantage. It is commonplace that parties may
be able to agree on a particular result more readily than
they can agree on a statement of the general approach that
harmonizes with the particular result. The parties may be
disposed to avoid the expense and distractions of litigation
if the various rates reached in a settlement do not constitute
a binding admission or ruling on principle. City of Chicago
v. FPC, supra, 128 U.S.App.D.C. at 119, 385 F.2d at 637.

Justice and law have room for both approaches—for the
reasoned application of rules to instances, and for the dis-
position without statement of reasons, either by virtue of
agreed settlement or by virtue of agreed arbitration.

I have already noted that the technique of arbitration,
however useful in appropriate instances, might have serious
drawbacks for the controversy before us because of the
third unit problem, But there are other problems that
trouble me. The case before us involves a license issued by
the Commission, and agreed to by Montana Power. Is the
Commission to become involved before the district court as

75a

a party agreeing to arbitration? Is the matter to be
re-constructed as an agreement to arbitrate between the
“company and the Secretary because the company accepted
and the Secretary approved (in more than one capacity) the
terms of the license? Is it the Tribes or the Secretary who
conducts the arbitration? I dare say these matters can be
handled with the application of ingenuity and problem-
solving spirit, especially since the landowner is anxious for
the adjustment. But they are a troublesome factor in the
case that undercuts the apparent simplicity of Montana’s
presentation.

As I take leave of this case, relieved. of the necessity of
coping with loose ends“ and the issues on the merits, I
suppose my main concern is dismay at the necessity of
further prolongation of an already long and bitter contro-
versy. I am confident that my brethren regret this on-
coming delay as much as I, but feel that it is an unfortunate
residue of sound principle. Perhaps we can take comfort
in the possibility that even if the case now goes to arbi-
tration the District Court for Montana could appoint the
Federal Power Commission as arbitrator. I have not
studied the matter in depth, but offhand I see no reason
why this appointment would not be permissible under the
Arbitration Act. If it were permissible and were made, it
would avoid unnecessary delay in settling this overdue
controversy, and would avoid unseemly. divergence in
readjustment charges as between the different units.

*Such as the so-called ‘‘veto’’ power asserted by the Secretary
of the Interior. The Secretary 's brief expressly disavows any
authority to overrule a judgment of this court. Commissioner

ar ver was of the view that the Indian tribes’ 1959 petitions for
readjustment by the Commission constituted the approval required
by the proviso to § 10(e).

76a

UNITED STATES OF AMERICA
FEDERAL POWER COM MISSION

ef

Axx VAL CHAN

Before Commissioners: Lee C. White, Chairman; L. J.
O’Connor, Jr., Charles R. Ross, Carl E. Bagge, and
John A. Carver, Jr.

Prosect No. 5
Tue Moxraxa Power Company
Opinion No. 529
Opinion and Order Readjusting Annual Charges
(Issued October 4, 1967)

Ross, Commissioner :

This matter is before us pursuant to the filing, on May 19,
1959, of a-petition by the Confederated Salish and Kootenai
Tribes of the Flathead Reservation (Tribes) to readjust
the annual charges paid by the Montana Power Company
(Montana Power) for the use of tribal lands used in the
Kerr Hydroelectric Development, Project No. 5, in ae-
cordance with Section 10(e) of the Federal Power Act
and Article 30(D) of the project license. ~

Following a hearing, Examiner Ames W. Williams
issued his decision finding that Montana Power should
increase its annual charges to the Tribes from $238,375
to $850,000 annually. The three parties—Tribes, Montana
Power, and the Secretary of Interior (Seeretary) and
Staff filed exceptions to the Examiner’s decision which
raise the following issues:

1. Whether the Commission has jurisdiction to establish
annual charges under Section 10(e) of the Federal Power
Act as opposed to arbitration.

2. The exact date of expiration of the initial twenty-year
period of commercial operation of Project No. 5 and

* 77a

whether the readjusted charge should be made retroactive
to this date. >.

3. Whether the readjustment of charges should include
the third unit of the current installation. |

4. The determination of the readjusted charge. This
includes the consideration of net benefits or profitability
or some other method of computation and, after that, a
consideration of what share the Tribes should have in such
net benefits or profitability,

5. The appropriate interest rate on any increased annual
charges,

We hold that: (1) The Commission has jurisdiction under
Section 10(e) of the Act to readjust. annual charges;
(2) the project was available for and began commercial
operations on May 20, 1939; (3) the readjusted annual
charges should be effective 20 years from May 20, 1939;
(+) the readjustment should include the third unit of the
current installation; (5) the readjusted annual charge is
$950,000 with simple interest at 6 persent.

In large meaure, the Examiner reached the same con-
clusions, and we are adopting his decision to the extent
consistent with this opinion. ° ca

Background

Project No. 5, which has an installed capacity of 168,000
kilowatts, is located on Flathead River and Flathead Lake
about five miles downstream from Poulson, in Flathead.
and Lake Counties, Montana. Flathead Lake serves as the
project reservoir,

Pursuant to the Hell Gate Treaty of July 16, 1855, (12
Stat. 975), the Tribes own the lands underlying the southern
half of the lake and the lands occupied by the dam and
powerhouse, g

78a

Kerr Dam is a variable radius concrete arch, 381 feet
long and 200 feet high, with a radius of 179 feet at the top.
The storage capacity of Flathead Lake between elevations
2883 and 2893 feet i is 1,217,000 acre feet. The installation
has three generating units, the first and second of which
are 77,000 horsepower and were placed in service on May
20, 1939, and May 31, 1949, respectively. The third unit, a
78,000 horsepower turbine, came on the line December 5,
1954.

The Commission issued the original license for the Kerr
Project on May 23, 1930, for a term of fifty years pursuant
to the Federal Water Power Act (41 Stat. 1063, 16 U.S.C.
791-823). The licensee did not complete construction
within the period prescribed by the license. When it applied
for an amendment to extend the time, the Secretary op-
posed the application and the matter was referred to the
Attorney General. Section 10(e) was thereafter amended
as part of the 1935 amendments to the Federal Water
Power Act, and the Tribes were organized. Subsequently,
the Secretary consented to the amendment of the license
which was granted by the Commission on June 23, 1936.

Section 10(e) of the Federal Power Act,-as amended,
authorizes the readjustment of annual charges for the use
of Indian lands after the development has been available
for service for twenty years and thereafter at intervals of
not less than ten years. The annual charges as originally
fixed by the Commission and supplemented by the Com-
mission’s decision involving the installation of the third
turbine in 1954 presently amount to $238,375.

The Tribes petitioned for readjustment on May 19, 1959,
but no action was taken thereon because a proceeding was

A special act of March 7, 1928, 45 Stat. 200, 212-213, authorized
the Commission to issue a license for the use of lands within the
Flathead Indian Reservation upon terms satisfactory to the See-
retary of Interior.

2 79a

then pending with respect to the fixing of annual charges
for the third unit. That matter was finally determined
on January 25, 1962, in the case of M Power Com-
pany v. F. P. C., 298 F.2d 335. a 5

We thereafter set this matter for hearing upon failure
of the parties to negotiate a mutually satisfactory read-
justment of the annual charges,

JURISDICTION or FPC

Shortly before hearings commenced the Company sought
to stay the proceeding and to compel compliance with the
arbitration provision of Article 30(D) of the license by
filing a petition in the U. S. District Court for the District
of Montana, Butte Division. The Court, however, dis-
missed the action forthwith, s that
jurisdiction to determine the isaue lies with the Federal
Power Commission and the Court of Appeals under Sec-
tion 313(b) of the Federal Power Act (16 U.S.C. 8251).

In setting the hearing in this case, the
recognized as a question of law the contention of Com-
pany that the Commission lacks the jurisdiction to hear
the dispute and permitted argument and the presentation
of briefs upon this basic issue.

Section 30 (D) of the subject license, which was issued
on May 23, 1930, provides:

The annual charges payable under this license may
be readjusted at the end of twenty (20) years after
the beginning of operation under this license and at

justment of such charges, it is hereby agreed that the
fixing of readjusted charges shall be submitted to

arbitration in the manner provided for in The United
States Arbitration Act,’’ (U.8.C., Title 9), such read-
Justed annual charges to be reasonable charges fixed
upon the basis provided in Section 5 of Regulation 14
of the Commission, to wit, upon the commercial value
of the tribal lands involved, for the most profitable

purpose for which suitable, including power develop-
ment. (Emphasis added.)

This license was issued under the Federal Water Power
Act, Section 10(e) of which, in pertinent part, read as
follows:

. (W)hen lechses are issued involving the use of
Government dams or other structures owned by the
United States or tribal lands embraced within Indian

reservations the Commission shall fix a reasonable
annual charge for the use thereof, and such charges
may be readjusted at the end of twenty years after
the beginning of operations and at periods of not less
than ten years thereafter in a manner to be described
in each license. -

The Act of August 26, 1935, amended Section 10(e) in
relevant part as follows:

(When licenses are issued involving the use of
Government dams or other structures owned by the
United States or tribal lands embraced within Indian
reservations the Commission shall, subject to the ap-
proval of the Secretary of the Interior in the case
of such dams or structures in reclamation projects
and, in the case of such tribal lands, subject to the
approval of the Indian tribe having jurisdiction of such
lands as provided in section 16 of the Act of June 18,
1934 (48 Stat. 984), fix a reasonable annual charge for
the use thereof, and such charges may with like ap-
proval be readjusted by the Commission at the end
of twenty years after the project is available for

;

813
service and at periods of not less than ten yes there.

after upon notice and opportunity for ao
(Emphasis added.) 7, ,

Montana Power contends that Article 30(D) of the
License calling for arbitration of readjustment of charges
confers a substantive right upon it and asserts that this
is confirmed by Section 28 of the Federal Power Act which
provides that ‘‘no ... amendment . . . shall affect any
license theretofore issued under the provisions of this
Act, or the rights of any licensee thereunder. Hence,
Montana Power claims that it is not affected by the changes
in Section 10(e) in the 1935 Act which provides that the
„Commission shall . . fix a reasonable annual charge.
and such charges may .. . be readjusted by the Commission
. Rather, it argues, it is governed by the provision
of the original Section 10(e) which provided that readjust-
ment of annual charges be made in the manner described
in each license,

The Commission must determine whether arbitration
controls the method of adjustment, or whether Section
10(e) controls it. a

If Section 300 D) of the License confers a substantive
right on the Licensee that right is expressly reserved by
Section 28 of the Federal Power Act, If, however, the
method of determination of annual fees is procedural
rather than substantive in nature, then Congress may from
time to time describe or change that procedure without
abrogating constitutional rights.

The substantive right. conferred by Section 30(D) of the
license consists of the expression: of the criterion for the
readjustment of the annual charge, to wit, upon the,
commercial value of the tribal lands involved, for the
most profitable purpose for which suitable, including power
development.“ But that criterion will govern irrespective
of the procedure employed for its application, Thus, it is

}
; ll
apparent that the procedural alteration preseribed by Con-
gress does not work any substantive change, Whatever
the procedure employed, the final result must be the estab-
lishment of a reasonable annual charge.’ Certainly it was
not unreasonable for Congress to eqnelude that the appli-
5 cation of this substantive standard, one which requires inti-
wate familiarity with the technical operations of hydro-
electric developments, could better be applied by a com-
mission with establishdd expertise than by arbitrator who
— ete reggae
lying technical and legal complexities, 4

Arbitration by reason of its inherent nature in a pro-
. g cedural process, namely: a means, mechanism or device
by which differentes may be adjusted, reconciled or settled.
The 1935 amendment of Section 10(e), by providing a
hearing procedure before the Commission, obviously did not
predetermine or deprive the Company of a reasonable
means of determining a readjustment of annual charges.
In addition to allowing the opportunity for a hearing, the
1935 amendment furnished the license with a facility for
obtaining judicial review of the resulting determination,

Tho cases support this conclusion, Particularly in point
is Pennsylvania Power d Light Company v. F. P. C., 19
F. 2d 445 (3d Cir, 1943), cert, denied, 321 U.S. 798 (1944),
wherein it was contended that Section 14 of the Water
Power Act, providing for a determination of net_invest-
ment by a district court if the Commission and licensee dis-

_ agreed, was a substantive right and, therefore, unaffected
by the 1935 amendment of such sections of the Act which —
provided for a determination of the issue by the Commis-

: sion, The court stated, in material part, at page 483

The licensee had no vested right to havo its invest-
ment determined by one procedure rather than another
at least so long as it was accorded a right to be heard

° 298 F.2d 335, 340 (CADO 1962),

83a
and an ultimate judicial review. Accordingly the
change of procedure which the 1935 amendment brought -
about did not, as applied to the present proceeding,
Also, in Safe Harbor Water Power Corp., 5 FPC 221
(1946), aff’d 179 F.2d 179 (3d Cir. 1949), cert. denied,

' 339 U.S. 957 (1950), a licensee under the Water Power

‘Act contended that any enlargement of Commission juris-
diction by reason of the enactment of Part II of the Federal

contends that it cannot be regulated under any pro-
visions other than those in Section 20, because it
construes its license to be a contract, and argues that
the effect of Section 28, which saves
- - lieenses from alteration, together with its license, issued
subject to the provisions of the Federal Water Power
Act of 1920, is to protect the license from alteration by
Congress without Safe Harbor’s consent. It does not
contend that the rate fixed by this Commission under
Section 20 would be any different from that fixed under
Part II. Safe Harbor’s objection, then, amounts to no
more than that Congress is without power to substi-
__ tute determination by one agency, for that by another.
The alteration opposed here is one of procedure, and
procedural changes may be effected without consent ff
the „licensee.“ ‘

Under Section 20 of the Federal Water Power Act the states
could regulate the wholesale rates of hydroelectric licensees whereas
the FPC was granted exclusive wholesale rate jurisdiction in Part
II of the Federal Power Act. . :

—
~~
.

ay
J

«
9

84a
\

Oshkosh Waterworks Co. v. Oshkosh, 187 U.S. 437
(1903), involved a change of procedures for enforcement
of the rights of the contract after the contract was entered
into. The Court there pointed out that the legislature may
not withdraw all remedies and thus, in effect, destroy the
contract. Nor may it impose new restrictions or conditions
as would materially delay or embarrass the enforcement

of justice as was established when the contract was made.

\ of rights under the contract according to the usual course
* Court held, however, that the legislature may modify

r existing remedies or procedures without impair-
ing obligation of. contract, provided that a sybstantial
and us remedy remains or is given by which means

the party can enforce his rights under the contract.

We find that Congress by amending Section 10(e) did
nothing more than change a procedure while retaining a
substantial and efficacious remedy protecting the rights of
the parties insofar as annual charges are concerned. In-
deed, Congress materially improved the rights of the
parties in the determination of a fair and reasonable charge
by the amendment to Section 10(e). The parties now have
the right to have an official record of the proceedings. They
obtained the right to cross-examination. They obtained the
right to rebuttal. They obtained the right to file excep-
tions. They obtained the — to apply for a rehearing if

aggrieved.

Wu Reapsustment or CHARGES
) May Bz Errrorno

SBooction 10(e) of the Federal Water Power Act and
Article 30(D). of the Kerr License provide for readjust-
ment of annual charges for the use of Indian lands ‘‘at
the.end of twenty years after the beginning of operations“
and at the end of twenty (20) years after the beginning
of operation under the license,“ respectively. In Section
10(e) 0 of. the Federal Power Act, as amended, the phrase

=

was altered to read at the end of twenty years the

Projest is available for service.’’

30, 1948 (7 FPC 528, 530) deter that interest costs
would be deemed to have terminated on August 1, 1938,
when Project No, 5 ‘‘was placed in commercial opera-
tion The record indicates that the August 1, 1938,
date was utilized for a limited accounting purpose relating
primarily to the termination of interest charges and that
it has no direct bearing upon the commencement of com-
moreial operations, g

Commencing on October 2, 1938, 1,103,000 kwh were
generated during a three-day period, but that date does not
appear to be either the date marking the beginning of
comercial operations or when the project became avall-
able for service, This generation amounted to only a test
run and generation was termin During this period,
Montana Power experienced t with a circuit breaker,
Additjonally, other technical adjustments were required,
No further power was generated until May, 1939 when- the
project began commercial operations, As noted in the third
unit case, ‘‘The first of the two units was placed in opera-
tion May 20, 1939... 298 F. 2d 335, 336,

There is no convincing evidence indicating that Montana
Power failed to commence the operation of this particu-
larly efficient project as soon as it was ready. We there-
fore find that the project began commercial operations
when it was available and that May 20, 1939, is the opera-
tive date under Section 10(¢), This conclusion finds sup-
port in the fact that, in accordance with the schedule of
charges, the charge accelerated on June 1, 1939, the first
full month after the commencement of operations, from
$1,000 to $5,000 a month. Further, the Tribes, apparently
relying on the same date as subsequently found by the

86a

Circuit Court, filed their petition for readjustment of
annual charges on May 19, 1959, it being the conclusion of
twenty years commencing May 20, 1939.

The date when the project began commercial operations
and hence when twenty years shall have expired becomes
important only if the annual charge is to be readjusted
and only if it is to be readjusted effective with the expira-
tion of the first twenty years.

Montana Power asserts that if the annual charge is to
be readjusted, it is to become effective beginning with the
determination and the readjustment can have no retroactive
effect. Montana Power alleges that the Tribes were
dilatory in waiting until the very end of the twentieth year
before petitioning for readjustment.

We are not persuaded by Montana Power’s contentions.
Section 10(e) of both the Federal Water. Power Act and
the Federal Power Act contemplated that annual charges
may be readjusted after twenty years. To hold that no
readjusted charge-could become effective until promulgated
after appropriate hearing not only would encourage liti-
gation but would place a premium on delay, dilatory tactics
and protraction of that litigation. The purpose of Sec-
tion 10(e) both of the Federal Water Power Act and the
Federal Power Act was to provide that the Indian pro-
prietors of the land would be compensated for use of their
lands by reasonable rentals thereon. It would be grossly
inequitable to allow a tenant to occupy premises during a
dispute over the establishment of a fair and reasonable
rental charge if such charge were not effective during the
full period of the dispute. The owner is entitled to his
proper rental for the period of occupancy although the
final determination as to the proper amount may not be
reached until long afterward. Indeed, it is not difficult to
imagine a situation where the final determination may not
be reached until after the premises have been vacated.
The logical extension of Montana Power’s argument is that

87a

the owner would be entitled to no readjusted rents in that

case, 7

Montana Power's argument that it would be irreparably
injured by a retroactive determination is not convincing.
Montana Power had available the obvious and normal prac-
tice of making adequate provision for possible increased
payments by maintaining a reserve account. It chose not to
a

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385605_0476%3A1. Public record. Not legal advice.