Wisconsin Valley Improvement Co. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 1, 2000 Decided January 26, 2001

No. 97-1557

Wisconsin Valley Improvement Company,
Petitioner

v.

Federal Energy Regulatory Commission,
Respondent

United States Department of the Interior and
Department of Agriculture,
Intervenors

Consolidated with 99-1511

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

Naikang Tsao argued the cause for petitioner. With him
on the briefs were Michael D. Fischer and Bradley D.
Jackson.

 Larry D. Gasteiger, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
the briefs was John H. Conway, Acting Solicitor.

Ronald M. Spritzer, Attorney, U.S. Department of Justice,
argued the cause for intervenors. With him on the briefs
were Lois J. Schiffer, Assistant Attorney General, and John
T. Stahr, Attorney.

Before: Edwards, Chief Judge, Sentelle and Randolph,
Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge: Wisconsin Valley Improvement
Company ("WVIC" or "the company") petitions for review of
Federal Energy Regulatory Commission ("FERC") orders
imposing conditions on its license to operate a hydropower
project. In addition to charging WVIC an annual fee for
"use" of submerged federal lands, the licensing order requires
petitioner to implement a "wild rice enhancement plan."
FERC imposed the latter condition at the instance of interve-
nors United States Forest Service and Department of the
Interior ("the agencies"), which hold federal lands overflowed
by WVIC's reservoir. Petitioner argues, inter alia, that the
conditions imposed exceed the scope of FERC's authority
under the Federal Power Act ("FPA"), 16 U.S.C. s 791a et
seq. (1994), as they govern areas that are not part of any
"reservations" of the United States. Petitioner further ar-
gues that the enhancement plan is arbitrary and capricious as
the required reduction in reservoir's water level would not
result in wild rice growth, and challenges the requirement
that it pay fees for its "use" of the submerged agency land.
We conclude that FERC lawfully could require the wild rice
implementation plan under the FPA and further, since it is
impossible to confine reductions in the water level to federally
controlled land, that FERC was entitled to impose water-level
conditions on the entire project. We further hold that the

agencies' decisions concerning the wild rice plan were not
arbitrary and capricious, but that FERC's decision to charge
annual fees was.

I. BACKGROUND

Subchapter I of the FPA, 16 U.S.C. ss 791a-823a (1994),
confers on FERC the authority to award licenses for the
operation of hydropower projects on the navigable waters of
the United States. In particular, FPA s 4(e) requires FERC
to include in licenses for projects that operate "within" a
"reservation" of the United States, any "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." Id. s 797(e).
That is, if a FERC-licensed project is located "within" an
agency-supervised "reservation," that agency may require
FERC to impose conditions on the manner in which the
licensee may operate it. The FPA further defines "reserva-
tion" to include "national forests, tribal lands embraced within
Indian reservations, military reservations, and other lands
and interests in lands owned by the United States, and
withdrawn, reserved, or withheld from private appropriation
and disposal under the public land laws; also lands and
interests in lands acquired and held for any public purposes;
but shall not include national monuments or national parks."
Id. s 796(2) (emphases added).

For the better part of a century, WVIC has operated a
project--known as the Wisconsin River Headwaters Sys-
tem--consisting of dams and reservoirs on the Wisconsin and
Tomahawk Rivers. WVIC was chartered by Wisconsin's
legislature in 1907. In the same year, the company acquired
the Lac Vieux Desert reservoir, a natural drainage lake on
the Wisconsin-Michigan border that had been dammed for
logging operations in 1870. Since 1907, WVIC has operated
the reservoir and dam with the principal intent of producing
hydroelectric power, as well as providing flood control. The
company in 1937 replaced Lac Vieux Desert's nineteenth-
century logging dam with a concrete reservoir dam. And in

1959, WVIC acquired from FERC's predecessor agency, the
Federal Power Commission, a 50-year license for its project
(the project was licensed in 1959, but its license was retroac-
tive to 1943). At the time, the company was not charged fees
for "using, enjoying, or occupying" the nearby federally
owned lands that its reservoir overflowed.

WVIC sought to renew its license in 1991. During the
relicensing proceedings, the agencies submitted to FERC,
pursuant to FPA s 4(e), a number of conditions that would
restrict the manner in which WVIC could operate its project.
Those conditions were appropriate, the agencies explained,
because WVIC's reservoir overflows 617.3 acres of the Nicolet
and Ottawa National Forests, under the Forest Service's
jurisdiction, and one-half acre of the Lac Vieux Desert Indian
Reservation, administered by the Interior Department. See
Wisconsin Valley Improvement Co., 80 FERC p 61,054,
61,170 (1997). After administrative hearings over a five-year
period, FERC on July 18, 1996 issued an order that granted
WVIC's license application and included the agencies' pro-
posed conditions, three of which the company now challenges.
See Wisconsin Valley Improvement Co., 76 FERC p 61,050
(1996).

First, and most important, is Article 114, which requires
WVIC to implement at Lac Vieux Desert what FERC styles
a ten-year "wild rice enhancement plan." The company is
obliged to reduce the reservoir's maximum water level by
about nine inches, and to contribute $200,000 toward the
planting and monitoring of wild rice. See id. at 61,257-59.
The agencies asserted that their "wild rice enhancement
plan" was necessary to reverse the depletion of wild rice at
the reservoir. Although rice had once been abundant at Lac
Vieux Desert, they explained, it had almost completely disap-
peared by the 1950s. The agencies attributed that decline to
the high water that resulted when WVIC rebuilt the reser-
voir's dam in 1937, and correspondingly concluded that de-
creasing the reservoir's water level would create conditions
favorable to the self-sustaining growth of wild rice. See Final
Environmental Impact Statement at 3-37, 4-74 to 4-76, app.
J (June 1996). WVIC estimates that, in addition to the

$200,000 rice expenditure, it will suffer $400,000 in lost hydro-
power revenues over the ten-year period. See Petitioner's
brief at 54; WVIC Response to Draft Environmental Impact
Statement at 5-3 to 5-4 (April 13, 1995).

In addition, FERC included in WVIC's new license two
provisions--Articles 201 and 202--that require the company
to pay annual fees to the United States for its use of
submerged federally-owned land. See Wisconsin Valley Im-
provement Co., 76 FERC at 61,237. Such payments are
required, FERC submits, by FPA s 10(e), which obliges a
licensee to "pay to the United States reasonable annual
charges in an amount to be fixed by the Commission ... for
recompensing it for the use, occupancy, and enjoyment of its
lands or other property." 16 U.S.C. s 803(e) (1994).

WVIC sought an administrative rehearing and petitioned
for review in this Court. Although FERC subsequently
issued several orders that modified its initial 1996 ruling, see
Wisconsin Valley Improvement Co., 80 FERC p 61,054
(1997); Wisconsin Valley Improvement Co., 87 FERC
p 62,251 (1999); Wisconsin Valley Improvement Co., 89
FERC p 61,057 (1999), it left intact the portions challenged
here. WVIC's first petition for review, case number 97-1557,
was consolidated with its present petition by a January 10,
2000 order of this Court.

II. DISCUSSION

A. FPA s 4(e)

This Court reviews FERC's orders--including conditions
prescribed by agencies pursuant to FPA s 4(e)--under the
Administrative Procedure Act ("APA"), 5 U.S.C. s 551 et seq.
(1994), which obliges us to reverse any agency action that is
"arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law." Id. s 706(2)(A); see Sithe/Indepen-
dence Power Partners v. FERC, 165 F.3d 944, 948 (D.C. Cir.
1998). As pertinent here, the APA's prohibition on arbitrary
and capricious agency action requires us to decide whether
FERC correctly concluded that the lands flooded by WVIC's

reservoir are part of a "reservation" of the United States
within the meaning of the FPA.

1. Existence of s 4(e) authority

WVIC argues that FERC cannot impose the conditions
submitted by the agencies under s 4(e) as the facts of the
present licensing procedure do not come within the rationale
of that section. As petitioner views it, the mandatory condi-
tioning authority under that section, giving as it does carte
blanche authority to impose conditions on projects located
within federal reservations, see Escondido Mut. Water Co. v.
La Jolla Band of Mission Indians, 466 U.S. 765 (1984), could
not have been intended to provide that sort of authority to
otherwise uninvolved agencies over the regulation of license
projects no more connected to reservation land than WVIC is
to the lands under consideration. WVIC argues that its
project cannot be "within" the relevant reservations because
"[t]he Agencies have no protectable property interests that
conflict with WVIC's prescriptive water rights, and its opera-
tion of the Reservoir does not depend on the use or occupan-
cy of any federal property right." Petitioner's brief at 11.
That is a non sequitur.

The question whether WVIC owns flowage easements over
the lands is irrelevant to whether the lands themselves are
part of a federal reservation. As we stated above, the FPA
defines the term "reservation" to include "national forest,
tribal lands embraced within Indian reservations, military
reservations, and other lands and interests in lands owned
by the United States, and withdrawn, reserved, or withheld
from private appropriation and disposal under the public land
laws; also lands and interests in lands acquired and held for
any public purposes; ... not includ[ing] national monuments
or national parks." 16 U.S.C. s 796(2) (emphases added).
By the terms of the statute, the United States need not even
hold land in fee simple absolute for it to operate a "reserva-
tion." It is enough that the government own an "interest" in
the land. See Escondido, 466 U.S. at 781 ("There is no doubt
that 'reservations' include 'interests in lands owned by the
United States....' "). And on the record before us, there

can be no dispute that the United States owns at least an
"interest" in the lands flooded by WVIC's reservoir, perhaps
even the fee simple, whether or not subject to a prescriptive
easement by WVIC.

Indeed, FERC consistently has affirmed its jurisdiction
over land that the federal government owns subject to a
citizen's easement. In South Carolina Elec. & Gas Co., 75
FERC p 61,308 n.9 (1996), FERC reasoned that "even if we
assume that SCE&G holds the easements it describes, that
fact does not make the land in question any less a reservation
for purposes of section 4(e) of the FPA," since "the term
['reservation'] is not limited to fee title." And in Town of
Estes Park, 75 FERC p 61,245 (1996), the Commission con-
cluded that "if the federal government holds fee title to
certain lands, the lands qualify as lands owned by the United
States for FPA purposes, even if someone else has a continu-
ing right to use them pursuant to an easement."

But while the question of whether WVIC holds flowage
easements is immaterial to the lands' status as federal "reser-
vations," it remains quite relevant to the possibility that
FERC's licensing order has "taken" the company's property
in violation of the Fifth Amendment. See U.S. Const. amend.
V ("[N]or shall private property be taken for public use
without just compensation."). If WVIC does indeed own
easements to flow the agencies' lands, and if FERC's order
has prevented it from using its property rights, the govern-
ment may well have affected an unconstitutional taking. See
National Wildlife Federation v. ICC, 850 F.2d 694, 703 (D.C.
Cir. 1988) (recognizing that property rights in easements "do
implicate the takings clause"); cf. Nollan v. California Coast-
al Comm'n, 483 U.S. 825, 831 (1987):

Had California simply required the Nollans to make an
easement across their beachfront available to the public
on a permanent basis in order to increase public access
to the beach ... we have no doubt there would have
been a taking. To say that the appropriation of a public
easement across a landowner's premises does not consti-
tute the taking of a property interest but rather ... "a

 mere restriction on its use," is to use words in a manner
that deprives them of all their ordinary meaning.

(citation omitted).

Both FERC and the agencies deny that WVIC has any
cognizable property interest in the flooded lands, and re-
peatedly insist that the company has not demonstrated that it
owns any recorded easements. Quite the contrary, they point
out, for the government has introduced evidence that "only
7.63% of the total quantified National Forest System land
within the Project is burdened with recorded flowage rights."
Intervenors' brief at 14 n.5 (emphasis added); see also Re-
spondent's brief at 16.

Of course, formal recordation is only one way--not, crucial-
ly, the exclusive way--by which a party in Wisconsin or
Michigan may establish a flowage easement. Rather, both
jurisdictions recognize that one may obtain an easement to
flow water over another's land through prescription. See,
e.g., Chippewa & Flambeau Improvement Co. v. R.R.
Comm'n, 159 N.W. 739, 745 (Wis. 1916); Cook v. Grand River
Hydroelectric Power Co., 346 N.W.2d 881, 884 (Mich. Ct. App.
1984). WVIC's inability to point to recorded flowage ease-
ments is hardly the "fatal flaw" FERC takes it to be. Re-
spondent's brief at 20.

But while WVIC may be able to advance a colorable
Takings-Clause claim, it is not within our jurisdiction to
adjudicate it. It is fixed law that, "[i]f there is a taking, and a
claim for just compensation, then that is a Tucker Act matter
to be pursued in the Court of Federal Claims, and not before
us." Transmission Access Policy Study Group v. FERC, 225
F.3d 667, 690 (D.C. Cir. 2000). So far as the underlying
questions of which property interests are owned by which
parties, neither FERC nor this Court have jurisdiction to try
title. Either the state courts or the United States District
Court of appropriate jurisdiction acting pursuant to the Quiet
Title Act, 28 U.S.C. s 2409a (1994), could adjudicate the
factual questions such as whether WVIC's operations have
been sufficient to give rise to prescriptive easements, and
apply the appropriate law. If WVIC proves successful in its

title actions, it could potentially pursue a takings claim in the
Court of Federal Claims, which has exclusive jurisdiction over
such actions. 28 U.S.C. s 1491 (1994). None of this, howev-
er, prevents either FERC or this Court on review from
applying the conditions sought by the affected agencies. We
therefore cannot grant a petition for review on that basis.

2. Scope of s 4(e) authority

Slightly more complicated than whether FERC has authori-
ty under s 4(e) to impose license conditions, is the extent of
that authority. The parties dispute whether the FPA--under
which FERC must attach license conditions to projects locat-
ed "within any reservation" of the United States, 16 U.S.C.
s 797(e) (1994) (emphasis added)--permits FERC to pre-
scribe conditions with respect to the entire Lac Vieux Desert
project, or only as to those portions of the project that
actually occupy reservation lands. The agencies propose that
the government's "section 4(e) conditioning authority applies
to the license, and therefore to all of the project works
covered by that license, so long as ... part of the licensed
project is within the reservation." Intervenors' brief at 18
(emphasis added). WVIC responds with what it supposes is
a reductio ad absurdum, and points out that the agencies'
interpretation would permit FERC to impose project-wide
license conditions "if any portion of the project touches a
reservation (even if the overlap is the size of a postage
stamp)."

We need not, however, decide the precise scope of the
government's power to prescribe conditions for projects locat-
ed "within" reservations. Rather, we resolve this issue on the
narrow ground that on the facts of this case it would be
impossible to attach a condition as to the reservation lands
without simultaneously imposing it with respect to the entire
project. As FERC points out, there simply is no way to
require WVIC to reduce the water level of Lac Vieux Desert
only over federal lands. A lake can have only one level. See
Respondent's brief at 32 n.8 ("As the condition imposes
maximum water levels on the entire project reservoir, it is

unclear how WVIC could be required to limit the maximum
water level on only those portions of the project reservoir
occupying the reservations, without affecting the water level
throughout the project reservoir."). WVIC does not dispute
that FERC could not reduce the level of the water that
overflows the reservation lands without lowering the entire
reservoir, and we therefore find that its order requiring
WVIC to do so was not arbitrary and capricious.

Besides requiring WVIC to reduce the water level at Lac
Vieux Desert, FERC's "wild rice enhancement plan" further
calls for the company to fund the agencies' efforts to plant
wild rice. Unlike changes in water level, it is possible to
confine rice-planting to the federally owned reservations.
Hence the rationale that permits the reduction of the reser-
voir's water level over non-reservation lands--that the gov-
ernment cannot lower the water over reservation lands with-
out doing so as to the entire reservoir--would not justify a
requirement that rice be planted on non-reservation lands.
But it appears that the agencies have imposed no such
condition. FERC's order calls for rice to be planted, not
throughout the Lac Vieux Desert reservoir, but only on
reservation lands--for example at Misery Bay and the suit-
ably-named Rice Bay, both of which are on Forest Service or
Indian Reservation land. See Final Environmental Impact
Statement at 4-76 to 4-77 (June 1996). "In any event,"
FERC explains, "it is clear that the planned wild rice seeding
is to occur on both the Indian and Forest Service reserva-
tions," and FERC has given no indication that it will require
the planting of rice on non-reservation lands. Wisconsin
Valley Improvement Co., 76 FERC p 61,050, 61,227 (1996).

3. Conclusion

In sum, FERC has the authority to attach conditions to
WVIC's license to operate a project at Lac Vieux Desert,
because the agencies own at least an "interest" in the lands
flowed by the reservoir. The lands therefore are part of a
"reservation" within the meaning of FPA s 4(e). FERC's
s 4(e) authority extends to areas outside the reservation's
geographic boundaries, because it is impossible to lower the

water level over the federal lands without reducing the entire
reservoir.

B. The "wild rice enhancement plan"

We review FERC and the agencies' decision to require that
WVIC undertake a "wild rice enhancement plan" under the
APA's arbitrary-and-capricious standard. See 5 U.S.C.
s 706(2)(A) (1994). A party seeking to have a court declare
an agency action to be arbitrary and capricious carries "a
heavy burden indeed." Transmission Access Policy Study
Group v. FERC, 225 F.3d 667, 714 (D.C. Cir. 2000). We will
not substitute our own judgment for that of the agency, but
will examine only "whether the decision was based on a
consideration of the relevant factors and whether there has
been a clear error of judgment," Citizens to Preserve Overton
Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), whether the
agency's policy choice is supported by "substantial evidence,"
and "whether there is a rational connection between the facts
and the choice made." Bangor Hydro-Electric Co. v. FERC,
78 F.3d 659, 663 n.3 (D.C. Cir. 1996).

At first blush, this case seemingly requires that we review
two distinct actions: first, the agencies' conclusion that the
"wild rice enhancement plan" would lead to the revitalization
of wild rice at Lac Vieux Desert; and second, FERC's
decision to include that condition in WVIC's project license.
In fact only the agencies' action is relevant to our inquiry.
FPA s 4(e) obliges FERC to include the conditions that are
prescribed by agencies that have jurisdiction over reservation
lands: Project licenses "shall be subject to and contain such
conditions as" the agencies deem necessary. 16 U.S.C.
s 797(e) (1994) (emphasis added). FERC has no discretion
to decide whether or not to include a proposed condition in a
project license; if an agency proposes a condition, FERC
must include it. The Commission was not acting arbitrarily
and capriciously when it included the agencies' wild-rice
condition; it simply was following the law.

Therefore, we review only the underlying decision of the
agencies, and in that analysis must determine whether it was
arbitrary and capricious for the agencies to conclude that (1)

high water levels were responsible for the decline of wild rice
at Lac Vieux Desert; (2) WVIC's 1937 construction of a
reservoir dam caused those high water levels; (3) a reduction
in water level will create conditions favorable to self-
sustaining wild rice growth; and (4) the use of "detritus
mats" would be an effective way of reintroducing wild rice to
the reservoir. We conclude--given "the very limited scope of
our review," Transmission Access, 225 F.3d at 713--that the
evidence before the agencies adequately supports each of
their four conclusions.

First, the agencies' conclusion that an increase in Lac
Vieux Desert's water depth was responsible for the decline in
wild rice was not arbitrary and capricious. The agencies
concede that a number of factors influence the success of wild
rice, but point to abundant evidence indicating that water
depth is the most important. To be sure, their experts
appear to disagree on just how deep water threatens rice
growth: one suggests that deep water does not allow enough
sunlight to penetrate for photosynthesis to occur, while anoth-
er proposes that deep water drowns the rice. But the crucial
point is that the agencies have based their policy choice on
substantial evidence.

Relatedly, it was not arbitrary and capricious for the
agencies to conclude that WVIC's 1937 construction of a
reservoir dam--which replaced a nineteenth-century logging
dam--was responsible for so increasing the lake's depth as to
kill off the then-extant wild rice. WVIC correctly points out
that Lac Vieux Desert had been dammed for some 60 years
before the rice began to decline in the 1940s. But it wrongly
insinuates that, because wild rice thrived alongside the log-
ging dam, the new dam cannot have been responsible for rice-
killing high water. That argument fails to take account of the
crucial difference between logging dams and reservoir dams:
While WVIC's reservoir dam maintains water depth at a
constant level, the logging dam was used to build up a head of
water that, when released, drove accumulated logs down-
stream. As Wisconsin's Supreme Court has explained:

 A log-driving dam is not built for storage purposes or for
keeping a constant head of water during the year, but for
the raising of a head of water in the early spring and
immediately using such water in successive rapid minia-
ture floods during the spring months. The reservoir
dam is built for the purpose of storing up a great
quantity of water during the spring and conserving it for
gradual depletion during the summer season. In the one
case the normal situation is that the dam is empty at the
beginning of the summer and so remains, while in the
other case it is full at the beginning of the summer and
remains so subject only to slow reduction when it be-
comes necessary to supplement the natural flow of the
river which has become lessened by long-continued dry
weather.

Chippewa & Flambeau Improvement Co. v. R.R. Comm'n,
159 N.W. 739, 745 (Wis. 1916). In fact, the two types of dams
"are practically the antitheses of each other." Id.

As the agencies point out, because the logging dam would
have been opened in the spring, Lac Vieux Desert would have
returned to its normal depth by June and July, just in time
for the crucial "floating leaf stage" of wild rice growth. See
Intervenors' brief at 35-36. The nineteenth-century reser-
voir dam would not have produced the consistent flooding the
agencies propose was responsible for destroying Lac Vieux
Desert's rice crop. It therefore was eminently reasonable for
them to conclude that WVIC's reservoir dam produced the
high water that in turn caused the decline in wild rice, even
though WVIC's old logging dam resulted in no similar reduc-
tion.

Third, the agencies's conclusion that reducing Lac Vieux
Desert's water level will enable the reservoir once again to
sustain wild rice was not arbitrary and capricious. If high
water is the principal factor inhibiting the growth of wild rice,
it follows that reducing the reservoir's depth will create
conditions more favorable to rice growth. WVIC attempts to
cast doubt on the agencies' conclusion by pointing to another
factor that, it submits, would continue to inhibit rice even if it

is made to reduce the reservoir's water level. The company
proposes that Lac Vieux Desert will remain inhospitable to
wild rice due to the continued presence of highly flocculent
sediments which, it argues, will expose fragile rice shoots to
destructive wind and wave action. But the company cannot
explain why the reservoir's sediments did not inhibit rice
growth before the 1940s. In addition, the agencies have
introduced evidence demonstrating other highly flocculent
lakes--including the Pat Shay and Kaine lakes--have been
reseeded successfully.

Finally, it was not arbitrary and capricious for the agencies
to conclude that the use of artificial "detritus mats"--layers
of floating vegetative residue on which, it is supposed, rice
can grow--would be an effective way of reintroducing wild
rice to Lac Vieux Desert. WVIC has introduced evidence
from a scientific expert that such detritus mats simply do not
exist. The foundational assumption of the detritus-mat theo-
ry, WVIC's expert explained, is that several years' worth of
undecomposed straw would amass on the lake's surface and
provide a bed for rice growth. But it would be impossible for
vegetative detritus to accumulate given that "[m]ost of this
straw is swept to shore before germination of the seed the
next spring."

Given the presence of disputing expert witnesses, this
controversy parallels one described by the Supreme Court as
"a classic example of a factual dispute the resolution of which
implicates substantial agency expertise." Marsh v. Oregon
Natural Resources Council, 490 U.S. 360, 376 (1989). We in
this case, as the Supreme Court in that one, "must defer to
'the informed discretion of the responsible federal agencies.' "
Id. at 377 (quoting Kleppe v. Sierra Club, 427 U.S. 390, 412
(1976)). Like the Supreme Court in Marsh, we hold that the
agency's decision concerning the evidence before it "involves
primarily issues of fact." Id. Accordingly, we hold that that
decision was not arbitrary and capricious, and we cannot set
it aside.

Here, the agencies had before them evidence that 10-14
inch-thick layers of vegetative detritus have been discovered

on the bed of the Wisconsin River. It may be true, as WVIC
argues, that because the detritus was found submerged on
the river's bed, and not on its surface, it would be unlikely to
support rice growth. If we were to decide the question as an
original matter, we might well agree. But it is not our role to
engage in the de novo weighing of evidence. As we recently
emphasized, "[i]t is not enough for petitioners to convince us
of the reasonableness of their views; ... those arguments
should be presented to FERC, whose commissioners are
appointed by the President and confirmed by the Senate with
the expectation that they, not Article III courts, will make
policy judgments." Transmission Access Policy Study
Group v. FERC, 225 F.3d 667, 714 (D.C. Cir. 2000). The
agencies here have based their policy choice on substantial
scientific evidence and that is enough to survive arbitrary-
and-capricious review, whatever may be this Court's views as
to the persuasiveness of that evidence.

In sum, because the agencies have relied upon sufficient
expert evidence to establish "a rational connection between
the facts and the choice made," Bangor Hydro-Electric Co. v.
FERC, 78 F.3d 659, 663 n.3 (D.C. Cir. 1996), it was not
arbitrary and capricious for them to require WVIC to under-
take a "wild rice enhancement plan." To be sure, WVIC has
submitted evidence that casts some doubt on the soundness of
the agencies' conclusions. But as the Supreme Court empha-
sized in Marsh, we are not called upon to weigh competing
experts' opinions "as an original matter." Marsh, 490 U.S. at
378. We only inquire whether the agencies have based their
policy choices on reasonable expert evidence. They have
done so here.

C. Usage fees under FPA s 10(e)

In addition to obliging WVIC to implement a "wild rice
enhancement plan" pursuant to FPA s 4(e), FERC's order
also charges the company annual fees for its "use" of the
reservation lands flooded by its reservoir. See Wisconsin
Valley Improvement Co., 76 FERC at 61,237. FERC im-
posed that condition pursuant to FPA s 10(e), which estab-
lishes that a "licensee shall pay to the United States rea-

sonable annual charges in an amount to be fixed by the
Commission for the purpose of reimbursing the United
States ... for the use, occupancy, and enjoyment of its
lands or other property." 16 U.S.C. s 803(e) (1994).
WVIC challenges the usage-fee condition by claiming that it
does not, in fact, "use, occupy, or enjoy" any federal prop-
erty, since it holds easements entitling it to flow water over
the agencies' lands--and, indeed, acquired those easements
many years before the agencies came to own the burdened
land. In essence, the company attempts to defeat the
s 10(e) conditions with the same argument it advanced
against the s 4(e) conditions.

Though, as we already have explained, the issue whether
WVIC owns rights to flow water over the agencies' lands is
immaterial to the lands' status as federal "reservations," it
remains relevant to the subsequent question of whether the
agencies may impose annual charges for the company's use of
federal lands pursuant to FPA s 10(e). And, again as we
have already explained, WVIC has not yet demonstrated that
it has flooded the agencies' lands pursuant to its own flowage
easements. However, WVIC's failure conclusively to estab-
lish that it owns the asserted easements does not end our
inquiry. This Court must further determine whether the
agencies have proffered a satisfactory explanation for now
deciding to assess s 10(e) usage fees, given that WVIC's old
license included no such charges.

Section 706(2)(A) of the APA requires agencies to, among
other things, "consider the relevant factors and draw a ration-
al connection between the facts found and the choice made."
Missouri Public Serv. Comm'n v. FERC, 215 F.3d 1, 3 (D.C.
Cir. 2000) (citation and quotation marks omitted). In particu-
lar, an agency acts arbitrarily and capriciously when it
abruptly departs from a position it previously held without
satisfactorily explaining its reason for doing so. "Indeed,
where an agency departs from established precedent without
a reasoned explanation, its decision will be vacated as arbi-
trary and capricious." ANR Pipeline Co. v. FERC, 71 F.3d
897, 901 (D.C. Cir. 1995); see also AT & T v. FCC, 974 F.2d
1351, 1355 (D.C. Cir. 1992) (faulting the FCC for failing to

explain why it "changed the original price cap rules" and
concluding that the Commission's "Reconsideration Order is
arbitrary and capricious for want of an adequate explana-
tion"). As the Supreme Court has put it, "an agency chang-
ing its course must supply a reasoned analysis...." Motor
Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 57 (1983) (citation omitted).

The requirements imposed by FERC's order mark a sharp
departure from WVIC's 1959 license, which contained no
obligation to reimburse the federal government for flooding
its lands. In its 1959 licensing order, the Commission found
that the company's project occupied lands of the United
States. See Wisconsin Valley Improvement Co., 21 FPC 785,
788 (1959). It concluded, however, that it could not impose
usage fees until then-ongoing land studies revealed the extent
of the United States' property rights. See id. ("However,
land studies, now in progress, must be completed before we
can make a final determination as to the amount of lands of
the United States occupied by the project and as to the
amount of annual charges due the United States for the use,
occupancy and enjoyment of such lands.").

FERC no longer holds that it may impose user fees only
after a land study establishes the extent of the United States'
property interests. Its new position is that it may charge
such fees "unless and until [WVIC's property] rights are
confirmed by an appropriate state or federal authority."
Wisconsin Valley Improvement Co., 80 FERC p 61,054,
61,174 (1997). Whereas the United States formerly bore the
burden of establishing that WVIC "used, occupied, or en-
joyed" various of its property interests, FERC's new license
places the burden on the company to demonstrate that it does
not use the government's land. FERC has offered no expla-
nation--far less a "reasoned" one--for this abrupt departure.
Because it has failed to do so, we find that FERC's sudden
imposition of usage fees under FPA s 10(e) was arbitrary and
capricious.

We therefore grant WVIC's petition for review, in part, and
remand to FERC with instructions that the Commission

remove the usage-fee provisions from the company's project
license.

III. CONCLUSION

With one exception, we uphold FERC's licensing orders.
FPA s 4(e) authorized FERC to attach "wild rice enhance-
ment" conditions to WVIC's project license because the Unit-
ed States owned at least an "interest" in the flooded lands.
FERC further was entitled to impose those conditions with
respect to the entire project, as it would be impossible to
reduce the reservoir's water level over just the federally
controlled land. The agencies reasonably concluded that a
reduction in the reservoir's water level would allow wild rice
again to flourish. However, it was arbitrary and capricious
for FERC to begin charging WVIC fees for "using, occupy-
ing, and enjoying" submerged federal lands, without provid-
ing any explanation for its sudden change in policy. The
petition for review is granted in part and denied in part, and
we remand to FERC so that it may eliminate the usage-fees
requirement from WVIC's project license.

It is so ordered.