City of Salisbury, North Carolina v. FERC

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 2, 2021 Decided June 10, 2022

No. 20-1238

CITY OF SALISBURY, NORTH CAROLINA,
PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

CUBE YADKIN GENERATION, LLC,
INTERVENOR

Consolidated with 20-1457

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

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
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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.

Opinion of the Court filed by Circuit Judge KATSAS.

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

*
Judge Jackson participated in the oral argument but not the
decision of this case.
 3

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 (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
 4

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
 5

“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).
 6

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 (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.
 7

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 (2016) (quoting Barnhart v. Thomas, 540 U.S. 20, 26
(2003)). If that noun or phrase does not fit, the limiting clause
should then be read to modify “the nearest reasonable referent.”
A. Scalia & B. Garner, Reading Law: The Interpretation of
Legal Texts 152 (2012); see Grecian Magnesite Mining, Indus.
& Shipping Co. v. Comm’r, 926 F.3d 819, 824 (D.C. Cir. 2019)
(“ordinarily, and within reason, modifiers and qualifying
 8

phrases attach to the terms that are nearest”). Here, the nearest
referent is the noun “access” or, alternatively, the noun phrase
“improved access to the pump station with the road.” Those
referents fit naturally with the limiting phrase “consistent with
the City of Salisbury’s design,” as Cube’s access plan must
integrate with the city’s existing road network. And because
the nearest referent is also a reasonable one, there is no basis
for reading the limiting phrase to modify other, more-distant
language in the first or third clauses of the condition.

In contrast, Salisbury would have the phrase “consistent
with the City of Salisbury’s design” qualify the more remote
noun “modifications.” That is not grammatically possible. In
some circumstances, an adjectival phrase may modify each of
the nouns in a preceding list, through what is called the series-
qualifier canon. But for that canon to apply, the nouns must
appear in a “straightforward, parallel construction,” Facebook,
Inc. v. Duguid, 141 S. Ct. 1163, 1169 (2021) (quoting Reading
Law, supra, at 147), as in the phrase “the laws, the treaties, and
the constitution of the United States,” see Lockhart, 577 U.S.
at 352 (cleaned up). Here, the relevant syntax is anything but
straightforward or parallel. In the second clause of the
condition, the central noun access is modified by one adjective
(“improved”) and two prepositional phrases (“to the pump
station” and “with the road”) as well as by the contested phrase
“consistent with the City of Salisbury’s design.” In the first
clause, the central noun modifications is modified by one
adjective (“physical”) and one prepositional phrase (“to the
facilities”) and is illustrated by a phrase of two prepositional
phrases (“such as a protective dike for the pump station”).
Given all these “internal modifiers or structure,” the phrase
consistent with the City of Salisbury’s design simply cannot
skip over 21 intervening words, six intervening nouns, and five
intervening prepositional phrases to qualify modifications as
 9

well as access. See id.; see also Yellen v. Confederated Tribes
of the Chehalis Reservation, 141 S. Ct. 2434, 2455 (2021)
(Gorsuch, J., dissenting).

Nor can the phrase modify the third clause in the way that
Salisbury urges. Introduced by the conjunction or, the third
clause permits other options “for achieving the same benefits”
as the required physical modifications or improved access. For
access improvements, these other options must achieve the
same benefits as improved access “consistent with the City of
Salisbury’s design.” But for physical modifications to the
pump station, the other options must achieve the same benefits
as modifications “such as a protective dike.” In short, because
consistent with the City of Salisbury’s design qualifies
improved access but not physical modifications, it likewise
qualifies “other feasible options” for improved access, but not
for physical modifications.

C

Any modification to pump station facilities must offer the
“same benefits” as a protective dike, but what are those
benefits? The parties agree that a plan must enable the station
to continue operating during a flood. Salisbury asserts that a
plan must also ensure that the station itself remains entirely dry.

A “benefit” is a “useful aid” or something that “promotes
well-being.” Fischer v. United States, 529 U.S. 667, 677
(2000) (quoting Webster’s Third New International Dictionary
204 (1971)). As this definition implies, what counts as a
benefit must be understood in relation to some underlying
goal—a useful aid for what? See id. at 677–80. Ice covering a
lake is a benefit for skating, but not for swimming.
 10

Salisbury built its pump station to operate, but not remain
entirely dry, during floods. According to its own expert, the
whole point of housing the station’s mechanical and electrical
equipment in elevated rooms was to permit operations when
flood waters submerged the lower portion of the station. J.A.
87. And since 1917, this design has achieved that objective
even though floods have reached high up the station’s outer
walls. FERC thus correctly concluded that the relevant
“benefits” are those flowing from continued operation of the
pump station, consistent with its original design and with
understandings prevailing for more than a century. The pump
station was never designed to ensure dry walls and dry floors
even during floods, and we see no textual or other indication
that North Carolina required Cube to provide Salisbury with
the substantial and expensive upgrade that would be necessary
to secure those benefits.

To the extent Salisbury further contends that a plan must
prevent flood waters from entering the inside of the pump
station, its position runs into another fatal difficulty: Even a
protective dike would not afford that benefit. Only one of the
engineering reports in the record recommends a dike to protect
the pump station. But as that report makes clear, a dike by itself
would not prevent flooding inside the station, because flood
water enters through a wet well inside the station. J.A. 56. So
even if the flood plan had to offer all the benefits of a dike,
permanently dry floors would not be among them.

Salisbury contends that the residual clause requires
“benefits” in the plural, and thus must provide for more than
just the continued operation of the pump station. But the
residual clause requires the “same benefits” as those afforded
by modifications to the facility itself and improvement of its
access road. Any plan that achieves these two objectives will
 11

necessarily offer more than one benefit. Moreover, keeping the
station operational could itself plausibly be described as
ensuring different benefits. For example, Salisbury itself
describes the station as providing both “potable and fire-
fighting water” for its residents. Salisbury Br. at 1.

III

We turn now to FERC’s decision to approve Cube’s flood
plan. In reviewing it, we must accept findings of fact supported
by substantial evidence. 16 U.S.C. § 825l(b). We must also
consider whether the decision is arbitrary and capricious under
the Administrative Procedure Act. 5 U.S.C. § 706(2)(A); see
Long Island Power Auth. v. FERC, 27 F.4th 705, 712 (D.C. Cir.
2022). A decision is not arbitrary if it is “reasonable and
reasonably explained.” Nw. Corp. v. FERC, 884 F.3d 1176,
1179 (D.C. Cir. 2018).

A

FERC reasonably concluded that Cube’s plan will enable
the pump station to continue operating during floods. As the
Commission explained, the pump station was designed to keep
sensitive equipment above the water line even when its lower
portions flooded. See Rehearing Order, 172 FERC ¶ 61,254,
P 28 n.55. And Cube proposed to further elevate this
equipment to account for rising water levels caused by the dam.
Id. at P 29. FERC thus reasonably explained the rationale for
both Cube’s plan and its approval decision.

Substantial evidence supports FERC’s decision. As the
Commission explained, the American Society of Civil
Engineers recommends, and North Carolina law requires,
essential structures to be placed two to three feet above the
expected level of a once-in-a-century flood. Rehearing Order,
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172 FERC ¶ 61,254, P 10 n.25. And Cube’s plan calls for
raising the pump station’s sensitive equipment a full 3.6 feet
above that mark. See id. P 10. Indeed, during the plan’s
consultation period, Salisbury’s expert agreed that raising
sensitive equipment to that altitude would satisfy the water
quality certification. J.A. 467.

B

Salisbury presses three arguments why FERC’s approval
order nonetheless was arbitrary. None persuades us.

First, Salisbury contends that FERC was required to
consider whether Cube’s flood plan would violate North
Carolina’s design, siting, electrical, and building codes. But
the Federal Power Act reflects a separation between “subjects
which remain under the jurisdiction of the States” and those
“over which Congress vests [FERC] with authority to act.”
S.C. Pub. Serv. Auth. v. FERC, 850 F.2d 788, 795 (D.C. Cir.
1988) (quoting First Iowa Hydro-Electric Coop. v. FPC, 328
U.S. 152, 168 (1946)). So while the Act empowers FERC to
exercise “operational control” over federal power projects,
Simmons v. Sabine River Auth., 732 F.3d 469, 476 (5th Cir.
2013), non-project facilities that lie outside project boundaries
“remain[] under the jurisdiction of the States,” S.C. Pub. Serv.
Auth., 850 F.2d at 795 (cleaned up)

Given this division of authority, FERC permissibly
declined to assess whether Cube’s plan complied with state
law. It is one thing for FERC to police compliance with state-
mandated conditions incorporated into a federal license by
operation of federal law, as FERC did here. But it is quite
another for FERC to police compliance with state law
generally: What North Carolina’s building code has to say
 13

about improvements to Salisbury’s pump station is a question
best left to North Carolina. Salisbury can raise any state-law
objections to the plan with the appropriate state regulatory
agencies. And in the unlikely event that it should be harmed
by operation of the dam, Salisbury can seek tort damages—a
remedy that the Federal Power Act expressly preserves. 16
U.S.C. § 803(c); see, e.g., Portland General Elec. Co., 107
FERC ¶ 61,158 PP 27–33 (2004). FERC did not act arbitrarily
in applying these settled rules to the pump station, which it
aptly described as a “non-project facilit[y] located on non-
project lands.” Rehearing Order, 172 FERC ¶ 61,254, P 19.

Second, Salisbury contends that FERC arbitrarily refused
to consider whether Cube’s flood protection plan was
consistent with sound engineering practices. Salisbury rests
that claim on 18 C.F.R. § 12.5, which requires a FERC licensee
to use such practices in designing, constructing, or modifying
a “water power project or project works.” By its terms, section
12.5 does not apply to Salisbury’s pump station, which exists
not to generate power, but to help turn river water into drinking
water. We note that the North Carolina State Building Code,
like section 12.5, requires “good engineering practice.” N.C.
Gen. Stat. § 143-138(c). But for the reasons explained above,
FERC was not compelled to police compliance with that state-
law provision.

Third, Salisbury contends that Cube’s plan will
unreasonably endanger the city’s pump station workers. As
framed before FERC on rehearing, this argument merely
repackaged Salisbury’s other arguments that the plan violates
North Carolina’s building code and is not based on sound
engineering practices. To the extent that Salisbury now presses
a freestanding argument about worker safety, the argument was
not preserved on rehearing before FERC, and we thus have no
 14

jurisdiction to consider it. See 16 U.S.C. § 825l(b); Shafer &
Freeman Lakes Envtl. Conservation Corp. v. FERC, 992 F.3d
1071, 1089 (D.C. Cir. 2021).

IV

FERC correctly interpreted the water quality certification,
and it reasonably approved Cube’s flood protection plan. We
therefore deny the petitions for review.

So ordered.