Solar Energy Indus. Ass'n v. Fed. Energy Regulatory Comm'n

80 F.4th 956

SOLAR ENERGY INDUSTRIES ASSOCIATION, Petitioner, NewSun Energy LLC; One Energy Enterprises LLC, Petitioners-Intervenors, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, National Rural Electric Cooperative Association [NRECA]; American Public Power Association; Large Public Power Council; Edison Electric Institute Inc., Respondents-Intervenors, American Forest & Paper Association, Intervenor.

Montana Environmental Information Center; Sierra Club; Center for Biological Diversity; Vote Solar; Community Renewable Energy Association; Appalachian Voices; Alabama Center for Sustainable Energy, d/b/a Energy Alabama; Georgia Interfaith Power & Light Inc.; North Carolina Sustainable Energy Association; Upstate Forever, Petitioners, One Energy Enterprises LLC, Petitioner-Intervenor, v. Federal Energy Regulatory Commission, Respondent, National Rural Electric Cooperative Association [NRECA]; Edison Electric Institute Inc.; American Public Power Association; Edison Electric Institute Inc.; Large Public Power Council, Respondents-Intervenors, American Forest & Paper Association, Intervenor.

Montana Environmental Information Center; Sierra Club; Center for Biological Diversity; Vote Solar; Community Renewable Energy Association; Appalachian Voices; Alabama Center for Sustainable Energy, d/b/a Energy Alabama; Georgia Interfaith Power & Light Inc.; North Carolina Sustainable Energy Association; Upstate Forever, Petitioners, One Energy Enterprises LLC, Petitioner-Intervenor, v. Federal Energy Regulatory Commission, Respondent, National Rural Electric Cooperative Association [NRECA]; American Public Power Association; Edison Electric Institute Inc.; Large Public Power Council, Respondents-Intervenors.

Solar Energy Industries Association, Petitioner, One Energy Enterprises LLC, Petitioner-Intervenor, v. Federal Energy Regulatory Commission, Respondent, National Rural Electric Cooperative Association [NRECA]; American Public Power Association; Edison Electric Institute Inc.; Large Public Power Council, Respondents-Intervenors.

No. 20-72788

No. 20-73375

No. 21-70083

No. 21-70113

United States Court of Appeals, Ninth Circuit

Argued and Submitted March 8, 2022 Seattle, Washington

Filed September 5, 2023

On Petition for Review of an Order of the Federal Energy Regulatory Commission, FERC Nos. RM19-15-000, AD16-16-000, FERC No. RM19-15-000, FERC No. RM19-15-001, FERC Nos. RM19-15-000, AD16-16-001.

Fred A. Rowley, Jr (argued), Wilson Sonsini Goodrich & Rosati, Los Angeles, California; John B. Kenney, Wilson Sonsini Goodrich & Rosati PC, Washington, D.C.; Heather Curlee and Todd G. Glass, Wilson Sonsini Goodrich & Rosati PC, Seattle, Washington; for Petitioner Solar Energy Industries Association.

David C. Bender (argued), Earthjustice, Washington, D.C for Petitioners Montana Environmental Information Center, Sierra Club, Center for Biological Diversity, and Vote Solar.

Matthew W.S. Estes (argued), Senior Attorney; Susanna Y. Chu, Attorney; Joshua A. Kirstein, Attorney Advisor; Robert H. Solomon, Solicitor; Matthew Christiansen, General Counsel; Federal Energy Regulatory Commission, Washington, D.C.; for Respondent Federal Energy Regulatory Commission.

Jeremy C. Marwell (argued), Margaret E. Peloso, and James T. Dawson, Vinson & Elkins LLP, Washington, D.C.; Emily S. Fisher and Adam Benshoff, Edison Electric Institute, Washington, D.C.; for Respondents-Intervenor Edison Electric Institute.

Gregory M. Adams and Peter J. Richardson, Richardson Adams PLLC, Boise, Idaho, for Petitioner Community and Renewable Energy Association.

Lauren J. Bowen, Nicholas Jimenez, and Jillian Kysor, Southern Environmental Law Center, Chapel Hill, North Carolina, for Petitioners Appalachian Voices, Alabama Center for Sustainable Energy, Georgia Interfaith Power & Light, North Carolina Sustainable Energy Association, and Upstate Forever.

Marie P. Barlow and Max Yoklic, NewSun Energy LLC, Bend, Oregon, for Petitioner-Intervenor NewSun Energy LLC.

Elizabeth W. Whittle, Nixon Peabody LLP, Washington, D.C., for Petitioner-Intervenor One Energy Enterprises LLC.

Randolph L. Elliot, McCarter & English LLP, Washington, D.C., for Respondent-Intervenor, National Rural Electric Cooperative Association.

John E. McCaffrey III, Stinson LLP, Washington, D.C., for Respondent-Intervenor American Public Power Association.

Jonathan D. Schneider, Harvey Reiter, and Marie D. Zosa, Stinson LLP, Washington, D.C., for Respondent-Intervenor Large Public Power Counsel.

Robert A. Weishaar Jr., McNees Wallace & Nurick, Harrisburg, Pennsylvania, for Intervenor (def/res)-Intervenor American Forest & Paper Association.

Sarah N. Norcott, NorthWestern Corporation d/b/a NorthWestern Energy, Helena, Montana, for Amicus Curiae NorthWestern Corporation d/b/a NorthWestern Energy.

Andrew R. Varcoe and Stephanie A. Maloney, U.S. Chamber Litigation Center, Washington, D.C.; Elbert Lin, Hunton Andrews Kurth LLP, Richmond, Virginia; for Amicus Curiae Chamber of Commerce of the United States of America.

Before: Jacqueline H. Nguyen, Eric D. Miller, and Patrick J. Bumatay, Circuit Judges.

Opinion by Judge Miller;

Concurrence by Judge Miller;

Partial Concurrence and Partial Dissent by Judge Bumatay

OPINION

MILLER, Circuit Judge:

This case involves rules adopted by the Federal Energy Regulatory Commission to implement the Public Utility Regulatory Policies Act of 1978 (PURPA), Pub. L. No. 95-617, 92 Stat. 3117. Congress enacted PURPA to encourage the development of a new class of independent, non-utility-owned energy producers known as "Qualifying Facilities," or "QFs." PURPA tasks FERC with promulgating rules to implement the statute. In 2020, FERC revised its rules to alter which facilities qualify for PURPA's benefits and how those facilities are compensated. The new rules make it more difficult to qualify for treatment as a QF, and they also make QF status less advantageous.

We are asked to decide whether FERC's new rules are consistent with PURPA and satisfy the requirements of the Administrative Procedure Act. In resolving those questions, we address challenges to discrete components of the new rules as well as challenges to the lawfulness of the rules as a whole. We must also decide whether FERC violated the National Environmental Policy Act of 1969 (NEPA), Pub. L. No. 91-190, 83 Stat. 852 (1970), by failing to prepare an environmental assessment or environmental impact statement. We hold that FERC's revised rules are consistent with both PURPA and the APA, but that FERC violated NEPA by failing to prepare, at minimum, an environmental assessment. In light of the extraordinary disruptive consequences that would accompany vacatur, we decline to vacate the rules. We grant the petition for review in part and remand without vacatur.

I

A

In response to the energy crises of the 1970s, Congress enacted PURPA to promote energy conservation, improve energy efficiency, lower consumer costs, and decrease reliance on foreign oil. See FERC v. Mississippi, 456 U.S. 742, 745-46, 756-57, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982); Independent Energy Producers Ass'n, Inc. v. California Pub. Utils. Comm'n, 36 F.3d 848, 850 (9th Cir. 1994). In enacting PURPA, "Congress sought to eliminate two significant barriers to the development of alternative energy sources: (1) the reluctance of traditional electric utilities to purchase power from and sell power to non-traditional facilities, and (2) the financial burdens imposed upon alternative energy sources by state and federal utility authorities." Independent Energy Producers Ass'n, 36 F.3d at 850.

PURPA directs FERC to "prescribe, and from time to time thereafter revise, such rules as it determines necessary to encourage" the development of Qualifying Facilities. 16 U.S.C. § 824a-3(a). There are two types of QFs. First, a "small power production facility" uses an alternative energy source—often a renewable source like solar or wind—to produce electricity. 16 U.S.C. § 796(17). As its name suggests, such a facility must be "small": It cannot have a power production capacity that, "together with any other facilities located at the same site (as determined by the Commission)," exceeds 80 megawatts. Id. § 796(17)(A)(ii). Second, a "cogeneration facility" typically uses traditional fossil fuels to produce both electric energy and a useful form of thermal energy (like steam) in a manner that is more efficient than producing each kind of energy separately. Id. § 796(18); 18 C.F.R. § 292.205; S. Rep. No. 95-442, at 21 (1977).

PURPA provides QFs with certain benefits. Of particular relevance here, PURPA imposes a mandatory-purchase obligation on electric utilities, which must purchase electricity from QFs at rates established by FERC. 16 U.S.C. § 824a-3(a)(2), (b). Those rates must be "just and reasonable to the electric consumers," must be "in the public interest," and may not "discriminate against" QFs. Id. § 824a-3(b). PURPA also sets an upper bound on rates: No rule "shall provide for a rate which exceeds the incremental cost to the electric utility of alternative electric energy." Id. A utility's "incremental cost"—commonly referred to as its "avoided cost"—is defined as "the cost to the electric utility of the electric energy which, but for the purchase from [a QF], such utility would generate or purchase from another source." Id. § 824a-3(d); see also American Paper Inst., Inc. v. American Elec. Power Serv. Corp., 461 U.S. 402, 406, 103 S.Ct. 1921, 76 L.Ed.2d 22 (1983).

While PURPA tasks FERC with the development of national rules and standards, States play a prominent role in PURPA's regulatory structure. Under PURPA, state regulatory authorities are primarily responsible for implementing FERC's rules. 16 U.S.C. § 824a-3(f)(1). For example, while FERC establishes, in broad terms, the rate to be used in the mandatory transactions described above, States are responsible for calculating and applying that rate for individual utilities and QFs.

Some utilities are...