Appendix — Powerex Corporation v. California (No. 05-584)
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05-584 NOV - 4 2005
No.ggeice-uF THE CLERK
IN THE
Supreme Court of the United States
POWEREX CORP., A CANADIAN CORPORATION
DBA POWEREX ENERGY CORP..
Petitioner
PEOPLE OF THE STATE OF CALIFORNIA
EX REL. BILL LOCKYER,
ATTORNEY GENERAL OF THE STATE OF CALIFORNIA,
Respondent
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Ninth Circuit
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI
J. CLIFFORD GUNTER III DAVID C. FREDERICK
ANDREW EDISON Counsel of Record
BRACEWELL & GIULIAN! LLP BRENDAN J. CRIMMINS
Pennzoil Plac South Tower KELLOGG, HUBER, HANSEN
i111 Louisiana Street TODD. EVANS & FIGEL,
Suite 2500 PLL
Houston, Texas 77002-2781 1615 M Street. N.W., Suite
(713) 223.2300 Washington, D.C. 20036
(202) 326-7900
PAUL W. FOX
DEANNA E. KIN
BRACEWELL & GIULIANI LLP
111 Congress Avenue
Suite 2400
Austin. Texas 78701] -406i
1»)
ri
} 472-7800 November 4
Counsel for Powerex Corp
Se ome eee
cr
TABLE OF CONTENTS
Order of the United States Court of Appeals for
the Ninth Circuit Dismissing Appeal, California
v. Powerex Corp., No. 05- 16682 (Oct. 6, 2005)...
Order of the United States Court of Appeals for
the Ninth Circuit, California v. Fowerex Corp.,
No. 05- 16682 (Sept. 2, 2005)
Order of the Umited States District Court for
the Eastern District of California, California vu
Powerex Corp., No. 2:05-cv-143-GEB-PAN (Aug.
22, 2005)
Powerex Corp.'s Request for Judicial Notice in
Opposition to Motion To Remand, California uv.
Powerex Corp., No. 2:05-cv-143-GEB-PAN (E.D.
Cal. filed Mar. 7, 2005) (excerpt)..
Declaration of Kenneth G. Peterson (Aug. Y,
2002), attached as Exhibit 5 to Defendant
Powerex Corp.'s Response to Plaintiffs’ Mo-
tion To Remand and Motion To Strike and/or
Sever Cross-Complaints, Nos. CV 02-0990-
JM(LAB) et al. (S.D. Cal. filed Aug. 9, 2002)
(excerpt)
Deposition of Kenneth Grant Peterson (Aug
21. 2002), attached as Exhibit 4 to Defen.
dants’ Supplemental Joint Notice of Lodg-
ment in Support of Supplemental Opposition
to Plaintiffs’ Motion To Remand and Motion
To Strike and/or Sever Cross-Complaints,
Nos. CV 02-0990-RHW et al. (S.D. Cal. filed
Sept. 4, 2002) (excerpt) ...
il
Opinion of the United States Court of Appeals for
the Ninth Circuit, California v. NRG Energy In
Nos. 02-57200 et al. (Dec. 8, 2004)
Treaty Between the United States of America
and Canada Relating to Cooperative Develop
ment of the Water Resources of the Columbia
River Basin, Jan. 17, 1961, T.LA.S. No. 5638, 15
U.S.T. 1555
Treaty Between Canada and the United States of
America Relating to the Skamt River and Ross
Lake, and the Seven Mile Reservoir on the Pend
D'Oreilie River, Apr. 2, 1984, T.1.A.S. No. 11088,
1469 U.N.T.S. 309
North American Free Trade Agreement Between
the Government of the United States of America
the Government of Canada and the Government
of the United Mexican States, done Dec. 17,
1992, 32 1.L.M. 289 (excerpt)
Statutory Provisions Involved
28 U.S.C. § 144]
28 U.S.C. § 1442
28 U.S.C. § 1603
28 U.S.C. § 1605
Constitution Act, 1867 (No. 5) (The British North
America Act, 1867), 30 & 31 Vict... Ch. 3 (U-K.)
(excerpt)
British Columma Hydro and Power Authority
Act, [R.S.B.C. 1996], ch. 212 (excerpt)
British Columbia Power for Jobs Development
Act, [8.B.C. 1997], ch. 51
bhi
Special Directive No. 4 to the British Columbia
Hydro and Power Authority
Special Direction No. 8 to the British Columbia
Hydro and Power Authority
Official Report of the Debates of the Legislative
Assembly (Hansard), 34th Parliament, 2nd Ses
sion (June 27, 1988) (excerpt)
la
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 05-16682
(D.C. No. CV-05-00143-GEB
Eastern California (Sacramento))
PEOPLE OF THE STATE OF CALIFORNIA
EX REL. BILL LOCKYER,
ATTORNEY GENERAL OF THE STATE OF CALIFORNIA,
Plaintiff-Appellee,
POWEREX CORP., A CANADIAN CORPORATION.
DBA POWEREX ENERGY CORP.,
Defendant-Appellant
[Oct. 6, 2005}
ORDER
Before: REINHARDT, RYMER, and HAWKINS, Circuit
Judges
We have reviewed the parties’ responses to the court's
September 2, 2005, order to show cause. We dismiss the
appeal for lack of jurisdiction. See 28 U.S.C. § 1447(d)
Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 128
(1995)
All pending motions are denied as moot
DISMISSED.
za
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 05-16682
(D.C. No. CV-05-00143-GEB
Eastern California (Sacramento))
PEOPLE OF THE STATE OF CALIFORNIA
EX REL. BILL LOCKYER,
ATTORNEY GENERAL OF THE STATE OF CALIFORNIA,
Plaintiff-Appellee,
POWEREX CORP., A CANADIAN CORPORATION,
DBA POWEREX ENERGY CORP.,
Defendant-Appellant.
(Sept. 2, 2005}
ORDER
Appellant has filed an emergency motion for stay of the
district court's August 23, 2005, remand order pending
appeal.
A review of the record suggests that this court may lack
jurisdiction over the appeal because an order remanding a
removed action to state court for lack of subject matter ju-
risdiction is not reviewable on appeal. See 28 U.S.C.
§ 1447(d); Things Remembered v. Petrurca, 516 U.S. 124,
127 (1995)
By September 7, 2005, appellant shall move for volun-
tary dismissal of the appeal or show cause why it should
not be dismissed for lack of jurisdiction. Appellee’s re-
sponse to the emergency motion for stay pending appeal
and this order to show cause is due September 12, 2005.
The optional reply is due September 14, 2005. The parties
shall file the memoranda by close of business on the due
date and may contact the court's Motions Unit at (415)
556.9890 to obtain the number to file the memoranda by
facsimile
if appellant does not comply with this order, the Clerk
PI }
shall dismiss this appeal pursuant to Ninth Circuit Rule
42-1
Briefing on the merits of the appeal is suspended pend
ing further order of the court
For the Court,
LESLEY HAL!
Lesley Hale
Motions Attorney/Deputy Clerk
Sth Cir. R. 27-7
General Orders/Appendix A
la
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
No. 2?:05-cv-143-GEB-PAN
PEOPLE OF THE STATE OF CALIFORNIA
EX REL. BILL LOCKYER,
ATTORNEY GENERAL OF THE STATE OF CALIFORNIA,
Plaintiff
POWEREX CORP... A CANADIAN CORPORATION,
DBA POWEREX ENERGY CORP., AND DOES 1 - 100,
Defendants
ORDER
Plainuff moves to remand this action to Sacramento
County Superior Court. Defendant Powerex Corp. op-
poses the motion, contending that federal question re
moval jurisdiction exists. Further, Defendant moves to
dismiss Plaintiff's complaint under Federal Rule of Civil
Procedure 12(b)(6). Plaintiff opposes this dismissal mo-
tion
BACKGROUND
The California energy crisis of 2000-2001 provides the
backdrop to this litigation. From 1998 to the present, De
fendant. a Canadian corporation, has conducted electricity
transactions in the California markets. (Compl. 44 4, 43.)
Plaintiff alleges that from 1999 through 2901, Defendant
engaged “in a number of unlawful, unfair, fraudulent, and
manipulative trading schemes to the detriment of the
People of the State of California,” in violation of Califor
nia's Unfair Competition Law (Cal. Bus. & Prof. Code
§ 17200, et seq.) CUCL") and the California Commodity
Law of 1990 (Cal. Corp. Code § 29500, et seq.). (Compl
7" 1, 19. 44.) Plaintiff's complaint seeks an injunction,
5a
restitution, disgorgement, damages, civil penalties, and
other equitable relief. (/d. “| 2.)
DISCUSSION
Motion to Remand
Plaintiff argues this action must be remanded to state
court because there is no federal question removal juris-
diction. Plaintiff contends its complaint “is a law en
forcement action brought against Powerex to enforce Cali-
fornia’s antifraud and consumer protection laws.
(PL.’s Mot. to Remand at 2.) Further, Plaintiff contends
that “the Attorney General's case solely addresses the
fraudulent market manipulation and gaming strategies
employed by Powerex which adversely impacted the citi-
zens of California.” (d.) Plaintiff further contends that
“Powerex|'s} removal [cannot be] based on the Foreign
Sovereign Immunity Act” and that “compelling the Attor-
ney General to move its state-law related case to federal
court would violate the Eleventh Amendment's provision
protecting a state’s sovereign immunity.” (/d. at 13-14.)
Defendant counters that removal was proper for two
independent reasons: (1) there is federal question jurisdic-
tion under the Federal Power Act, 16 U.S.C. § 825p
(“FPA”), and (2) Defendant's “foreign state” status as de
fined by the Foreign Sovereign Immunities Act, 28 U.S.C
§ 1603 et seq. (“FSIA”). Defendant contends federal ques-
tion removal jurisdiction exists since “|t]he Attorney Gen
eral’s claims arise under federal law because he alleges
misconduct in wholesale power transactions, which are
exclusively the province of federal law, and implicate spe-
cific federal tariffs governing the transactions at issue.”
(Def.’s Opp'n to PI.’s Mot. at 13.) Defendant also contends
it was “entitled to remove this action because it satisfies
the statutory criteria of a foreign state codified in [FSLA
since] it is both an agent and instrumentality of the Prov-
ince of British Columbia and is also a wholly owned
subdivision of the Province’s statutory agent BC Hydro.”
(/d. at 2.)
A. Standard
An action filed m state court can be removed to federal
court if it “originally could have been filed in federal
court.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392
(1987); see also 28 U.S.C. § 1441(b) (Any crvil action of
which the district courts have orginal jurisdiction
founded on a claim or right arising under the Constitu
tion, treaties or laws of the United States shal] be remov
able without regard to the citizenship or residence of the
parties.) Defendant bears the burden of establishing fed
eral jurisdiction, “and the removal statute is strictly con
strued against removal jurisdiction.” Prize Frize, Inc. '
Matrix (U.S.) Inc., 167 F.3d 1261, 1265 (9th Cir. 1999)
“The presence or absence of federal-question jurisdx
tion w governed by the ‘well-pleaded complaint rule
which provides that federal jurisdiction exists only when a
federal question is presented on the face of the plaintiff's
properly pleaded complaint The rule makes the
plaintiff the master of the claim; [it] may avoid federal
jurisdiction by exclusive rehance on state law. Caterpil
lar Inc. v. Williams, 482 U.S. 386, 392 (1987)
B. Federal Question Jurisdiction Under the
Federal Power Act
Plaintiff argues this action must be remanded because
“It}he Attorney Generals well-pleaded Complaint solely
asserts state causes of action based on California's con
sumer protection and commodities laws [that] protect
California citizens from fraud and deceit.” (Pl.'s Mot. to
Remand at 13.) Plaintiff argues
In particular, the Attorney General's Complaint al
leges that Powerex's market manipulation and gam
ing stratemes constituted “unfair and “fraudulent
business practices pursuant to Califorma Business
and Professions Code § 17200 (Complaint, $4 64
65), and that Powerex’s market manipulation and
gaming strategies constituted “unlawful” business
practices within the meaning of § 17200 “because
they violate Calitorma law, including but not limited
to Califorma Corporations Code § 29536." (Com
plaint © 66). Additionally. the Complaint alleges
that Powerex’s market manipulation and gaming
strategies violated the California Commodity Law
because they involved willful and fraudulent acts
involving offers to sell, sales, offers to purchase, and
purchases of commodities and commodity options
*te
[Blecause the Complaint does not rely on any fed
eral law to create the causes of action or to seek re
lef, it 1s clear that the Attorney General's well
pleaded Complaint does not present a federal ques
tion. Thus, removal is improper based on the face of
the Complaint
(id. at 5-6.)
Defendant rejoins that Plaintiff cannot rely on the well
pleaded complaint rule since Plaintiff's complaint is “art
fully pled” to avoid federal! jurisdiction. Defendant con
tends “the Attorney General's state law claims necessarily
implicate substantial disputed questions concerning the
FPA land] the Attorney General's state law claims are
completely preempted by the FPA.” (Def.’s Opp'n to Pl.'s
Mot. at 13.) Plaintiff counters that “courts have long rex
ognized that there is no complete pre-emption under the
FPA” and “Powerex has failed to demonstrate that the At
torney General's Consumer Protection Action is an ‘art
fully pleaded federal cause of action.” (Pl.'s Reply at 4, 9.)
The artful pleading doctrine applies to a situation
“where a plaintiff articulates an inherently federal claim
in state-law terms.” Hrennan v. S.W. Airlines Co., 134
F.3d 1405, 1409 (9th Cir. 1998). “The doctrine allows
courts to delve beyond the face of the state court com
plaint and find federal question jurisdiction by recharac
teriz{ing! a plaintiff's state-law claim as a federal claim
Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d
1033, 1041 (9th Cir. 2003) (internal quotation marks and
citations omitted). “Whether the [doctrine] apphes re
quires an analysis of whether plaintiff[s|claams ‘arse
Sa
under’ federal law.” /n re Cal. Retail Natural Gas & Elec
Antitrust Litig., 170 F. Supp. 2d 1052, 1056 (D. Nev
2001). “|Cjourts have used the doctrine in: (1) com-
plete preemption cases, and (2) substantial federal ques
tion cases. Subsumed within this second category are
those cases where the claim is necessarily federal in char-
acter, or where the right to relief depends on the resolu
tion of a substantial, disputed federal question.” Lippitt,
340 F.3d at 1041-42 (internal citations omitted)
A state law claim is completely preempted if federal law
“provide|s] the exclusive cause of action for the claim as-
serted and also set|s} forth procedures and remedies gov
erning that cause of action.” /d. at 1042 (citing Beneficial
Natl Bank v. Anderson, 539 U.S. 1, 8 (2003)). Complete
preemption is rare; the Supreme Court has only found
complete preemption in three categories of cases: certain
causes of action under the Labor Management Relations
Act, the Employee Retirement Income Security Act, and
the National Banking Act. Beneficial Natl Bank, 539
U.S. at 8
“(T}he artful pleading doctrine [also] allows federal
courts to lexercise} jurisdiction over state law claims that
implicate a substantial federal question.” Lippitt, 340
F.3d at 1042. “[{A] case is ‘necessarily federal’ when it
falls within the express terms of a statute granting fed-
eral courts exclusive jurisdiction over the subject matter
of the claim.” Hendricks v. Dynegy Power Mtkg., Inc.,160
F. Supp. 2d 1155, 1161 (S.D. Cal. 2001). Further, “lejven
where state law creates the cause of action, federal!
jurisdiction may still lie if ‘it appears that some substan-
tial, disputed question of federal law is a necessary ele-
ment of one of the well-pleaded state claims."” Arco Envtl
Remediation, LLC v. Dept of Health & Envtl. Quality, 213
F.3d 1108, 1114 (9th Cir. 2000) (citing Rains v. Critzrion
Sys., Inc., 80 F.3d 339, 345 (9th Cir. 1996))
The Ninth Circuit cautions that the artful pleading doc-
trine “should [be] invoke/d] only in limited circumstances
as it raises difficult issues of state and federal relation
Ya
ships and often yields unsatisfactory results. While the
artful pleading doctrine is a useful procedural sieve to de
tect traces of federal subject matter jurisdiction in a par-
ticular case, it also has substantive implications on the
scope of federal jurisdiction and efficiency.” Lippitt, 340
F.3d at 1041 (internal quotation marks and citations
omitted)
> lete Preemption
Defendant argues “the FPA completely preempts the
Attorney General's purported state law claims,” contend
ing that “[t}he FPA creates an exclusive federal scheme
for the regulation of wholesale electric power transactions,
preempting state regulation.” (Def.’s Opp'n at 21-22.)
Plaintiff counters that “courts have long recognized that
there is no complete pre-emption under the FPA.” (PI.’s
Reply at 3, 4.)
The FPA does not completely preempt Plaintiff's state
law claims since the claims do not seek to enforce any “li-
ability or duty created by” the FPA. See Hendricks, 160 F.
Supp. 2d at 1160; Calif. ex rel Lockyer v. Mirant Corp.,
2002 WL 1897669, at *6 (N.D. Cal. Aug. 6, 2001); In re
Cal. Retail Natural Gas & Elec. Antitrust Litig.,170 F.
Supp. 2d 1052 (D. Nev. 2001); Indeck Maine Energy, LLC
v. ISO New England, Inc., 167 F. Supp. 2d 675, 687 (D.
Del. 2001). The FPA preempts only those claims that fall
within the FPA'’s exclusive jurisdictional provision. This
exclusive jurisdictional provision provides that the federal
courts “shall have exclusive jurisdiction of violations of
ithe FPA] or the rules, regulations, and orders there-
under, and of all suits in equity and actions at law
brought to enforce any liability or duty created by, or to
enjoin any violation of, [the F?Al or any rule, regulation,
or order thereunder.” 16 U.S.C. § 825p.
2. Substantial Federal Question
Defendant also contends that Plaintiff's removal was
proper because Plaintiff's “state law claims necessarily
implicate substantial disputed questions concerning the
FPA.” (Def.’s Opp'n at13.) Defendant argues that Plain
4 -
iVa
uff's clanms arise under federal law because they “cannot
be judged without consideration of the tariffs (filed
with the Federal Energy Regulatory Commission
(FERC )| (id. at 17.) Defendant contends Plaintill's
complaint was artfully pled in the guise of state claims “to
avoid jalleging| expheit claims of violations of the [SO and
the PX tariffs.” since Plaintiff recognizes that “no court
state or federal - could determine whether Powerex s con
duct was ‘unlawful, unfair or fraudulent’ without resort to
the tanffis.” Ud.) Defendant argues that Plaintiff's claime
arise under federal law because Plaintiff alleges miscon
duct in wholesale power transactions which are exclu
sively the province of federal law, and implicate specify
federai tarills governing the transactions at issue
Piayntaff counters that the artful pleading doctrine does
not apply because “The Complaint does not seek to en
force any federal obligations that Powerex might have vio
lated.” (Pi.'s Reply at 6.) Plaintiff argues that “any allu
sions to federally-regulated entities hke the ISO and PX
that were made in order to provide the context for the
gaming allegations, do not change the state causes of ac
tion into federal ones.” (/d. at 7.) Moreover, Plaintiff ar
gues that “the Attorney General does not seek to enforce
or challenge Powerex's agreements with the ISO or its ob
hgations under the MMIP. Resolution of any issues re
garding federal tariffs is not necessary to resolve the state
law claims (/d.)
Thus, the issue is “whether [Plaintiff] has artfully
phrased a federal! clarm by dressing it in state law attire
Lippitt, 340 F.3d at 104] A caretul reading of artful
pleading cases shows that no specific recipe exists for a
yurt to alchemuze a state clarm into a federal claim a
(wurt must OOK at a compl x group of factors in any par
ticular case to de whether a state claim actually
irises under tedera!l law Id. at 1042-43
Defendant contends that Californie re Lockyer
Dvnegwy 11 «(9th Cor. 2004) (Dynegy
fis motion, arguing that the
lia
Attorney General unsuccessfully argued in Dynegy, as he
does here, “that the core of his allegations was not that
defendants expressly violated the FPA, but that they ‘en
gaged in a pattern of fraudulent and unfair’ behavior in
furtherance of their scheme to manipulate California en
ergy prices. (Def.'s Opp'n at 18 (citing Dynexy. 375 F.3d
at 841).) Defendant contends that “Here, as in Dynegy
the Attorney General lacks an independent state law ba
sis for its Unfair Competition Law claim because ‘Califor
nia s state claim represented a naked attempt to enforce
these federal obligations.” (Def.s Oppn at 19 (citing
Dynegy, 375 F.3d at 843).) Defendant also contends that
Even if some of the matters alleged in the Attorney Gen
erals Complaint do not fall within the exclusive jurisdx
tion provision of the FPA, the allegations regarding anci!
lary services - which repeat the Attorney General's all
gations in Dynegy — certainly do [and] |t|hose allegations
alone justify removal.” (Def.'s Opp'n at 19.)
Plaintiff counters, arguing Dynegy 1s distinguishable
In Dynegy, the state’s lawsuit was expressly based
on the defendants violation of the ISO tariff
Thus, the cause of action was deemed necessarily
federal in character Here, the Attorney General
does not asser! violations of the ISO tariff. The al
legation that Powerex fraudulently offered to sell
ancillary services is asserted as one of the various
gaming strategies and fraudulent market manipula
tion schemes employe d by Powerex to deceive Cali
formia consumers Moreover, not only does the
Complaint fail to allege the ISO tariff, but the issue
of whether Powerex violated the ISO tariff agre
ment would not resolve whether anti-competitive
conduct occurred under state law
(Pi.'s Reply at 8.)
The Ninth Circuit found in Dynegy that the “relief
sougnt was] predicated on a subject matter committed
exclusively to federal! jurisdiction The state lawsuit
turnied], entirely, upon the defendant's compliance with a
l2a
federal regulation. The tanff define|d] the companies
contractual obligation with respect to the conduct at issue
Absent a violation of the FERC-filed tanff, no state law
liability could survive.” Dynegy, 375 F.3d at 841. The
Court further atated that “The very face of California's
complaint betrays that the gravamen of the complaint ts
the companies’ alleged violations of federal tariff obliga
tions. It repeatedly cites the federal tariff and alleges
that the companies violated the agreement embodied
within »t.” /d. at 841 n.6. The claim for unlawfulness in
Dynexy was “based entirely on alleged tariff obligations (1)
to hold ancillary services capacity in reserve prior to re-
ceipt of an ISO dispatch instruction and (ii) to comply
with ISO's dispatch instructions. The federal tariff wholly
governied| the lawfulness of the companies’ conduct
Similarly, with respect to the ‘unfair’ and ‘fraudulent’
terms, the claims dependjed] entirely upon the federal
tarifi. Id
Plaintiff's reference to a federal tariff in its complaint
in the instant case is unlike the reference in Dynegy be
cause Plaintiff's claims do not seek to enforce any federal
law duty or lability; rather, Plaintiff seeks only to enforce
state law duties and liabilities. See id.; Compl. 4 66
Therefore, this case is distinguishable from Dynegy since
in Dynegy, “|t)he state lawsuit turn/ed], entirely, upon the
defendant's compliance with a FERC-filed tariff
Id. at 841. Thus, in Dynegy, “the reference to and neces
sity of relying upon federal law |was| unavoidable.” /d. at
841 0.7 (distinguishing Lippitt)
Lippitt concerned allegations analogous to those alleged
in Plaintiff's complaint. The Ninth Circuit held in Lippitt
that since the plaintiff's complaint alleged fraud and de
ceptive advertising practices, rather than any violation of
federal regulations, there was no need for inquiry about
federal law because Lippitt “merely allege!/d| that De
fendants conduct was either unfair or fraudulent’ and did
not allege that the conduct was “unlawful under federal
law. Lippitt, 340 F.3d at 1043
ida
“Lippitt iavolved a private attorney generals lawsuit
under Cal. Bus. & Prof. Code § 17200 et seq. CUCL’)
against several brokerage firms for sales and marketing
practices associated with certain investment product
Dynegy, 375 F.3d at 841 n.7. In the instant case, as in
Lippitt,
Federal law is not a necessary element of [Plain
tiff}'s UCL claim. To bring a UCL claim, a plaintiff
must show either an (1) unlawful, unfair, or fraudu
lent business act or practice, or (2) untarr, deceptive
untrue or misleading advertising. Because
tion 17200 is written in the dispunctive, it
hshes three vaneties of unfai competition-acts or
practices which are unlawful, or unfair. or fraudu
lent. [A] practice is prohibited as “unfair” or “decep
tive” even if not “unlawful” or vice versa. Therefore
[Plaintiff] does not have to rely on a violation of [the
FPA or any federal tariffs] to bring a UCL claim in
California state court Plaintiff) me rely has to
lege that Defendant!'s| conduct was either
raudulent.
Lippitt, 340 F.3d at 1043
Plaintiff's “allegations are sufficient to sustain
ments of [its] § 17200 claim without resert to federal law
since Plaintiff “makes no effort to enforce l[any federa
rights or obligations}. Rather, |Plaimtiff| seeks to us
State statute[s|, namely California's Unfair Competition
Law land the California Commodity Law], as vehi
cle{s} to hold Defendant|) liable for [market manipulation
and gaming strategies!) ld. Whether Plaintill « alleged
activities underlying these state claims also violated th
FPA or a federal tariff is wrelevant since Plaintiff, as
master of its complaint, chose to allege that Delendant
engaged in conduct that was unlawful under state law
instead of alleging violations of federal law Caterpillar
Inc., 482 U.S. at 392. “That the specific goal of protecting
California customers trom dishonest business practic
. May comport with the broader goals of the [FPA 1
l4a
not enough to sweep |Plaintiff]'s complaint within the ex
clusive jurisdictional ambit of [16 U.S.C. § 825p).” Lippitt,
340 F.3d at 1043-44
Since Plaintiff's complaint does not seek to enforce any
hability or duty’ created by the FPA, and Plaintiff al
leges it can show that Defendant violated the alleged Cah
formia claims without reliance upon federal law, Plaintiff's
complaint was not artfully pled and Defendant lacked
federal removal jurisdiction under the FPA
C. Federal Question Jurisdiction Under the
Federal Sovereign Immunity Act
Defendant also contends removal was appropriate since
i 8 a foreign sovereign entitied to remove this action un-
der FSLA. Under 28 U.S.C. § 1441(d), an action against a
foreign state may be removed. A “foreign state includes a
politucal subdivision of a foreign state or an agency or in
strumentality of a foreign state. 28 U.S.C. § 1603(a). An
“agency or instrumentality of a foreign state” means any
entity (1) which is a separate legai person, corporate or
otherwise, and (2) which is an organ of a foreign state or
political subdivision thereof, or a majority of whose shares
or other ownership interest is owned by a foreign state or
political subdivision thereof, and (3) which is neither a
citizen of a State of the United States nor created under
the laws of any third country.” /d. § 1603(b). In Califor
ma vu. NRG Energy, inc., the Ninth Circuit held that Pow
erex is “not a forewn instrumentality under FSIA.” 391
F.3d 1011, 1026 488 Cir. 2004)
But Defendané argues that NRG Energy is distinguish
able because ta ARG Energy, Powerex was not then a
wholly owned subdivision of a province of Canada, and
Powerex pow is a wholly owned subdivision of the Prov
ince of British Columbia's statutory agent BC Hydro
Thus, Defendant argues it is a foreign state for purposes
of FSIA. However, “only a direct ownership of a majority
of shares by the foreign state satisfies the statutory re
quirement fof FSLA).” Dole Food Co. v. Patrickson, 538
U.S. 468, 474 (2003). Although Powerex is owned by BC
L5a
Hydro and BC Hydro is an agent of the Province, the
Province does not itself own a majority of the shares ol
Powerex. Therefore, Powerex is not a foreign state for
purposes of FSLA
Since feceral removal jurisdiction is lacking, Plaintiff's
remand motion is granted.’ Therefore, this action is re
manded to Sacramento County Supenor Court
IT IS SO ORDERED
Dated: August 22, 2005
s/ GARLAND E. BURRELL, JR
GARLAND E. BURRELL, JR
United States District Judge
Because of this ruling. neither Plaintiff's Eleventh Amendment
argument nor Defendant s motion to dismiss need be addressed
loa
‘UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF CALIFORNIA
Case No. 2:05-CV-00143-GEB-PAN
PEOPLE OF THE STATE OF CALIFORNIA
EX REL. BILL LOCKYER,
ATTORNEY GENERAL OF THE STATE OF CALIFORNIA,
Plaintiff,
POWEREX CORP., A CANADIAN CORPORATION,
DBA POWEREX ENERGY CORP., AND DOES 1 - 100,
Defendants
POWEREX CORP.'S REQUEST FOR
JUDICIAL NOTICE IN OPPOSITION TO
MOTION TO REMAND
Pursuant to Federal Rule of Evidence 201, Defendant
Powerex Corp. (“Powerex”) requests that the Court take
judicial notice of the information contained in the follow-
ing exhibits attached
ereee
Powerex requests that the Court take judicial notice of
the following documents, which are true and accurate cop-
ies of materials contained in the certified record on appeal
in California v. NRG Energy, No. 02-57200 filed with the
United States Court of Appeals for the Ninth Circuit on
February 11, 2003:"
* These documents are proved up hy the Declaration of Andrew M
Edison in Support of Powerex Corp.'s Request for Judicial Notice in
Opposition to Motion to Remand. See also U.S. vu. Bornev, Inc... 971
F.2d 244, 248 (9 Cir. 1992) (holding that a court may take judicial
notice of the records of (1) any court of thes state, or (2) any court of
record of the United States or of any state of the United States);
DeMarco v. DepoTech Corp.. 149 F. Supp. 2d 1212, 1218-19 (5.D. Cal
Declaration of Kenneth G. Peterson
Entitlement Assignment Agreement Between the
Province of British Columbia and Powerex Regard
ing the Columbia River
10. Skagit River Agreement Between the Province of
British Columha and the City of Seatth
1] Agreement for the Tranemission of Skagit Treaty
Power Hetween the Province of Bontish Columbia
Hydro ana Power Authority and the City of Seattle
12 Assignment Agreement between HC Hydro and
Powerex Regarding the Skagit River Agreement
13. Orders in Council of the Province of Brootish Colum
bia Nos. 8847/2001 (dated September Zo, 2001) and
15/2001 (dated Auguat 9, 2001)
14 Extract from the Minutes of a Meeting of the Board
of Directors of British Columima Hydro and Power
Authority held on October 18, 200)
British Columbia Hydro and Power Act. R.S.B4
1968. Ch , ( olumpbia Basin Trust kK S HW
Ch >
1496
British Columma Powe r tor Jobs le veiopment Act
5.B.4
1997. Ch. 5
Special Direction No. 8 to the British Columba
Utuhties Commission
18. Special Directive No. 4 to the British Columma Hy
dro and Power Authority,
Excerpt rom BC Hydro’s 2002 Annual Report
At Printout from Powerex's Website discussing Cana
dian Entitlement Power
Declaration of Valerve Lambert
ish Columma Hydro and Power Authority s Motion
To Dismiss
Dated
lSa
Excerpt from the Deposition Transcript of Valerie
C. Lambert, August 27, 2002, pages 1-36
Excerpt from the Deposition Kenneth G. Peterson,
August 2], 200], volume |, pages 1-97
Excerpt from the Deposition Transcript of Kenneth
G. Peterson, August 22, 2002, volume 2, pages 114
iseh
Letter from the Honorable Jack Davis, Mints-.er
Province of British Columbia to L.1. Bail, Chairman
and CEO of BC Hydro. dated November 4, 1988
Deposition Trans ript of Kenneth Grant Peterson
August 21, 2002, volume 1, pages 1-113
Revised Minutes of the Meeting of the Risk Man
mzement Commuttee, August 3, J000
J
March 7. 2005
Counsel name/address block omitted]
1Ya
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
Coordination Proceeding Nos. CV 02-0990.) M(LAB)
Special Title (Rule 1550(b)) CV 02-1000-LAJAH)
CV 02-1001-B(POR)
WHOLESALE ELECTRICITY
ANTITRUST CASES I & I!
This Document relates To
Reliant Enerwzy Services, inc., et al. t
Arizona Electric Power Cooperative, Inc.. et al
f
Duke Energy Trading and Marketing, LLC, et al. «
Arizona Public Service Company, et al
Reliant Energy Services. in« et al
Arizona Electric Power Cooperative, Inc., et al
DECLARATION OF KENNETH G. PETERSON
| Kenneth G. Peterson. declare as follows
| have personal knowledge of the facts contained in
this Declaration, except for those matters stated on in
formation and belief, as to which | believe them to be true
If called as a witness, | could and would competently tes
tify to all of the facts stated herein
v4 | have held the position of President and Chief Ex
ecutive Officer of Powerex Corporation (“Powerex’) since
December 1, 1994
} | am trained as a resource economist and hold a
masters degree in economics. Prior to wimng Powerex, |
was employed for 14 years with the British Columbia Hy
dro and Power Authority (“BC Hydro"). During my career
at BC Hydro, | was responsible for various aspects of re
source planning and, in wuiat capacity, developed ap inti
HH)
ZUa
mate knowledge of BC Hydros generating resources, the
evolution of domestic demand for electricity within Kf
Hydros service area in British Columbia, and the poten
tial for the export of electricity to interconnected jurisdx
tions, particularly mm the United States. | had personal
responsibility for overseeing the preparation of both re
source plans and demand forecasts during my tenure at
BC Hydro When ! began my career at BC Hydro, the
corporation was in the latter stages of a very significant
eXpansion of ite generating « apacity through the construc
tion of major hydroelectric facihtieer in British Columbia
My understanding of the genesis of that construction pro
gram and ite subsequent evolution is set out in the follow
Ing paragrapns
4 In 1962. the Provincial Government passed the
British Col imma Hydro and Power Authority Act to es
tablish a vehicle in which to hold assets it had acquired
and lo promote mayor hydroelectric devel pment involving
the construction of significant storage dams and generat
ing capacity on the Peace and Columbia River systems
(the “Two River Policy The Act was subject to litigation
and ultemately declared ultra vires by the British Colum
bia Supreme Court in 1963. In 1964 the Provincia! G:
ernment passed another British Columba Hydro and
Power Authority Act. which created the Provinca! Crown
Corporation known today as BC Hydr
) Lince reated He Hvdro im ple mented the Two
River Poliwy Specifically, it began planning for the devel
‘
opment of the wWwAt Kennett Dam to create the Willreton
Reservoir on the Peace River. The Dam was completed in
196; Si rhe 1v6R, HC Hydro has further de.
hydroelectric potential of the Peace River with the
lation of the Peace Canyon Dam and other power related
Laculetve
6 in cor m with the Two River Policy and its
development of the Columba River evetem. KC Hudr
joined the Provincial Government an Lanadian (0%
ecrnmen nm negotiations with thre \ | 1 States between
1962 and 1964 to develop a Protocol to the Columbia
River Treaty (‘Treaty’)
The formal documents that comprise the arrange
ments between Canada and the United States with re
spect to the Treaty are compiled in a book issued by the
Canadian Departments of External Affairs and Northern
Affairs and National Resources and published by the
Queens Printer and Controller of Stationery in February
1964. In April 1964, the Department of Externa! Affairs
issued a further volume explaining additional aspects of
the process that led to the finalization of the Treaty and
the Protocol My review of these documents, together
with my involvement with the Treaty in the context of my
responsifilities at BC Hydro and later at Powerex, has
informed my understanding of these historical events
8 Attached as Exhibit A hereto is a true copy of the
following pages from the book described in Paragraph 8
58-81 (Columbia River Treaty), 82-90 (the formal press
release wasued by the Prnme Miniter of Canada on danu
ary 17, 1961, immediately after signing the Treaty, ex
plaiung its ormin and effect); 100-106 (Canada-British
Columma Agreement dated duly & 1963) 107-109
(Canada-Kntish Columma Agreement dated January 13
1964), 110-114 (exchange of Notes and Protocol regarding
the Columma River Treaty), 115-121 (exchange of Notes
and Attachment Relating to Terms of Sale)
4 The Treaty required Canada to construct storag:
facilities in Canada to control the flow of the Columbia
River in a way that would enable the United States to
generate more power at its existing facilities on the Co
lumba River (the “Downstream Benefits’), and entitled
Canada to receive half of the Downstream Benefits over
the 60-year life of the Treaty (the “Canadian Entitle
ment ) In 1963. the British Columive Provincal Cov
ernment negotiated an agreement with Canada that pro
vided for British Columbea to directiv recerve the Down
stream Benefits This Agreement m found at pages ALL
106 of Exhebit A
>
oi
10. Im 1964, the Province, Canada, and the United
States agreed to a Protocol for the implementation of the
Treaty. The Protocol is found at pages 110-114 of Exhibit
A. In two separate documents, it was agreed that British
Columbia would receive an upfront payment in place of
the first 30 years of the Canadian Entitlement. These two
documents are found at pages 107-109 and 115-121 of Ex
hibit A
ll. In October 1964 BC Hydro prepared a booklet that
consolidated for convement reference a number of docu
ments relating to the Treaty Attached as Exhibit B
hereto is a true copy of the following pages from the book
described in Paragraph 11: 1; 39-45 (Canadian Entitle
ment Purchase Agreement), 47 (Designation of Canadian
Entity), and 49-54 (Exchange of Notes)
12. In September 1964, Canada designated BC Hydro
as the Canadian Entity under the Treaty. This Designa
tion is found at page 47 of Exhibit B
1 BC Hydro played a key role, through its then
Chairman Hugh Keenlyside., in the negotiations that pro
duced these important international and interprovincial
agreements. As a result, BC Hydro was responsible for
onstruction of the reservoir facilities on the Columbia
River to fulfill Canada’s obligations under the Treaty and
has been responsible ever since for the ongoing implemen
tation and administration of the Treaty. The arrange
ments made for the mmuitial disposal are found in the Ca
nadian Entitlement Purchase Agreement (the “CEPA’)
between BC Hydro and Columbia Storage Power Ex
hange. a non-profit corporation organized under the laws
i the State of Washington. Mr. Keenlyside signed this
document on behalf of BC Hydro and it was approved by
an Exch inge ot Notes dated September 16. 1964. between
Canada and the United States. True copies of the CEPA
ind the Exchange of Notes are found at pages 39-45 and
19-54 of Exhibit B
2a
14. During the negotiations related to the Columbia
River Treaty, BC Hydro continued its parallel develop
ment of the Peace River pursuant to the Two River Policy
15. Construction of the facilities contemplated by the
Two River Policy were completed in 1984 with the comple
tion of the Revelstoke Dam on the Columbia River
16. During the 1980s, BC Hydro was an active seller of
power to the United States entities, primanly the Bonne
ville Power Administration (“Bonneville”), with such sales
taking place at the international border
17. Im the late 1980's, the Provincial Government
overhauled the legislation governing the energy sector in
British Columbia. The Provincial Government created
Powerex as an export agency for the purpose of marketing
power to United States entities. The Provincial Govern.
ment wished to ensure that BC Hydro’s surplus power
was marketed in a manner that maximized the benefits to
all British Columbians. Additionally, the Provincial Gov-
ernment wished to promote the development of electricity
produced by independent power producers for sales to the
United States market
18. In December 1988, BC Hydro — acting as the agent
of the British Columbia Provincial Government under
§ 3(1) of the Hydro Act - incorporated Powerex under the
Company Act of British Columbia as a whoily owned sub
sidiary of BC Hydro to serve the vital role of market-
ing the Province’s surplus electric power. Powerex was
originally incorporated as the British Columbia Power
Export Corporation on December 13, 1988. The company
changed its name to British Columbia Power Exchange
Corporation on February 15, 1991, and then changed its
name again to Powerex Corp. on September 6, 2000. True
and correct copies of the Articles of Incorporation and
Certificates changing the name of the company are at
tached hereto as Exhibit C
\9. Following its incorporation in 1988, Powerex as
sumed its responsibility for marketing surplus power from
the BC’ Mydro system. BC Hydro delivered surplus ele
24a
tricity to Powerex at the Brtish Columine border and
Powerex, m turn, sold it to entitres from the United States
and Alberta at wholesale. Powerex continues to perform
this function within this structure to the present day
20. Since its incorporation, Powerex has aiso been
called upon to serve some specific policy objectives set for
it by the Provincial Government. For instance, mm the
early 1990's the Provincial Government approved Power
ex as the appropriate vehicle to create a power exchange
operation (PEO") in British Columma. The Provincial
Government desired to promote a domestic independent
power production industry by creating an efficrent market
for the private power. The PEO was approved as opera
tional as of September 1993. The PEO contemplated
Powerex making an auction market for the trading of
electrecity The objectives for Powerex were set out im a
document prepared by Powerex entitled “Opportunities in
the Short-Term Electricity Market,” which formed the ba
sis for a presentation to stakeholders in early 1991 as part
of the application process associated with the approval of
the PEO. True copies of the relevant portions of this
document are attached hereto as Exhibit D
21. The PEO was part oi the means by which Powerex
was to meet the objectives of the Province. The PEO re
mained in place for a number of years, but did not fulfill
expectations because of lack of interest from the generat
ing sector. The PEO is no longer operational
;
22. Powerex was directiy involved with the realization
of Provincial objectives in connecticn with the Columbia
River Treaty commencing early in the 1990s. It was at
that time that the Province began the process of deter
mining how to receive or dispose of the Canadian Ent
tlement under the Treaty once their coutracts for the sale
of the Downstream Benefits began to expire in 1998. Un
der the Treaty, the United States would be obliged to re
turn the Canadian Entitlement to Canada unless a resale
could be negotiated and approved by both countnes
23. Commencing in early 1990, BC Hydro began dis
cussions with the U.S. Army Corps of Engineers and Bon
neviile (collectively the U.S. Entity under the Treaty) to
define the Canadian Entitlement Discussions became
more focused commencing in }¥93 as representatives of
the Province, BC Hydro, Bonneville, and the U.S. Army
Corps of Engineers began meetings to address the issue
24. Early on, the potential for resale of the Canadian
Entitlement in the United States became a prominent
part of the discussions. Mr. Ken Epp, then President of
Powerex, was an early member of the negotiating team,
along with the Deputy Minister of Energy, Petroleum
Mines and Mineral Resources. Upon the retirement of
Mr. Epp, | became President and CEO of Powerex. | was
also a member of the Province’s negotiating team | re
mained in both capacities through the completion of the
negotiating process that resulted in arrangements with
the United States for the return and/or resale of the Ca
nadian Entitlement effective April 1, 1999. The negotia
tion process with respect to the Canadian Entitlement
took approximately seven years. While the negotiating
team on the Canadian side varied from time to time, | was
a part of it throughout the process. The final arrange
ments approved by both countries include a significant
role for Powerex
25. Pursuant to an Entitlement Assignment Agree
ment, the Province assigned all of its rights, title, and in
terests in the Entitlement to Powerex so that it can real
ze the maximum benefits of the surplus power for British
Columbians. While the precise amount of the Canadian
Entitlement is determined pursuant to very ceraplex cal
culations, it is a very significant resource. A true copy of
the Entitlement Assignment Agreement is attached
hereto as Exhibit E
26. In i997, the Province passed the Power for Jobs
Act (“Jobs Act”). The Jobs Act contemplates diverting por
tions of BC Hydro's surplus power or the Canadian Ent:
tlement, which would otherwise be sold by Powerex to ex
26a
ternal markets, to British Columbia industry for the pur-
pose of job creation. Pursuant to the Jobs Act, the Provin-
cial Government was empowered to instruct either BC
Hydro or Powerex to supply power to British Columbia
industry on terms defined by the Provincial Government.
27. On behaif of Powerex, | have been involved in nu-
merous negotiations between the Provincial Government
and industrial undertakings contemplating locating facilli-
tres in British Columbia for which the price of power is a
significant factor in making a location decision. Powerex
was contemplated to play an important role in connection
with the supply of power in each case. While those efforts
have been unsuccessful, pursuant to the Jobs Act and at
the direction of the Provincial Government, Powerex has
supplied power on favorable terms to facilitate the expan-
sion of some existing businesses in British Columbia.
28. On March 30, 1984, the Provincial Government en-
tered into an agreement with the City of Seattle, Wash-
ington (“Seattle”), related to the Skagit River Treaty (the
“Skagit Agreement”). Under the Skagit Agreement, Seat-
tle agreed not to raise the High Ross Dam, which would
have had the effect of flooding substantial areas of British
Columbia. As compensation for the loss of the power
benefits that would have been derived from the High Ross
Dam, British Columbia agreed to deliver certain quanti-
ties of electricity to Seattle until 2066. A true copy of the
Skagit Agreement is attached hereto as Exhibit F.
29. On December 3, 1985, the Province assigned cer-
tain of the Province’s benefits and obligations under the
Skagit Agreement to BC Hydro. A true copy of this docu-
ment is attached hereto as Exhibit G. As a result of a
1996 Bonneville rate case, lengthy negotiations com-
menced between the Province, Seattle, and Bonneville re-
garding the transmission arrangements relating to the
power provider under the Skagit River Treaty. Powerex
took the lead role (on behalf of the Province) in negotiat-
ing a resolution of the issues among the parties. Effective
February 1, 1999. BC Hydro entered into the “Agreement
for the Transmission of Skagit River Treaty Power be
tween British Columbia Hydro and Power Authority and
the City of Seattle” (the “Skagt Transmission Agree
ment’). A true copy of the Skagit Transmission Agre«
ment is attached hereto as Exhibit H. Powerex executed a
replacement power agreement with Bonneville, also effe:
tive February 1, 1999, under which Seattle was able to
call upon Bonneville to deliver power to Seattle for the
account of Powerex in the event Powerex was unable to
deliver the Skagit River Treaty power pursuant to the
Skagit Agreement. Additionally. Seattle and Bonnevill
executed a Point-to-Point Transmission Service Agree
ment (“Skagit PTP Agreement”) for the necessary trans
mission capacity for the provision of the Skagit Treaty
power. BC Hydro assigned iis rights and obligations, and
delegated its Operating responsibilities under the Skagit
Transmissicn Agreement and the Skagit PTP Agreement
to Powerex, to the extent permitted by such agreements
A true copy of the BC Hydro Powerex Assignment
Agreement is attached hereto as Exhibit |
30. Columbia Power Corporation (CPC") and CBT
Power Corp. (“CBT”) were established by Columbia Basin
Trust, a corporation established by Columbia Basin Trust
Act. CPC and CBT were responsible for upgrading the
Brilliant generating facilities. CPC/CBT’s upgrade was
secured by a power purchase agreement with West
Kootenay Power (now UtuliCorp Networks Canada, Inc)
Powerex entered into a Backstop Agreement with CPC
CBT to facilitate the Provincial Government's desire that
CPC/CBT develop the Brilliant Dam upgrade. Under the
Backstop Agreement, Powerex agreed to purchase elec
tricity produced at the Brilhant facilities in the event
West Kootenay Power defaults on its purchase obhgation
due to insolvency. A true copy of the Backstop Agreement
is attached hereto as Exhibit J
31. Powerex performs its role as the exclusive exporter
of BC Hydro’s surplus under my direction. | report in the
normal course to my Board of Directors, but, on a day-to
ima
day basis, my Management team and | are solely respon
sible for determining the manner in which Powerex meets
its mandate to maximize the value of its export activities
Over the course of the 1990s, it became apparent that
Powerex could better achieve its objectives by expanding
its activities into acquiring and reselling power generated
by parties other than BC Hydro. Again, under my direc
tion, Powerex has expanded considerably in this area
and has become an active trader in wholesale markets
throughout North A.merica. This has occurred under my
direction and it is my belief chat it has assisted British
Columbia 1n achieving its objecteve of obtaining maximum
value for the surplus power generated from British Co-
lumbia to the benefit of British Columbia taxpayers and
ratepayers
$2. BC Hydro’s Board of Directors appoints Powerex’'s
Board of Directors. A number of Powerex’'s current execu-
tives previously worked at BC Hydro
33. Powerex does not pay Canadian federal and Pro-
vincial income tax
44. BC Hydro ws a Crown corporation, incorporated in
1964 pursuant to the British Columbia Hydro and Power
Authority Act. BC Hydro is owned in its entirety by Her
Majesty the Queen in Right of the Province of British Co-
lumbia, by which name the Province of British Columbia
ithe “Province’) is formally known. Dividends from the
operations of BC Hydro are payable only to the Province
35. The Lieutenant Governor in Council (the Executive
Council of the Province) appoints BC Hydro’s Board of Di-
rectors. A true copy of Orders in Council Nos. 751/2001,
dated August 9, 2001, and 847/2001, dated September 25
2001, appointing SC Hydro’s Board of Directors, are at-
tached hereto as Exhibit K. To my knowledge, no subse
quent Orders in Council have been passed amending, re-
scinding, or superseding the above-described Orders in
Council. BC Hydro. as the sole shareholder of Powerex, is
authorized to appoint Powerex’s Board of Directors. It
does sp by issuing a resolution naming the Board mem-
29a
bers. Outside members of Powerex's current Board of Di
rectors were subject to concurrence by tine Office of the
Premier. A true copy of the Extract from the Minutes of a
Meeting of the Board of Directors of British Columbia Hy
dro and Power Authority held on October 18, 2001, is at
tached hereto as Exhibit L.
36. All substantive powers of BC Hydro are subject to,
and can only be exercised with, the approval of the Lieu-
tenant Governor in Council or the Minister responsible for
BC Hydro.
37. BC Hydro’s corporate objective is to support the
development of the Province of British Columbia through
the efficient supply of electricity. On behalf of the Prov-
ince, BC Hydro operates an electric utility involved in the
generation, transmission, and distribution of electricity
38. BC Hydro maintains authority over Powerex
through various arrangements, including a Risk Man-
agement Committee that oversees the financial exposure
to which Powerex is subject. The Risk Management
Committee is required to make periodic reports to the
Provincial Government's Ministry of Finance.
39. BC Hydro also acts as the treasury for Powerex
and facilitates the issuance of letters of credit in support
of Powerex’s commercial! arrangements.
40. BC Hydro’s borrowings and other fiscal arrange-
ments are provided through, and therefore are supported
by, the Provincial Government. As a result, BC Hydro
maintains a credit rating equal to that of the Province
Powerex's commercial arrangements, in tuen, are fre-
quently supported by a guarantee from BC Hydro, thus
providing Powerex the benefit of both BC Hydro’s credit
rating as well as the implied backing of the Provincial
Government
41. BC Hydro sells all of its surplus electricity to Pow-
erex, and all of those salea take place et the Provincial
border. BC Hydro does nat, and has not, sold power at
points of delivery in the United States. BC Hydro has
30a
never participated in the bidding process established by
the CalPX and ISO
42. Powerex maintains two rate schedules on file with
FERC under which it sells power generated by BC Hydro
at wholesale in United States interstate commerce pursu-
ant to market-based rate authority granted by FERC on
September 24, \997
I declare under penalty of perjury under the laws of the
United States of America that the foregoing is true and
correct, and that this Declaration was executed this 9th
day of August 2002, at Belle Fourche, South Dakota
/s/ Kenneth G. Peterson
KENNETH G. PETERSON
{Exhibits omitted]
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
Coordination Proceeding No. CV 02-0990-RHW
Special Title (Rule 1550(b))
WHOLESALE ELECTRICITY
ANTITRUST CASES I & II
This Document relates To
ALL ACTIONS
DEPOSITION OF
KENNETH GRANT PETERSON
Volume }, Page 1 - 113
Wednesday, August 21, 2002
ree?
eff
Yes
Is it related to a government pension plan”
Does BC Hydro have a pension plan”
it's a separate pension plan from the govern
ments plan
And are Powerex employees part of the BC Hvdro
195] pension plan”
Yes, they are
And are they part of BC Hydro’s — does BC Hydro
have any other retirement plans’
No
Do Powerex employees have the same employee
benefits as BC Hydro employees”
For the most part, in terms of standard employee
benefits
Such as
Medical, dental
Are there any limits on Powerex’'s ability to pay
market compensation to tts traders?
Yes
What are they’
In the broad context of Provincial guidelines on
compensation were under certain constraints
We have a bonus compensation program that’s
unique. No one else in the public service has
anything like it. But that’s in order to be com
petitive
But other than the bonus compensation plan,
there are - are Powerex’s employees paid within
Provincial guidelines
Not within Provincial guidelines
I'm sorry. | must have misunderstood what you
|96] said before
| said within the context of what could be ac
cepted provincially, you might say. Aga, public
salaries or public-service salaries can be a politi
cal issue. Powerex aims to compensate at the
median of the Canadian market for its traders
So higher compensation could be politically un
palatable’
Yes
And that would be a problem for the Provincial
government?
Yes
3da
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 02-57200
(D.C. No. CV-02-01001-RHW)
PEOPLE OF THE STATE OF CALIFORNIA, ET AL..
Plaintiffs,
ARIZONA ELECTRIC POWER COOPERATIVE. INC.. ET AL..
intervenor.
V
NRG ENERGY INC.. ET AL.
Defendants,
V
RELIANT ENERGY SERVICES, INC., ET AL..
Cross-claimants-Appellants,
7
ARIZONA ELECTRIC POWER COOPERATIVE, INC., ET Al
Cross-defendants-Appellees
No. 02-57202
(D.C. No. CV-02-00990-RHW)
PEOPLE OF THE STATE OF CALIFORNIA, ET AL..,
Plaintif{s-Appellees,
V
NRG ENERGY, INC., ET AL..,
Defendants,
\
RELIANT ENERGY SERVICES, !NC., ET AL..,
Cross-claimants-Appellants,
Vv
ARIZONA ELECTRIC POWER COOPERATIVE, INC., ET AL...
Cross-defendants,
AND
BONNEVILLE POWER ADMINISTRATION, ET AL
Cross-defendants-Appellees
4a
No. 02-57211
(D.C. Ne. CV.02-.01000-RHW
NRG ENERGY. INC.. ET AI
Defendants
AND)
RELIANT ENERGY SERVICES. INC.. ETAI
Defendants-Appellants
DUKE ENERGY TRADING AND MARKETING. LLC. ET AI
( roas-ciaimants
ARIZONA PUBLIC SV% TAI
( Tosa de fendants Appellees
No. 05-55118
(D.C. No. CV.02-.01000-RHW)
NRG ENERGY, INC., ET Al
Defendants
DUKE ENERGY TRADING AND MARKETING. LLC. eT Al
( ross-ciaimants App llees
ARIZONA PUBLIC SVC, ET AI
Cross-defendants
AND
POWEREX COR}
Cross defendant -Appeliant
No 03-55131
(D.C. Noe. CV.02-.00990-RHW)
PEOPLE OF THE STATE OF CALIPORNIA. ET Al
Plaintiffs
vy
NRG ENERGY, INC., ET AI
Defendants
v
RELIANT ENERGY SERVICES, INC., ET Al
Cross-claimants Appellee .
¥
ARIZONA ELECTRIC POWER COOPERATIVE, INC.. ET Al
Cross-defendants
AND
POWEREX CORI
Cross -defendant lppe liant
No. 03-55176
(D.C. No. CV-02-01001-RHW)
NRG ENERGY, INC.. ET Al
Defendants-Appellees
¥
RELIANT ENERGY SERVICES, INC., ET Al
Cross-claimants- Appellees
\
ARIZONA ELFCTRIC POWER COOPERATIVE, INC... ET Al
Cross-defendants,
AND
POWEREX Corp
Cross-defendant Appellant
6a
No. 03-5524]
(D.C. No. CV-02-01000-RHW)
NRG ENERGY. INC... ET AL
Defendants
Vv
DUKE ENERGY TRADING AND MARKETING, LLC, ET Au..,
Cross-claimanis-Appeuants,
v
ARIZONA PUBLIC SVC. ET AL
Cross-defendants-Appellees
No. 03-55249
(D.C. No. CV-02-01001-RHW)
NRG ENERGY. INC.. ET AI
Defendants,
AND
DUKE ENERGY TRADING AND MARKETING, LLC. €TAL..
Defendants -Appellants
Vv
RELIANT ENERGY SERVICES, INC., ET AL..
Cross-claimants
\
ARIZONA ELECTRIC POWER COOPERATIVE. IN<.. ET AL..
Cross-defendants- Appellees
No. 03-55266
(D.C. No. CV-02-00990-RHW»
PEOPLE OF THE STATE OF CALIFORNIA, ET Al
Pilaintif{[s-Appellees,
vy
NRG ENERGY. INC.. ET AL
Dejendants
AND
1) KE ENERGY 7 RADING: AND M L\RKETING LLC ET 7
Defendants Appellants,
37a
RELIANT ENERGY SERVICES, INC., ET AL..
Cross-claimants,
Vv
ARIZONA ELECTRIC POWER COOPERATIVE, INC., ET AL..,
Cross-defendants.
No. 03-55319
(D.C. No. CV-02-01000-RHW)
NRG ENERGY, INC., ET AL.,
Defendants,
Vv.
DUKE ENERGY TRADING AND MARKETING, LLC, ET AL.,
Cross-claimants-Appellees,
Vv
ARIZONA PUBLIC SVC, ET AL.,_
Cross-defendants,
AND
BONNEVILLE POWER ADMINISTRATION, ET AL.,
Cross-defendants-Appellants.
No. 03-55322
(D.C. No. CV-02-01001-RHW)
NRG ENERGY, INC., ET AL.,
Defendants,
Vv.
RELIANT ENERGY SERVICES, INC., ET AL.,
Cross-claimants-Appellees,
‘
¥
ARIZONA ELECTRI” "OWER COOPERATIVE, INC., ET AL
Cross-defendants,
AND
BONNEVILLE POWER ADMINISTRATION, ET AL
ja
No. 03-55349
(D.C. No. CV-02-00990-RHW)
PEOPLE OF THE STATE OF CALIFt IRNIA, ET AL..
Plaintiffs- Appellees,
V
NRG ENERGY INC.. ET AL..
Defendants,
Vv
RELIANT ENERGY SERVICES, INC., ET AL..
Cross-claimants-Appellees,
Vv
ARIZONA ELECTRIC POWER COOPERATIVE, INC... ET AL.,
Cross-defendants
AND
BONNEVILLE POWER ADMINISTRATION, ET AL.,
Cross-defendants-Appellants
Appeal from the United States District Court
tor the Southern District of Califorma.,
Robert H. Whaley. U.S. District Judge, Presiding
[Argued June 14, 2004)
[Decided Dec. 8, 2004]
Before: SCHROEDER, Chief Judge, CANBY, and
TALLMAN, Circuit Judges
SCHROEDER, Chief Judge
“he fundamental question in this appeal from a district
court order of remand is whether we have appellate juris-
diction in hght of the limitations of 28 U.S.C. § 1447(d)
We hold that we have jurisdiction to review the district
courts ruling on substantive issues of controlling law on
the merits of the case. We affirm all of the district court's
rulings on those substantive issues, relating principally to
39a
immunity, but hold that the claims against the U.S. gov-
ernment agencies should have been dismissed rather than
remanded to state court.
BACKGROUND
The underlying consolidated actions are suits arising
from the energy crisis of 2000-2001. See generally Duke
Energy Trading & Marketing, L.L.C. v. Davis, 267 F.3d
1042 (9th Cir.2001). As a result of the crisis, the State of
California, together with some of its private and corporate
citizens, filed suits in California state courts against Reli
ant Energy, Duke Energy and other generators of power in
the California energy market (collectively referred to as
“Duke and Reliant”). The Plaintiffs alleged that Defen-
dants conspired to fix prices of wholesale electricity in vio-
lation of Califorma’s Cartwright Act, Cal. Bus. & Prof.
Code § 16720, et. seqg., and California's Unfair Competition
Law, id. at § 17200.
Duke and Reliant filed cross-claims in the state court
seeking indemnity from two agencies of the United States
government, Bonneville Power Administration, (“BPA"),
and Western Area Power Administration, (“WAPA"), and
from two Canadian entities, PowerEx Corporation, (“Pow-
erEx”), and British Columbia Hydre and Power Authority,
(“BC Hydro”). Both BPA and WA?A are agencies of -the
United States Government statutorily authorized to pro-
mote the development, sale, and distribution of electric
power in the western United States. See 16 U.S.C. § 832;
42 U.S.C. § 7152, 43 U.S.C. §§ 389, 485(h); see also United
States by W. Area Power Admin. v. Pac. Gas & Elec. Co.,
714 F.Supp. 1039, 1045-47 (N.D.Cal.1989). BC Hydro is a
crown corporation of the Canadian province of British Co-
lumbia created by the British Columbia Hydro and Power
Authority Act of 1964. PowerEx is a wholly owned sub-
sidiary of BC Hydro. PowerEx markets and exports sur-
plus Canadian hydropower to the United States
Each of the cross-defendants removed the cases to fed
eral court. As the basis for removal, BPA and WAPA in-
voked 28 U.S.C. § 1442(a), which permits removal by fed-
40a
eral agencies. BC Hydro and PowerEx invoked 28 U.S.C.
§ 1441(d), which allows removal by foreign states as de-
fined by the Foreign Sovereign Immunity Act (“FSILA”), 28
U.S.C. § 1603(a). California then moved the district court
for remand. BPA and WAPA opposed the remand, arguing
that they were entitled to be dismissed from the action be-
cause they enjoyed sovereign immunity as agencies of the
U.S. government. BC Hydro argued for dismissal on the
ground that it was an immune foreign sovereign as defined
by the FSLA. PowerEx opposed California's motion for re-
mand on the ground it was entitled to remove under the
removal statutes 28 U.S.C. § 144l(a)(d) and the Foreign
Sovereign [Immunities Act, 28 U.S.C. § 1603(a). PowerEx
did not argue for sovereign immunity bécause the claim
arises from commercial activities PowerEx conducted
within the United States. See 28 U.S.C. § 1605(a)(2).
The district court ruled first on the immunity argu-
ments. The court held that BC Hydro was entitled to for-
eign sovereign immunity under the FSILA as a crown cor-
poration of British Columbia. As to the U.S. government
agencies, Duke and Reliant contended BPA and WAPA
had waived their immunity. The district court held that
there had been no waiver because only Congress could
waive immunity and Congress had not done so. It there-
fore held that (he WAPA and BPA were immune from suit.
Finally, the district court held that PowerEx was not enti-
tled to removal because it was not the instrumentality of a
foreign sovereign. Then the district court granted the ear-
lier motion to remand the entire case.
Defendants-appellants, Duke and Reliant, now appeal,
challenging the district court’s holdings that BPA and
WAPA have not waived their sovereign immunity, and
that BC Hydro is immune from suit. Cross-appellants,
BPA and WAPA, challenge the district court's decision to
remand the entire case to state court, contending that the
district court should first have dismissed them from the
suit. Cross-appellant, PowerEx, challenges the district
4la
court's ruling that it is not a sovereign as defined by the
FSIA.
Plaintiff-appellee, California, happy to be back in state
court, contends that this court is without jurisdiction to
hear any of these appeals. It argues that 28 U.S.C
§ 1447(d) prohibits the exercise of appellate jurisdiction
over the district court’s order of remand and that we there-
fore cannot review the substantive issues of law the dis
trict court resolved.
We first deal with the issue of appellate jurisdiction
We conclude that we have jurisdiction to review the under
lying merits of the district court’s substantive rulings on
immunity and sovereign status. We then turn to the mer-
its of those rulings.
APPELLATE J"RISDICTION
The district court’s fina] order that is on appeal to this
court remands the case to state court following its original
removal to federal court. Section 1447(c) provides that a
motion for remand for procedural irregularities in the re
moval must he filed within 30 days and that a case may be
remanded at any time if it appears that the district court
lacks subject matter jurisdiction. '
Appellate review of a remand order pursuant to
§ 1447i{c) is limited by the provisions of § 1447(d). Section
1447(d) provides:
(d) An order remanding a case to the State court from
which it was removed is not reviewable on appeal or
otherwise, except that an order remanding a case to
the State court from which it was removed pursuant to
section 1443 of this title shall be reviewable by appeal
or otherwise.
' Section 1447(c) provides:
c) A motion to remand the case on the basis of any defect other
than lack of subject matter jurisdiction must be made within JO
days after the filing of the notice of removal under section 14464)
if at any time before final judgment it appears that the district
court lacks subject matter jurisdiction, the case shall be remanded
42a
The limitation relates on its face only to appellate re-
view of federal jurisdiction or of whether the remand order
itself was procedurally correct. Our court has therefore
recognized that the limitations on review in § 1447(d) do
not preclude our review of su»stantive issues of law that
may have preceded the remand order. We have said that
§ 1447(d) “preclude|s}] only appellate review of remand or-
ders based on one of the two grounds listed in subsection
1447(c): lack of subject matter jurisdiction or removal pro-
cedure irregularities.” United Investors Life Ins. Co. uv.
Waddell & Reed, 360 F.3d 960, 963 (9th Cir.2004), citing
Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127-
28, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995). Section 1447(d)
does not preclude our review of a district court's resolution
of substantive issues on the merits, apart from issues of
jurisdictional or procedural! defects leading to remand. See
Abada v. Charles Schwab & Co., 300 F.3d 1112, 1118 (9th
Cir.2002), citing Clorox Co. v. United States Dist. Ct., 779
F.2d 517, 520 (9th Cir.1985) and Pelleport Investors, Inc. v.
Budco Quality Theatres, Inc., 741 F.2d 273, 276-77 (9th
Cir. 1984)
Moreover, the district court had jurisdiction over this
case because BPA, WAPA and BC Hydro properly removed
the case from state court. Such a removal removes the en-
tire case, not merely the portion affecting the removing
sovereign. See /MFC Professional Services of Fla., Inc. v.
Latin American Home Health, Inc., 676 F.2d 152, 158-59
(Sth Cir.1980); Nolan v. Boeing Co., 919 F.2d 1058, 1064-
65 (5th Cir.1990). The district court accordingly did not
lack jurisdiction to decide the issues of immumity of BPA,
WAPA and BC Hydro and of the sovereign status of Pow-
erEx. We accordingly are not deprived by § 1447(d) of ju-
risdiction to review these substantive rulings, and we now
address them on their merits.
43a
IMMUNITY OF THE U.S. AGENCIES:
BPA AND WAPA
Reliant and Duke argue that the federal agencies
waived their immunity by acting as generators, buyers,
and sellers of electricity in the California energy markets.
Specifically, Duke and Reliant contend that by agreeing to
the Federal Energy Regulatory Commission, , “RC’),
tariff governing the California market, BPA and WAPA
were bound by the provisions of the tariff. Under the tar-
iff, participants in the California energy market “irrevoca-
bly waive any objection” to the jurisdiction of California
courts over legal actions arising from the tariff. In es-
sence, Duke and Reliant contend that by performing their
statutory function to provide power to the western mar-
kets, BPA and WAPA became “participants” in that mar-
ket within the meaning of FERC tariffs and thereby
waived their governmental immunity.
The district court rejected the arguments of Duke and
Reliant and concluded that BPA and WAPA did not waive
their sovereign immunity. This ruling was correct because
only Congress can waive immunity of a federal govern-
mental agency and BPA and WAPA are indisputably such
agencies.
In Lane v. Pena, 518 U.S. 187, 116 S.Ct. 2092, 135
L.Ed.2d 486 (1996), the Supreme Court unambiguously
reaffirmed that “{a] waiver of the Federal Government's
sovereign immunity must be unequivocally expressed [by
Congress] in statutory text.” Jd. at 192, 116 S.Ct. 2092.
Duke and Reliant point to no such text waiving the immu-
nity of BPA or WAPA. Nor is there a statute waiving the
sovereign immunity of BPA or WAPA with regard to suits
for indemnity. See 16 U.S.C. § 832; 43 U.S.C. § 390uu; see
also City of Tacoma v. Richardson, 163 F.3d 1337, 1339-41
(Fed.Cir.1998) (interpreting section 390uu and holding
Congress has waived WAPA’s sovereign immunity only
with regard to contracts executed pursuant to federal rec-
lamation law). The district court correctly concluded that
BPA and WAPA retain their sovereign immunity.
44a
IMMUNITY OF.BC HYDRO UNDER THE FSIA
The district court held that BC Hydro was an immune
foreign sovereign as defined by the Foreign Sovereign Im-
munities Act and was therefore not amenable to suit by
Duke and Reliant. Under the FSIA, BC Hydro waived its
foreign sovereign immunity if it: 1) conducted commercial
activity in the U.S., or 2) engaged in commercial activity
yutside the U.S. having a “direct effect” in the United
States. 28 U.S.C. § 1605(a)(2). Duke and Reliant argue
that BC Hydro did both.
Duke and Reliant first argue that BC Hydro activity in
Canada had a direct effect on California energy markets.
They claim that BC Hydro made decisions that restricted
how and with whom PowerEx, BC Hydro’s exporting sub-
sidiary, could trade. Because BC Hydro’s decisions deter-
mined who in the California market received energy from
Powerkx and at what price, Duke and Reliant claim that
BC Hydro directly affected that market. Duke and Reliant
also claim that BC Hydro’s credit decisions were them-
selves commercial! activities and therefore caused BC Hy-
dro <o forfeit its immunity.
A “direct effect” in the United States must follow “as an
immediate consequence of [the otherwise immune defen-
dant’s] activity.” Argentina v. Weltover, 504 U.S. 607, 618,
112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). The actions of BC
Hydro did not cause direct effects in the United States
within the meaning of the FSIA. Althougti the credit deci-
sions of BC Hydro had a direct effect on PowerEx, it was
only the decisions of PowerEx that directly affected the
California markets. Because the credit decisions affected
an intermediary, whose actions in turn affected the U.S.,
the decisions did not have direct effects within the United
States. See Corzo v. Banco Central De Reserva Del Peru,
243 F.3d 519, 525 (9th Cir.2001).
Duke and Reliant also contend that BC Hydro lacks
immunity in the case because its decisions about how to
generate power and about how much power PowerEx could
sell to the California markets were commercial acts with
45a
direct effects in the U.S. The district court correctly held,
hewever, that these decisions were sovereign functions,
not commercial ones. BC Hydro is responsible for deci-
sions relating to, for example, flood control, management
of fisheries, and construction of dams. These are govern-
mental responsibilities, unlike any responsibilities of a
private, commercial actor. The ability to make decisions
about the management of natural resources is a uniquely
sovereign capacity. See MOL, Inc. v. People's Republic of
Bangladesh, 736 F.2d 1326, 1329 (9th Cir.1984).
Next, appellants argue that PowerEx is the agent of BC
Hydro and that BC Hydro waived its immunity by and
through the conduct of its agent. The district court cor-
rectly held that there was no agency relationship between
BC Hydro and PowerEx. Independence is to be presumed
In First National City Bank v. Banco Para El Comercio
Exterior De Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77
L.Ed.2d 46 (1983) (“Bancec”), the Supreme Court an-
nounced that “government instrumentalities established
as juridical entities distinct and independent from their
sovereign should normally be treated as such.” /d. at 626
27, 103 S.Ct. 2591. The presumption of independence ts
defeated only “where a corporate entity is so extensively
controlled by its owner that a relationship of principal and
agent is created.” /d. at 629, 103 S.Ct. 2591; see also Fla-
tow v. Islamic Republic of Iran, 308 F.3d 1065, 1070-71
(9th Cir.2002).
As the district court carefully explained, no evidence
suggests that BC Hydro exerted the day-to-day control
over PowerEx that would demonstrate an agency relation-
ship. Cf. Flatow, 308 F.3d at 1071-73 (noting absence of a
showing of day-to day-control and reject.ag agency argu-
ment). BC Hydro undoubtedly cooperated with PowerEx
to establish PowerEx’s credit risk policies and to provide
PowerEx with administrative and other support for its op-
erations. As the Supreme Court has noted, however, it is
not at all remarkable for a parent organization to super-
vise the “finance and capital budget decisions” and to be
46a
responsible for the “articulation of general policies and
procedures’ for a subsidiary. United States v. Bestfoods,
524 U.S. 51, 72, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998).
These areas of cooperation are completely characteristic of
a parent-subsidiary operation, and not at all like a princi-
ple-agent relationship. The district court correctly con-
cluded that PowerEx was not the agent of BC Hydro.
For all of the foregoing reasons, BC Hydro did not waive
its sovereign immunity under the FSIA.
SOVEREIGN STATUS OF POWEREX
UNDER THE FSIA
In its cross-appeal PowerEx argues that the district
court erred in holding that it is not a foreign sovereign un-
der the FSLA, and that it therefore is not entitled to re-
move under § 1441(d). The statute defines a foreign sov-
ereign as including “an agency or instrumentality of a for-
eign state.” 28 US.C. § 1603(a). An agency or instrumen-
tality is defined as any entity:
(1) which is a separate legal person, corporate or oth-
erwise, and
(2) which is an organ of a foreign state or political sub-
division thereof, or a majority of whose shares or other
ownership interest ts owned by a foreign state or politi-
cal subdivision thereof, and
(3) which ts neither a citizen of a State of the United
States as defined in section 1332(c) and (d) of this title,
nor created under the laws of any third country.
28 U.S.C. § 1603(b). PowerEx argues that it is a foreign
sovereign both because it is an “organ” of a foreign state
and alternatively because it is wholly owned by a foreign
State
In support of its contention that PowerEx is an organ of
Canada, Powerkx cites this court’s recent decision in EIE
Guam Corporation v. Long Term Credit Bank of Japan,
322 F.3d 635, 640-41 (9th Cir.2003). In EIE Guam, we
held that a Japanese corporation was an organ of Japan
where that corporation (RCC) was created to collect and
47a
administer bad debts o. .ailed financial institutions in-
sured by the Deposit Insurance Corporation of Japan. /d.
at 640.
PowerEx argues that just as RCC served a public pur-
pose in helping to manage the debts of failed Japanese
banks, PowerEx serves a public purpose in maximizing the
value of the Province’s surplus hydropower. This is the
only material similarity, however. There are substantial
differences between PowerEx and RCC. In EIE Guam, the
district court found that many of RCC’s functions were ex-
clusive, that other companies were not permitted to take
similar actions, that RCC was funded by the Japanese
government, and that the government even compensated
RCC for its financial losses. See id. at640.
In contrast, the district court here found that PowerEx
acted not in the public interest, but rather as an inde-
pendent commercial enterprise pursuing its own profits.
The district court also found that any profits and losses
from its sales of power are solely the responsibility of Pow-
erEx and are in no way guaranteed or subsidized by the
government. The Canadian government does not immu-
nize PowerEx from suit.
We have said that the ultimate question is “whether the
entity engages in a public activity on behalf of the foreign
government.” Patrickson v. Dole Food Co., 251 F.3d 795,
807 (9th Cir.2001), aff d on other grounds Dole Food Co. v.
Patrickson, 538 U.S. 468, 123 S.Ct. 1655, 155 L.Ed.2d 643
(2003). Applying Patrickson, we look to the purposes of an
entity's activities, the entity's independence from govern-
ment, the level of financial support received from the gov-
ernment, and the entity's privileges and obligations under
the law. Patrickson, 251 F.3d at 807.
As the district court correctly noted, the facts of this
case closely mirror the facts of Patrickson and compel our
conclusion that PowerEx is not an organ of a foreign gov-
ernment. In Patrickson, as here, the party claiming organ
status under the FSIA was not run by government ap-
pointees, was not staffed with civil servants, was not
4a
wholly owned by the government, was not immune from
suit, and did not exercise any regulatory authority. See
Patrickson, 251 F.3d at 808. Even though PowerEx offers
some evidence that it serves a public purpose, its high de-
gree of independence from the government of British Co-
lumbia, combined with its lack of financial support from
the government and its lack of special privileges or obliga-
tions under Canadian law dictate our holding that Pow.
erkx is not an organ of British Columbia
PowerEx also argues that it qualifies under the FSIA
because it is owned by the Province of British Columbia.
PowerEx concedes, however, that its shares are owned by
BC Hydro. The Supreme Court has held that “only direct
ownership of a majority of shares by the foreign state sat-
isfies the statutory requirement lof the FSLA].” Dole Food,
538 U.S. at 474, 123 S.Ct. 1655. The Court noted that
formalities are essential in the law c* corporations and
that unless the foreign government itself actually owns the
shares, the entity does not meet the definition of a foreign
state. /d. at 474-76, 123 S.Ct. 1655. PowerEx is not
owned by the Province but by BC Hydro. It is therefore
not a foreign instrumentality under FSLA
THE REMAND OF CLAIMS AGAINST
THE UNITED STATES
In their cross-appeal, BPA and WAPA argue that al-
though the district court correctly held them immune from
suit, it incorrectly failed to dismiss the claims against
them. They are correct
Section 1442(a) guarantees federal agencies a federal fo-
rum in which to adjudicate claims. Where it is immune
from suit, a federal agency's right to a federal forum is
vindicated only by the district court's dismissal of the
claims against the agency. Any other outcome would frus-
trate the purpose of § 1442(a)
We have previously held that where federal law pre-
vents state and federal courts from subjecting a federal
agency to suit, a district court presented with such a suit
is required to dismiss it. See Nebraska v. Bentson, 146
4¥a
F.3d 676, 679 (9th Cir.1998). The same result ts required
here. We therefore remand the claims against BPA and
WAPA with instructions to dismiss them
CONCLUSION
We AFFIRM the district court's decision that BC Hydro
is an immune foreign sovereign under the Foreign Sover-
eign Immunities Act, but that its export subsidiary, Pow-
erEx, is not such a sovereign or instrumentality of a sover-
eign. We also AFFIRM the district court’s order that BPA
and WAPA are immune from suit. We VACATE the por
tion of the district court's order remanding the claims
against BPA and WAPA and instruct the district court to
enter an order of dismissal
AFFIRMED IN PART: VACATED IN PART and RE.
MANDED. Costs are awarded to BPA, WAPA, and BC
Hydro and against PowerEx
50a
TREATY BETWEEN THE UNITED STATES OF AMERICA
AND CANADA RELATING TO COOPERATIVE
DEVELOPMENT OF THE WATER RESOURCES
OF THE COLUMBIA RIVER BASIN
The Governments of the United States of America and
Canada
Recognizing that their peoples have, for many genera-
tions, lived together and cooperated with one another in
many aspects of their national enterprises for the greater
wealth and happiness of their respective nations, and
Recognizing that the Columbia River basin, as a part of
the territory of both countries, contains water resources
that are capable of contributing greatly to the economic
growth and strength and to the general welfare of the two
nations, and
Being desirous of achieving the development of those re-
sources in a manner that will make the largest contribu-
tion to the economic progress of both countries and to the
welfare of their peoples of which those resources are capa-
ble, and
Recognizing that the greatest benefit to each country
can be secured by cooperative measures for hydroelectric
power generation and flood control, which will make pos-
sible other benefits as well,
Have agreed as follows:
ARTICLE |
Interpretation
(1) In the Treaty, the expression
(a) “average critical period load factor” means the aver-
age of the monthly load factors during the critical
stream flow period;
(b) “base system” means the plants, works and facilities
listed in the table in Annex B as enlarged from time
to time by the installation of additional generating
facilities, together with any other plants, works or
(f)
(g)
(h)
(1)
())
5la
facilities which may be constructed on the main
stem of the Columbia River in the United States of
America;
“Canadian storage” means the storage provided by
Canada under Article II;
“critical stream flow period” means the period, he-
ginning with the initial release of stored water from
full reservoir conditions and ending with the reser
voirs empty, when the water available from reser-
voir releases plus the natural stream flow is capable
of producing the least amount of hydroelectric power
in meeting system load requirements;
“consumptive use” means use of water for domestic,
municipal, stock-water, irrigation, mining or indus-
trial purposes but does not include use for the gen-
eration of hydroelectric power;
“dam” means a structure to impound water, includ-
ing facilities for controljling the release of the im-
pounded water;
“entity” means an entity designated by either the
\Inited States of America or Canada under Article
XIV and includes its lawful successor;
“International Joint Commission” means the Com-
mission established under Article VII of the Bound-
ary Waters Treaty, 1909, or any body designated by
the United States of America and Canada to succeed
to the functions of the Commission under. this
Treaty;
“maintenance curtailment” means an interruption
or curtailment which the entity responsible therefor
considers necessary for purposes of repairs, re-
placements, installations of equipment, performance
of other maintenance work, investigations and in-
spections;
“monthly load factor” means the ratio of the average
load for a month to the integrated maximum load
over one hour during that month;
(k) “normal full pool elevation’ means the elevation to
which water ts stored im a reservoir by deliberate
impoundment every year, subject to the availability
of sufficient flow
(l) ratification date” means the day on which the in
struments of ratification of the Treaty are ex
changed,
(m) “storage” means the space in a reservoir wh ch is
usable for impounding water for flood contro: or for
regulating stream flows for hydroelectric power gen
eration
in) “Treaty” means this Treaty and its Annexes A and
B
(o) “useful life” means the time between the date of
commencement of operation of a dam or facility and
the date of its permanent retirement from service by
reason of obsolescence or wear and tear which oc
curs notwithstanding good maintenance practices
2) The exercise of any power, or the performance of any
luty, under the Treaty does not preclude a subsequent ex'
rcise or performance of the power or duty
ARTICLE I
Development by Canada
1) Canada shall provide in the Columma River basin in
anada 15,500,000 acre-feet of storage usable for improv
ny the flow of the Columbia River
2) In order to provide this storage, which in the Treaty is
eferred to as the Canadian storage, Canada hall con
truct dams
(a) on the Columbia River near Mica Creek, British Co
lumbia, with approximately 7,000,000 acre-feet of
storage
ib) near the outlet of Arrow Lakes. British Columina
with approximately 7,100,000 acre-feet of storage
and
pa
(c) on one or more tributaries of the Kootenay River in
British Columbia downstream from the Canada
United States of America boundary with storage
equivalent in effect to approximately 1,400,000 acre
feet of storage near Duncan Lake, British Columbia
(3) Canada shall commence construction of the dams as
soon as possible after the ratification date
ARTICLE II]
Development by the United States of America
Respecting Power
(1) The United States of America shall maintain and oper
ate the hydroelectric facilities included in the base system
and any additional hydroelectric facilities constructed on
the main stem of the Columbia River in the United States
of America in a manner that makes the most effective use
of the improvement in stream flow resulting from opera
tion of the Canadian storage for hydroelectric power gen-
eration in the United States of America power system
(2) The obligation in paragraph (1) is discharged by reflect
ing in the determination of downstream power benefits to
which Canada is entitled the assumption that the facilities
referred to in paragraph (1) were maintained and operated
in accordance therewith
ARTICLE IV
Operation by Canada
(1) For the purpose of increasing hydroelectric power gen-
eration in the United States of America and Canada, Can-
ada shall operate the Canadian storage in accordance with
Annex A and pursuant to hydroelectric operating plans
made thereunder. For the purposes of this obhgation an
operating plan if it is either the first operating plan or if in
the view of either the United States of America or Canada
it departs substantially from the immediately preceding
operating plan must, in order to be effective, be confirmed
54a
by an exchange of notes between the United States of
America and Canada
(2) For the purpose of flood control until the expiration of
sixtv years from the ratification date, Canada shall
(a) operate in accordance with Annex A and pursuant
(b)
to flood control operating plans made thereunder
(i) 80,000 acre-feet of the Canadian storage de-
scribed in Article I1(2)(a),
(ui) 7,100,000 acre-feet of the Canadian storage de-
scribed in Article I1(2)(b),
(ii) 1,270,000 acre-feet of the Canadian storage de-
scribed in Article 11(2)(c),
provided that the Canadian entity may exchange
flood control storage under subparagraph (ii) for
flood control storage additional to that under sub-
paragraph (i), at the location described in Article
1l(2)(a), if the entities agree that the exchange
would provide the same effectiveness for control of
floods on the Columbia River at the Dalles, Oregon;
operate any additional storage in the Columbia
River basin in Canada, when called upon by an en-
tity designated by the United States of America for
that purpose, within the limits of existing facilities
and as the entity requires to meet flood control
needs for the duration of the flood period for which
the call is made
(3) For the purpose of flood control after the expiration of
sixty years from the ratification date, and for so long as
the flows in the Columbia River in Canada continue to
contribute to potential flood hazard in the United States of
America, Canada shall, when called upon by an entity des-
ignated by the United States of America for that purpose,
operate within the limits of existing facilities any storage
in the Columbia River basin in Canada as the entity re-
quires to meet flood control needs for the duration of the
flood period for which the call is made
oda
(4) The return to Canada for hydroelectric operation and
the compensation to Canada for flood control operation
shall be as set out in Articles V and VI
(5) Any water resource development, in addition to the
Canadian storage, constructed in Canada after the ratifi
cation date shall not be operated in a way that adversely
affects the stream flow contro) in the Columbia River
within Canada so as to reduce the flood control and hy
droelectric power benefits which the operation of the Ca
nadian storage in accordance with the uperating plans in
force from time to time would otherwise produce
(6) As soon as any Canadian storage becomes operable
Canada shall commence operation thereof in accordanc
with this Article and in any event shall commence full op
eration of the Canadian storage described in Article
11(2)(b) and Article 11(2)(c) within five years of the ratifica
tion date and shall commence full operation of the balance
of the Canadian storage within nine years of the ratifica
tion date.
ARTICLE V
Entitlement to Downstream Power Benefits
(1) Canada is entitled to one half the downstream power
benefits determined under Article VII
(2) The United States of America shall! deliver to Canada
at a point on the Canada-United States of America bound
ary near Oliver, British Columbia, or at such other place
as the entities may agree upon, the downstream power
benefits to which Canada is entitled, less
(a) transmission loss,
(b) the portion of the entitlement disposed of under Ar
ticle VIII(1), and
(c) the energy component described tn Article VIEIN4)
(3) The entitlement of Canada to downstream power bene
fits begins for any portion of Canadian storage upon com
mencement of its operation in accordance with Annex A
56a
and pursuant to a hydroelectric operating plan made
thereunder
ARTICLE V1!
Payment for Flood Control
(1) For the flood control previded by Canada under Article
[V(2)(a) the United States of America shall pay Canada in
United States funds
(a) 1,200,000 dollars upon the commencement of opera-
tion of the storage referred to in subparagraph (a)(1)
thereof,
92,100,000 dollars upon the commencement of op-
eration of the storage referred to in subparagraph
(a(n) thereof, and
11,100,000 dollars upon the commencement of op-
eration of the storage referred to in subparagraph
(a)(ii) thereof
(2) if full operation of any storage is not commenced within
the time specified in Article [V, the amount set forth in
paragraph (1) of this Article with respect to that storage
shall be reduced as follows
(a) under paragraph (1)(a), 4,500 dollars for each month
beyond the required time,
(b) under paragraph (1)(b), 192,100 dollars for each
month beyond the required time, and
(c) under paragraph (1)ic), 40,800 dollars for each
month beyond the required time
(3) For the flood control provided by Canada under Article
['V(2)(b) the United States of America shal! pay Canada in
United States funds in respect only of each of the first four
flood periods for which a call is made 1,875,000 dollars and
shall deliver to Canada in respect of each and every call
made, electric power equal to the hydroelectric power lost
by Canada as a result of operating the storage to meet the
flood control need for which the call was made, delivery to
be made when the loss of hydroelectric power occurs
Jia
(4) For each flood period for which flood control is provided
by Canada under Article [V(3) the United States of Amer
ica shall pay Canada in United States funds
(a)
(b)
the operating cost incurred by Canada in providing
the flood control, and
compensation for the economic loss to Canada aris-
ing directly from Canada foreyoing alternative uses
of the storage used to provide the flood control
(5) Canada may elect to receive in electric power, the
whole or any portion of the compensation under paragraph
(4)(b) reprosenting loss of hydroelectric power to Canada
ARTICLE VII
(1) The downstream power benefits shall be the difference
in the hydroelectric power capable of being generated in
the United States of America with and without the use of
Canadian storage, determined in advance, and is referred
to in the Treaty as the downstream power benefits
(2) For the purpose of determining the downstream power
benefits
(a)
(b)
the principles and procedures set out in Annex B
shall be used and followed;
the Canadian storage shall be considered as next
added to 13,000,000 acre-feet of the usable s:orage
listed in Column 4 of the table in Annex B;
the hydroelectric facilities included in the base sys-
tem shall be considered as being operated to make
the most effective use for hydroelectric power gen
eration of the improvement in stream flow resulting
from operation of the Canadian storage
(3) The downstream power benefits to which Canada is
entitled shall! be delivered as follows
(a)
dependable hydroelectric capacity as scheduled by
the Canadian entity, and
5a
(b) average annual! usable hydroelectric energy in equal
amounts each month, or in accordance with a modi-
fication agreed upon under paragraph (4).
(4) Modification of the obligation in paragraph (3)(b) may
be agreed upon by the entities
ARTICLE VIII
Disposal of Entitlement to Downstream Power Benefits
eee
(t) With the authorization of the United States of America
and Canada evidenced by exchange of notes, portions of
the downstream power benefits to which Canada is enti-
tled may be disposed of within the United States of Amer-
wa. The respective general conditions and limits within
which the entities may arrange initial disposals shall be
set out in an exchange of notes to be made as soon as pos-
sible after the ratification date.
(2) The entities may arrange and carry out exchange® of
dependable hydroelectric capacity and average annual us-
able hydroelectric energy to which Canada is entitled for
average annual usable hydroelectric energy and depend-
able hydroelectric capacity respectively.
(3) Energy to which Canada is entitled may not be used in
the United States of America except in accordance with
paragranhs (1) and (2).
(4) The bypassing at dams on the main stem of the Colum-
bia River in the United States of America of an amount of
water which could produce usable energy equal to the en-
ergy component of the downstream power benefits to
which Canada is entitled but not delivered to Canada un-
der Article V or disposed of in accordance with paragraphs
(1) and (2) at the time the energy component was not so
delivered or disposed of, is conclusive evidence that such
energy component was not used in the United States of
America and that the entitlement of Canada to such en-
ergy component is satisfied.
59a
ARTICLE IX
Vanation of Entitlement to Downstream Power Benefits
(1) If the United States of America considers with respect
to any hydroelectric power project planned on the main
stem of the Columbia River between Priest Rapids Dam
and McNary Dam that the increase in entitlement of Can
ada to downstream power benefits resulting from the op
eration of the projyect would produce a result which would
not justify the United States of America im incurring the
costs of construction and operation of the project, th
United States of America and Canada at the request of the
United States of America shall consider modification of the
increase in entitlement
(2) An agreement reached for the purposes of this Article
shall be evidenced by an exchange of notes
ARTICLE X
East-West Standby Transmission
(1) The United States of America shall provide in accor
dance with good engineering practice east-west standby
transmission service adequate to safeguard the transmis
sion from Oliver, British Columbia, to Vancouver, British
Columma, of the downstream power benefits to which
Canada is entitled and to improve system stability of the
east-west circuits in British Columbia
(2) in consideration of the standby transmission service
Canada shall pay the United States of America in Cana
dian funds the equivalent of 1.50 United States dollars a
year for each kilowatt of dependable hydroelectric « apacity
included in the downstream power benefits to which Can
ada is entitled
(3) When a mutually satisfactory electrical coordination
arrangement ts entered into between the entities and con
firmed by exchange of notes between the United States of
America and Canada the obligation of Canada in para
graph (2) ceases
60a
ARTICLE XI
Use of Improved Stream Flow
(1) Improvement in stream flow in one country brought
about by operation of storage constructed under the Treaty
yn the other country shall not be used directly or indirectly
for hydroelectric power purposes except
(a) in the case of use within the United States of Amer-
ica with the prior approval of the United States en-
tity, and
in the case of use within Canada with the prior ap-
proval of the authority in Canada having jurisdic-
tion
(2) The approval required by this Article shall not be given
except upon such conditions, consistent with the Treaty, as
the entity or authority considers appropriate
ARTICLE XI}!
Kootena) River Development
(1) The United States of America for a period of five years
from the ratification date, has the option to commence
construction of a dam on the Kootenai River near Libby,
Montana, to provide storage to meet flood control and
other purposes in the United States America. The stor-
age reservoir of the dam shall not raise the level of the
Kootenai River at the Canada-United States of America
boundary above an elevation consistent with a normal full
pool elevation at the dam of 2,459 feet, United States
Coast and Geodetic Survey datum, 1929 General Adjust-
ment, 1947 International Supplemental Adjustment
2) All benefits which occur in either country from the con-
struction and operation of the storage accrue to the coun-
try in which the benefits occur
(3) The United States of America shall exercise its option
by written notice to Canada and shall submit with the no-
tice a schedule of construction which shall include prov-
sion for commencement of construction, whether by way of
6la
railroad relocation work or otherwise, within five vears of
the ratification date
(4) If the United States of America exercises its option,
Canada in consideration of the benefits accruing to it un-
der paragraph (2) shall prepare and make available for
flooding the land in Canada necessary for the storage res-
ervoir of the dam within a period consistent with the con-
struction schedule
(5) If a variation in the operation of the storage + -onsid-
ered by Canada to be of advantage to it the United States
of America shall, upon request, consult with Canada. If
the United States of America determines that the varia-
tion would not be to its disadvantage it shall vary the op-
eration accordingly
(6) The operation of the storage by the United States of
America shall be consistent with any order of approval
which may he in force from time to time relating to the
levels of Kootenay Lake made by the International Joint
Commission under the Boundary Waters Treaty, 1909
(7) Any obligation of Canada under this Article ceases if
the United States of America, having exercised the option,
does not commence construction of the dam in accordance
with the construction schedule.
(8) If the United States of America exercises the option it
shall commence full operation of the storage within seven
years of the date fixed in the construction schedule for
commencement of construction.
(9) If Canada considers that any portion of the land re-
ferred to in paragraph (4) is no longer needed for the pur
pose of this Article the United States of America and Can-
ada, at the request of Canada, shall consider modification
of the obligation of Canada in paragraph (4)
(10) If the Treaty is terminated before the end of the use
ful life of the dam Canada shall for the remainder of the
useful life of the dam continue to make available for the
storage reservoir of the dam any portion of the land made
available under paragraph (4) that is not required by Can-
62a
ada for purposes of diversion of the Kootenay River under
Article XI]]
ARTICLE XIll
Diversions
(1) Except as provided in this Article neither the United
States of America nor Canada shall, without the consent of
the other evidenced by an exchange of notes, divert for any
use, other than a consumptive use, any water from its
natural channel in a way that alters the flow of any water
as it crosses the Canada-United States of America bound
iry within the Columbia River basin
(2) Canada has the right, after the expiration of twenty
vears from the ratification date, to divert not more than
100,000 acre-feet of water a year from the Kootenay
River in the vicinity of Canal Flats, British Columbia, to
the headwaters of the Columbia River, provided that the
diversion does not reduce the flow of the Kootenay River
immediately downstream from the point of diversion below
the lesser of 200 cubic feet per second or the natural flow
(3) Canada has the mght, exercisable at any time during
the period commencing sixty years after the ratification
date and expiring one hundred years after the ratification
date, to divert to the headwaters of the Columba River
any water which, in its natural channel, would flow in the
Kootenay River across the Canada-United States of Amer
ica boundary, provided that the diversion does not reduce
the flow of the Kootenay River at the Canada-United
States of America boundary near Newgate, British Colum
bia, below the lesser of 2,500 cubic feet pet second or the
natural flow
(4) During the last twenty years of the period within which
Canada may exercise the right to divert described mn para
graph (3) the limitation on diversion ts the lesser of 1,000
cubic feet per second or the natural flow
63a
(5) Canada has the nght
(a) if the United States of America does not exercise the
option mm Article XI1I¢1), or
(b) if it 1s determined that the United States of Amer
ica, having exercised the option, did not commence
construction of the dam referred to in Article XII in
accordance therewith or that the United States of
America 1s in breach of the obligation in that Article
to commence full operation of the storage,
to divert to the headwaters of the Columbia River any wa
ter which, in its natural channel, would flow in the
Kootenay River across the Canada-United States of Amer
ica boundary, provided that the diversion does not reduce
the flow of the Kootenay River at the Canada-United
States of America boundary near Newgate, British Colum
bia, below the lesser of 1,000 cubic feet per second or the
natural flow
(6) If a variation in the use of the water diverted under
paragraph (2) is considered by the United States of Amer
ica to be of advantage to it Canada shall, upon request
consult with the United States of America. If Canada de
termines that the variation would not be to its disadvan
tage it shall vary the use accordingly
ARTICLE XIV
(1) The United States of America and Canada shall! each
as soon as possible after the ratification date, designate
entities and when so designated the entities are empow
ered and charged with the duty to formulate and carry out
the operating arrangements necessary to implement the
Treaty. Either the United States of America or Canada
may designate one or more entities. If more than one is
designated the powers and duties conferred upon the enti
ties by the Treaty shall be allocated among them in the
designation
64a
(2) In addition to the powers and duties dealt with specifi.
cally elsewhere in the Treaty the powers and duties of the
entities include
(a)
(h)
(c)
(d)
(i)
yy)
(k)
coordination of plans and exchange of information
relating to facilities to be used in producing and ob-
taining the benefits contemplated by the Treaty,
calculation of and arrangements for delivery of hy-
droelectric power to which Canada is entitled for
providing flood control,
calculation of the amounts payable to the United
States of America for standby transmission services,
consultation on requests for variations made pursu-
ant to Articles XI1(5) and XI1I1(6),
the establishment and operation of a hydrometeo-
rological system as required by Annex A,
assisting and cooperating with the Permanent En-
gineering Board in the discharge of its functions,
periodic calculation of accounts,
preparation of the hydroelectric operating plans and
the flood control operating plans for the Canadian
storage together with determination of the down
stream power benefits to which Canada ts entitled,
preparation of proposals to implement Article VIII
and carrying out any disposal authorized or ex-
change provided for therein,
making appropriate arrangements for delivery to
Canada of the downstream power benefits to which
Canada 1s entitled including such matters as load
factors for delivery, times and points of delivery, and
calculation of transmission loss,
preparation and implementation of detailed operat
ing plans that may produce results more advanta
geous to both countries than those that would arise
from operation under the plans referred to in An-
nexes A and B
65a
(3) The entities are authorized to make maintenance cur-
tailments. Except in case of emergency, the entity respon.
sible for a maintenance curtailment shall give notice to the
corresponding United States or Canadian entity of the cur-
tailment, including the reason therefor and the probable
duration thereof and shall both schedule the curtailment
with a view to minimizing its impact and exercise due dil
gence to resume full operation
(4) The United States of America and Canada may by an
exchange of notes empower or charge the entities with any
other matter coming within the scope of the Treaty.
ARTICLE XV
Permanent Engineering Board
(1) A Permanent Engineering Board is established consist-
ing of four members, two to be appointed by Canada and
two by the United States of America. The initial appoint-
ments shall be made within three months of the ratifica
tion date
(2) The Permanent Engineering Board shall
(a) assemble records of the flows of the Columbia River
and the Kootenay River at the Canada-United
States of America boundary;
(b) report to the United States of America and Canada
whenever there is substantial deviation from the
hydroelectric and flood control operating plans and
if appropriate include in the report recommenda-
tions for remedial action and compen: iory adjust-
ments;
(c) assist in reconciling differences concerning technical
or operational matters that may arise between the
entities,
(d) make periodic inspections and require reports as
necessary from the entities with a view to ensuring
that the objectives of the Treaty are being met;
bbda
(e) make reports to the United States of America and
Canada at least once a vear of the results being
achieved under the Treaty and make special reports
concerning any matter which it considers should be
brought to their attention:
investigate and report with respect to any other
matter coming within the scope of the Treaty at the
request of either the United States of America or
Canada
(3) Reports of the Permanent Engineering Board made in
the course of the performance of its functions under this
Article shall be prima facie evidence of the facts therein
contained and shall be accepted unless rebutted by other
evidence
i4) The Permanent Engineering Board shall comply with
directions, relating to its administration and procedures,
agreed upon by the United States of America.and Canada
as evidenced by an exchange of notes
States of America and Canada cannot resolve may be re-
ferred by either to the International Joint Commission for
decision
(2) If the International Joint Commission does not render
a decision within three months of the referral or within
such other period as may be agreed upon by the United
States of America and Canada, either may then submit
the difference to arbitration by written notice to the other
(3) Arbitration shall be by a tribunal composed of a mem-
ber appointed by Canada, a member appointed by the
United States of America and a member appointed jointly
by the United States of America and Canada who shall be
Chairman. If within six weeks of the delivery of a notice
under paragraph (2) ether the United States of America
or Canada has failed to appoint its member, or they are
67a
unable to agree upon the member who is to be Chairman,
either the United States of America or Canada may re
quest the President of the International Court of Justice to
appoint the member or members. The decision of a major
ity of the members of an arbitration tribunal shall be the
decision of the tribunal.
(4) The United States of America and Canada shall accept
as definitive and binding and shall carry out any decision
of the International Joint Commission or an arbitration
tribunal
(5) Provision for the administrative support of a tribunal
and for remuneration and expenses of its members shall
be as agreed in an exchange of notes between the United
States of America and Canada.
(6) The United States of America and Canada may agree
by an exchange of notes on alternative procedures for set-
tling differences arising under the Treaty, including refer
ence of any difference to the International Court of Justice
for decision
ARTICLE XVII
Restoration of Pre-Treaty Legal Status
(1) Nothing in this Treaty and no action taken or foregone
pursuant to its provisions shall be deemed, after its term:-
nation or expiration, to have abrogated or modified any of
the rights or obligations of the United States of America or
Canada under then existing international law, with re-
spect to the uses of the water resources of the Columbia
River basin.
(2) Upon termination of this Treaty, the Boundary Waters
Treaty, 1909, shall, if it has not been terminated, apply to
the Columbia River basin, except insofar as the provisions
of that Treaty may be inconsistent with any provision of
this Treaty which continues in effect
(3) Upon termination of this Treaty, if the Boundary Wa-
ters Treaty, 1909, has been terminated in accordance with
Article XIV of that Treaty, provisions of Article Il of
68a
that Treaty shall continue to apply to the waters of the Co-
lumbia River basin.
(4) if upon the termination of this Treaty Article Il of the
Boundary Waters Treaty, 1909, continues in force by vir-
tue of paragraph (3) of this Article the effect of Article [I of
that Treaty with respect to the Columbia River basin may
be terminated by either the United States of America or
Canada delivering to the other one year’s written notice to
that effect; provided however that the notice may be given
only after the termination of this Treaty.
(5) If, prior to the termination of this Treaty, Canada un-
dertakes works usable for and relating to a diversion of
water from the Columbia River basin, other than works
authorized by or undertaken for the purpose of exercising
a right under Article XIII or any other provision of this
Treaty, paragraph (3) of this Article shall cease to apply
one year after delivery by either the United States of
America or Canada to the other of written notice to that
effect
ARTICLE XVIII
Liability for Damage
(1) The United States of America and Canada shall be hi-
able to the other and shall make appropriate compensa-
tion to the other in respect of any act, failure to act, omis-
sion or delay amounting to a breach of the Treaty or of any
of its provisions other than an act, failure to act, omission
or delay occurring by reason of war, strike, major calamity,
act of God, uncontrollable force or maintenance curtail-
ment.
(2) Except as provided in paragraph (1) neither the United
States of America nor Canada shall be liable to the other
or to any person in respect of any injury, damage or loss
occurring in the territory of the other caused by any act,
failure to act, omission or delay under the Treaty whether
the injury, damage or loss results from negligence or oth-
erTwise
69a
(3) The United States of America and Canada, each to the
extent possible within its territory, shall exercise due dil
gence to remove the cause of and to mitigate the effect of
any injury, damage or loss occurring in the territory of the
other as a result of any act, failure to act, omission or de
lay under the Treaty.
(4) Failure to commence operation as required under Art:
cles 1V and XII is not a breach of the Treaty and does not
result in the loss of rights under the Treaty if the failure
results from a delay that is not wilful or reasonably avoid
able.
(5) The compensation payable under paragraph (1)
(a) in respect of a breach by Canada of the obligation to
commence full operation of a storage, shall be forfer
ture of entitlement to downstream power benefits
resulting from the operation of that storage, after
operation commences, for a period equal to the pe
riod between the day of commencement of operation
and the day when commencement should have oc
curred;
in respect of any other breach by either the United
States of America or Canada, causing loss of power
benefits, shall not exceed the actual loss in revenue
from the sale of hydroelectric power
ARTICLE XIX
Period of Treaty
(1) The Treaty shall come into force on the ratification
date.
(2) Either the United States of America or Canada may
terminate the Treaty other than Article XIII (except para
graph (1) thereof), Article XVII and this Article at any
time after the Treaty has been in force for sixty vears uf it
has delivered at least ten years written notice to the other
of its intention to terminate the Treaty
70a
(3) If the Treaty is terminated before the end of the useful
life of a dam built under Article XII then, notwithstanding
termination, Article XI] remains in force until the end of
the useful life of the dam
(4) If the Treaty is terminated before the end of the useful
life of the facilities providing the storage described in
Article [V(3) and if the conditions described therein exist
then, notwithstanding termination, Articles IV(3) and
Vi(4) and (5) remain in force until either the end of the
useful life of those facilities or until those conditions cease
to exist, whichever is the first to occur
ARTICLE XX
Ratification
The instruments of ratification of the Treaty shall be ex-
changed by the United States of America and Canada at
Ottawa, Canada
ARTICLE XXIl
Registration with the United Nations
In conformity with Article 102 of the Charter of the
United Nations, the Treaty shall be registered by Canada
with the Secretariat of the United Nations
This Treaty has been done in duplicate copies in the
English language
IN WITNESS WHEREOF the undersigned, duly authorized
by their respective Governments, have signed this Treaty
at Washington, District of Columbia, United States of
America, this 17th day of January, 1961
7la
FOR THE UNITED STATES OF AMERICA
DWIGHT D. EISENHOWER
President of the United States of America
CHRISTIAN A. HERTER
Secretary of State
ELMER F. BENNETT
Under Secretary of the Interior
FOR CANADA
JOHN G. DIEFENBAKER
Prime Minister of Canada
E. D. FULTON
Minister of Justice
A. D. P. HEENEY
Ambassador Extraordinary and Plenipotentiary
of Canada to the United States of America
ANNEX A
PRINCIPLES OF OPERATION
General
1. The Canadian storage provided under Article II will be
operated in accordance with the procedures described
herein.
2. A hydrometeorological system, including snow courses,
precipitation stations and stream flow gauges will be es-
tablished and operated, as mutually agreed by the entities
and in consultation with the Permanent Engineering
Board, for use in establishing data for detailed program-
ming of flood control and power operations. Hydrometeo-
rological information will be made available to the entities
in both countries for immediate and continuing use in
flood control and power operations.
3. Sufficient discharge capacity at each dam to afford the
desired regulation for power and flood control will be pro-
vided through outlet works and turbine installations as
mutually agreed by the entities. The discharge capacity
provided for flood control operations will be large enough
to pass inflow plus sufficient storage releases during the
evacuation period to provide the storage space required.
The discharge capacity will be evaluated on the basis of
full use of any conduits provided for that purpose plus one
half the hydraulic capacity of the turbine installation at
the time of commencement of the operation of storage un-
der the Treaty
4. The outflows will be in accordance with storage reser-
vation diagrams and associated criteria established for
flood control purposes and with reservoir-balance relation-
ships established for power operations. Unless otherwise
agreed by the entities the average weekly outflows shall
not be less than 3.000 cubic feet per second at the dam de-
scribed in Article I1(2)(a), not less than 5,000 cubic feet per
second at the dam described in Article I1(2)(b) and not less
than 1,000 cubic feet per second at the dam described in
Article I1(2)(c). These minimum average weekly releases
ida
may be scheduled by the Canadian entity as required for
power or other purposes
Flood Control
5. For flood contro] operation, the United States entity
will submit flood control operating plans which may con-
sist of or include flood control storage reservation dia-
grams and associated criteria for each of the dams. The
Canadian entity will operate in accordance with these dia-
grams or any variation which the entities agree will not
derogate from the desired aim of the flood control plan
The use of these diagrams will be based on data obtained
in accordance with paragraph 2. The diagrams will! con-
sist of relationships specifying the flood control storage
reservations required at indicated times of the year for
volumes of forecast runoff. After consultation with the
Canadian entity the United States entity may from time to
time as conditions warrant adjust these storage reserva
tion diagrams within the general limitations of flood con-
trol operation. Evacuation of the storages listed here-
under will be guided by the flood contro! storage reserva
tion diagrams and refill will be as requested by the United
States entity after consultation with the Canadian entity
The general limitations of flood control operation are as
follows
(a) The Dam described in Article Il(2)(a) — The reser-
voir will be evacuated to provide up to 80,000 acre
feet of storage, if required, for flood control use by
May | of each year
The Dam described in Article I1(2)(b) — The reser-
voir will be evacuated to provide up to 7,100,000
acre-feet of storage, if required, for flood control use
by May 1 of each year
The Dam described in Article Ll(2)(c) — The reservorr
will be evacuated to provide up to 700,000 acre-feet
of storage, if required, for flood control use by April
1 of each year and up to 1,270,000 acre-feet of stor-
age, if required, for flood contro! use by May |! of
each year
74a
(d) The Canadian entity may exchange flood control
storage provided in the reservoir referred to in sub-
paragraph (b) for additional storage provided in the
reservoir referred to in subparagraph (a) if the enti-
ties agree that the exchange would provide the same
effectiveness for control of floods on the Columbia
River at The Dalles, Oregon.
Power
6. For power generating purposes the 15,500,000 acre feet
of Canadian storage will be operated in accordance with
vperating plans designed to achieve optimum power gen-
eration downstream in the United States of America until
such time as power generating facilities are installed at
the site referred to in paragraph 5(a) or at sites in Canada
downstream therefrom.
7. Afcer at-site power is developed at the site referred to
in paragraph 5(a) or power generating facilities are placed
in operation in Canada downstream from that site, the
storage operation will be changed so as to be operated in
accordance with operating plans designed to achieve opti-
mum power generation at-site in Canada and downstream
in the United States of America and Canada, including
consideration of any agreed electrical coordination be-
tween the two countries. Any reduction in the down-
stream power benefits in the United States of America re-
sulting from that change in operation of the Canadian
storage shall not exceed in any one year the reduction in
downstream power benefits in the United States of Amer-
ica which would result from reducing by 500,000 acre-feet
the Canadian storage operated to achieve optimum power
generation in the United States of America and shall not
exceed at any time during the period of the Treaty the re-
duction in downstream power benefits in the United
States of America which would result from similarly re-
ducing the Canadian storage by 3,000,000 acre-feet.
8. After at-site power is developed at the site referred to
in paragraph 5(a) or power generating facilities are placed
In Operation in Canada downstream from that site, storage
4/oa
may be operated to achieve optimum generation of power
in the United States of America alone if mutually agreed
by the entities in which event the United States of Amer
ica shall supply power to Canada to offset any reduction in
Canadian generation which would be created as a result of
such operation as compared to operation to achieve opti-
mum power generation at-site in Canada and downstream
in the United States of America and Canada. Similarly,
the storage may be operated to achieve optimum genera-
tion of power in Canada alone if mutually agreed by the
entities in which event Canada shall supply power to the
United States of America to offset any reduction in United
States generation which would be created as a result of
such operation as compared to operation to achieve opti-
mum power generation at-site in Canada and downstream
in the United States of America and Canada.
9. Before the first storage becomes operative, the entities
will agree on operating plans and the resulting down-
stream power benefits for each year until the total of
15,500,000 acre-feet of storage in Canada hecomes opera-
tive, In addition, commencing five years before the total of
15,500,000 acre-feet of storage is expected to become op-
erative, the entities will agree annually on operating plans
and the resulting downstream power benefits for the sixth
succeeding year of operation thereafter. This procedure
will continue during the life of the Treaty, providing to
both the entities, in advance, an assured plan of operation
of the Canadian storage and a determination of the result-
ing downstream power benefits for the next succeeding
five years.
76a
— B
OWNSTREAM POWER BENEFITS
l. The Se ecieeeeie power benefits in the United States of
America attributable to operation in accordance with An
nex A of the storage provided by Canada under Article I
will be determined in advance and will be the estimated
increase in dependable hydroelectric capacity in kilowatts
for agreed critical stream flow periods and the increase in
average annual usable hydroelectric energy output in
kilowatt hours on the basis of an agreed period of stream
flow record
2. The dependable hydroelectric capacity to be credited to
Canadian storage will be the difference between the aver-
age rates of generation in kilowatts during the appropriate
critical stream flow periods for the United States of Amer-
ica base system, consisting of the projects listed in the ta-
ble, with and without the addition of the Canadian stor-
age, divided by the estimated average critica! period load
factor. The capacity credit shall not exceed the difference
between the capability of the base system without Cana.
dian storage and the maximum feasible capability of the
base system with Canadian storage, to supply firm load
during the critical stream flow periods
3. The increase in the average annual usable hydroelectric
energy will be determined by first computing the differ-
ence between the available hydroelectric energy at the
United States base system with and without Canadian
storage. The entities will then agree upon the part of
available energy which is usable with and without Cana-
dian storage, and the difference thus agreed will be the
increase in average annual usable hydroelectric energy
Determination of the part of the energy which is usable
will include consideration of existing and scheduled
transmission facilities and the existence of markets capa
ble of using the energy on a contractual basis similar to
the then existing contracts. The part of the available en
ergy which ts considered usable shall be the sum of
(a) the firm energy
a
iia
(b) the energy which can be used for thermal power
displacement in the Pacific Northwest Area as de-
fined in Paragraph 7, and
the amount of the remaining portion of the available
energy which is agreed by the entities to be usable
and which shall not exceed in any event 40% of that
remainder
4. An initial determination of the estimated downstream
power benefits in the United States of America from Ca-
nadian storage added to the United States base system
will be made before any of the Canadian storage becomes
operative. This determination will include estimates of
the downstream power benefits for each year until the to
tal of 15,500,000 acre-feet of Canadian storage becomes
operative
5. Commencing five years before the total of 15,500,000
acre-feet of storage is expected to become operative, esti-
mates of downstream power benefits will be calculated an
nually for the sixth succeeding year on the basis of the as-
sured plan of operation for that year.
6. The critical stream flow period and the details of the
assured plan of operation will be agreed upon by the enti
ties at each determination. Unless otherwise agreed upon
by the entities, the determination of the downstream
power benefits shall be based upon stream flows for the
twenty year period beginning with July 1928 as contained
in the report entitled Modified Flows at Selected Power
Sites — Columbia River Basin, dated June 1957. No retro
active adjustment in downstream power benefits will be
made at any time during the period of the Treaty. No re
duction in the downstream power benefits credited to Ca
nadian storage will be made as a result of the load esti
mate in the United States of America, for the year for
which the determination is made, being less than the load
estimate for the preceding year
7. In computing the increase in dependable hydroelectric
capacity and the increase in average annual hydroelectric
energy, the procedure shall be in accordance with the
78a
three steps described below and shall c:icompass the loads
of the Pacific Northwest Area. The Pacific Northwest Area
for purposes of these determinations shall be Oregon,
Washington, Idaho and Montana west of the Continental
Divide but shall exclude areas served on the ratification
date by the California Oregon Power Company and Utah
Power and Light Company
Step |
The system for the period covered by the estimate will
consist of the Canadian storage, the United States base
system, any thermal installation operated in coordination
with the base system, and additional hydroelectric projects
which will provide storage releases usable by the base sys-
tem or which will use storage releases that are usable by
the base system. The installations included in this system
will be those required, with allowance for adequate re-
serves, to meet the forecast power load to be served by this
system in the United States of America, including the es-
timated flow of power at points of inter-connection with
adjacent areas, subject to paragraph 3, plus the portion of
the entitlement of Canada that is expected to be used in
Canada. The capability of this system to supply this load
will be determined on the basis that the system will be op-
erated in accordance with the established operating proce-
dures of each of the projects involved
Step Il
A determination of the energy capabilhty will be made
using the same thermal! installation as in Step |, the
United States base system with the same installed capac-
ity as in Step | and Canadian storage
Step II)
A similar determination of the energy capability will be
made using the same thermal! installation as in Step I and
the United States base system with the same installed ca-
pacity as in Step |
8. The downstream power benefits to be credited to Cana
dian storage will be the differences between the determi-
79a
nations in Step II and Step II! in dependable hydroelectric
capacity and in average annual usable hydroelectric en-
ergy, made in accordance with paragraphs 2 and 3
S. Pk. Plathead
Plathead
Clark Pork
Clark Pork
Clark Pork
> =
& 883
Pend Oreille
Pend Oreille
Columbia
Columbie
Columbia
SN
S888 888 Bau 8888 88888
AD @ ww row
ey ®
Columbia
Columbia
Columbia
Columbia
wn
ese
@
.**
3 eres
Séé~
S
% 8
o }
_
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w
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, BREF SB
z
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=
=
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=
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loo)
Columbie
Columbia
Columbia
Columb>is
$235 ¥
Kootenay : 673,000 - - - . -
Chelan 676,000 393 : 96 , 000
: 223,000 - a " . ~
WTAL 2% PROJECTS 13,.323,000(4) 3128 166 11,598,800 268 19,876,6
———
The Welle project is not presently under construction; wen this project or any other project on the main stem of the
Columbia River is completed, they will be integral componente of the base systen.
Tmhecludes two 15,500 Kilowatt unite for fish attraction water.
iy ay t the # Ho rvoir storage will &
deterwini the base sysetes bilities with and withou ian sto e ree rese
bimited to 3, , 000 peve-feck 1 full pool elevation of 3ae0 Feet} ant the 0 lee project will not include
the effect of adding flashboards, limiting the storage to 5,072,000 acre-feet (mormal full pool elevation of 1268 feet)
The total usable storage of the base systee as so adjusted Will be 13,000,000 acre-feet.
Sila
WHEREAS the Senate of the United States of America by
their resolution of March 16, 1961. two-thirds of the Sena
tors present concurring therein, did advise and consent to
the ratification of the aforesaid treaty.
WHEREAS the aforesaid treaty was duly ratified by the
President of the United States of America on March 23
1961, in pursuance of the aforesaid advice and consent of
the Senate, and was duly ratified on the part of Canada
WHEREAS it is provided in Article XIX of the aforesaid
treaty that the treaty shall come into force on the ratifica
tion date and in Article XX of the aforesaid treaty that the
instruments of ratification shall be exchanged at Ottawa
AND WHEREAS the respective instruments of ratification
of the aforesaid treaty were duly exchanged at Ottawa on
September 16, 1964 by the respective Plenipotentiaries of
the United States of America and Canada
NOW, THEREFORE, be it known that |. Lyndon B. John
son, President of the United States of America, do hereby
proclaim and make public the aforesaid treaty to the end
that the said treaty and each and every article and claus
thereof may be observed and fulfilled, on and after Sep
tember 16, 1964, with good faith by the United States of
America and by the citizens of the United States of Amer
ica and all other persons subject to the jurisdiction thereof
IN TESTIMONY WHEREOF, | have hereunto set my hand
and caused the Seal of the United States of America to be
affixed .
DONE at the Internationa! Peace Arch, Blaine, Washing
ton. this sixteenth day of September in the vear of our
Lord one thousand nine hundred sixty-four and of the In
dependence of the United States of America the one hun
dred eighty-ninth
[Seal Omitted]
LYNDON BKB. JOHNSON
By the President
DEAN RUSK
Secretary of State
Bla
The Canadian Secretary of State for External Affairs
to the Secretary of State
THE SECRETARY OF STATE FOR EXTERNAL AFFAIRS
CANADA
2, 1964
January 2
SIR
| have the honour to refer to discussions which have
been held between representatives of the Government of
Canada and of the Government of the United States of
America regarding the Treaty between Canada and the
United States of America relating to cooperative develop
ment of the water resources of the Columbia River Basin
signed at Washington on January 17, 1961. On the basis
of these discussions, the Government of Canada under-
stands that the two Governments have agreed to the terms
of the attached Protocol
| should like to propose that, if agreeable to your Gov-
ernment, this Note together with the Protocol attached
thereto and your reply, shall constitute an agreement be-
tween our two Governments relating to the carrying out of
the provisions of the Treaty with effect from the date of
the exchange of instruments of ratification of the Treaty
Accept, Sir, the renewed assurances of my highest con
sideration
PAUL MARTIN
Secretary of State
for External Affairs
The Honourable
DEAN RUSK
Secretary of State of the
United States of America,
Washington
Sa
ANNEX TO EXCHANGE OF NOTES DATED
JANUARY 22, 1964 BETWEEN THE GOVERNMENTS
OF CANADA AND THE UNITED STATES
DING THE COLUMBIA RIVER TREATY
PROTOCOL
1. if the United States entity should call upon Canada to
operate storage in the Columbia River Basin to meet flood
control needs of the United States of America pursuant to
Article [V(2)(b) or Article [V(3) of the Treaty. such call
shall be made only to the extent necessary to meet forecast
flood control needs in the territory of the United States of
America that cannot adequately be met by flood control
facilities in the United States of America in accordance
with the following conditions
(1) Unless otherwise agreed by the Permanent Engineer
ing Board, the need to use Canadian flood contro! fa
cilities under Article [V(2)(b) of the Treaty shal! be
considered to have arisen only in the case of potential
floods which could result in a peak discharge in excess
of 600,000 cubic feet per second at The Dalles, Oregon
assuming the use of all related storage in the United
States of America existing and under construction in
January 1961, storage provided by any dam con
structed pursuant to Article XII of the Treaty and the
Canadian storage described in Article 1V(2)(a) of the
Treaty.
The United States entity will call upon Canada to op
erate storage under Article [V(3) of the Treaty only to
control potential floods in the United States of Amer
ica that could not be adequately centrolled by all the
related storage facilities in the United States of Amer
ica existing at the expiration of 60 years from the rat)
fication date but in no event shall Canada be required
to provide any greater degree of flood contro! under
Article [V(3) of the Treaty than that provided for un
der Article 1V(2) of the Treaty
S4a
(3) A call shall be made only if the Canadian entity has
been consulted whether the need for flood control is, or
is likely to be, such that it cannot be met by the use of
flood control facilities in the United States of America
in accordance with subparagraphs (1) or (2) of this
paragraph. Within ten days of receipt of a call, the
Canadian entity will communicate its acceptance, or
its rejection or proposals for modification of the call,
together with supporting considerations. When the
communication indicates rejection or modification of
the call the United States entity will review the situa-
tion in the light of the communication and subsequent
developments and will then withdraw or modify the
call if practicable. In the absence of agreement on the
call or its terms the United States entity will submit
the matter to the Permanent Engineering Board pro-
vided for under Article XV of the Treaty for assistance
as contemplated in Article XV(2)ic) of the Treaty. The
entities will be guided by any instructions issued by
the Permanent Engineering Board. If the Permanent
Engineering Board does not issue instructions within
ten days of receipt of a submission the United States
entity may renew the call for any part or all of the
storage covered in the original call and the Canadian
entity shall forthwith honour the request
2. In preparing the flood control operating plans in accor-
dance with paragraph 5 of Annex A of the Treaty, and in
making calls to operate for flood control pursuant to Arti-
cle 1V(2)(b) and Article I'V(3) of the Treaty, every effort will
be made to minimize flood damage both in Canada and the
United States of America
3. The exchange of Notes provided for in Article VIII(1) of
the Treaty shall take place contemporaneously with the
exchange of the Instruments of Ratification of the Treaty
provided for in Article XX of the Treaty
4.(1) During the period and to the extent that the sale of
Canadas entitlement to downstream power benefits
within the United States of America as a result of an
Soa
exchange of Notes pursuant to Article VIII(1) of the
Treaty relheves the United States of America of its
obligation to provide east-west standby transmission
service as called for by Article X(1) of the Treaty,
Canada is not required to make payment for the
east-west standby transmission service with regard
to Canada’s entitlement to downstream power ben
fits sold in the United States of America
(2) The United States of America is not entitled to any
payments of the character set out in subparagraph
(1) of this paragraph in respect of that portion of
Canada's entitlement to downstrea.n power benefits
delivered by the United States of America to Canada
at any point on the Canada- United States of America
boundary other than at a point near Oliver, British
Columbia, and the United States of America is not
required to provide the east-west standby transmis
sion service referred to in subparagraph (1) of this
paragraph in respect of the portion of Canada’s enti-
tlement to downstream power benefits which is so
delivered
5. Inasmuch as control of historic streamflows of “he
Kootenay River by the dam provided for in Article XI1(1) of
the Treaty would result in more than 200,000 kilowatt
years per annum of energy benefit downstream in Canada,
as well as important flood contro! protection to Canada,
and the operation of that dam is therefore of concern to
Canada, the entities shall, pursuant to Article XIV(2)(a) of
the Treaty, cooperate on a continuing basis to coordinate
the operation of that dam with the operation of hydroeiec
tric plants on the Kootenay River and elsewhere in Can
ada in accordance with the provisions of Article X11(5) and
Article X11(6) of the Treaty
6.(1) Canada and the United States of Ameria are in
agreement that Article XII1I(1) of the Treaty provides
to each of them a right to divert water for a con
sumptive use
86a
Any diversion of water from the Kootenay River
when once instituted under the provisions of Article
XIII of the Treaty is not subject to any limitation as
to time.
7. As contemplated by Article [V(1) of the Treaty, Canada
shail operate the Canadian stornge in accordance with
Annex A and hydroelectric operating plans made there-
under. Also, as contemplated by Annexes A and B of the
Treaty and Article XIV(2)(k) of the Treaty, these operating
plans before they are agreed to by the entities will be con-
ditioned as follows:
(1) As the downstream power benefits credited to Cana-
dian storage decrease with time, the storage required
to be operated by Canada pursuant to paragraphs 6
and 9 of Annex A of the Treaty, will be that required
to produce those benefits
The hydroelectric operating plans, which will be
based on Step | of the studies referred to in para-
graph 7 of Annex B of the Treaty, will provide a
reservoir-balance relationship for each month for the
whole of the Canadian storage committed rather
than a separate relationship for each of the three
Canadian storages. Subject to compliance with any
detailed operating plan agreed to by the entities as
permitted by Article XIV(2)(k) of the Treaty, the
manner of operation which will achieve the specific
storage or release of storage called for in a hydroelec-
tric Operating plan consistent with optimum storage
use will be at the discretion of the Canadian entity.
Optimum power generation at-site in Canada and
downstream in Canada and the United States of
America referred to in paragraph 7 of Annex A of the
Treaty will include power generation at-site and
downstream in Canada of the Canadian storages re-
ferred to in Article I1(2) of the Treaty, power genera-
tion in Canada which is coordinated therewith,
downstream power benefits from the Canadian stor-
age which are produced in the United States of
Sila
America and measured under the terms of Annex B
of the Treaty, power generation in the Pacific
Northwest Area of the United States of America and
power generation coordinated therewith
8 The determination of downstream power benefits pur
suant to Annex B of the Treaty, in respect of each year un
til the expiration of thirty years from the commencement
of full operation in accordance with Article IV of the
Treaty of that portion of the Canadian storage described in
Article II of the Treaty which is last placed in full opera
tion, and thereafter until otherwise agreed upon by the
entities, shall ne based upon stream flows for the thirty
year period beginning July 1928 as contained in the report
entitled “Extension of Modified Flows Through 1958 — Co
lumbia River Besin” and dated June 1960, as amended
and suppleme:ted to June 29, 1961, by the Water Man
agement Subcommittee of the Columma Basin Inter
Agency Committee
911) Each load used in making the determinations re
quired by Steps I and III of paragraph 7 of Annex B
of the Treaty shal! have the same shape as the load
of the Pacific Northwest area as that area is defined
in that paragraph
The capacity credit of Canadian storage shall not ex
ceed the difference between the firm load carrying
capabilities of the projects and installations included
in Step Il of paragraph 7 of Annex B of the Treaty
and the projects and installations included in Step
iil of paragraph 7 of Annex B of the Treaty
10. in making all determinations required by Annex B of
the Treaty the loads used shall include the power required
for pumping water for consumptive use into the Banks
Equalizing Reservoir of the Columbia Basin Federal Re
lamation Project but mention of this particular load ts not
intended in any way to exclude from those loads any use of
power that would normally be part of such loads
11. In the event operation of any of the Canadian storages
is commenced at a time which would result mn the United
Ra
States of America receiving flood protection for periods
longer than those on which the amounts of flood contro!
payments to Canada set forth in Article V1(1) of the Treaty
are based, the United States of America and Canada shall
consult as to the adjustments, if any, in the flood control
payments that may be equitable in the light of all relevant
factors. Any adjustment would be calculated over the
longer period or periods on the same basis and in the same
manner as the calculation of the amounts set forth in Arti-
cle Vi{l) of the Treaty. The consultations shal! begin
promptly upon the determination of definite dates for the
commencement of operation of the Canadian storages
12. Canada and the United States of America are in
agreement that the Treaty does not establish any general
principle or precedent applicable to waters other than
those of the Columbia River Basin and does not detract
from the application of the Boundary Waters Treaty, 1909,
to other waters
89a
The Secretary of State to the Canadian
Secretary of State for External Affairs
DEPARTMENT OF STATE
WASHINGTON
January 22, 1964
SIR
| have the honor to refer to your note dated January 22,
1964, together with the Annex thereto regarding the
Treaty between Canada and the United States of America
relating to cooperative development of the water resources
of the Columbia River Basin signed at Washington on
January 17, 1961
[ wish to advise you that the Government of the United
States of America agrees that your note with the Annex
thereto, together with this reply, shall constitute an
agreement between our two Governments relating to the
carrying out of the provisions of the Treaty with effect
from the date of the exchange of instruments of ratifica-
tion of the Treaty
Accept, Sir, the renewed assurances of my highest con-
sideration
DEAN RUSK
The Honorable
PAUL MARTIN, P.C., Q.C.,
Secretary of State for External Affairs,
Ottawa
“Wa
DEPARTMENT OF STATI
WASHINGTON
January 22, 1964
SIR
| have the honor to refer to the discussions which have
been held between representatives of the Government of
Canada and of the Government of the United States of
America regarding a sale of Canada’s entitlement to
downstream power benefits under the Treaty between
Canada and the United States of America relating to « oop
erative development of the water resources of the Colum
hia River Basin, signed on January 17. 196)
On the basis of these discussions my Government un
derstands that the two Governments recognize that it
would be in the public interest of both countries if Can
ada’s entitlement to downstream power benefits could be
disposed of, as contemplated by Article VIII of the Treaty
in accordance with general conditions and limits similar to
those set out in detail in the attachment hereto, and fur
ther, that before such a disposition can be concluded an
confirmed by the two Governments, additional steps must
be taken in each country. Therefore. in furtherance of this
aim, it is understood the two Covernments are agreed
that
a) the Government of the United States will use its
best efforts to arrange for disposition of Canadas
entitiement to downstream power benefits within
the United States of America in accordance with the
general conditions and limits set forth in the at
tachment, and
hb) the Government of Canada will use its beat etiorts
to accomplish all those things which are considered
necessary and preliminary to ratification of the
Treaty as quickly as possible, including any ar
rangements for implementation and acceptance of
the general conditions and limits set forth in the at
tachment
| should ike to propose that ta
greeabie to our (rv
ernment this note
together with the attachment and your
reply shall constitute an agreement by our
tsovernments
reiating t the 'T reaty
Accept, Sir, the renewed
assurances of my highest con
sideration
DEAN RUSK
The Honorable
PAUL MARTIN, P.C., QC
Secretary of State for External Affairs
(tau +i
Ya
ATTACHMENT RELATING TO TERMS OF SALE
A. The disposition shall consist of the downstream power
benefits to which Canada is entitled under the Treaty,
other than Canada’s entitlement to downstream power
benefits resulting from the construction or operation
of a project described in Article IX of the Treaty, and
shall be by way of a contract of sale authorized in ac-
cordance with Article VIII of the Treaty between the
British Columma Hydro and Power Authority and a
single Purchaser containing provisions mutually satis-
factory to the parties to the contract but shall be sub-
yect to and be operative in accordance with the follow-
ing general conditions and limits
t.(a) The storages described in Article Il of the
“
Treaty shall be fully operative for power pur-
poses in accordance with the following sched-
ule
Storage described im Article [1(2)c) —- approx-
mately 1,400,000 acre feet on April 1, 1968,
Storage described in Article [1(2)(b) — approxt-
mately 7,100,000 acre feet on April 1, 1969,
Storage described in Article I1(2)a) — approxi
mately 7,000,000 acre feet on April 1, 1973
(ib) The period of sale of the entitlement allocated
to each of the storages shall terminate and ex
pire thirty years from the date on which that
storage is required to be vully operative for
power purposes in accordance with the sched-
ule in subparagraph (a) of this paragraph
(c) In the event any storage is not fully operative
in accordance with the schedule in subpara-
graph (a) of this paragraph or if, during the pe
riod of sale, the storage is not operated as re-
quired by the hydroelectric operating plans
agreed upen im accordance with the Treaty, as
modified by any detailed operating plan agreed
upon im accordance with Article XIV(2)(k) of
93a
the Treaty, and the Canadian entitlement is
thereby reduced, the British Columba Hvdro
and Power Authority shall pay the Purchaser
an amount equal to the cost it would have to
incur to replace that part of the reduction in
the Canadian entitlement which the vendees of
the Purchaser could have used other than costs
that could have been avoided had every rea-
sonable effort to mitigate losses been made by
the Purchaser, the United States entity and
the owners of non-federal dams on the Colum
bia River in the United States of America. Al.
ternatively, the British Columbia Hydro and
Power Authority may, at its option, supply
power to the Purchaser in an amount which as-
sures that the Purchaser receives the capacity
and energy which would have constituted that
part of the reduction in the Canadian entitle
ment that the vendees of the Purchaser could
have used if there had been no default, to
gether with appropriate adjustments to reflect
transmission costs in the United States of
America, delivery to be made when the loss of
power would otherwise have occurred.
lf the assurance described in paragraph B.5. of
this attachment ts given to the Purchaser, the
United States entity may succeed to all the
rights of the Purchaser and its vendees to re
ceive the entire Canadian entitlement, or that
part that could be used by the vendees,. and to
be compensated by British Columbia Hydro
and Power Authority in the event of non
receipt thereof The United States entity
agrees that before it purchases more costly
power from any third party for the purpose of
supplying the necessary amount of the Cana
dian entitlement to the Purchaser, it will first
cause to be delivered to the Purchaser, or for
Y4a
its account, any available surplus capacity or
ener.’ from the United States Federal Colum-
bia River System and compensstion to the
United States entity because of such deliveries
shall be computed by applying the then appli-
cable rate schedules of the Bonneville Power
Administration to the deliveries
In the event of disagreement, determination of
compensation in money or power due under
this paragraph shall be resolved by arbitration
and shall be confined to the actual loss in-
curred in accordance with the principles in this
paragraph
(d) For the purpose of allocating downstream
power benefits among the Treaty storages from
April 1, 1998 to April 1, 2003, the percentage of
downstream power benefits allocated to each
Treaty storage shall be the percentage of the
total of the Treaty storages provided by that
storage
2. For the period of the saie the British Columina Hy-
dro and Power Authority shall operate and main-
tain the Treaty storages in accordance with the
provisions of the Treaty
3. (a) The purchase price of the entitlement shall be
$254,400,000, in United States funds as of Oc
tober 1, 1964. subject to adjustment, in the
event of an earher payment of all or part
thereof, to the then present worth, at a dis-
count rate of 4 1/2 percent per annum
(b) The purchase price shall be paid to Canada
contemporaneously with the exchange of ratifi-
cations of the Treaty and shall be applied to-
wards the cost of constructing the Treaty pro-
jects through a transfer of the purchase price
by Canada to the Government of British Co-
lumbia, pursuant to arrangements deemed sat-
istactory to Canada, to be entered into between
4
95a
Canada and the Government of British Colum
bia
If, during the period of the sale, there is any reduc-
tion in Canada’s entitlement to downstream power
benefits which results from action taken by the Ca
nadian entity pursuant te paragraph 7 of Annex A
of the Treaty, the British Columbia Hydro and
Power Authority shall, by supplying power to the
Purchaser, or otherwise as may be agreed, offset
that reduciion in a manner so that the Purchaser
will be compensated therefor
The Purchaser shall have and may exercise the
nights of the British Columma Hydro and Power
Authority relating to the negotiation and conclusion
with the United States entity, of proposals relating
to the exchanges authorized by Article VI11(2) of
the Treaty with respect to any portion of Canada's
entitlement to downstream power benefits sold to
the Purchaser
B. The Notes to be exchanged pursuant to Article VII1I(1)
of the Treaty shal! contain, inter alia, provisions tn
corporating the following requirements
l
As soon as practicable after start of construction
of each Treaty project the Canadian and United
States entities shall agree upon a program for fill
ing the storage provided by the project. The fill
ing program shall have the objective of having the
storages described in Article [1(2)(c) and Article
11(2)(b) of the ‘Treaty full by September | following
the date when the storages become fully operative
and the storage provided by the dam mentioned in
Article 11(2)a) of the Treaty full to 15 millon
acre-feet by September 1, 1975. This objective
shall be reflected in the hydroelectric operating
plans and shall take into account generating re
quirements at-site and downstream in Canada
and the United States of America to meet loads
ho
96a
In the event the United States of America be-
comes entitled to compensation in respect of a
breach of the obligation under Article IV(6) of the
Treaty to commence full operation of a storage,
compensation payable to the United States of
America under Article XVIII(5)(a) of the Treaty
shall be made in an amount equal to 2.70 mills
per kilowatt-hour, and 46 cents per kilowatt of
dependable capacity for each month or fraction
thereof, in United States funds, for and in lieu of
the power which would have been forfeited under
Article XVILI(5)(a) of the Treaty if Canada’s enti-
tlement to downstream power benefits had not
been sold in the United States of America. Alter-
natively, Canada may, at its option, supply capac-
ity and energy to the United States entity in an
amount equal to that which would have been for-
feited, together with appropriate adjustments to
reflect transmission costs in the United States of
America, delivery to be made when the loss would
otherwise have occurred.
A diminution of Canada’s entitlement to down-
stream power benefits sold in the United States of
America which is directly attributable to a failure
to comply with paragraph A. l(a) or paragraph A.2
of this attachment, in the absence of compensa-
tion therefor by the British Columbia Hydro and
Power Authority, constitutes a breach of the
Treaty by Canada and Article XVIII(5) of the
Treaty and the exculpatory provisions in Articie
XVIII of the Treaty do not apply to such breach.
Compensation or replacement of power as speci-
fied in paragraph A.1(c) of this attachment shall
be made by Canada and shall be accepted by the
United States of America as complete satisfaction
of Canada’s liability under this paragraph.
For any year in which Canada’s entitlement to
downstream power benefits is sold in the United
9Y7a
States of America, the United States entity may
decide the amount of the downstream power bene
fits for purposes connected with the disposition
thereof in the United States of America. This au
thorization, however, shall not affect the rights or
relieve the obligations of the Canadian and
United States entities relating to joint activities
under the provisions of Article XIV and Annexes
A and B of the Treaty; nor shall it apply to deter
mination of compensation provided for in para
graph A.l(c) and paragraph B.2 of this attach
ment.
If necessary to accomplish the sale of Canada’s
entitlement to downstream power benefits in a
cordance with this attachment, the United States
entity shall assure unconditionally the delivery to
or for the account of the Purchaser, by appropriate
exchange contracts, of an amount of power agreed
between the United States entity and the Pur
chaser to be the equivalent of the entitlement dur
ing the period of the sale
Canada shail designate the British Columbia Hydre
and Power Authority as the Canadian entity for the
purposes of Article XIV(1) of the Treaty
Ga
The Canadian Secretary of State for External Affairs
to the Secretary of State
THE SECRETARY OF STATE FOR EXTERNAL AFFAIRS
CANADA
January 22, 1964
SIR,
I have the honour to refer to your Note dated January
22. 1964, together with the attachment thereto regarding
the Treaty between Canada and the United States of
America relating to cooperative development of the water
resources of the Columbia River Basin signed at Washing-
ton on January 17, 1961
| wish to advise you that the Government of Canada
ayvrees that your Note with the attachment thereto, to-
gether with this reply, shall constitute an agreement be-
tween our two Governments relating to the Treaty
Accept, Sir, the renewed assurances of my highest con-
sideration
PAUL MARTIN
Secretary of State
for External Affairs
The Honourable
DEAN R
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