Keating v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 14, 2009 Decided June 19, 2009

No. 08-1005

JOSEPH M. KEATING,
PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

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

Joshua P. Thompson argued the cause for petitioner. With
him on the briefs were James S. Burling and Damien M. Schiff.

Robert M. Kennedy Jr., Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent. On
the brief were Cynthia A. Marlette, General Counsel, Robert H.
Solomon, Solicitor, and Holly E. Cafer, Attorney.

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

Opinion for the Court filed by Chief Judge SENTELLE.
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SENTELLE, Chief Judge: The Federal Energy Regulatory
Commission granted Joseph Keating a license to build a
hydroelectric power plant in 1992. At Keating’s request, the
Commission stayed the four-year statutory deadline for
commencing construction on the project to allow Keating to
obtain the necessary water rights. Over fifteen years after the
license issued, the Commission lifted the stay and Keating’s
license expired. Keating now petitions for review of the
Commission’s decision to lift the stay, arguing that the record
does not support the decision and that his reliance on the stay
should estop the Commission from lifting it. We deny the
petition because Keating was not entitled to an indefinite
extension of the stay and the Commission’s findings concerning
the remaining hurdles to commencing construction were
sufficient to support the denial of a further stay.

I

In July 1992, the Commission issued Keating a license to
develop his proposed “Tungstar Project,” a hydroelectric power
plant in the Inyo National Forest in California. Joseph M.
Keating, Order Issuing License, 60 F.E.R.C. ¶ 61,016 (July 2,
1992). Under the proposed project, a dam would divert water
flowing from Morgan Creek and a nearby tungsten mine’s water
treatment facility through a 3,500-foot-long penstock to one 990
kilowatt turbine generator. Id. at 61,061. After exiting the
powerhouse tailrace, the water would “enter a 4,000-foot-long,
man-made, meandering channel where suspended mine water
flocculants w[ould] settle out” before the water would enter Pine
Creek below its confluence with Morgan Creek. Id.

Under Section 4(e) of the Federal Power Act (FPA), 16
U.S.C. § 797(e), the United States Forest Service may impose
conditions on the grant of a license on land within its
jurisdiction. The Forest Service required Keating to obtain a
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special use permit from the Service before starting construction,
which he did in November 1995. That permit in turn required
Keating to obtain the necessary water rights before beginning
construction.

Section 13 of the FPA, 16 U.S.C. § 806, requires a licensee
to commence construction of a newly licensed hydroelectric
facility within two years of license issuance but allows the
Commission to extend the deadline once for a maximum of two
additional years. If the licensee does not commence
construction within the statutory time frame, then “the license
shall . . . be terminated” by the Commission after notice to the
licensee. Id.; see 18 C.F.R. § 6.3 (requiring 90 days’ notice to
the licensee before termination). Nevertheless, the Commission
has stayed the commencement-of-construction deadline beyond
the statutory four-year period when a licensee was required to
await “necessary actions of other federal or state agencies,” such
as approval of plans, before commencing construction. Boise-
Kuna Irrigation Dist., 111 F.E.R.C. ¶ 61,271, 62,216 (2005);
see, e.g., R.L. Garry Corp., 51 F.E.R.C. ¶ 61,115, 61,310 (1990);
cf. Kings River Conservation Dist., 30 F.E.R.C. ¶ 61,151, 61,320
(1985) (describing the Commission’s authority to issue stays as
deriving from Section 309 of the FPA, 16 U.S.C. § 825h, and
Section 705 of the Administrative Procedure Act, 5 U.S.C.
§ 705). The Commission stays the deadline only in these and
similar “narrowly circumscribed circumstances”; it will not
grant a stay “merely to relieve the licensee from the statutorily
prescribed commencement of construction deadline.” Ronald E.
Rulofson, 62 F.E.R.C. ¶ 61,268, 62,780 (1993); accord Elec.
Plant Bd. of the City of Augusta, Ky., 112 F.E.R.C. ¶ 61,342,
62,504 (2005).

Keating requested, and the Commission granted, an
extension of the commencement-of-construction deadline for
two additional years as permitted under Section 13. See Joseph
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M. Keating, Order Granting Stay Request in Part and Setting
Deadline for Required Filings, 77 F.E.R.C. ¶ 61,060, 61,224 n.4
(October 21, 1996) (noting that the Commission granted the
extension in an unreported order issued April 12, 1994). On his
last day to commence construction under the four-year deadline,
Keating asked the Commission to stay the deadline while he
sought the necessary water rights. The Commission granted a
stay of the commencement-of-construction deadline and ordered
Keating to file annual reports on the status of his efforts to
obtain water rights and satisfy the requirements of his Forest
Service permit. Id. at 61,225-26. The Commission did not,
however, stay the other requirements of Keating’s license and
advised Keating that within six months of the stay order he must
file a license amendment application (necessitated by his
proposed project redesigns) and eleven outstanding pre-
construction plans, addressing topics such as erosion control and
wildlife mitigation, some of which needed Forest Service
approval in addition to Commission approval. Id.

Seeking the water rights necessary to develop his project
and satisfy his Forest Service permit, Keating first argued to the
Forest Service that he already had riparian rights to use the
water. The Forest Service disagreed and directed Keating to
pursue appropriative water rights from the state or a special use
permit for use of federal riparian rights. Id. at 61,224 n.5.
Keating instead litigated against the Forest Service from 1997
through 1999 in an attempt to confirm the adequacy of his
riparian rights. Ultimately, the district court dismissed his suit,
holding the Forest Service entitled to sovereign immunity, and
the Ninth Circuit affirmed. See Keating v. U.S. Dep’t of Agric.,
178 F.3d 1300, 1999 WL 311353 (9th Cir. 1999) (unpub.).

In 2001, Keating began seeking appropriative water rights
by filing an application with the California State Water
Resources Control Board (Water Board). His application
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elicited protests from twelve entities; all but one—Pine Creek
Mine—were eventually dismissed. Pine Creek Mine owned the
mine that discharged some of the water Keating’s Tungstar
Project proposed to use and also held its own FERC permit for
a proposed hydroelectric project. Of concern to the Water
Board was the fact that Pine Creek Mine owned the property
encompassing the proposed diversion point for Keating’s
project. In accordance with state regulations, the Water Board
required Keating to demonstrate his ability to secure the
necessary right of access over the land before it would approve
his application. See Cal. Admin. Code tit. 23, § 775 (“When the
owner will not consent, the board may require satisfactory
evidence of the applicant’s ability through condemnation
proceedings or otherwise to secure the necessary right of access
before the application will be approved.”). Keating argued that,
as a FERC licensee, the FPA gave him authority to condemn the
land and claim the diversion point property. See 16 U.S.C.
§ 814. However, because Keating had not attempted to acquire
the necessary property rights, the Water Board advised Keating
that it would not move forward with his application until he
provided information demonstrating that he had the ability to
acquire the property and was actively pursuing obtaining it.
Although Keating engaged in unsurprisingly unfruitful
negotiations with Pine Creek Mine, he has not taken any steps
to acquire access to the diversion point property through
condemnation.

During this time, Keating sought numerous extensions of
the six-month deadline for filing the required pre-construction
plans and license amendment application, which extensions the
Commission continued to grant from 1997 through 2003. In
August 2003, the Commission sent Keating a letter reminding
him of the most recent extended deadline for those requirements
coming up in November 2003. The Commission directed
Keating to respond and address why it should not lift the stay of
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the construction deadline in light of the fact that the stay had
been in effect for seven years, the fact that Keating had “ample
opportunity . . . to secure the necessary property rights for th[is]
project[] with no success,” and his “repeated failure to provide
timely status reports” as required by the stay order. Letter from
Joseph D. Morgan, Director of Division of Hydropower, FERC,
to Joseph M. Keating (August 26, 2003).

Keating missed the November 2003 deadline but requested
a further extension in March 2004, which the Commission again
granted. After corresponding with the Commission in April
2004, almost two years passed before Keating filed another
status report, in February 2006. This report included some but
not all of the required pre-construction plans. The report
included correspondence showing the Forest Service approved
the filed plans, but the Service later clarified that it believed its
approval was not necessary because of Keating’s “pending
FERC license amendment.” Keating, however, has not filed an
amendment application with the Commission. When, in April
2007, the Commission inquired why Keating continued to resist
filing the overdue amendment application to satisfy the
Commission’s requirement, he responded that his first priority
was to obtain water rights.

The Commission lifted the stay of the commencement-of-
construction deadline for the Tungstar Project by order of
September 20, 2007 and announced that, because the stay was
requested on the day of the deadline, the project license would
terminate immediately after the mandatory 90 days’ notice. See
Joseph M. Keating, Order Lifting Stay of Construction
Deadlines, Issuing Notice of Termination of License, and
Dismissing Intervention, 120 F.E.R.C. ¶ 61,246 (September 20,
2007). The Commission explained that Keating’s ability to
commence construction still depended on approval of his six-
year-old state water rights application, which in turn potentially
 7

depended on Keating gaining access to the diversion site from
the protesting party and obtaining a “point of discharge” permit;
his yet-to-be-filed license amendment application; and Forest
Service approval of certain pre-construction plans. Id. at ¶¶ 19-
22. Because of these remaining hurdles, the Commission had
“no reasonable assurance” that Keating would be able to
commence construction “anytime in the foreseeable future.” Id.
at ¶ 22. Therefore, in light of Section 13’s purpose to provide
for prompt development of licensed projects, the Commission
lifted the over eleven year stay, fifteen years after it issued the
project license.

Keating sought rehearing of the order, arguing that he had
been diligent in working to fulfill the requirements of the
license. The Commission dismissed the request for rehearing as
deficient because it did not include a “Statement of Issues”
section separate from its arguments, as required by the
Commission’s Rules of Practice and Procedure. See Joseph M.
Keating, Notice Dismissing Request for Rehearing, 121
F.E.R.C. ¶ 61,192 (November 19, 2007). In the dismissal order,
however, the Commission went on to consider Keating’s
arguments and reject them as “without merit.” Id. The
Commission explained that, contrary to his argument in the
rehearing request, Keating’s diligence or lack thereof was not
the deciding factor in the Commission’s decision; rather, it was
the “prolonged, continuing, and indefinite delay” in obtaining
“water rights and other required pre-construction approvals.” Id.
(quoting Order Lifting Stay, 120 F.E.R.C. ¶ 61,246 at ¶ 1).
Keating now petitions for judicial review of the order lifting the
stay.

II

We must first address our jurisdiction to review this
petition. The Commission urges that Keating did not satisfy the
 8

jurisdictional prerequisites for judicial review because the
Commission dismissed his rehearing request based on a
regulatory deficiency instead of denying it on the merits, and he
did not request rehearing of the dismissal order. See 16 U.S.C.
§ 825l(b). The Commission attempts to support its position with
arguments focusing on the terminology of the rehearing order
and characterizing its substantive content as unnecessary.

The reviewability of an administrative order, however,
“must be evaluated in pragmatic terms,” “by reference to its
practical function.” Papago Tribal Util. Auth. v. FERC, 628
F.2d 235, 239 (D.C. Cir. 1980) (quotation omitted). Section
313(b) of the FPA provides for judicial review of “orders of a
definitive character dealing with the merits of a proceeding
before the Commission . . . .” Id. (quoting FPC v. Metro.
Edison Co., 304 U.S. 375, 384 (1938)). That is what we have
here. In the rehearing order, the Commission considered the
merits of Keating’s objections to the order lifting the stay,
addressed those objections, and pronounced them “without
merit.” Notice Dismissing Request for Rehearing, 121 F.E.R.C.
¶ 61,192. Even if, as the Commission suggests, its discussion of
the merits of Keating’s objections was not the ultimate reason
for dismissal of his rehearing request, that discussion and the
consequent conclusion that the objections were “without merit”
assures the “certainty of an adverse decision” should Keating
undertake the “futil[e] [exercise] of seeking relief from the
agency” again on the basis of those objections. Tesoro Refining
& Mktg. Co. v. FERC, 552 F.3d 868, 873, 874 (D.C. Cir. 2009)
(quotations and emphasis omitted). Keating sought agency
rehearing based on objections to the aggrieving order, the
Commission discussed and denied the merits of those
objections, and Keating timely sought judicial review. We
therefore have jurisdiction over his petition.
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III

Turning to the merits of his petition, Keating argues that the
record does not support the Commission’s decision to lift the
stay of the construction deadline and that his reliance on the stay
should estop the Commission from lifting it. We will set aside
the agency’s order only if it is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C.
§ 706(2)(A). We may not disturb the Commission’s decision
under this deferential standard if the agency “considered the
relevant factors and articulated a rational connection between
the facts found and the choice made.” Balt. Gas & Elec. Co. v.
Natural Res. Def. Council, Inc., 462 U.S. 87, 105 (1983).

A

Keating argues that the record does not support the
Commission’s conclusion that there is no reasonable basis to
expect that he will be able to commence construction in the
foreseeable future. The Commission reached this conclusion
because his ability to commence construction still depended on
(1) approval of his six-year-old state water rights application;
(2) filing and approval of his license amendment application;
and (3) filing and Forest Service approval of certain pre-
construction plans. Order Lifting Stay, 120 F.E.R.C. ¶ 61,246
at ¶ 22. Even if, as Keating asserts without support, the license
amendment and pre-construction plans would follow closely
after he obtains water rights, the Commission emphasized record
evidence demonstrating that, after six years before the Water
Board, resolution of Keating’s water rights application depended
on “still-unresolved requirements of the Water Board that could
require additional prolonged proceedings.” Id. at ¶ 19. Namely,
the Water Board had suggested that Keating might be required
to obtain a “point of discharge” permit for his application and
had instructed Keating that he must demonstrate he had the
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ability to obtain, and was actively pursuing obtaining, the
diversion point property before the Water Board would give him
a hearing, which he had not taken steps to do. See id. at ¶¶ 19-
20.

Keating cannot dispute the Commission’s reasons for
reaching its conclusion. He does not deny that he has not filed
a license amendment application or the outstanding pre-
construction plans, or that he has not obtained water rights or
taken steps to acquire the diversion point property by
condemnation. He takes issue primarily with the actions and
decisions of the Water Board, in not yet clarifying whether a
point discharge permit is necessary and in refusing to accept
Keating’s condemnation authority under the FPA as dispositive
evidence of his ability and willingness to obtain the diversion
point property through condemnation. The Water Board’s
actions and decisions, however, were matters of fact affecting
Keating’s ability to obtain the necessary water rights, and the
Commission was entitled to consider them when assessing
whether Keating could obtain water rights and satisfy the license
requirements in the foreseeable future. We are not situated in
this proceeding to rule on the Water Board’s decisions. Because
the Commission considered the factors relevant to its decision
and articulated a rational connection between the facts found
and the choice made, its conclusion was not arbitrary or
capricious. See Balt. Gas & Elec. Co., 462 U.S. at 105.

Moreover, assuming without deciding that the Commission
may stay the statutory commencement-of-construction deadline,
it was entirely within the agency’s discretion to determine that
a stay of over eleven years was long enough. “FERC has wide
discretion to determine where to draw administrative lines,” and
“[w]e are generally unwilling to review line-drawing performed
by the Commission unless a petitioner can demonstrate that lines
drawn . . . are patently unreasonable, having no relationship to
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the underlying regulatory problem.” ExxonMobil Gas Mktg. Co.
v. FERC, 297 F.3d 1071, 1085 (D.C. Cir. 2002) (quotations
omitted). In deciding to lift the stay, the Commission articulated
rational reasons related to its statutory responsibility to provide
for prompt development of licensed hydroelectric projects. See
16 U.S.C. § 806. Keating has not attempted to show that the
Commission’s line drawing in this case is inconsistent with its
precedent. See Elec. Plant Bd. of the City of Augusta, Ky., 112
F.E.R.C. ¶ 61,342, 61,504 (“After a licensee has held a license
for [ten years] without making substantial progress toward
project construction, the public interest requires that the license
be terminated, thus freeing the site for development by other
entities, or for other beneficial public uses.”). Keating has not
argued that the Commission treated him differently from others
who were similarly situated. See Burlington N. & Santa Fe Ry.
Co. v. STB, 403 F.3d 771, 776-77 (D.C. Cir. 2005). The
Commission’s decision therefore was not arbitrary or capricious,
and we have no reason to second-guess the Commission’s
exercise of its line-drawing discretion.

B

Although the Commission has discretion to lift stays of
construction deadlines and it gave rational reasons for doing so
here, Keating argues that the Commission should nevertheless
be estopped from lifting the stay. Even assuming principles of
equitable estoppel may be applied against the federal
government in these circumstances, see Office of Personnel
Mgmt. v. Richmond, 496 U.S. 414, 423 (1990), Keating’s
argument fails.

A party attempting to apply equitable estoppel against the
government must show that “(1) there was a definite
representation to the party claiming estoppel, (2) the party relied
on its adversary’s conduct in such a manner as to change his
 12

position for the worse, (3) the party’s reliance was reasonable[,]
and (4) the government engaged in affirmative misconduct.”
Morris Commc’ns, Inc. v. FCC, ___ F.3d ___, 2009 WL
1288780, at *6 (D.C. Cir. May 12, 2009) (quotations omitted).
Keating has not shown that the Commission made a “definite
representation” to him that the stay of the construction deadline
would extend indefinitely until he obtained the necessary water
rights. The stay order stated only that the construction deadline
was stayed “pending further order of the Commission” and
instructed Keating to file annual reports “on the status of efforts
to obtain a Forest Service determination” that he had satisfied
the Service’s permit requirements. Order Granting Stay Request
in Part, 77 F.E.R.C. ¶ 61,060, 61,225-26. The order also made
clear that the deadlines for the license amendment application
and pre-construction plans were still in effect. Id. Nowhere did
the Commission represent to Keating that it would stay the
statutory construction deadline for as long as he might want or
need in order to obtain the water rights necessary to undertake
his hydroelectric project. Cf. Sierra Hydro, Inc., 116 F.E.R.C.
¶ 61,060, ¶ 7 (2006) (“While we are willing to make reasonable
accommodations to afford licensees the time need[ed] to resolve
issues with other agencies, we will not hold licenses in abeyance
indefinitely.”). Keating therefore cannot now estop the
Commission from lifting the stay on that basis.1

1
As Keating’s claim to estoppel fails at this first step, we
need not consider the remaining estoppel elements; our silence does
not imply that he would be any more successful on those elements.
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IV

For the foregoing reasons, we deny Keating’s petition for
review. We have no difficulty concluding that the Commission
acted within its discretion in denying a further stay in light of its
findings concerning the pre-construction elements still lacking
after an over eleven year stay of the commencement-of-
construction deadline.
So ordered.