Reply Brief — Edison Electric Institute v. Piedmont Environmental Council (No. 09-343)

Suprem

r

e Court, Us.

DEC 2 3 2009

OFFICE OF THE CLERK

No. 09-343

IN THE

Supreme Court of the United States

EDISON ELECTRIC [NSTITUTE; AMERICAN PUBLIC POWER

ASSOCIATION; NATIONAL RURAL ELECTRIC COOPERATIVE

ASSOCIATION; AMERICAN WIND ENERGY ASSOCIATION;

ALLEGHENY POWER; TRANS-ALLEGHENY INTERSTATE

LINE CO.; AND SAN DIEGO GAS & ELECTRIC CoO.,

Petitioners,

Vv.

PIFDMONT ENVIRONMENTAL COUNCLL, ET AL.,

Respondents,

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fourth Circuit

REPLY BRIEF FOR PETITIONERS

Brian R. Gish Jeffrey L. Fisher

DAVIS WRIGHT TREMAINE Counsel of Record

LLP DAVIS WRIGHT TREMAINE LLP

1919 Pennsylvania Avenue, 1201 Third Avenue,

NW, Suite 200 Suite 2200

Washington, DC 20006 Seattle, WA 98101

(202) 973-4200 (206) 622-3150

(Additional counsel listed on inside cover)

LEGAL PRINTERS 1 LC, Washington DC e 202-747-2400 e legalpnnters.com

Edward H. Comer Richard Meyer

Vice President and General Senior Regulatory Counsel

Counsel NATIONAL RURAL

Henri D. Bartholomot ELECTRIC COOPERATIVE

Director, Regulatory Legal ASSOC.

Issues 4301 Wilson Blvd.

EDISON ELECTRIC Arlington, VA 22203

INSTITUTE

701 Pennsylvania Ave., NW __ E. Gregory Barnes

Washington, DC 20004 Attorney

SAN DIEGO GAS &

Susan N. Kelly ELECTRIC COMPANY

Vice President of Policy 101 Ash Street

Analysis and General San Diego, CA 92101

Counsel

AMERICAN PUBLIC POWER Gene Grace

ASSOCIATION Senior Counsel

1875 Connecticut Ave., NW AMERICAN WIND ENERGY

Suite 1200 ASSOCIATION

Washington, DC 20009 1501 M St. NW, Suite 1000

Washington, DC 20005

Alden L. Atkins

VINSON & ELKINS, LLP

The Willard Office Building

1455 Pennsylvania Ave., NW

Suite 600

Washington, DC 20004

Counsel for Allegheny

Power and Trans-Allegheny

Interstate Line Company

TABLE OF CONTENTS

TABLE OF AUT HRFiie mee perteitetinepestecseensiccessescesccee. ll

REPLY BRIEF FOR PETITIONERS. .......................:. l

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TABLE OF AUTHORITIES

FEDERAL CASES

Atlantic City Elec. Co. v. FERC,

BAD Fe BO 0. Ce. BO vin riveivvertnascsaxievsonnovess 8

Castro v. U.S.,

Oy UE FI vs canned cc docsoaehexchenvecushanscs 11

Chevron U.S.A. v. Nat. Resources Det.

Council,

BET Oe Ae ceed Bee 2

Clean Air Implementation Project v. EPA,

150 F.3d 1200 (D.C. Cir. 1998)...........:0..csccecceseees 11

Coeur Alaska, Inc. v. Southeast Alaska Cons.

Coun.,

De Oe Ee, i ais os ces conecssivvasacicesssscaseeea 2

Entergy Corp. v. Riverkeeper, Inc.,

Re Ee Oe, ee Ge rekcinciiecsseavaraacdcssicachacvisicees 2

Global Crossing Telecom., Inc. v. Metrophones

Tclecom., Inc.,

TE EB Me PO vaaknscen cats vccivacdeasscneeseonveseususiersees 2

GTE South, Inc. v. Morrison,

100 F.3d T3EB COG Cie, LODO) soo vceiincccccccccccoencsscsevsss 8

Kansas v. Marsh,

BG ED, Be Re sven cin ins decrees 11

il

Lawrence v. Chater,

Ne Ny IEE ocx scccteneeacanvanteosanceacknavencens 12

Nat! Cable & Telecom. Ass'n v. Brand X

Internet Servs.,

SN re Pe ox viccn yc desc siieseernénonsnancensvovciavaseis 10

New York v. FERC,

BO Fe eS cn. cca ccusnigvsceiicacecaaearens 2, 10-11

Pactitic Gas & Elec. Co. v. FERC.

633 F.3d G20 W.C. Civ. BOOB)........ccecccccsosecscecscees 10

Penn-Central Merger and N&W Inclusion

Cases, 389 U.S. 486 (19GB) .............0..ccccccescecccesccees s

Powerex Corp. v. Reliant Energy Servs.,

By UB, 21 TB CI iivincdnccesscacvececccncccsccscccescversccess 11

Summers v. Karth Island Inst.,

Re Bs Gi Fe ima skcsccoaccaceccsccssectescsssccns 11,12

US West Comm., Inc. v. Hamilton,

BSE FB LORD CG Civ. BIE voce cccsiacscckcccsesssaseccess: 8

FEDERAL STATUTES

16 U.S.C. § 8624p (“EPAct” § 246).............0...c000s. passim

re cease deces ds ci ciaepracnsisaawanesnerteacesteiad 7

REPLY BRIEF FOR PETITIONERS

Respondents attempt to downplay the

significance of this case and argue that the Fourth

Circuit correctly held that Section 216 of EPAct 2005

does not grant FERC backstop siting authority over

state denials of applications to construct electric

transmission facilities. But the Solicitor General’s

brief, along with the amicus briefs from the FERC

Commissioners who served from 1993-2009 and the

Chamber of Commerce, confirm that the scope of

FERC’s backstop authority is, indeed, “important” to

national energy policy and even implicates “national-

security concerns.” SG Br. 13-14; see also Former

FERC Comm’rs Br. 6-18; Chamber Br. 5-11. Those

bnefs also make clear that the Fourth Circuit’s

interpretation of the statute is erroneous.

That leaves as the only potential justification

for denying review the Solicitor General’s suggestion

that this Court should forego review for prudential

reasons. But none of the Solicitor General's

arguments in this respect justifies allowing the

Fourth Circuit's decision to stand. It is very

difficult, if not impossible, to imagine this Court

having another opportunity to address this issue.

And any infirmity in the Fourth Circuit's exercise of

jurisdiction simply provides additional reason for

this Court’s intervention. It does not counsel

allowing such an important and harmful decision to

stand.

2

1. Respondents dispute the importance of this

case on two grounds. Neither is persuasive.

First, respondents contend that “this case does

not present an important question of Federal law”

because it involves a “straightforward application of

Chevron U.S.A. v. Nat. Resources Def Council, 467

U.S. 837 (1984).”. BIO 12. But this argument

misapprehends the reason why review is necessary.

The point of the petition is not to seek an elaboration

in Chevron jurisprudence. Rather, the petition asks

this Court to resolve the meaning of Section 216 of

EPAct 2005. And this Court regularly grants review

of these kinds of statutory interpretation questions,

even when their resolution does not promise to

establish any new canon of statutory construction or

to revise the Chevron framework. See, e.g., New

York v. FERC, 535 U.S. 1, 16 (2002) (certiorari

granted “[blecause of the importance” of the FERC

rulemaking at issue); see generally Coeur Alaska,

Inc. v. Southeast Alaska Cons. Coun., 129 S. Ct.

2458 (2009) (applying Chevron analysis to Clean

Water Act issue); Entergy Corp. v. Riverkeeper, Inc.,

129 S. Ct. 1498 (2009) (same); Global Crossing

Telecom., Inc. v. Metrophones Telecom., Inc., 550

U.S. 45 (2007) (same respecting Communications Act

issue).

Second, respondents assert that transmission

siting is not very important because economics and

market structure play a larger role in_ the

development of transmission infrastructure. BIO 26-

27. But as the Solicitor General and the amuci

explain, “difficulty in siting new _ transmission

facilities — and, in particular, difficulty in obtaining

3

state regulatory approval for such siting - ss a

significant factor contributing to inadequate

investment in transmission infrastructure.” SG Br.

12 (emphasis added); see also Former FERC

Comm’rs Br. 10-18; Chamber Br. 9-10.

Contrary to respondent's suggestion (BIO 25-26

& n.7), state denials are just as much of an obstacle

in this respect as are delays and unreasonable

conditions. As the Solicitor General explains, the

Fourth Circuit’s decision allows “any State, simply

by denying a permit to site or construct transmission

facilities, to dcrail the multi-state transmission

projects necessary to assure reliability in national

interest corridors, regardless of how important those

projects may be to the national interest in relieving

congestion on the interstate grid.” SG Br. 12. That

is why the National Energy Policy proposal that led

to EPAct 2005 specifically targeted “state reyections

of transmission projects as a causal factor in

transmission constraints.” Former FERC Comm'rs

Br. at 20 (citing examples). Excluding state denials

from FERC’s backstop authority would create a

gaping loophole — allowing states to evade EPAct

2005's goal of preventing state commissions from

thwarting national transmission siting interests.

Respondents say that this loophole will merely

incentivize industry to work closely and

cooperatively with state authorities. BIO 29. But

that is exactly the system Congress decided was

broken and needed to be changed, because state

authorities all too often consider only local interests.

Former FERC Comm’rs Br. 17, 20. The states, no

doubt, have a preference for the “status quo ante.”

4

Id. at 27. But they cannot reasonably challenge

Congress's decision that it was important to change

the status quo.!

2. Respondents’ attempt to defend the Fourth

Circuit’s decision is unconvincing. As the Solicitor

General explains, FERC’s interpretation of Section

216 “represents the most natural reading of the

statutory text, best harmonizes all of the provisions

of the statute, and most effectively promotes the

congressional purpose.” SG Br. 7.

a. Text. Echoing the Fourth Circuit’s majority,

respondents argue that the word “withheld” in the

statutory phrase “withheld approval” is a

“continuous” term, while a “denial” is

“instantaneous.” BIO 13, 20. Not so. The act of

“withholding” can be based on a particular event, as

when one speaks of consent being “unreasonably

withheld.” Chamber Br. 13. In any event,

respondents have no answer for the fact that the

word “withheld” precedes “approval,” not a word

such as “action” or “decision.” Denying an

application is unquestionably a form of withholding

approval. “[DJenial is the opposite of approval.” SG

Br. 8.

| Respondents also suggest at the end of their filing that it 1s

not necessary to address the question presented now because

energy policy is generally “in flux” and Congress is considering

new legislation concerning “renewable energy facihties” BIO

29 But given the importance of energy to our modern

economy, Congress will probably always be considering energy

legislation of one form or another That realty provides no

reason to deny review concerning legislation that has actually

been enacted

5

b. Statutory structure and purpose.

Respondents’ more generalized arguments fare no

better. Respondents first argue that there is no

reason that Congress would have been concerned

with state denials, because such decisions are

reviewable in state courts. BIO 10. The Fourth

Circuit did not rely on this rationale, and for good

reason; it ignores the fact that state commissions’

denials that thwart federal interests are often

consistent with state law and thus cannot be

disturbed on appeal in state courts. See National

Energy Policy Dev. Group, National Energy Policy,

at 7-7 (2001) (“Some state siting laws require that

the benefits of a proposed transmission facility

accrue to the individual state, resulting in the

rejection of transmission proposals that benefit an

entire region, rather than a single state.”); Former

FERC Comm'rs Br. 17 n.15 (citing examples of this

phenomenon).

Respondents also suggest that allowing FERC

to override state denials of permits would upset a

carefully calibrated federal/state balance. BIO 4:5,

15-16. But contrary to respondents’ suggestions,

FERC’s rule does not prevent states from playing a

significant role in siting decisions in National

Interest Corridors. States retain the power to

consider applications in the first instance and to

enforce state requirements that do not conflict with

national energy policy. See Pet. 18. Even with

respect to assessing federal considerations, the mere

fact that one decision-making body's work is

reviewable by another hardly renders the first body's

work “futile.” Pet. App. 20a. A federal district

6

courts work is not futile simply because it is

reviewable in a federal court of appeals.

c. Statutory history. Respondents argue that

early drafts of the legislation that became EPAct

2005, which separated the concept of “withholding”

approval from “delaying” approval, support reading

the two terms to mean the same thing. BIO 3-4.

But just the opposite is true; this history shows that

Congress always understood the term “withheld” to

mean more than merely delaying issuance of a

decision. See Former FERC Comm’rs Br. 21-26.

Congress's decision to drop the “delaying” phrase

from the final legislation shows that it understood

the “withholding approval” phrase to cover both

denials and delays.

d. Chevron analysis. Finally, respondents

attack petitioners’ deference argument in two ways.

First, they protest that “[a]Jn appellate court dissent

does not create statutory ‘ambiguity’ entitling an

agency to judicial deference.” BIO 21. That may be

truc, but no one is making that argument here.

Instead, petitioners are merely making the common:

sense observation that when federal judges construe

statutory language in diametrically opposite ways,

that is a data point suggesting the statute at issue is

ambiguous. Pet. 20: see also Chamber Br. 13-14.

The cases petitioners cite speak for themselves in

this regard,

Second, respondents assert that Chevron

deference is appropriate only when the agency at

issue brought its expertise to bear in the order at

issue. BIO 23-24. Again, this may be true, but it

7

does not help respondents. FERC clearly brought its

expertise to bear when it decided how far its

backstop siting authority needed to extend to be able

to break logjams at the state level that thwart

national energy policy.

3. The Solicitor General suggests that even

though the Fourth Circuit's decision misconstrues a

vital component of our national energy policy — and

thus “could have serious consequences” — this

Court’s review “is not warranted at this time” for two

prudential reasons. SG Br. 12, 14. Neither

purported reason withstands scrutiny.

a. The Solicitor General first suggests that this

Court will have other opportunities to examine

whether FERC’s backstop authority covers state

denials of permit applications. According to the

Solicitor General, “lilf a party seeking to build a

transmission facility in a national interest corridor

outside the Fourth Circuit were to seek a permit

from FERC after having been denied a permit by a

State,” FERC would be free to agree or disagree with

the Fourth Circuit's decision, and review from that

decision would be possible in a federal court of

appeals. SG Br. 15.

This is a puzzling suggestion on several levels.

As an initial matter, this case represents a

consolidated action under 28 U.S.C. § 2112 of

petitions for review from the Second, Fourth, and

D.C. Circuits. See Pet. 8-9. The whole point of such

consolidated actions is “centralizing . . . judicial

review and avoiding conflicts which might obtain if

the parties could go to any court that had venue.”

8

Penn-Central Merger and N&W Inclusion Cases, 389

U.S. 486, 544 (1968) (Douglas, J., dissenting in part).

Thus, courts have held that a circuit that hears a

consolidated challenge to an agency rule is the “sole

forum for addressing challenges to the validity of the

frulel.” G7E South, Inc. v. Morrison, 199 F.3d 733,

743 (4th Cir. 1999); accord US West Comm., Inc. v.

Hamilton, 224 F.3d 1049, 1054 (9th Cir. 2000).

Even apart from the nature of consolidated

challenges to agency orders, petitioners are at a loss

to understand how FERC could disregard the Fourth

Circuit’s decision even in a case arising outside that

jurisdiction. FERC was a party in the Fourth

Circuit and thus is seemingly bound by the Fourth

Circuit’s decision invalidating FERC’s construction

of Section 216. For example, in Atlantic City Elec.

Co. v. FERC, 329 F.3d 856 (D.C. Cir. 2003), FERC

decided to continue enforcing an order that the D.C.

Circuit had held conflicted with a federal statute.

The D.C. Circuit had little patience for FERC's

explanation that it “still believed it was correct the

first time,” stating: “If FERC thinks we are wrong,

then like any other litigant, it may petition for

certiorari to the Supreme Court of the United States.

Absent such a petition and the issuance of certiorazi,

in an order by the Supreme Court, FERC is bound by

our decision.” Jd. at 859. The Solicitor General

provides no reason to think that the same reasoning

does not hold here. See Pet. 22.

To the extent the Solicitor General is

suggesting that a utility company could generate a

new case by seeking review in a different federal

court of appeals from a future FERC order refusing

9

to exercise backstop siting authority respecting a

state denial of a permit, there are at least two

difficulties with that suggestion. First, the Solicitor

General ignores the enormous amount of resources a

utility company must invest to prepare, present, and

pursue a permit application. See Pet. 21. If the

Fourth Circuit’s decision is left in place, it is highly

unlikely that any utility company will be willing to

pursue to FERC and the courts an application

denied by a state commission, based simply on the

hope that after spending millions of additional

dollars and enduring additional years’ of

administrative procedures and litigation, a different

court of appeals will disagree with the Fourth

Circuit and send the matter back to FERC for still

further proceedings. It would be infinitely better —

not to mention infinitely more consistent with EPAct

2005’s purpose of spurring prompt development in

National Interest Corridors — to definitively resolve

proper interpretation of the Act here and now,

without triggering years of substantial doubt as to

the rights of developers and states.

Second, even if a utility company initiated a

new case that resulted in a state denial and

ultimately challenged in another federal court of

appeals FERC’s refusal to consider exercising

backstop siting authority over the denial, the legal

question this case presents might not be cleanly

presented in that federal court of appeals as it is

here. As a general rule, “[a] court’s prior judicial

construction of a statute trumps an agency

construction otherwise entitled to Chevron deference

if the prior court decision holds that its

construction follows from the unambiguous terms of

10

the statute and thus leaves no room for agency

discretion.” Nat Cable & Telecom. Ass'n v. Brand

X Internet Servs., 545 U.S. 967, 983 (2005). The

Fourth Circuit held here that Section 216 leaves no

room for FERC to exercise backstop siting authority

over state denials. So in a future case in another

court of appeals, it is questionable whether FERC

would still be able to claim Chevron deference for its

contrary interpretation of Section 216 - an

interpretation which, by hypotheses, it would not

even have applied when the case was before it.

At the same time, once such a future case was

appealed to federal court, parties seeking to dispute

FERC’s original interpretation of Section 216 and

who did not participate as parties in this case (which

would include any state besides New York and

Minnesota) could be foreclosed from challenging that

interpretation on the ground that such a challenge is

untimely. See, e.g., Pacific Gas & Elec. Co. v. FERC,

533 F.3d 820, 824-25 (D.C. Cir. 2008) (agreeing with

FERC that a party could not challenge FERC’s

interpretation of federal statute in the context of a

case-specific proceeding because the party did not

bring a pre-enforcement challenge against FERC’s

earlier rulemaking order). Once again, it would be

far better to resolve the meaning of Section 216 now,

before the legal landscape becomes cluttered with

potential procedural difficulties.

b. The Solicitor General also suggests that

“there is a substantial question” whether the Fourth

Circuit had jurisdiction to hear this case. SG Br. 15.

The Solicitor General does not explain how this case

is any different from New York v. FERC, 535 U.S. at

11

15-16, in which this Court considered a state’s pre-

enforcement challenge to a FERC order construing

the Federal Power Act. But, relying on this Court's

recent decision in Summers v. Earth Island Inst.,

129 S. Ct. 1142 (2009), the Solicitor General

contends that respondents failed to establish

standing to challenge FERC’s order construing

Section 216 (or, aiternatively, that FERC’s

construction was not ripe for judicial review). SG Br.

17-18.2

To the extent the Solicitor General raises

legitimate concerns, the proper course would not be

to deny certiorari but rather to grant the petition for

certiorari and add an additional question presented,

directing the parties to brief whether the Fourth

Circuit had jurisdiction over the case. See, e.g.,

Powerex Corp. v. Reliant Energy Servs., 549 U.S.

1178 (2007) (adding jurisdictional question to grant

of certiorar); Kansas v. Marsh, 544 U.S. 1060 (2005)

(same); Castro v. U.S., 5387 U.S. 1170 (2003) (same).

Suffice it to say that it would be news to the energy

bar — and presumably to other admunistrative

lawyers as well — to learn that cases of this sort are

nonjusticiable. See, e.g., Clean Air Implementation

Project v. EPA, 150 F.3d 1200, 1204 (D.C. Cir. 1998)

(‘{P]re-enforcement review of agency rules and

regulations has become the norm, not the

2 The Solicitor General also notes that FERC’s interpretation of

Section 216 1s set forth in a “preamble issued as part of a

rulemaking,” not a regulation. SG Br. 15. But this has no

relevance to any jurisdictional or legal issue here. As the

Sohcitor General herself explains, FERC’s interpretation

represents its “authoritative construction of a statute the

agency 1s charged with administering.” SG Br. 7.

12

exception.”). If pre-enforcement challenges are no

longer viable, this Court should say so, after taking

into account the impacts of such a change on orderly

agency implementation of statutes and on the

regulated community that is bound by agency rules.

At the very least, this Court should grant the

petition and vacate and remand (GVR) the Fourth

Circuit's decision for consideration of this issue. The

Summers decision, upon which the _ Solicitor

General’s jurisdictional argument rests, was decided

in March of 2009, the month afterthe Fourth Circuit

decided this case (on February 18, 2009). Pet. App.

5a. Accordingly, if the Solicitor General’s

jurisdictional argument has merit, the scenario she

describes would fall squarely within this Court’s

GVR authority, which applies when new authority

from this Court “revealls] a reasonable probability —

that the decision below rests upon a premise that the

lower court would reject if given the opportunity for

further consideration, and where it appears that

such a redetermination may determine the ultimate

outcome of the litigation.” Lawrence v. Chater, 516

U.S. 163, 167 (1996).

In short, it would be not only ironic, but unjust

and quite harmful to national energy policy, if this

Court allowed the Fourth Circuit’s decision to stand

on the ground that new authority calls into question

that court’s very exercise of jurisdiction. This Court

can, and should, avoid such an outcome.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

Brian R. Gish

DAVIS WRIGHT TREMAINE

LLP

1919 Pennsylvania Ave.,

NW, Ste. 200

Washington, DC 20006

(202) 973-4200

Edward H. Comer

Vice President and

General Counsel

Henri D. Bartholomot

Director, Regulatory

Legal Issues

EDISON ELECTRIC

INSTITUTE

701 Pennsylvania Ave.,

NW

Washington, DC 20004

Jeffrey L. Fisher

Counsel of Record

DAVIS WRIGHT TREMAINE

LLP

1201 Third Ave., Ste. 2200

Seattle, WA 98101

(206) 622-3150

Wallace Tillman

Vice President and

General Counsel

Richard Meyer

Senior Regulatory

Counsel

NATIONAL RURAL

ELECTRIC COOPERATIVE

ASSOC.

4301 Wilson Blvd.

Arlington, VA 22203

Susan N. Kelly

Vice President of Policy

Analysis and General

Counsel

AMERICAN PUBLIC

POWER ASSOCIATION

1875 Connecticut Ave.,

NW, Ste. 1200

Washington, DC 20009

Alden L. Atkins

VINSON & ELKINS, LLP

The Willard Office

Building

1455 Pennsylvania Ave..,

NW

Ste. 600

Washington, DC 20004

Counsel for Allegheny

Power and Trans:

Allegheny Interstate

Line Company

14

E. Gregory Barnes

Attorney

SAN DIEGO GAS &

ELECTRIC COMPANY

101 Ash Street

San Diego, CA 92101

Gene Grace

Senior Counsel

AMERICAN WIND ENERGY

ASSOCIATION

1501 M St. NW, Ste.

1000

Washington, DC 20005