Opposition Brief — Montana Power Co. v. Federal Power Commission

INDEX.

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CITATIONS

Cases:

Bernhardt v. Polygraphie Co., 350 U.S. 198_________-_ 7

De La Rama Steamship Co. v. United States, 344 U.S.

pM Ne NN hth Lr | 6

El Paso v. Simmons, 379 U.S. 497_....-_-________- 7

Pennsylvania Power & Light Co. v. Federal Power

Commission, 139 F. 2d 445, certiorari denied, “

Oe Wh Fic civccstccnsemnane cee 8

Statutes:

Federal Water Power Act (Act of June 10, 1920, 41

Stat. 1063, 16 U.S.C. 791-823) as subsequently

amended (46 Stat. 757), including amendments and

additions and change of name by Title II of the

Public Utility Act of 1935 (Act of August 26, 1935,

c. 687, 49 Stat. 838, 16 U.S.C. 791a-825r)_________ 3

Section 10(e), 16 U.S.C. 803(e)______________ 2, 6, 8, 9

Section 28, 16 U.S.C. 822................- 3, 5, 6, 8, 9

(1)

LOL LOL NLD, OLE TOL TAI

Iu the Supreme Court of the United States

OctToBer TERM, 1970 ©

No. 838

. THE Montana Power CoMPaNy, PETITIONER

v.

FEDERAL PowER COMMISSION, ET AL.

_ STATES COURT OF APPEALS FOR THE DISTRICT OF COLUM-

BIA CIRCUIT

3

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED -

BRIEF FOR THE FEDERAL POWER COMMISSION AND THE

SECRETARY OF THE INTERIOR IN OPPOSITION

OPINIONS BELOW

The opinions of the court of appeals (Pet. App-

la-46a)’ are not yet reported.* The opinion of the

Federal Power Commission (Pet. App. 76a-108a) is

reported at 38 FPC 766, and its order denying rehear-

ing (Pet. App. 108a-112a) is reported at 39 FPC 321.

*“Pet. App.” references are to the separate appendix to the

petition filed by The Montana Power Company. |

*The opinions were rendered by the court on rehearing en

banc. The opinions of the original panel (Pet. App. 482-75a)

were vacated by order of -November 17, 1969. : :

{1)

&

2

JURISDICTION

The order on rehearing en banc of the court of

appeals (Pet. App. 47a) was entered on July 15, 1970.

The petition for a writ of certiorari was filed on Oc-

tober 12, 1970. The jurisdiction of this Court is in-

voked under 28 U.S.C. 1254(1).

‘QUESTION PRESENTED

Whether the court of appeals was correct in con-

eluding that the Commission had exclusive jurisdic-

tion to readjust annual charges to petitioner for the

use of tribal lands under Section 10(e), as amended,

of the Federal Power Act.

STATUTES INVOLVED

The pertinent provisions of the Federal Power Act,

as amended, 16 U.S.C. 791 et seq., and of the Federal

Water Power Act of 1920, 41 Stat. 1063, ave set forth

in an attachment to the petition. |

STATEMENT

The Commission initiated this proceeding as a re-

sult of a petition filed in 1959 by the Confederated

Salish and Kootenai Tribes of the Flathead Reserva-

tion, Montana (the ‘‘Tribes”) to readjust the annual

charges paid by petitioner, The Montana Power Com-

pany, for use of tribal lands in conjunction with the

operation of the Kerr hydroelectric project. The Kerr

project has been in service since’ 1939 (Pet.

App. 3a, 76a) under -a license originally issued in

1930 subject to Section 10(e) of the Federal Water

3

Power Act of 1920 as then in effect, which authorized

the Commission to fix a reasonable annual charge for.

the use of tribal lands and provided that after 20 years

of service the “charges may be’ readjusted wee in a

manner to he described in each license.’’ Article 30(D)

of Kerr project license called for readjustment—on

the basis of ‘‘the commercial value of the tribal lands

involved, for the most profitable purpose for which

suitable, intluding power development”—by agreement

of the licensee, the Commission and the Secretary of

Interior (then a member of the Commission),’ or

failing agreement by submission to arbitration (Pet. |

App. 79a-80a).. Section 28 of the 1920 Act, which —

remains unchanged today, 16° U.S.C. 822, provided

that no amendment to the Act “* * * shall affect any

license theretofore issued under the provisions of this

Act, or the rights. of any licensee thereunder.”

- In- 1935, Section 10(e) was amended to give the

Commission ‘* the authority to determine, pon notice —

and sgl aN for hearing and subject to judicial :

review, the amount-6f any réadjustment of annual

‘charges under Section 10(e). The court below re-

jected petitioner’s contention that the saving clause

of Section 28 deprived the Commission of jurisdiction

under the 1935 Act over readjustments under licenses

issued prior to 1935.

“She Onnailidien was then composed of the. Secretary of

War, the Secretary of the Interior, and the Secretary of Ag- -

riculture (41 Stat. 1063).

*The Commission was reconstituted as an independent regu-

latory agency with five commissioners in 1930, soon after the

license was issued (46 Stat. 797).

4

Background. The original 1930 license was issued’

by the Commission with the approval of the Secre-

tary of the Interior, to the Rocky Mountain Power

Company, a wholly-owned subsidiary of petitioner

(Pet. App. 2a-3a). Under this license, Rocky Moun-

tain was authorized to commence within one year, and

complete within three years thereafter, construction

of adam and powerhouse containing three generating

units (J.A. 239). ©

Rocky Mountain failed to meet enn Sealine as ex-

tended, and was in default under its license ° at the time

of the 1935 amendment to Section 10(e) of the 1920

> Act mentioned above. In 1936, an amendment to the

license was issued by the Commission (J.A. 260-275),

extending to 1939 the time for the completion of the

first generating unit of the project. The amended

license, which was approved by the Secretary of the

Interior and the Tribes, contained a: waiver of any

damage claims by the Tribes arising out of the initial

default. In 1938, petitioner became the sole licensee

of the Kerr project. The first generating unit became

operational in 1939 and the second in 1949 (Pet.

App. 89a). ,

The instant proceedings. As noted above, in: the

1959 proceedings initiated by the Commission, peti-

tioner challenged the jurisdiction of the Commission

to make the 20-year readjustment in annual charges

payable to’the Tribes; petitioner argued that Article

5 While the licensee was in default, the matter was referred

to the Attorney General of the United States for proceedings

to revoke the license (Pet. App. 30a, 78a). No formal] action

appears to have been taken on that request.

ly

5

- 30(D) of its license, which was not in terms altered |

by the 1936 license amendment, gave it an absolute |

right to arbitration in the event the parties involved

could not agree on the amount of the readjustment.

After almost 10 years of litigation on the jurisdic-

tional and diverse other issues, the Commission de-

cided that it had jurisdiction and awarded the Indians

an increase in rerital from $238,375 to $950,000 per

year effective May 20, 1959. (Pet. App. 76a—-77a, 109a.)

On petitions for review, the court of appeals first

held that the arbitration provision in Article 30(D)

was “a substantive right, embodied in the contract,

bargained for and bought by the Commission in’ its

effort to secure a licensee for this project” (Pet. App.

56a). It remanded the case for submission to arbi-

tration (Pet. App. 61a). On rehearing en banc, how-

ever, the court upheld the Commission’s jurisdiction

(Pet. App. la-46a), holding “that the 1935 statute,

which made no changes in the substantive standard

applicable under outstanding license for readjustment

of tribal land charges, intended to prescribe the Com-

mission as the tribunal for readjustment under out-

standing as well as future licenses” (Pet. App. 2a). -

The court acknowledged that: the saving clause of

Section 28 of the 1920 Act. (supra, p. 3) protects a

licensee against changes in his substantive rights or

duties under a license (Pet. App. 12a-13a), but ruled

that that section did not constitute “a general pro-

hibition against changes in the procedure or machin-

ery applicable to a license, changes that do not have

the quality of changing substantive rights or obliga-

6

tions.”? (Pet. App. 15a).° In this respect, the court

found that the readjustment of annual charges by the

Commission, rather than by an arbitrator, was a per-

missible change of remedy not constituting a general

alteration of substantive rights (Pet. App. 14a).

Since the only issue considered by the en banc deci-

sion was the jurisdictional issue, the case was referred

back to a panel of the court of appeals for a hearing

on the merits of the Commission’s decision (Pet. App.

47a). The petition for a writ of certivrari followed.

ARGUMENT

The en bane decision of the court of appeals is cor-

rect and, contrary to petitioner’s assertion (Pet. 7-

12), presents no direct conflict. with prior decisions

of this Court. Moreover, no*significant questions of

general importance are presented by this interlocu-

tory petition, since the decision below that Section

10(e), as amended, applies to pre-1935 licenses turns

on interpretations of the intent of Congress and since

no readjustment provisions comparable to those in peti-

tioner’s license appear in any other license involving

substantial annual charge payments.

Petitioner’s assertion that the decision below con-

flicts with this Court’s decision in De La Rama S.S. Co.

¢The court was of the opinion that a procedure specified in»

a license could assume the quality of a substantive right pro-

tected by Section 28 if it could be shown that the given pro-

cedure had been specifically bargained for by the licensee. Re-

viewing the record in this case, the court concluded that no

affirmative showing had been made that the arbitration provi-

sion in the 1930 license had been bargained for.

7

v. United States, 344 U.S. 386, is'without merit.’ That

case involved the question whether the general saving

statute preserved, as to claims arising before the repeal

of the War Risk Insurance Act, the jurisdiction of

the United States district courts which had been desig-

nated under that Act to hear war risk insurance

claims; if the effect of the saving statute had been

—inerely to protect claims arising prior to. the repeal

without preserving the designated forum for their ad-

judication, then the Court of Claims would have had

sole jurisdiction over such claims. This Court found

the language of that saving statute explicit, see 344

U.S: at 389, and ruled that its provisions acted to pre-

serve jurisdiction in the district courts, The Court also

relied on the fact that because of conflicting interest

provisions, successful claimants would actually recover

less in the Court of Claims than in the district courts. —

344 U.§$, 389-390. Moreover, from the context of the

repeal, it was clear that Congress was bringing an end

to the war risk insurance scheme without intending to

*The allegations of conflict (Pet. 13) with #7 Paso v.

Simmons, 379 U.S. 497, and Bernhardt v. Polygraphic Co.,

350 U.S. 198, are equally insubstantial. The court below was

fully cognizant of the fact that depending upon the circum-

stances the preservation of a particular remedy may be neces-

sary to protect a person's substantive rights. But it concluded

that this was not true here, just as this Court in £7 Paso v.

Simmons, supra, had held that the State of Texas could validly

change the redemption procedures that had been applicable

when the property involyed had been sold. Nor, as the court

below stated (Pet. App. 19a), is Bernhardt v. Polygraphic Co.,

supra, inconsistent with the view that the legislature may affect

the availability of arbitration by substituting a different and

appropriate procedure.

8

affect the procedures under that scheme for dealing

with claims arising prior to the repeal. See 344 U.S. at

391.

By contrast, in this case, the applicable saving pro-

vision—Section 28—did not clearly protect procedures

written into licenses. Nor did the Section 10(e) amend-

ment affect petitioner’s substantive liability. In addi-

tion, the 10(e) amendment did not bring an end to

federal activity in a given area, but merely effected

a procedural change in an ongoing statutory scheme

for regulating water power development. Under these

circumstances, perception of the congressional intent

behind the saving clause of Section 28 of the 1920

Act required a substantial analysis of the considera-

tions unique to this particular statutory scheme.

The analysis and conclusions of the court below as to

the effect of Section 28 under the circumstances are, we

submit, entirely correct.’ Moreover, they are consist-

ent with the construction of Section 28 in Pennsyl-

vania Power & Light Co. v. Federal Power Commis-

sion, 139 F. 2d 445 (C.A. 8), certiorari denied, 321

U.S. 798. In that ease, the Third Circuit held that

Section 28 did not preclude Congress from directing

*In view of these conclusions, the court of appeals found it

unnecessary to consider whether petitioner's claim that its rights

under the 1930 license were protected by Section 28 was under-

cut by its default under the license at the time Section 10(e)

was amended (Pet. App. 30a-3la). An alternative ground for

sustaining the decision below rests on the fact that petitioner's

actual authorization to construct the two units involved stems

from the 1936 amendment to the license accepted subsequent —

to the amendment of Section 10(e).

ee 9

the Commission, rather than a district court, to deter-

mine a licensee’s net investment under pre-existing

licenses.

The court below was also on solid ground in conclud-

ing that Congress, in amending Section 10(e) in 1935,

intended to prescribe a procedure for determining an-

nual charge readjustments that would apply uniformly

to all matters later set for decision, whether under

new or existing licenses; a different reading of con-

gressional intent would have produced the anomalous

situation of having different procedures for deter-

mining annual charges for related aspects of the same

project (Pet. App. 18a, 17a-19a).’

Finally, the court was fully warranted in rejecting

petitioner’s alternative @grtention that the arbitration

provision in the 1930 license had been bargained for

as a major element in the license and thus was tanta-

mount to a substantive right (Pet. App. 26a-28a).

We rely on the court’s detailed analysis of thisissue.”

*Such an anomaly would exist with respect to the Kerr

project itself, as petitioner put into operation in 1954 a third

generating unit pursuant to a license issued well after the 1935

amendment to Section 10(e). Under petitioner’s view of this

case, readjustments for annual charges for the use of Indian

lands with respect to the third generating unit would have to

be made under a different procedure than readjustments with

respect to the first two units constructed under the 1930 license.

1° Petitioner asserts (Pet. 15) that upon any remand to the

Commission, it would offer evidencs to show that the provision

for arbitration was a significant factor in petitioner’s decision

to accept the 1930 license. But petitioner has had its oppor-

tunity to introduce such evidence in the protracted proceedings

before the Commission.

ee we Re er er > =e, PP OO . ~ : : ——_— a ee

o-,

10

For the foregoing reasons, the petition for a writ

of certiorari should be denied.

Respectfully submitted. .

Erwin N. Griswop,

Solicitor General.

SHO KasHiwa,

Assistant Attorney General.

SAMUEL HUNTINGTON,

Assistant to the Solicitor General.

Gorvon GoocH,

General Counsel,

Peter H. Scuirr,

Solicitor,

LeonakD D. EESLEY,

Assistant General Counsel,

J. RicHarD TIANo,

Assistant Soltcitox,

Federal Power Commission.

NOovEMBER 1970.

US. GOVERNMENT PRINTING OFFICE: 1970