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State v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

January 18, 2019

State of North Carolina, Petitioner
v.
Federal Energy Regulatory Commission, Respondent Cube Yadkin Generation, LLC, Intervenor

          Argued October 17, 2018

          On Petition for Review of Orders of the Federal Energy Regulatory Commission

          James W. Doggett, Deputy Solicitor General, Office of the Attorney General for the State of North Carolina, argued the cause for petitioner. With him on the briefs were Joshua H. Stein, Attorney General, and Matthew W. Sawchak, Solicitor General.

          Robert M. Kennedy Jr., Senior Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief was Robert H. Solomon, Solicitor. Holly E. Cafer, Attorney, entered an appearance.

          Michael F. McBride argued the cause for intervenor. On the brief were Julia S. Wood, Sharon L. White, and Eli W.L. Hopson.

          Before: Wilkins and Katsas, Circuit Judges, and Sentelle, Senior Circuit Judge.

          OPINION

          SENTELLE, SENIOR CIRCUIT JUDGE.

         North Carolina petitions for review of Federal Energy Regulatory Commission ("FERC") orders involving the relicensing of the Yadkin Hydroelectric Project No. 2197 ("Yadkin Project"). Petitioner alleges that the license applicant, Alcoa Power Generating, Inc. ("Alcoa"), misrepresented its plans to discontinue the use of project power for industrial production at Badin Works, a major source of employment in the state. North Carolina alleges that Alcoa gained an unearned advantage and chilled competition because no other applicant possessed Alcoa's ace in the hole: the ongoing industrial production at Badin Works and its impact on the public interest. North Carolina proposes that FERC reopen licensing proceedings, or, in the alternative, recommend federal recapture of the Yadkin Project for transfer to the state. We conclude that substantial evidence supports FERC's decision, and we deny North Carolina's petition for review.

         I. BACKGROUND

         In 1958, Alcoa was awarded a fifty-year license to operate the Yadkin Project, a series of hydroelectric dams on the Yadkin River in North Carolina. The Yadkin Project powered industrial production at Badin Works, an aluminum smelting plant that provided approximately 1, 000 jobs to citizens in the state. In 2002, Alcoa began the process of applying for a new license, immediately disclosing that aluminum production had been "temporarily curtailed," and that the Yadkin Project's excess energy was being "sold on the open market." Alcoa, again in 2004, informed FERC that the curtailment continued due to "adverse business conditions," and that "surplus electricity" was being sold "into the market." In its 2006 relicensing application, Alcoa explained that the Yadkin Project was only providing "3 to 5 megawatts (MW) of electricity" (or ~2% output) to Badin Works, so "the remaining power [was being] sold to help offset the cost of electricity purchases required for Alcoa's other domestic smelting operations." None of Alcoa's competitors filed timely applications.[1]

         In 2009, North Carolina requested that FERC recommend federal recapture of the Yadkin Project for transfer to the state, with North Carolina funding Alcoa's "statutory net investment and severance damages." Months later, Alcoa formally announced that Badin Works would permanently close, and all aluminum smelting and manufacturing facilities would be dismantled. In July of 2016, Alcoa declared its intent to sell the Yadkin Project to Cube Yadkin Generation LLC ("Cube"), and it applied for a license transfer. On September 22, 2016, FERC issued Alcoa a new license and denied North Carolina's recapture proposal. Alcoa Power Generating, Inc., 156 FERC ¶ 62, 210 (2016). The state petitioned for rehearing of that decision. In December of 2016, FERC approved the transfer of Alcoa's license to Cube, and the sale of the Yadkin Project was completed in 2017 for an after-tax value of approximately $243 million. Final resolution came on September 20, 2017, when FERC denied North Carolina's petition for rehearing. Alcoa Power Generating Inc., 160 FERC ¶ 61, 097 (2017).

         On November 16, 2017, North Carolina petitioned this Court to review FERC's orders. The Court permitted Cube to intervene. The matter was fully briefed, and the Court heard oral argument on October 17, 2018.

         II. DISCUSSION

         We review FERC orders under the Administrative Procedure Act ("APA"), which empowers the Court "to reverse any agency action that is 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.'" See, e.g., Wisconsin Valley Improvement Co. v. FERC, 236 F.3d 738, 742 (D.C. Cir. 2001) (quoting 5 U.S.C. § 706(2)(A)). The Court owes deference to FERC's interpretation of the Federal Power Act ("FPA") since it is the agency charged with administering that statute. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984); e.g., TNA Merch. Projects, Inc. v. FERC, 857 F.3d 354, 358 (D.C. Cir. 2017). Unless "plainly erroneous," the Court also extends deference to ...


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