City of Salisbury v. Fed. Energy Regulatory Comm'n

36 F.4th 1164

CITY OF SALISBURY, NORTH CAROLINA, Petitioner

v.FEDERAL ENERGY REGULATORY COMMISSION, Respondent

Cube Yadkin Generation, LLC, Intervenor

No. 20-1238

C/w 20-1457

United States Court of Appeals, District of Columbia Circuit.

Argued November 2, 2021

Decided June 10, 2022

Robert J. King, III argued the cause for petitioner. On the briefs were V. Randall Tinsley, Kyle Woosley, and Julia C. Ambrose. Joseph A. Ponzi entered an appearance.

Jared B. Fish, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Matthew R. Christiansen, General Counsel, and Robert H. Solomon, Solicitor.

Sharon L. White and Julia S. Wood were on the brief for intervenor Cube Yadkin Generation, LLC in support of respondent.

Before: Katsas and Jackson,^* Circuit Judges, and Ginsburg, Senior Circuit Judge.

Katsas, Circuit Judge:

The Federal Energy Regulatory Commission has licensed Cube Yadkin Generation LLC to operate a series of hydroelectric dams on the Yadkin River in North Carolina. The license requires Cube to develop a plan to protect a nearby water pump station from flooding. In the order under review, FERC approved a plan to do so by raising the station's sensitive equipment above the water levels expected during extreme flooding. We hold that this order correctly construed the license and was not arbitrary.

I

A

Two federal statutes govern the regulation of hydroelectric dams. The Federal Power Act makes it unlawful to operate such dams in the navigable waters of the United States without a license from FERC. 16 U.S.C. § 817(1). The Clean Water Act preserves the states’ ability to regulate hydroelectric dams and other projects that "may result in any discharge" into navigable waters. 33 U.S.C. § 1341(a)(1) ; see S.D. Warren Co. v. Me. Bd. of Envtl. Prot. , 547 U.S. 370, 373–74, 126 S.Ct. 1843, 164 L.Ed.2d 625 (2006). A FERC hydroelectric license thus is ineffective until the relevant state issues or waives a water quality certification, 33 U.S.C. § 1341(a)(1), which may impose conditions to control pollution or implement other state laws, id. § 1341(d). If FERC licenses a dam under the Federal Power Act, such state-imposed conditions become part of the federal license by operation of law. Id .

B

Since 1958, the federal government has licensed a hydroelectric dam project along the Yadkin River in central North Carolina. The project's northern-most facility is the High Rock Dam, which provides electricity for local communities. The dam has caused sediment deposits to accumulate, which has led to rising upstream water levels.

The city of Salisbury, North Carolina relies on the river for drinking water, which it obtains by operating a pump station about 20 miles upstream from the dam. Rising water levels pose two threats to the station. During moderate flooding, the river washes out its access road, preventing workers from reaching it. During severe flooding, the water level approaches the floor of elevated rooms that house the station's sensitive mechanical and electrical systems. Although such equipment has never suffered flood damage since the station was built in 1917, a storm in 2003 brought the water level to within a few feet of the equipment-room floor.

During re-licensing proceedings, Salisbury pressed its concerns with federal and state regulators. It asked FERC to require Cube's predecessor to build the city a new pump station in a less flood-prone area. FERC staff recommended a more modest requirement—development of a flood protection plan for the existing station.

The Commission declined to impose either requirement. Alcoa Power Generating, Inc. , 156 FERC ¶ 62,210, PP 67–69 (2016) ( Licensing Order ).

Salisbury had more success at the state level. North Carolina conditioned its water quality certification on the development of a flood protection plan for the pump station. When FERC renewed the license for the dam, this state-imposed requirement became part of the federal license. Licensing Order, 156 FERC ¶ 62,210, P 180, Appendix A.

C

Cube currently operates the Yadkin River dam project. As required by its license, Cube developed a flood protection plan for the pump station. The plan calls for dredging to reduce sediment. To address flooding of the access road, it also calls for electronic upgrades to allow remote operation of the station, as well as an amphibious vehicle to allow physical access in case of emergency. Finally, the plan calls for raising the pump station's equipment above the highest projected flood level. Salisbury objected that raising the equipment would damage the station and violate state building codes. Cube responded that the proposed modifications would be reviewed for engineering soundness and code compliance. North Carolina did not object to the plan in substance, but it required Cube to submit further details for review prior to construction.

FERC approved the plan. It found that Cube's proposal to further elevate the pump station's equipment was consistent with the water quality certification and otherwise reasonable. Cube Yadkin Generation LLC , 170 FERC ¶ 62,143, PP 30–31 (2020) ( Approval Order ). FERC acknowledged Salisbury's preference for a new pump station but noted that Cube's plan "achieves similar results" at "significantly less" cost—upwards of $16 million for a new pump station, versus $2.8 million to modify the existing structure. Id. P 31.

FERC denied rehearing in relevant part. It again approved Cube's proposal to raise the pump station's equipment rather than to build a new pump station. Cube Yadkin Generation LLC , 172 FERC ¶ 61,254, P 29 (2020) ( Rehearing Order ). FERC declined to consider whether Cube's proposal was consistent with state-law siting, design, and water-quality standards. Id. P 32. Finally, FERC found inapplicable to the pump station a federal regulation requiring sound engineering practices for hydroelectric dams. Id. P 34.

Salisbury petitioned for review of FERC's decision approving the plan to elevate the pump station's equipment. Cube has intervened in support of the Commission. We have jurisdiction under 16 U.S.C. § 825l (b).

II

We begin by considering the condition imposed by the North Carolina water quality certification, which requires Cube to develop a flood protection plan for Salisbury's pump station. The parties raise two disputes about the scope of this condition, as well as a dispute about deference.

A

FERC asks us to defer to its interpretation of the condition. It invokes cases stating that the Commission is entitled to deference when construing license conditions that it imposes under the Federal Power Act. See , e.g. , Pacific Gas & Electric Company v. FERC , 720 F.2d 78, 84 (D.C. Cir. 1983).

We are not so sure that deference is appropriate here, because state-imposed conditions under the Clean Water Act raise distinctive deference questions. That Act preserves a primary role for the states in regulating emissions into navigable waters. Solid Waste Agency of N. Cook Cnty. v. U.S. Army Corps of Eng'rs , 531 U.S. 159, 174, 121 S.Ct. 675, 148 L.Ed.2d 576 (2001). Accordingly, FERC "may not alter ... conditions imposed by the states" in a water quality certification. U.S. Dep't of Interior v. FERC , 952 F.2d 538, 548 (D.C. Cir. 1992) ; see also Keating v. FERC , 927 F.2d 616, 622 (D.C. Cir. 1991) (Clean Water Act permits states "to block, for environmental reasons, local water projects that might otherwise win federal approval"). Given this assignment of substantive authority to the states, we are reluctant to vest in FERC the interpretive authority to resolve ambiguities in water-quality certifications as it thinks best.

We reserve the deference issue. As explained below, we conclude that FERC has adopted the best interpretation of the disputed condition, so we need not decide who must yield when the agency and the court reach competing reasonable interpretations. See , e.g. , Truck Trailer Mfrs. Ass'n v. EPA , 17 F.4th 1198, 1201 n.1 (D.C. Cir. 2021).

B

The condition at issue requires Cube to develop a flood protection plan that includes:

[1] Physical modifications to the facilities such as a protective dike for the pump station, [2] improved access to the pump station with the road consistent with the City of Salisbury's design or [3] other feasible option(s) for achieving the same benefits.

Licensing Order, 156 FERC ¶ 62,210, P 180, Appendix A. As shown above, this text has three clauses: The first requires physical modifications to the pump station facilities. The second requires improved access to the pump station. The third permits other feasible options in place of the first two.

The parties’ first interpretive dispute centers on the phrase "consistent with the City of Salisbury's design" in the second clause. The parties agree that it governs provisions for improved access to the pump station. But Salisbury reads the phrase as qualifying the first and third clauses as well as the second. So while the first clause requires physical modifications "such as a protective dike," Salisbury contends that any physical modifications must also be consistent with the city's design. Likewise, while the third clause permits other options that achieve the "same benefits" as physical modifications, Salisbury contends that these options must achieve not only the same benefits as a dike, but also the same benefits as the city's design. And since the city asked for Cube to build it a new pump station, Salisbury concludes that any physical modifications, or other options in their place, must afford the same benefits as a new pump station.

This proposed construction is untenable. Under the rule of the last antecedent, "a limiting clause or phrase ... should ordinarily be read as modifying only the noun or phrase that it immediately follows." Lockhart v. United States , 577 U.S. 347, 351, 136 S.Ct. 958, 194 L.Ed.2d 48 (2016) (quoting Barnhart v. Thomas , 540 U.S. 20, 26, 124 S.Ct. 376, 157 L.Ed.2d 333 (2003) ). If that...