City of Tacoma v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 27, 2006 Decided August 22, 2006

No. 05-1054

CITY OF TACOMA, WASHINGTON,
PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

SKOKOMISH INDIAN TRIBE, ET AL.,
INTERVENORS

Consolidated with
05-1093, 05-1180, 05-1181

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

Sam Kalen and Stephen H. Goodman, Jr. argued the cause
for petitioners City of Tacoma, Washington and Save the Lakes
Coalition. With them on the briefs were Michael A. Swiger and
Susan A. Moore.

Mason D. Morisset argued the cause and filed the briefs for
petitioner Skokomish Indian Tribe.
 2

John Katz, Deputy Associate General Counsel, Federal
Energy Regulatory Commission, argued the cause for
respondent. With him on the brief were John S. Moot, General
Counsel, and Robert H. Solomon, Solicitor.

Lisa E. Jones, Attorney, United States Department of
Justice, argued the cause for intervenors the United States
Department of Interior and the United States Department of
Commerce. With her on the brief was M. Alice Thurston,
Attorney.

Daniel H. Squire was on the brief for intervenors American
Rivers, et al.

Before: GINSBURG, Chief Judge, and ROGERS and BROWN,
Circuit Judges.

Opinion for the Court filed by Circuit Judge BROWN.

BROWN, Circuit Judge: These consolidated cases seek our
review of a series of orders issued by the Federal Energy
Regulatory Commission (“FERC” or “Commission”), granting
a conditional license to the City of Tacoma (“Tacoma”) to
operate a hydroelectric project on the Skokomish River in the
State of Washington. We deny the petitions in part, grant the
petitions in part, and remand for further proceedings, without
vacating the license.

I

In 1924, Tacoma obtained a license from the Federal Power
Commission to flood 8.8 acres of national forest land by
damming the North Fork of the Skokomish River at Lake
Cushman on the Olympic Peninsula. This license was
designated a “minor part license” because it covered only a
 3

small part of Tacoma’s much larger hydroelectric project (the
“Cushman Project”). At that time, the Federal Power
Commission interpreted its licensing authority narrowly, and
therefore, the 1924 minor part license gave Tacoma the authority
it needed to proceed with the Cushman Project. In the ensuing
years, Tacoma built two dams across the North Fork river. The
first dam greatly increased the size of Lake Cushman, and the
second dam created Lake Kokanee further downstream. Tacoma
also constructed two hydroelectric plants, one at the upper dam
and a second near Hood Canal, which adjoins Puget Sound.
Between Lake Kokanee and Hood Canal, Tacoma diverted
virtually all the water from the North Fork riverbed into a
pipeline, thereby maximizing the generating power of the river.
Nevertheless, some distance downhill from Lake Kokanee,
water continued to flow into the North Fork riverbed from
McTaggert Creek, and recently Tacoma has released into the
riverbed an additional flow of sixty cubic feet per second
(“cfs”).

The five-thousand-acre reservation of the Skokomish Indian
Tribe (“Tribe”) is located near the mouth of the Skokomish
River, with Hood Canal as its northeastern border and the
Skokomish River as its eastern, southeastern, and southern
borders. The reservation was established in 1855 by the Treaty
of Point No Point, which guarantees certain rights to the Tribe,
including the right to take fish from the Skokomish River. The
Cushman Project’s second hydroelectric plant is situated within
the boundary of the reservation, on property Tacoma owns in
fee, and an access road and transmission line run across
reservation property. The Cushman Project did not remove all
water from the section of the Skokomish River that borders the
Tribe’s reservation; the lower portion of the river continues to
be fed by the South Fork and also the small flow that remains in
the North Fork. Nevertheless, the Cushman Project sharply
reduced water levels, thereby affecting fish populations and
 4

increasing silt deposits. The Tribe asserts that the historic mean
annual water-flow in the North Fork was eight-hundred cfs. If
this figure is accurate, then even accounting for the sixty cfs that
Tacoma is now releasing into the North Fork riverbed, Tacoma
is still diverting about 92.5 percent of the North Fork’s water.

In 1963, the Federal Power Commission determined that its
hydroelectric licensing jurisdiction extends to whole projects,
not just to the parts of those projects that occupy or use federal
land. See Pac. Gas & Elec. Co., 29 FPC 1265, 1266 (1963)
(PG&E I). On that basis, the Commission concluded certain
minor part licenses under consideration in that proceeding had
been “improperly issued” based on an “erroneous conclusion of
law.” Id. This holding cast a shadow of doubt over all projects
that were then operating under minor part licenses, including the
Cushman Project, but Tacoma nevertheless continued to operate
the project under the terms of its 1924 minor part license.

In 1974, Tacoma’s minor part license expired, and Tacoma
applied for a new license, expressly seeking a “major project
license” that would cover all its project-related facilities.
Pursuant to section 15 of the Federal Power Act (“FPA” or the
“Act”), 16 U.S.C. § 808(a)(1), which is the section governing
relicensing, the Commission is required to issue annual renewals
of the existing license during the application review period that
precedes issuance of a new long-term license. The Commission
therefore issued Tacoma an annual license, and as a
consequence of repeated delays, Tacoma operated the project for
the next twenty-four years under these annual renewals.

The array of matters addressed during this lengthy review
period included: (1) the state certification required under
section 401(a) of the Clean Water Act, 33 U.S.C. § 1341(a); (2)
the state “concurrence” required under section 307(c)(3)(A) of
the Coastal Zone Management Act, 16 U.S.C. § 1456(c)(3)(A);
 5

(3) the consultations with state and federal wildlife agencies
required under section 10(j) of the FPA, id. § 803(j); and (4) the
consultations with the Advisory Council on Historic
Preservation required under section 106 of the National Historic
Preservation Act, id. § 470f. In addition, FERC (the successor
agency to the Federal Power Commission) prepared an
environmental impact statement as required by the National
Environmental Policy Act, 42 U.S.C. § 4332(2)(C), and the
Department of the Interior (“Interior”), as the agency
supervising the Tribe’s reservation, prepared a list of
“conditions” to be included in Tacoma’s new license pursuant
to section 4(e) of the FPA. See 16 U.S.C. § 797(e).

The Tribe also petitioned FERC in 1992 for an order
declaring the proceeding to be an original license proceeding,
not a relicensing. Among other things, the Tribe was seeking to
establish pre-1924 environmental conditions as the baseline for
FERC’s analysis of environmental impact, arguing that most of
the project had never been the subject of any license proceeding.
FERC rejected the Tribe’s argument, stating, “We . . . conclude
that the subsequent licensing of a major project with an expiring
minor part license is not an original licensing proceeding, but is
a relicensing proceeding which is governed by the relicensing
provisions of section 15 of the FPA.” City of Tacoma, 67 FERC
¶ 61,152, at 61,443 (1994). FERC also specifically rejected the
use of pre-1924 environmental conditions as the baseline for
measuring environmental impact. See id. at 61,443-44.

FERC finally completed the application review process in
1998, and on July 30th of that year, FERC issued a forty-year
major license for the Cushman Project, imposing a number of
conditions designed, among other things, to protect the
environment, to remedy past environmental impacts, to restore
fish populations, and otherwise to mitigate the effect of the
project on the Tribe’s reservation. See City of Tacoma, 84
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FERC ¶ 61,107, at 61,578-99 (1998). FERC rejected Interior’s
section 4(e) conditions, but article 407 of the license requires
Tacoma to release a minimum flow of 240 cfs (or inflow,
whichever is less) into the North Fork riverbed, below Lake
Kokanee, and this requirement partially satisfies one of
Interior’s conditions.

Several parties petitioned for rehearing. Tacoma’s petition
asserted that, under the terms of the license, the Cushman
Project would cost more to operate than the value of the power
it generated. The Tribe’s petition asserted that the license did
not adequately protect the environment or the Tribe’s
reservation and should have included all of Interior’s section
4(e) conditions. The Tribe also contested whether the
requirements of the Clean Water Act, the Coastal Zone
Management Act, and the National Historic Preservation Act
had been satisfied. In a series of orders, FERC (1) denied
several petitions for rehearing; (2) clarified that Tacoma could
defer its final decision as to whether to accept or reject the new
license until after completion of the appeal process; and (3)
granted a stay of the new license pending judicial review,
thereby permitting Tacoma to continue operations without
satisfying any of the license conditions.

Several petitions for review were filed in this court, but we
remanded without any decision on the merits because the listing
of two salmon species as endangered pursuant to the
Endangered Species Act (“ESA”), see 16 U.S.C. § 1533,
necessitated consultations between FERC and the National
Marine Fisheries Service (the “Fisheries Service”) regarding the
impact of the Cushman Project on these species, see id.
§ 1536(a), and we anticipated that these consultations might
result in significant license changes. After remand, FERC also
entered into consultations with the Fish and Wildlife Service
regarding the impact the project would have on a third species,
 7

the bull trout. Pursuant to section 7(b) of the ESA, id.
§ 1536(b), the Fisheries Service and the Fish and Wildlife
Service began preparing biological opinions (“BiOps”) detailing
their expert findings regarding the impact FERC’s proposed
action would have on the endangered species and specifying
“reasonable and prudent measures” FERC needed to take to
minimize any “incidental taking” of the species. Id.
§ 1536(b)(4).

More delays followed, and in September 2003, FERC
ordered a “nonadversarial” factfinding hearing before an
administrative law judge (“ALJ”) in an effort to move the matter
forward. In December 2003, the Fisheries Service and the Fish
and Wildlife Service issued draft versions of their BiOps, and
the ALJ was able to take those draft BiOps into consideration.
That same month, the ALJ issued a report emphasizing the
critical importance of releasing a minimum flow of 240 cfs into
the North Fork riverbed, even on an interim basis, to benefit
endangered salmon. A few months later, in March 2004, the
Fisheries Service and the Fish and Wildlife Service issued their
final BiOps, and in June, FERC amended the license for the
Cushman Project, adding specific protections for the endangered
species, as recommended in the BiOps. In the same order,
FERC partially lifted its stay, thereby requiring the 240 cfs
minimum flow the ALJ had recommended in his report. In
February 2005, FERC granted in part and denied in part requests
for rehearing, making relatively minor additional amendments
to the license, and in March 2005, FERC denied rehearing of its
February order.

Several petitions challenging FERC’s orders are
consolidated in this proceeding. On May 3, 2005, we granted a
motion for a stay of the 240 cfs minimum-flow requirement.
Tacoma thus continues to operate the Cushman Project without
any significant license conditions, as it has done for
 8

approximately eighty years. It also continues to divert nearly all
the water from the North Fork River, as it has done for
approximately eighty years. Tacoma has consistently asserted
that the 240 cfs minimum flow will necessitate a shut down of
the project.

II

A

The Tribe’s petition argues that Tacoma has reaped huge
profits operating a largely unlicensed hydroelectric project for
nearly eighty years, while ignoring the devastating impact its
actions have had on the Tribe’s traditional lifestyle. Tacoma has
almost completely removed the water from the North Fork of the
Skokomish River, and it has sharply reduced water levels in the
mainstem of the river. The result, the Tribe asserts, has been a
major alteration of the local environment, a devastating drop in
the fish populations, and damage to natural resources of great
economic and cultural significance to the Tribe. All of these
factors weigh against the license, argues the Tribe, but in
addition, the Tribe relies on article 4 of the Treaty of Point No
Point, which provides in relevant part: “The right of taking fish
at usual and accustomed grounds and stations is . . . secured to
said Indians . . . .” While the Tribe arguably still has the right to
“tak[e] fish at usual and accustomed grounds,” that right is now
of little value, because the water has disappeared, and with it,
the fish.

The Tribe already litigated most of these points before
FERC in the early 1990s, and FERC gave persuasive reasons for
rejecting the Tribe’s arguments. As noted, the Tribe filed a
petition in 1992 asking FERC to treat Tacoma’s application as
an application for an original license, rather than a section 15
relicensing proceeding. In the same petition, the Tribe sought
 9

to establish pre-1924 environmental conditions as the baseline
for measuring the environmental impact of the Cushman Project.
As the Tribe viewed the situation, most of the Cushman Project
had never been the subject of a FERC licensing proceeding, but
Tacoma was nevertheless assuming the preferred status of a
licensee seeking merely to renew a license for an approved
project. According to the Tribe, unless FERC treated Tacoma’s
application as an application for an original license, the severe
impact of the Cushman Project on the Tribe’s reservation (and
its way of life) would escape regulatory review altogether.

Two points put these arguments in context. First, the
primary focus of the FPA in 1924 was on development of the
nation’s natural resources, and the Act did not include many of
the environmental protection provisions on which the Tribe now
relies. Therefore, even if the Commission had licensed the
entire Cushman Project back in 1924, instead of only a minor
part of that project, it is doubtful it would have imposed
significantly different license conditions. The Commission was
certainly aware of the full scope of the Cushman Project when
it issued the 1924 minor part license, and it could have withheld
the minor part license if it had been opposed to the project.

Second, in 1924, Tacoma obtained the regulatory approvals
it was required to obtain as of that time, based on the
Commission’s then-narrow interpretation of its licensing
authority. Therefore, the assertion that Tacoma should be
penalized, at the relicensing stage, for having only a minor part
license is unfounded.

FERC made essentially these points in its 1994 declaratory
order in which it found the instant proceeding to be a
relicensing, not an original licensing. See 67 FERC at 61,441-
44. The Tribe, however, argues that FERC had no statutory
authority for conducting a relicensing proceeding, and therefore
 10

the license it issued in 1998 is invalid. The Tribe points out that
in PG&E I the Commission held that minor part licenses similar
to Tacoma’s 1924 license were “improperly issued” based on an
“erroneous conclusion of law.” 29 FPC at 1266. On this basis,
the Tribe argues the Cushman Project has never operated under
a valid license, and a relicensing proceeding only compounds
this error by treating the 1924 license as if it were valid.

The Commission addressed this question in a somewhat
different context in Pac. Gas & Elec. Co., 56 FPC 994 (1976)
(PG&E II). In PG&E II, the Commission granted an application
for surrender of a minor part license and issuance of a new
major license, and in the course of its decision, it discussed the
appropriate effective date for the new license. Id. at 1006-08.
The Commission rejected the conclusion that its 1963 decision
in PG&E I effectively invalidated all minor part licenses and
therefore the date of that decision should constitute the date of
surrender:

While the Commission stated [in the 1963 decision] that
minor-part licenses were based on an ‘erroneous conclusion
of law’ and were ‘improperly issued,’ we do not believe it
is appropriate to accept the proposed surrender as of the
date of the 1963 decision. We also do not establish the
effective date of the [new] license as the date of the 1963
decision. The effective date of the surrender of the minor-
part license and the effective date of the [new] license for
the project works are the first day of the month in which
this order is issued.

Id. at 1007. The Commission added:

In view of the 1963 decision and our reconsideration of
minor-part licenses herein, we are directing the Secretary to
serve this order on all minor-part licensees and to direct
 11

those licensees to file a schedule for submission of a license
application covering all project works of a project as
defined in Section 3(11) of the [FPA].

Id. at 1008. In other words, the Commission determined that
projects operating under minor part licenses prior to the 1976
decision were operating under adequate licenses, though as of
the 1976 decision, they were on notice that they needed to apply
for major licenses.

We agree with the Commission’s conclusion that minor part
licenses issued prior to 1963 were adequate even if issued based
on an erroneous conclusion as to the scope of the Commission’s
licensing authority. Significantly, the Commission’s issuance of
a minor part license in 1924 was not an ultra vires act. The
Commission erred by construing its authority too narrowly, not
in acting beyond the bounds of its mandate. Therefore, even if
the Commission erred in issuing Tacoma a minor part license in
1924, the minor part license it issued was not inherently
improper or lacking in legal force. When the Commission later
reinterpreted its licensing jurisdiction more broadly, we think
the Commission had discretion to recognize the legitimacy of
existing minor part licenses and, on that basis, to apply the
relicensing provision found in section 15 of the FPA.

The Tribe points out, however, that section 15 nowhere
expressly refers to minor part licenses or authorizes relicensing
upon expiration of a minor part license. The Tribe is correct that
section 15 is not specific in this regard. It provides simply that
FERC can “issue a new license” to the licensee “at the
expiration of the existing license.” 16 U.S.C. § 808(a)(1).
Nevertheless, we think this statutory language is broad enough
to permit the interpretation FERC has given it, and because we
find FERC’s interpretation to be reasonable, we defer to it. See
Chevron, U.S.A., Inc. v. Natural Resources Defense Council,
 12

467 U.S. 837, 842-43 (1984).

The Tribe argues that Chevron deference does not apply
here because this case involves an Indian tribe. In support of
this argument, the Tribe cites Cobell v. Norton, 240 F.3d 1081,
1101 (D.C. Cir. 2001), in which we found Chevron deference
inapplicable to the Secretary of the Interior’s interpretation of
the Indian Trust Fund Management Reform Act, because “the
trust relationship between the United States and the Native
American people” requires liberal construction of statutes in
favor of Indian tribes. This principle only applies, however, to
provisions of the law that are “for the benefit of Indian tribes.”
Id. at 1103 (quoting Bryan v. Itasca County, 426 U.S. 373, 392
(1976)). The FPA includes at least one provision for the benefit
of Indian tribes (section 4(e)), but the Act’s relicensing
provision (section 15) cannot be characterized that way, and
therefore the Tribe’s argument fails.

In sum, we reject the Tribe’s argument that FERC erred in
conducting a relicensing proceeding rather than an original
license proceeding.

B

The Tribe asserts that FERC violated section 4(e) of the
FPA by not including Interior’s section 4(e) conditions in
Tacoma’s new license. Section 4(e) of the FPA, 16 U.S.C.
§ 797(e), provides

[t]hat licenses shall be issued within any reservation only
after a finding by the Commission that the license will not
interfere or be inconsistent with the purpose for which such
reservation was created or acquired, and shall be subject to
and contain such conditions as the Secretary of the
department under whose supervision such reservation falls
 13

shall deem necessary for the adequate protection and
utilization of such reservation[.]

In this case, Interior is the federal agency under whose
supervision the Skokomish Indian Reservation falls, and on
August 4, 1997, the Secretary of the Interior submitted
section 4(e) conditions to FERC. FERC rejected these
conditions because they “were not timely filed.” City of
Tacoma, 84 FERC at 61,549, order on reh’g, 86 FERC ¶ 61,311,
at 62,074 (1999).

The FPA does not indicate what, if any, time limitation
applies in this context, but FERC has imposed a strict time
limitation, now codified at Title 18, § 4.34(b) of the Code of
Federal Regulations, which provides in relevant part:

All comments (including mandatory . . . terms and
conditions or prescriptions) on an application for . . . [a]
license must be filed with the Commission no later than 60
days after issuance by the Commission of public notice
declaring that the application is ready for environmental
analysis. . . . A commenter . . . may obtain an extension of
time from the Commission only upon a showing of good
cause or extraordinary circumstances in accordance with
§ 385.2008 of this chapter. . . . Late-filed . . . terms and
conditions, or prescriptions will be considered by the
Commission under section 10(a) of the Federal Power Act
if such consideration would not delay or disrupt the
proceeding.

18 C.F.R. § 4.34(b). The regulation also states:

[I]f ongoing agency proceedings to determine terms and
conditions or prescriptions are not completed by the date
specified, the agency must submit to the Commission by the
 14

due date: (i) Preliminary terms and conditions or
prescriptions and a schedule showing the status of the
agency proceedings and when the terms and conditions or
prescriptions are expected to become final; or (ii) A
statement waiving the agency’s right to file the terms and
conditions or prescriptions or indicating the agency does
not intend to file terms and conditions or prescriptions.

Id. § 4.34(b)(1) (paragraph breaks omitted).

In accordance with this regulation, Interior’s section 4(e)
conditions were due on October 31, 1994. Interior, however, did
not submit its conditions, or even preliminary conditions, by that
date. Instead, Interior submitted a letter stating that, because of
the complexity of the project, it would submit preliminary
conditions within two years. In this letter, Interior also
questioned FERC’s authority to impose a time restriction on
responsibilities the FPA expressly delegated to the Secretary of
the Interior. Interior complained that FERC’s short time
restriction was “unworkable,” “as a practical matter . . . not
possible,” and in conflict with FERC’s “trust responsibility to
protect the lands and resources of Indian Tribes.” Two years
later, Interior submitted preliminary section 4(e) conditions, as
it said it would do, and about nine months after that, it submitted
its final conditions, which FERC rejected as untimely. See City
of Tacoma, 84 FERC at 61,549, order on reh’g, 86 FERC at
62,074.

We conclude FERC exceeded its statutory authority by
placing a strict time restriction on responsibilities Congress
delegated to other federal agencies. The FPA provides that
licenses “within any reservation” “shall be subject to and
contain such conditions as the Secretary of the department under
whose supervision such reservation falls shall deem necessary
for the adequate protection and utilization of such reservation[.]”
 15

16 U.S.C. § 797(e). The FPA gives FERC no discretion in this
regard. Though FERC makes the final decision as to whether to
issue a license, FERC shares its authority to impose license
conditions with other federal agencies. See Escondido Mut.
Water Co. v. La Jolla Band of Mission Indians, 466 U.S. 765,
772-79 (1984). To the extent Congress has delegated licensing
authority to agencies other than FERC, those agencies, and not
FERC, determine how to exercise that authority, subject of
course to judicial review. FERC can no more dictate to Interior
when Interior should complete its work than Interior can dictate
to FERC when FERC should do so. Here, FERC took all the
time it needed—a full 24 years—to issue a license to Tacoma.
Interior, in contrast, produced its license conditions within about
three years of receiving notice on August 1, 1994.

To be sure, Interior and FERC should certainly make every
effort to cooperate and to coordinate their efforts, because
license conditions imposed by one agency may alter the
conditions the other agency deems necessary. Furthermore,
when two or more federal agencies have shared authority to
impose license conditions, they can certainly agree on an
appropriate time frame to govern the process. FERC, however,
has no authority to impose a short 60-day limitation unilaterally,
thereby effectively stripping Interior of its statutorily delegated
authority.

A further question relates to the scope of Interior’s
statutorily delegated authority, which according to the express
terms of section 4(e) extends only to “licenses . . . issued within
any reservation.” 16 U.S.C. § 797(e). In FPC v. Tuscarora
Indian Nation, 362 U.S. 99, 110-15 (1960), the Supreme Court
held that only land actually owned by the United States qualifies
as reservation land for purposes of the FPA. Out of all the
various facilities that constitute the Cushman Project, the lower
of the two generating plants, an access road, and a transmission
 16

line are within the boundary of the reservation, but the
generating plant is on land Tacoma owns in fee. Therefore, only
the transmission line and the access road are “within” the
reservation for purposes of the FPA, but this is sufficient.

FERC concluded that Interior’s authority to impose section
4(e) conditions was limited to mitigating the relatively small
impact the transmission line and access road had (and would
have) on the reservation, and it did not extend to the much
greater impact the dams and water diversion had (and would
have) on the reservation. See City of Tacoma, 84 FERC at
61,548-49, order on reh’g, 86 FERC at 62,074-76. In reaching
this conclusion, FERC relied on its prior decision in Minnesota
Power & Light Co., 75 FERC ¶ 61,131, at 61,447-48 (1996), in
which it had rejected Interior’s assertion of a broad right to
impose license conditions based on the presence of any small
part of a project on reservation land. In Minnesota Power,
FERC stated:

Interior’s theory could lead to any number of results
that would be inconsistent with the letter and intent of
section 4(e). For example, if a project is located entirely on
private land with the exception of a small segment of a
power line that crossed the corner of a reservation,
Interior’s theory would allow it to set minimum instream
flows and impose other conditions on aspects of the project
that have absolutely no impact on the reservation. . . . We
do not interpret section 4(e) to require such [an] outcome[].

Id. at 61,448. FERC cited Escondido in support of this
conclusion, but Escondido actually suggests a different rule.

The Supreme Court in Escondido considered whether
Interior could impose section 4(e) conditions “any time a
reservation is ‘affected’ by a licensed project even if none of the
 17

licensed facilities is actually located on the reservation.” 466
U.S. at 782-83. The Court rejected this argument, stating,
“Congress intended . . . the conditioning power of the Secretary
[of the Interior] to apply only with respect to [a] . . . reservation
upon which any project works were to be located.” Id. at 782.
Significantly, the Court referred to any project works, which
would seem to include, contrary to FERC’s conclusion, even “a
small segment of a power line that crosse[s] the corner of a
reservation.” Minnesota Power, 75 FERC at 61,448. Later in
its opinion, the Court stated, “[I]t is clear that Congress
concluded that reservations were not entitled to the added
protection provided by the proviso of § 4(e) unless some of the
licensed works were actually within the reservation.”
Escondido, 466 U.S. at 784 (emphasis added). “[S]ome” means
“some”; it does not mean “all,” or even “a lot.” The issue under
consideration in Escondido was whether Interior can impose
license conditions based on the indirect effects a project has on
a reservation. Therefore, the implication of the court’s
statements is that Interior can do so provided that at least
“some” or “any” part of the licensed facilities is on reservation
land.

This conclusion is consistent with the plain meaning of the
statutory language. All the parties agree Tacoma’s Cushman
Project is “within [a] reservation” at least to the extent of the
access road and transmission line, and section 4(e) provides that
licenses issued “within [a] reservation” “shall be subject to and
contain such conditions as the Secretary [of the Interior] . . .
shall deem necessary for the adequate protection and utilization
of such reservation.” 16 U.S.C. § 797(e) (emphasis added).
This language nowhere limits Interior’s regulatory authority to
those portions of the project that are on the reservation. On the
contrary, so long as some portion of the project is on the
reservation, the Secretary is authorized to impose any conditions
that will protect the reservation, including utilization of the
 18

reservation in a manner consistent with its original purpose.

We conclude, therefore, that the Secretary of the Interior is
not limited in this proceeding to mitigating the impact the access
road and the transmission line will have on the reservation.
Instead, he may impose license conditions that are designed to
mitigate the effect of the project on the Skokomish River to the
extent doing so is reasonably related to protecting the
reservation and the Tribe. Moreover, the FPA gives FERC no
discretion to reject Interior’s section 4(e) conditions, Escondido,
466 U.S. at 777-79, though FERC is “free to express its
disagreement” with the conditions “in connection with the
issuance of the license” or “on [judicial] review,” and it also has
the option of not issuing the license, id. at 778 n.20. Here,
because FERC rejected Interior’s section 4(e) conditions as
untimely, FERC did not argue against the conditions on the
merits, which perhaps would have persuaded Interior to change
some of the conditions, and it did not rule on whether, with the
conditions included, the license should nevertheless issue. For
the same reason, the record before us might not include all of
Interior’s evidentiary support for the conditions, and no party
has had an opportunity to challenge the validity of the conditions
in a petition for review. Therefore, our decision should not be
read as foreclosing the Commission from deciding not to issue
the license as modified by the section 4(e) conditions, or if it
does issue the license, foreclosing the petitioners from future
litigation over the conditions.

C

The Tribe argues that, in issuing the license, FERC violated
its obligations under the Clean Water Act. Section 401 of the
Clean Water Act requires a water quality “certification” from
the appropriate state government agency before FERC can
license a hydroelectric project like the Cushman Project. 33
 19

U.S.C. § 1341(a)(1). On April 30, 1985, the State of
Washington Department of Ecology (“Ecology”) issued a
conditional certification for the Cushman Project, and Tacoma
appealed that certification to the state’s Pollution Control
Hearings Board. Pursuant to a settlement between Ecology and
Tacoma, Ecology issued a new conditional certification on
December 30, 1987. Ecology, however, was unable to produce
records showing that it gave public notice or held a hearing with
respect to either certification.

In most cases, if a party seeks to challenge a state
certification issued pursuant to section 401, it must do so
through the state courts. The reason for this rule is plain
enough. The Clean Water Act gives a primary role to states “to
block . . . local water projects” by imposing and enforcing water
quality standards that are more stringent than applicable federal
standards. Keating v. FERC, 927 F.2d 616, 622 (D.C. Cir.
1991). Therefore, the decision whether to issue a section 401
certification generally turns on questions of state law. FERC’s
role is limited to awaiting, and then deferring to, the final
decision of the state. Otherwise, the state’s power to block the
project would be meaningless. Id.

The reason for this rule, however, also establishes its outer
limits. If the question regarding the state’s section 401
certification is not the application of state water quality
standards but compliance with the terms of section 401, then
FERC must address it. This conclusion is evident from the plain
language of section 401: “No license or permit shall be granted
until the certification required by this section has been obtained
or has been waived . . . .” 33 U.S.C. § 1341(a)(1) (emphasis
added). FERC, in other words, may not act based on any
certification the state might submit; rather, it has an obligation
to determine that the specific certification “required by
[section 401] has been obtained,” and without that certification,
 20

FERC lacks authority to issue a license.

This obligation does not require FERC to inquire into every
nuance of the state law proceeding, especially to the extent
doing so would place FERC in the position of applying state law
standards, but it does require FERC at least to confirm that the
state has facially satisfied the express requirements of
section 401. For example, where a state claims to have revoked
a certification pursuant to section 401(a)(3), FERC has an
obligation to confirm that the state has done so in a way that
satisfies the restrictions of that subsection. Keating, 927 F.2d at
624-25. Likewise, when a state issues a water quality
certification, FERC has an obligation to confirm, at least
facially, that the state has complied with section 401(a)(1)’s
public notice requirements.

Section 401(a)(1) requires states to “establish procedures
for public notice in the case of all applications for certification.”
33 U.S.C. § 1341(a)(1). The State of Washington has complied
with this provision by adopting section 173-225-030 of the
Washington Administrative Code, which provides: “Whenever
an application for [section 401] certification . . . is filed . . . (1)
Public notice . . . shall be performed . . . as follows: (a) By
mailing notice of the application for certification to persons or
organizations who have requested the same and to all others
deemed appropriate . . . .” WASH. ADMIN. CODE 173-225-030
(1975). In addition, section 173-225-030 permits the state to
publish notice in a newspaper of general circulation, if such
additional notice is “desirable in the public interest.” Id. § 173-
225-030(1)(b). We do not, however, think FERC’s obligation
is limited to confirming that the state has enacted a public notice
procedure. Rather, we think that, by implication, section
401(a)(1) also requires states to comply with their public notice
procedures, and therefore it requires FERC to obtain some
minimal confirmation of such compliance, at least in a case
 21

where compliance has been called into question. Otherwise,
FERC has no assurance that the certification the state has issued
satisfies section 401, and in the absence of such an assurance, it
has no authority to grant a license.

We do not mean to suggest that FERC should resolve
disputes relating to whether the state’s public notice procedures
have been satisfied, for doing so would require FERC to
construe state law. However, some minimal form of public
notice is an explicit requirement of section 401, which is federal
law, and therefore in a case such as this one, where public notice
has been called into question, we think FERC has a role to play
in verifying compliance with state public notice procedures at
least to the extent of obtaining an assertion of compliance from
the relevant state agency. FERC argues that the state “was no
longer troubled by the issue,” but this point is without legal
significance, because section 401 sets forth constraints upon
FERC’s authority to act.

Nevertheless, we do not think our conclusion requires us to
vacate the 1998 license, especially because vacating the 1998
license would allow Tacoma to operate under annual renewals
of its 1924 minor part license and would likely have greater
adverse impact on water quality than leaving the license in
place. FERC should seek an affirmation from Ecology that it
complied with state law notice requirements when it issued its
water quality certification or, if it did not, that it has done so in
response to this decision.

D

The Tribe asserts that FERC violated section 106 of the
National Historic Preservation Act, 16 U.S.C. § 470f, which
requires federal agencies to consider the effect of their actions
on certain historic or culturally significant sites and properties
 22

(expressly including those of Indian tribes) and to seek ways to
mitigate those effects. FERC complied with its section 106
obligation, and it expressly took into consideration the
comments of the Advisory Council on Historic Preservation,
adopting some of the Council’s suggestions. City of Tacoma, 84
FERC at 61,564-66. The Tribe argues, however, that FERC
failed to take into consideration and mitigate the impact the
original project had in 1924 on historic and culturally
significant sites. [Blue Br., p. 45] We need not decide whether
section 106 requires consideration of past impacts in the course
of a relicensing proceeding, because FERC took the prior impact
of the Cushman Project into account. In its July 30, 1998 order,
FERC stated: “[W]e acknowledge that the Cushman Project has
had adverse environmental effects because of its diversion of
water out of the North Fork Skokomish River. To mitigate some
of those effects, we are adopting many, but not all, of the
agencies’ recommended terms and conditions for the Cushman
Project license. . . . We believe these measures provide
sufficient protection for historic properties.” Id. at 61,566.

As an aside, it is worth noting our conclusion that FERC
must include Interior’s section 4(e) conditions in the new license
may alter the analysis of what impact the license will have on
historic or culturally significant sites and properties, thereby
requiring the Commission to consider anew the effects of its
actions.

E

The Tribe argues FERC violated the Coastal Zone
Management Act (“CZMA”) by issuing a license without a
concurrence from Ecology confirming compliance with
Washington’s coastal program. The CZMA requires an
applicant for any federal license affecting land, water, or natural
resources of a coastal zone to certify compliance with the
 23

relevant state’s coastal program, and the state must then concur
in the applicant’s certification, though if no concurrence is
forthcoming within six months, the state’s concurrence “shall be
conclusively presumed.” 16 U.S.C. § 1456(c)(3)(A). On June
20, 1996, Tacoma certified compliance with Washington’s
coastal program, and on May 6, 1997, Ecology issued a
somewhat equivocal concurrence. Ecology’s letter stated that
Tacoma’s proposal for operating the Cushman Project “d[id] not
comply with Washington’s Coastal Zone Program,” but
nevertheless “the purposes of the Coastal Zone Program will be
better met by declining to object.” The letter continued:
“Therefore, . . . Ecology hereby declines its right to take action
under its Coastal Zone Management authority . . . . Ecology
hopes that declining further CZM review . . . will allow FERC
to proceed with licensing without further delay. This letter
constitutes the formal agency action on CZM related to this
licensing proceeding.” (Paragraph breaks omitted.)

Though Ecology’s ultimate decision not to object was
unambiguous, the element of reluctance in Ecology’s letter cast
some doubt over the matter. That doubt, however, was cleared
away when the United States Department of Commerce
(“Commerce”), which administers the CZMA, ruled that
Ecology’s letter constituted the state’s conclusive concurrence
in Tacoma’s certification. Commerce’s 1997 ruling with respect
to the letter satisfied FERC, which issued the new license to
Tacoma. City of Tacoma, 84 FERC at 61,546.

The Tribe subsequently prevailed in state court litigation
challenging the validity, under state law, of Ecology’s
concurrence. Skokomish Indian Tribe v. Fitzsimmons, 982 P.2d
1179 (Wash. Ct. App. 1999). The state court held that Ecology
had issued its concurrence in violation of state administrative
law, id. at 1184-86, though it expressly did not rule on the merits
of whether the concurrence was warranted, id. at 1183 n.3.
 24

When FERC issued the license, however, the question at issue
before FERC was only the federal-law effect of Ecology’s letter
stating its concurrence, and Commerce had ruled that the letter
should be treated as a valid concurrence for federal law
purposes. Under the circumstances, FERC did not need to delay
licensing until all state-law challenges to Ecology’s actions were
complete.

Moreover, after the state court invalidated Ecology’s
concurrence, Ecology issued a new letter on February 9, 2000,
stating the specific conditions that would satisfy its coastal
program, and those conditions are generally consistent with the
license FERC issued in 1998. Specifically, Ecology stated that
Tacoma should release a minimum of 240 cfs (or inflow,
whichever is less) to the North Fork riverbed and Tacoma
should “participate in an adaptive management process with the
goal of increasing flows in the river to more natural levels.”
FERC concluded that, because Tacoma’s 1998 license met
Ecology’s conditions, reopening the CZMA certification process
would serve no purpose. City of Tacoma, 104 FERC ¶ 61,324,
at 62,223 (2003), order on reh’g, 105 FERC ¶ 61,333, at 62,544-
45 (2003). We agree.

The Tribe argues that, regardless of Commerce’s ruling,
Tacoma should have sought a new CZMA certification due to
the listing of three species as endangered under the ESA. See 15
C.F.R. § 930.66(a). FERC, however, took into account the
recommendations of the BiOps with respect to these species,
amending several articles of the 1998 license, and Ecology never
suggested to Tacoma that the listing of these species altered its
conclusion with respect to coastal program compliance. See id.
§ 930.66(b). Under the circumstances, we think FERC
reasonably concluded that a supplemental certification was
unnecessary.
 25

F

The Tribe argues that Tacoma lacks water rights for the
water it uses in connection with the Cushman Project. On
November 13, 1993, Ecology sent a nine-page letter to FERC,
describing in detail the ways in which Tacoma had
“mischaracterize[d] the extent of its state water rights.” Ecology
reiterated its position in two subsequent letters to FERC, one
dated January 25, 1994, and the other dated October 27, 1994.
The Tribe then raised this issue in its request for reconsideration
of the July 30, 1998 order granting the license. FERC rejected
the Tribe’s argument, noting that Tacoma had applied for
additional water rights and that section 27 of the FPA, 16 U.S.C.
§ 821, deprived FERC of authority to adjudicate issues related
to state water rights. City of Tacoma, 86 FERC at 62,073 n.13.
The Tribe next brought a motion asking FERC to add two new
articles to the license: (1) “an article requiring Tacoma’s
compliance with its existing state water rights to the satisfaction
of . . . Ecology or a court of competent jurisdiction, including if
necessary Tacoma’s restricting its water usage to match its
authorized amount”; and (2) “an article reserving [FERC’s]
authority to unilaterally modify the Cushman Project license as
may be necessitated by action on Tacoma’s water rights taken
by . . . Ecology or a court of competent jurisdiction.”

We agree with FERC that the articles the Tribe proposed in
this motion are unnecessary in light of section 27 of the FPA.
Section 27 provides:

Nothing contained in this chapter shall be construed as
affecting or intending to affect or in any way to interfere
with the laws of the respective States relating to the control,
appropriation, use, or distribution of water used in irrigation
or for municipal or other uses, or any vested right acquired
therein.
 26

16 U.S.C. § 821. If FERC lacks power to “affect[] or . . .
interfere with” state water rights, then the license FERC issued
for the Cushman Project does not (and cannot) exempt Tacoma
from meeting its water rights obligations under state law.
Incorporating those water rights obligations into the license
would serve no purpose other than to interpose FERC, in its role
as enforcer of the license, into a matter that is not its concern.
The Tribe argues that FERC, by issuing the license, has
“condone[d] Tacoma’s blatant violation” of state water rights
law. It cannot under section 27.

III

A

Tacoma argues the license conditions FERC has imposed
make the Cushman Project more costly to operate than the value
of the power the project generates. On that account, Tacoma
asserts the license amounts to a de facto decommissioning of the
project, in violation of sections 14 and 15 of the FPA.

Under the FPA, any of several things can happen when a
license to operate a hydroelectric facility expires: (1) the federal
government can take over the project, 16 U.S.C. § 807; (2)
FERC can issue a new license to the same licensee “upon
reasonable terms,” id. § 808(a)(1); (3) FERC can issue a license
to a different licensee “upon reasonable terms,” id.; (4) FERC
can license all or part of the project for nonpower use, id.
§ 808(f); and (5) FERC can decline to issue a new license. The
last option is implicit in section 4(e), which gives to FERC the
authority to decide “whether to issue any license under this
subchapter.” Id. § 797(e) (emphasis added); see also Escondido,
466 U.S. at 778 n.20. If the Commission decides not to issue a
new license, however, the Act is silent with respect to the
disposition of the project works and any other remedial
 27

measures that might be necessary to restore the environment.
For example, on the one hand, failure to maintain a dam after a
project ceases operations would lead to the gradual deterioration
of the dam’s structural integrity followed by a possible
catastrophe (and huge liability for the landowner) should the
dam suddenly give way. On the other hand, the project’s former
operator may not want to bear the cost of maintaining the dam
when it no longer receives revenues from the project, and if the
former operator removes the dam, homes and businesses that
have come to rely on the presence of the dam may lose much of
their value. FERC could, of course, address these issues at the
time of licensing by imposing appropriate license conditions, 16
U.S.C. § 799, but it is not clear whether, in the absence of
express license conditions, FERC has the authority to impose
obligations and costs on a former licensee.

When Congress first enacted the FPA in 1920, its general
expectation may have been that FERC would renew
hydroelectric project licenses in perpetuity, making post-license
disposition of project works unnecessary. At that time, the Act
included few provisions protecting the environment, and the
general focus was on development of the nation’s resources.
But with the later addition of various provisions protecting the
environment, and also fish and wildlife, the possibility arose that
existing projects would be inconsistent with the new values
embodied in the law, and FERC might therefore decline to
renew a license, or it might issue a renewal on terms the licensee
found objectionable. Aware of this possibility, FERC published
a “policy statement” in the Federal Register in 1995, claiming
authority to decommission existing projects at the time of
relicensing and to impose decommissioning costs on the former
licensee. See Project Decommissioning at Relicensing; Policy
Statement, 60 Fed. Reg. 339 (FERC Jan. 4, 1995). The validity
of this policy has never been tested in the courts.
 28

Tacoma argues that FERC has no authority to
decommission a project unilaterally at the time of relicensing.
Rather, sections 14 and 15 of the FPA list several possibilities
upon expiration of a license term, and FERC’s decommissioning
policy is simply not on the list. Tacoma suggests that if FERC
does not want to renew Tacoma’s 1924 license, and it cannot
find another party to take over the Cushman Project, then the
federal government must itself take over the project. Of course,
FERC did not decommission the Cushman Project; rather, it
issued a new license to Tacoma to operate the project.
Nevertheless, Tacoma claims FERC loaded up the new license
with so many conditions Tacoma has no choice but to shut the
project down. In that way, FERC effectively decommissioned
the project by the ruse of offering an uneconomic license and
saying, in effect, “Take it or leave it.” Tacoma argues “FERC
may not do indirectly that which it has no authority to do
directly—or, in other words, de facto decommissioning.”
Pet’rs’ Br. 23.

In pressing this argument, Tacoma emphasizes FERC’s
concession that the new license is uneconomic. Specifically,
FERC’s own finding is that the “net benefits” of the Cushman
Project are “negative $2.06 million” per year. This concession
has limited significance, however, in light of FERC’s decision
in Mead Corp., Publishing Paper Division, 72 FERC ¶ 61,027
(1995). In Mead Corp., FERC concluded it is institutionally
unqualified to make business judgments about the long-term
economic viability of hydroelectric projects, especially in light
of the “new era of competition” in the electric power industry
and the unpredictability of market conditions over the course of
a thirty- or fifty-year license term. Id. at 61,068, 61,070. In
addition, FERC noted that the potentially high cost associated
with decommissioning a project might prompt a licensee to
continue operating a project though the project is only
marginally viable economically. Id. at 61,068. Accordingly,
 29

FERC determined that it would cease the practice of projecting
long-term costs when assessing the economic benefits of a
project. Instead, it would focus (for the most part) on then-
existent conditions, and it would leave to the prospective
licensee the decision whether or not to accept the license. Id. at
61,069-70. FERC expressly noted the possibility that, under this
new approach, it might license projects that had “negative
economic benefits.” Id. at 61,069.

In light of Mead Corp., Tacoma finds far too much
significance in FERC’s concession that the Cushman Project is
uneconomic under the new license. The project may offer
advantages to Tacoma that are not readily quantifiable, and
market conditions may change significantly over the next forty
years, making the project economically viable over the long-
term. Tacoma’s more persuasive point is that the take-it-or-
leave-it attitude FERC expressed in Mead Corp. is inconsistent
with FERC’s statutory obligation under the FPA. Section 15 of
the FPA requires FERC to offer a new license on “reasonable
terms,” or an annual renewal of the old license, and in Tacoma’s
view, an uneconomic license is per se an unreasonable license.
FERC responds that its duty is to issue licenses that reflect the
congressional mandate irrespective of whether those licenses
make good business sense.

In some cases, a change in congressional priorities might
cast doubt on a once viable project and lead to closure of the
project when its license expires, either because FERC denies a
new license outright or because FERC issues a new license that
the licensee finds too costly or burdensome. In FERC’s
decommissioning policy statement, FERC argues persuasively
that it cannot guarantee license renewal when Congress has
greatly altered the regulatory landscape during the course of the
prior license term. 60 Fed. Reg. at 341-43. Moreover, the very
fact that a license may not exceed fifty years, see 16 U.S.C.
 30

§ 808(e), indicates Congress’s intent that projects be reevaluated
from time to time in light of changing circumstances and
national priorities, and this reevaluation necessarily implies that
in some cases new licenses will not be issued.

One of the major shifts in national priorities since the 1920s
has been from a near-exclusive focus on development to an
increasing focus on environmental protection, and this shift is
reflected in amendments to the FPA. In the 1920s, the FPA
contained only two provisions aimed at protecting natural
resources: (1) section 4(e) included a provision protecting
reservations and authorizing the Secretary of any federal agency
overseeing a reservation to impose appropriate license
conditions, 16 U.S.C. § 797(e), and (2) section 18 gave the
Secretary of Commerce (and later the Secretary of the Interior)
the power to impose license conditions governing the
construction of fishways, id. § 811. Starting in the 1950s,
however, environmental protection became an increasingly
important concern, and FERC’s hydroelectric decisions reflected
this shift in national values.

Then, in 1972, Congress enacted the Clean Water Act,
under which state water protection agencies must give a water
quality “certification” before FERC can license a hydroelectric
project. 33 U.S.C. § 1341(a)(1). In addition, section 7 of the
ESA, first enacted in 1973, requires FERC to impose license
conditions that are necessary to protect any listed species. 16
U.S.C. § 1536(a)(1). Finally, in 1986, Congress amended the
FPA to add the following provision to section 4(e):

In deciding whether to issue any license under this Part for
any project, the Commission, in addition to the power and
development purposes for which licenses are issued, shall
give equal consideration to the purposes of energy
conservation, the protection, mitigation of damage to, and
 31

enhancement of, fish and wildlife (including related
spawning grounds and habitat), the protection of
recreational opportunities, and the preservation of other
aspects of environmental quality.

Pub. L. No. 99-495, § 3(a), 100 Stat. 1243, 1243 (1986)
(codified at 16 U.S.C. § 797(e)). At the same time, Congress
also required FERC to consult with state and federal wildlife
protection agencies and to include license conditions to protect
fish and wildlife. Id. § 3(c), 100 Stat. at 1244 (codified at 16
U.S.C. § 803(j)).

In light of these sweeping changes in FERC’s statutory
mandate, FERC not only has the authority but also the
obligation to evaluate existing projects completely anew upon
expiration of their license terms. If Congress’s enactments are
to have any meaning at all, then Congress must have envisioned
major changes at some if not all of these existing projects. In
cases where these changes render the project impractical, then
closure becomes a possibility. As FERC put the point: “[T]he
Commission does not read the [Federal Power] Act as requiring
it to issue a license.” 60 Fed. Reg. at 342. Nothing in the FPA
suggests that Congress intended to “grandfather” existing
projects so they could continue to operate indefinitely despite
changes in national priorities.

Tacoma relies heavily on the provision of the FPA requiring
FERC to grant new licenses “upon reasonable terms,” 16 U.S.C.
§ 808(a)(1), but we cannot accept the implication that
“reasonable terms” means the same terms that were imposed
eighty years ago, or that “reasonable terms” means terms that
ignore the present-day statutory mandate. In fact, section 15 of
the Act states the opposite: “[T]he commission is authorized
[upon expiration of a license] to issue a new license to the
existing licensee upon such terms and conditions as may be
 32

authorized or required under the then existing laws and
regulations.” Id. (emphasis added).

Therefore, the question we must decide is whether
“reasonable terms” can, in some cases, be terms that may have
the effect of shutting a project down or occasioning a change of
ownership. We think the answer is yes, especially here where,
according to FERC’s factual finding, Tacoma has recouped its
initial investment plus a significant annual return on that
investment. The obligation to give “equal consideration” to
wildlife protection and the environment, id. § 797(e), implies
that, at least in some cases, these environmental concerns will
prevail. At the very least, the Act is ambiguous, and FERC’s
interpretation of its statutory authority is reasonable and entitled
to deference under Chevron, 467 U.S. at 842-43.

In conclusion, we find persuasive FERC’s argument that
Congress implicitly extended to FERC the power to shut down
projects either directly, by denying a new license, or indirectly,
by imposing reasonable and necessary conditions that cause the
licensee to reject the new license. We have no cause to decide
in this case whether, and in what circumstances, FERC can
impose decommissioning obligations or costs on a former
licensee.

B

Tacoma asserts that it will not operate the Cushman Project
under the license FERC has issued, and therefore FERC’s
environmental impact statement, required under 42 U.S.C.
§ 4332(2)(C), should have given consideration to the impact
shutting the project down would have on the environment. We
decline to address this issue in light of our conclusion that FERC
must include Interior’s section 4(e) conditions in Tacoma’s
license. The inclusion of these conditions will substantially alter
 33

the character of the license, requiring FERC to reweigh power
and nonpower interests and reassess environmental impacts. We
think Tacoma’s argument is more properly considered after such
reassessment takes place.

C

Tacoma argues FERC acted arbitrarily and capriciously in
relying upon flawed BiOps. In order to address this argument,
we start with some general background on the multi-agency
statutory scheme the ESA establishes.

The ESA imposes an obligation on all federal agencies to
protect listed species. 16 U.S.C. § 1536(a)(1)-(2). If a federal
agency concludes that an anticipated action is likely to
jeopardize the existence of a listed species or adversely modify
its critical habitat, the agency must consult with the appropriate
expert agency, either the Fisheries Service or the Fish and
Wildlife Service. Id. § 1536(a)(2), (4); 50 C.F.R. § 402.01(b).
The consultant agency then prepares a BiOp, finding either no
jeopardy or suggesting “reasonable and prudent alternatives”
that would protect the species and its habitat. 16 U.S.C.
§ 1536(b)(3)(A).

The ESA also makes it unlawful for any person to “take” a
listed species, id. § 1538(a)(1)(B), (C), which “means to harass,
harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect”
a listed species, or to attempt to do so, id. § 1532(19).
Nevertheless, if an agency’s proposed action (including any
incidental taking of a listed species that will result from the
action) will not jeopardize the existence of the species or
adversely modify its critical habitat, the consultant agency must
provide the action agency—here, FERC—with a “written
statement,” known as an Incidental Take Statement (“ITS”),
specifying “reasonable and prudent measures” the consultant
 34

agency deems appropriate to minimize any impact on the
species and setting forth “terms and conditions” to implement
those measures. Id. § 1536(b)(4)(ii), (iv). If the action agency
complies with those terms and conditions, then any taking that
results from the agency’s action is permissible. Id. § 1536(o)(2).

This interagency consultation process reflects Congress’s
awareness that expert agencies (such as the Fisheries Service
and the Fish and Wildlife Service) are far more knowledgeable
than other federal agencies about the precise conditions that
pose a threat to listed species, and that those expert agencies are
in the best position to make discretionary factual determinations
about whether a proposed agency action will create a problem
for a listed species and what measures might be appropriate to
protect the species. Congress’s recognition of this expertise
suggests that Congress intended the action agency to defer, at
least to some extent, to the determinations of the consultant
agency, a point the Supreme Court recognized in Bennett v.
Spear, 520 U.S. 154, 169-170 (1997). In Bennett, the Court
stated that an action agency disregards a jeopardy finding in a
BiOp “at its own peril” and bears the burden of articulating the
reasons for reaching its contrary conclusion. Id.

Accordingly, when we are reviewing the decision of an
action agency to rely on a BiOp, the focus of our review is quite
different than when we are reviewing a BiOp directly. In the
former case, the critical question is whether the action agency’s
reliance was arbitrary and capricious, not whether the BiOp
itself is somehow flawed. Aluminum Co. of Am. v. Adm’r,
Bonneville Power Admin., 175 F.3d 1156, 1160 (9th Cir. 1999);
Pyramid Lake Paiute Tribe v. U.S. Dep’t of Navy, 898 F.2d
1410, 1415 (9th Cir. 1990); Stop H-3 Ass’n v. Dole, 740 F.2d
1442, 1460 (9th Cir. 1984); cf. Nat’l Wildlife Fed’n v. Nat’l
Marine Fisheries Serv., 422 F.3d 782, 790 (9th Cir. 2005)
(direct review of a BiOp). Of course, the two inquiries overlap
 35

to some extent, because reliance on a facially flawed BiOp
would likely be arbitrary and capricious, but the action agency
“need not undertake a separate, independent analysis” of the
issues addressed in the BiOp. Aluminum Co., 175 F.3d at 1161.
In fact, if the law required the action agency to undertake an
independent analysis, then the expertise of the consultant agency
would be seriously undermined. Yet the action agency must not
blindly adopt the conclusions of the consultant agency, citing
that agency’s expertise. Id. Rather, the ultimate responsibility
for compliance with the ESA falls on the action agency. 16
U.S.C. § 1536(a)(1)-(2). In Pyramid Lake, the Ninth Circuit
balanced these two somewhat inconsistent principles and
articulated the following rule:

[E]ven when the [consultant agency’s] opinion is based on
“admittedly weak” information, another agency’s reliance
on that opinion will satisfy its obligations under the Act if
a challenging party can point to no “new” information—i.e.,
information the [consultant agency] did not take into
account—which challenges the opinion’s conclusions.

898 F.2d at 1415; see also Defenders of Wildlife v. U.S. EPA,
420 F.3d 946, 959, 976 (9th Cir. 2005); Stop H-3 Ass’n, 740
F.2d at 1459-60.

Here, Tacoma does not claim that it presented FERC with
new information that was unavailable to the Fisheries Service or
the Fish and Wildlife Service and that would give FERC a basis
for doubting the expert conclusions in the BiOps those agencies
prepared. It does not suffice, when urging an action agency to
reject the BiOp of a consultant agency, simply to reargue factual
issues the consultant agency already took into consideration.
Pyramid Lake, 898 F.2d at 1415-16; Stop H-3 Ass’n, 740 F.2d
at 1459-60. Because Tacoma did not assert new information
that called into question the factual conclusions of the BiOps,
 36

FERC was justified in relying on the BiOps and did not act
arbitrarily and capriciously in doing so.

Tacoma also challenges the validity of the BiOps
themselves, arguing that they are legally flawed and
unsupported by the evidence. Although in other contexts a BiOp
is subject to independent review in a proceeding in which the
agency issuing the BiOp is a party, see, e.g., Nat’l Wildlife
Fed’n, 422 F.3d at 790, when a BiOp is prepared in the course
of a FERC licensing proceeding, the only means of challenging
the substantive validity of the BiOp is on review of FERC’s
decision in the court of appeals. See 16 U.S.C. § 825l(b); City
of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320, 336 (1958);
California Save Our Streams Council, Inc. v. Yeutter, 887 F.2d
908, 912 (9th Cir. 1989); City of Tacoma v. Nat’l Marine
Fisheries Serv., 383 F.Supp.2d 89 (D.D.C. 2005); cf. Defenders
of Wildlife, 420 F.3d at 956 (in review of EPA decision, court of
appeals has jurisdiction to consider adequacy of BiOp on which
EPA relied). Accordingly, Tacoma properly brings this
challenge as part of the present proceeding, and the participation
of the consultant agencies that prepared the BiOps has ensured
that the matter is adequately presented. Our review is governed
by section 706 of the Administrative Procedure Act, requiring
us to determine that agency decisions are not “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706; see Bangor Hydro-Elec.
Co. v. FERC, 78 F.3d 659, 663 & n.3 (D.C. Cir. 1996); Pyramid
Lake, 898 F.2d at 1414. Therefore, the BiOps and the ITSs must
be upheld as long as the agencies “considered the relevant
factors and articulated a rational connection between the facts
found and the choice made.” Ariz. Cattle Growers’ Ass’n v.
FWS, 273 F.3d 1229, 1235-36 (9th Cir. 2001).

Tacoma argues that the BiOp of the Fisheries Service
improperly required upstream and downstream fish passage as
 37

a “reasonable and prudent measure[],” 16 U.S.C.
§ 1536(b)(4)(ii), to minimize take of the two listed salmon
species. Tacoma complains that this requirement duplicated
terms that already existed in the proposed license. Tacoma,
however, does not persuade us that this duplication of license
terms is per se improper.

Tacoma also complains that the same BiOp “anticipates . . .
incidental take of Puget Sound chinook salmon” but does not
mention any incidental take of the other endangered species
under consideration, the summer chum. Despite this oversight,
the BiOp’s list of “reasonable and prudent measures” refers to
protection of the summer chum, giving rise to an internal
inconsistency. Tacoma, however, concedes that this oversight
was an “apparent[] mistake[],” as is clear from the overall
context. This oversight does not render the BiOp invalid.

Tacoma further objects that the BiOp lists fish passage
facilities as being necessary to minimize incidental take of
summer chum, though the BiOp acknowledges summer chum
historically did not ascend the river as far as the dams. Here,
Tacoma simply misreads the BiOp. The BiOp lists eight
measures that together will minimize take of the two endangered
salmon species. The BiOp does not specify which measure is
needed to minimize incidental take of which species, nor does
it suggest fish passage in particular is necessary to minimize
incidental take of the summer chum.

Tacoma next notes the BiOp’s list of “reasonable and
prudent measures” requires “a minimum instream flow of 240
cfs, or natural inflow,” at the lower dam. The BiOp omits from
this requirement the words “whichever is less”—words that are
included in the comparable provision in article 407 of the
license. Tacoma argues that this omission has the effect of
requiring a minimum release of 240 cfs even when inflow is
 38

much lower than 240 cfs. Tacoma, in effect, interprets the
requirement as if it called for release of 240 cfs, or inflow,
whichever is more. That interpretation, however, makes no
sense because it would drain the lakes, after which the
requirement could no longer be met. Moreover, in other places,
the BiOp discusses the effect of “[a] flow of 240 cfs, or inflow,
whichever is less,” thereby making clear that the omission of the
words “whichever is less” from the BiOp’s list of “reasonable
and prudent measures” was an unintended oversight. FERC
reached just this conclusion when this issue was called to its
attention. City of Tacoma, 110 FERC ¶ 61,140, at 61,544
(2005). We do not think that the BiOp needs to be amended to
correct this error. Rather, it should be interpreted as if the words
“whichever is less” were expressly included. Of course, this
clarification of the BiOp may have limited significance in light
of our conclusion regarding Interior’s section 4(e) conditions,
because one of Interior’s conditions is a continuous release of
240 cfs, irrespective of inflow.

Finally, Tacoma questions the sufficiency of the evidence
supporting both BiOps, arguing they are based on speculation
about species migration through the intakes of the powerhouse
tunnels and related survival rates. Tacoma primarily objects to
the agencies’ reliance on inferences where actual species
behavior has not been verified in situ. We conclude, however,
that a BiOp is not fatally flawed when it relies, as the BiOps do
here, on inferences drawn from observations of the same (or a
similar) species, in close geographic proximity, adapting to
analogous facilities and conditions. Minimal reliance on such
inferences does not undermine the rational connection between
the facts found and the choices made.

The decision in Arizona Cattle Growers, is not to the
contrary. In that case, the court rejected an ITS where the
service failed to provide any evidence of the existence of the
 39

species on the land for which the statement was prepared.
Arizona Cattle Growers, 273 F.3d at 1244. Here, the listed
species are present in the general project area and the dispute
relates to speculation about possible migratory patterns and
survival rates. Although the agencies are unable to document
activity of the species in every segment of the project, their
conclusions are based on actual observations at very similar
projects. The “agenc[ies] have a very low bar to meet,” id., and
we think they have met it here. The Arizona Cattle court
concluded that “the use of ecological conditions as a surrogate
for defining the amount or extent of incidental take is reasonable
so long as these conditions are linked to the take of the protected
species.” Id. at 1250. Likewise, we find inferences drawn from
the behavior of the same (or a similar) species in analogous
conditions a reasonable substitute for actual observations in
these limited circumstances.

Accordingly, we reject Tacoma’s challenge to the validity
of the BiOps, and we find no error in FERC’s reliance on them.

IV

Save the Lakes Coalition (“SLC”) is an organization of
homeowners and businesses that surround Lake Cushman and
Lake Kokanee and share an interest in keeping water levels in
the lakes unchanged. SLC argues that FERC should have
granted its request to be consulted regarding changes in lake
water levels that become necessary under article 413 of the
license. It also sought to be included in article 405’s list of
parties that had to agree to any temporary changes in lake levels.
FERC rejected these requests, and we believe it fell within
FERC’s discretion to do so. FERC noted SLC can petition
FERC in the future if Tacoma does not comply with minimum
water level requirements, and it can seek to intervene in any
future proceeding that might affect water levels. We think these
 40

remedies adequately protect SLC. If the changes in the license
that result from this opinion will be likely to impact water levels
in the lakes, we think FERC should give SLC a reasonable
opportunity to express its views, and FERC should take those
views into consideration.

V

In our order of May 3, 2005, we stayed the minimum-flow
requirements set forth in article 407 of the license. In light of
our conclusion that FERC is obligated to include Interior’s
section 4(e) conditions in the license, including several
conditions imposing minimum flow requirements in excess of
those in presently set forth in article 407, we hereby vacate our
stay.

VI

We deny the petitions in part, grant them in part, and
remand to FERC, without vacating the license. On remand, if
FERC determines upon including the section 4(e) conditions that
it will issue a license, then it should amend its 1998 licensing
order (making such adjustments to the license as are required to
conform to inclusion of the conditions) and then lift its partial
stay of that order. If FERC determines not to issue a license,
then it should lift its partial stay and vacate its order issuing the
1998 license.

So ordered.