PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-1655
NORTH CAROLINA DEPARTMENT OF ENVIRONMENTAL QUALITY,
Petitioner,
v.
FEDERAL ENERGY REGULATORY COMMISSION,
Respondent.
------------------------------
STATE OF WASHINGTON; STATE OF CALIFORNIA; STATE OF
CONNECTICUT; STATE OF MAINE; STATE OF MICHIGAN; STATE OF
MINNESOTA; STATE OF NEW JERSEY; STATE OF OREGON; STATE OF
VERMONT; COMMONWEALTH OF VIRGINIA,
Amici Supporting Petitioner.
MERCED IRRIGATION DISTRICT; NATIONAL HYDROPOWER
ASSOCIATION; NEVADA IRRIGATION DISTRICT; NORTHWEST
HYDROELECTRIC ASSOCIATION; PUBLIC UTILITY DISTRICT NO. 1 OF
SNOHOMISH COUNTY, WASHINGTON; SOUTH FEATHER WATER AND
POWER AGENCY; YUBA WATER AGENCY,
Amici Supporting Respondent.
No. 20-1671
PK VENTURES I LIMITED PARTNERSHIP,
Petitioner,
v.
FEDERAL ENERGY REGULATORY COMMISSION,
Respondent.
------------------------------
STATE OF WASHINGTON; STATE OF CALIFORNIA; STATE OF
CONNECTICUT; STATE OF MAINE; STATE OF MICHIGAN; STATE OF
MINNESOTA; STATE OF NEW JERSEY; STATE OF OREGON; STATE OF
VERMONT; COMMONWEALTH OF VIRGINIA,
Amici Supporting Petitioner.
MERCED IRRIGATION DISTRICT; NATIONAL HYDROPOWER
ASSOCIATION; NEVADA IRRIGATION DISTRICT; NORTHWEST
HYDROELECTRIC ASSOCIATION; PUBLIC UTILITY DISTRICT NO. 1 OF
SNOHOMISH COUNTY, WASHINGTON; SOUTH FEATHER WATER AND
POWER AGENCY; YUBA WATER AGENCY,
Amici Supporting Respondent.
On Petitions for Review of an Order of the Federal Energy Regulatory Commission. (P-
14858; P-4093)
Argued: May 6, 2021 Decided: July 2, 2021
Before KING and THACKER, Circuit Judges, and TRAXLER, Senior Circuit Judge.
Petition for review in No. 20-1655 granted and petition for review in No. 20-1671
dismissed in part and denied in part by published opinion. Senior Judge Traxler wrote the
opinion, in which Judge King and Judge Thacker joined.
ARGUED: David Montgomery Moore, EARTH & WATER LAW, LLC, Atlanta,
Georgia; Asher Paris Spiller, NORTH CAROLINA DEPARTMENT OF JUSTICE,
Raleigh, North Carolina, for Petitioners. Susanna Y. Chu, FEDERAL ENERGY
REGULATORY COMMISSION, Washington, D.C., for Respondent. ON BRIEF:
2
Joshua H. Stein, Attorney General, Taylor H. Crabtree, Assistant Attorney General,
NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for
Petitioner North Carolina Department of Environmental Quality. David L. Morenoff,
Acting General Counsel, Robert H. Solomon, Solicitor, FEDERAL ENERGY
REGULATORY COMMISSION, Washington, D.C., for Respondent. Robert W.
Ferguson, Attorney General, Cindy Chang, Assistant Attorney General, Kelly T. Wood,
Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL OF
WASHINGTON, Seattle, Washington, for Amicus State of Washington. Xavier Becerra,
Attorney General, Sarah E. Morrison, Supervising Deputy Attorney General, Tatiana K.
Gaur, Deputy Attorney General, Catherina M. Wieman, Deputy Attorney General, Lani M.
Maher, Deputy Attorney General, Environment Section, OFFICE OF THE ATTORNEY
GENERAL OF CALIFORNIA, Los Angeles, California, for Amicus State of California.
William Tong, Attorney General, Jill Lacedonia, Assistant Attorney General, OFFICE OF
THE ATTORNEY GENERAL OF CONNECTICUT, Hartford, Connecticut, for Amicus
State of Connecticut. Aaron M. Frey, Attorney General, Scott Boak, Assistant Attorney
General, OFFICE OF THE ATTORNEY GENERAL OF MAINE, Augusta, Maine, for
Amicus State of Maine. Dana Nessel, Attorney General, Fadwa Hammoud, Solicitor
General, OFFICE OF THE ATTORNEY GENERAL OF MICHIGAN, Lansing,
Michigan, for Amicus State of Michigan. Keith Ellison, Attorney General, Peter N. Surdo,
Special Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL OF
MINNESOTA, Saint Paul, Minnesota, for Amicus State of Minnesota. Gurbir S. Grewal,
Attorney General, Kristina Miles, Deputy Attorney General, OFFICE OF THE
ATTORNEY GENERAL OF NEW JERSEY, Trenton, New Jersey, for Amicus State of
New Jersey. Ellen F. Rosenblum, Attorney General, Paul Garrahan, Attorney-in-Charge,
Natural Resources Section, OREGON DEPARTMENT OF JUSTICE, Salem, Oregon, for
Amicus State of Oregon. Thomas J. Donovan, Jr., Attorney General, Laura B. Murphy,
Assistant Attorney General, Environmental Protection Division, OFFICE OF THE
ATTORNEY GENERAL OF VERMONT, Montpelier, Vermont, for Amicus State of
Vermont. Mark R. Herring, Attorney General, Donald D. Anderson, Deputy Attorney
General, Paul Kugelman, Jr., Senior Assistant Attorney General, Section Chief, David C.
Grandis, Senior Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL
OF VIRGINIA, Richmond, Virginia, for Amicus Commonwealth of Virginia. Charles R.
Sensiba, Washington, D.C., Andrea W. Wortzel, Richmond, Virginia, Angela J. Levin,
TROUTMAN PEPPER HAMILTON SANDERS, LLP, San Francisco, California;
Michael A. Swiger, Sharon L. White, VAN NESS FELDMAN, LLP, Washington, D.C.,
for Amici Merced Irrigation District, National Hydropower Association, Nevada Irrigation
District, Northwest Hydroelectric Association, Public Utility District No. 1 of Snohomish
County, Washington, South Feather Water and Power Agency, and Yuba Water Agency.
3
TRAXLER, Senior Circuit Judge:
In this case, we consider two petitions for review challenging the issuance of a
license by the Federal Energy Regulatory Commission (“FERC”) to McMahan
Hydroelectric (“McMahan”), authorizing McMahan to operate the Bynum Hydroelectric
Project (the “Project”) on the Haw River in North Carolina. In Case No. 20-1655, the
North Carolina Department of Environmental Quality (“NCDEQ”) challenges FERC’s
determination that NCDEQ waived its rights under the Clean Water Act to issue a water
quality certification for the Project. In Case No. 20-1671, PK Ventures I Limited
Partnership (“PK Ventures”) challenges FERC’s jurisdiction to issue the license for the
Project. As we will explain, in Case No. 20-1655, we grant NCDEQ’s petition for review,
vacate the license issued by FERC, and remand with instructions for FERC to re-issue the
license to include the water-quality conditions imposed by NCDEQ. In Case No. 20-1671,
we deny in part and dismiss in part PK Ventures’ petition for review.
I.
The Federal Power Act (“FPA”), 16 U.S.C. §§ 791a-825r et seq., created “a
complete scheme of national regulation” to “promote the comprehensive development of
the water resources of the Nation.” First Iowa Hydro-Elec. Coop. v. FPC, 328 U.S. 152,
180 (1946). The FPA provides for “comprehensive control over those uses of the Nation’s
water resources in which the [f]ederal [g]overnment ha[s] a legitimate interest,” including
“navigation, irrigation, flood control, and, very prominently, hydroelectric power.” Fed.
Power Comm’n v. Union Elec. Co., 381 U.S. 90, 98 (1965).
4
Under the FPA, a FERC-issued license is required for the construction,
maintenance, and operation of any hydroelectric project located on “any of the navigable
waters of the United States.” 16 U.S.C. § 817(1). Since 1935, the statute has also required
a FERC license for the construction of hydroelectric projects located on a non-navigable
body of water that is nonetheless subject to Congress’ authority under the Commerce
Clause, if FERC determines that the project will affect interstate or foreign commerce. See
id.; Aquenergy Sys., Inc. v. FERC, 857 F.2d 227, 228 (4th Cir. 1988) (“[FERC] had long
had regulatory authority over [hydroelectric] projects in navigable waters, but until 1935,
one undertaking any activity in non-navigable waters was not required to apply to [FERC]
for anything.”). The license requirement for projects on Commerce-Clause waters operates
prospectively, applying only to projects where qualifying construction occurred after 1935.
See Aquenergy Sys., 857 F.2d at 228; L.S. Starrett Co. v. FERC, 650 F.3d 19, 23 (1st Cir.
2011).
Section 401 of the Clean Water Act (“CWA”) requires an applicant seeking federal
licensing of a project that would result in a discharge to navigable waters to obtain a
certification from the appropriate state agency verifying that the planned project complies
with state water quality requirements. See 33 U.S.C. § 1341(a)(1). If the state concludes
that conditions on the operation of the project are necessary to ensure compliance with its
water quality standards, those conditions must be set out in the § 401 certification, and the
federal licensing agency must incorporate the state’s conditions into the federal license.
See id. § 1341(d). A state waives its certification authority if it “fails or refuses to act on a
request for certification, within a reasonable period of time (which shall not exceed one
5
year) after receipt of such request.” Id. § 1341(a)(l). “No license or permit shall be granted
until the certification required by this section has been obtained or has been waived as
provided . . . . No license or permit shall be granted if certification has been denied by the
State.” Id.
II.
The Project consists of a dam, powerhouse, and related facilities in Chatham
County, North Carolina. The 10-feet high, 900-feet long masonry dam was built in 1874.
The Project converted from a mechanical operation to an electrical hydropower operation
in 1940, when an electrical turbine was installed.
In 1985, FERC issued a 30-year license for operation for the Project; the license was
transferred to Bynum Hydro Company in 1986. Petitioner PK Ventures subsequently
acquired the Project from Bynum, but the license was never formally transferred to PK
Ventures. J.A. 287. The Project last generated electricity more than a decade ago.
Anticipating the 2015 expiration of the license, PK Ventures in 2010 filed a notice
of intent to apply for relicensing of the Project. PK Ventures did not follow through,
however, and never filed a license application for the Project with FERC. On March 30,
2015, McMahan filed an application for a license to operate the Project.
While McMahan’s application was pending, FERC determined that Bynum Hydro
had been dissolved, and FERC transferred the Project license to PK Ventures. PK Ventures
sought rehearing, arguing that it was not the licensee of the Project and asking FERC to
rescind the transfer. FERC granted rehearing and rescinded the transfer, explaining that
“it is in the public interest to allow the license to expire while [FERC] considers
6
McMahan’s application.” J.A. 290. FERC’s order prohibited PK Ventures from operating
the Project or filing its own application while McMahan’s application was under review.
See id. (“[B]ecause PK Ventures failed to file a timely application after being made aware
of the filing deadline . . . , PK Ventures is barred from filing a license or exemption
application for this project while the Commission reviews McMahan’s license application.
In addition, PK Ventures may not operate the project without Commission authorization.”)
(footnotes omitted).
As required by the CWA, McMahan sought a § 401 water-quality certification from
NCDEQ, filing its application on March 3, 2017. On April 26, 2017, NCDEQ sent a letter
directing McMahan to submit a water-quality monitoring plan and giving guidance as to
what should be included in the plan. NCDEQ also asked McMahan to provide it with
FERC’s environmental assessment 1 (“EA”) of the Project.
On December 21, 2017, McMahan emailed a water-quality monitoring plan to
NCDEQ. In the email, McMahan also asked to “discuss refiling” its application since
FERC still had not completed the Project’s EA. J.A. 524. NCDEQ responded to McMahan
on January 3, 2018. NCDEQ acknowledged receipt of the water quality monitoring plan
and told McMahan that “[t]o refile your application, you will need to send a letter stating
1
Under the National Environmental Policy Act, 42 U.S.C. § 4321 et seq.,
“[federal] agencies considering certain projects must evaluate whether the project would
have a significant impact on the environment by preparing an Environmental Assessment.
. . . If the project would have a significant impact, the agency must prepare an
Environmental Impact Statement.” Save Our Sound OBX, Inc. v. N.C. Dep’t of Transp.,
914 F.3d 213, 218 (4th Cir. 2019).
7
that you would like to withdraw your application and reapply prior to March 3, 201[8]. We
do not charge an additional review fee when the delay is beyond the applicant’s control as
in your situation.” J.A. 537. On February 20, 2018, McMahan sent NCDEQ a letter
“withdrawing its current application, and re-applying for the 401 Certification.” J.A. 311.
FERC issued the EA on October 25, 2018. After reviewing the EA, NCDEQ staff
met with McMahan on December 19, 2018. NCDEQ staff told McMahan that it would not
be able to issue a § 401 certification by February 20, 2019 (one year after McMahan
withdrew and resubmitted his certification application), in part because of the time frames
imposed by the statutorily mandated public-notice-and-comment process. 2 At that
meeting, McMahan informed NCDEQ that it intended to withdraw and resubmit its
application before expiration of the one-year review period. NCDEQ sent McMahan
written comments about the water-quality monitoring plan the day after the meeting.
On January 18, 2019, McMahan submitted a revised water-quality monitoring plan.
NCDEQ responded on February 7, 2019, stating that the agency had “no further
comment/question on the revised monitoring plan. However, please remember to send
Karen a request to withdraw and reapply (I think the deadline is by February 20th).” J.A.
547. On February 11, 2019, McMahan withdrew and resubmitted its § 401 application.
2
The notice-and-comment period could not have begun before NCDEQ
reviewed the EA. As explained in an affidavit from NCDEQ’s supervisor of the § 401
certifications, the environmental assessment “serves as a critical component of any 401
application for a federally licensed hydroelectric project.” J.A. 504. Because “agencies
must consider reasonable alternatives, . . . the configuration of a project may change as a
result of the EA process. The EA also contains an analysis of environmental impacts that
inform NCDEQ’s analysis of the potential impacts on waters of the State.” Id.
8
McMahan asked NCDEQ to put the application on hold again on April 19, 2019, and then
asked NCDEQ to resume review on July 23, 2019.
NCDEQ issued McMahan a § 401 certification for the Project on September 20,
2019. The § 401 certification included several conditions NCDEQ deemed necessary to
ensure compliance with North Carolina’s water quality standards.
On the same day that NCDEQ issued the certification, FERC issued an order (the
“License Order”) granting McMahan a 40-year license to operate the Project. See J.A.
429-79. In the License Order, FERC concluded that NCDEQ had waived its authority to
issue a § 401 certification. FERC determined that the statutory review period began on
March 3, 2017, when McMahan filed its initial application for § 401 certification, and that
“the one-year clock” was not restarted by McMahan’s withdrawals and resubmissions of
its application. J.A. 438-39. Relying on Hoopa Valley Tribe v. FERC, 913 F.3d 1099
(D.C. Cir. 2019), FERC explained that an “ongoing agreement” between an applicant and
the state agency to repeatedly withdraw and resubmit a § 401 certification application over
a period exceeding a year amounts to a waiver of the State’s certification authority. J.A.
439. In FERC’s view, “the record shows that North Carolina DEQ and McMahan Hydro
agreed to a withdrawal and refiling process (and, indeed, that the state agency directed that
activity), such that North Carolina DEQ has delayed the licensing of the Bynum Project.”
Id. (emphasis added). FERC also concluded that the one-year review-period was not tolled
by NCDEQ’s requests for additional information, noting that a contrary rule “could
encourage the states to ask applicants to provide additional data in order to give themselves
9
more time to process certification requests, in contravention of Congress’ intent.” Id. at
440 n.43.
NCDEQ filed a rehearing request with FERC, seeking a rescission of the waiver
determination and asking FERC to incorporate the conditions of the § 401 certification into
the License Order. NCDEQ informed McMahan of its intent to seek rehearing, and
McMahan did not oppose it. In support of rehearing, NCDEQ submitted an affidavit from
Karen Higgins, who was in charge of the division responsible for issuing § 401
certifications. The affidavit detailed the agency’s interactions with McMahan and
explained that in every instance it was McMahan who sought to withdraw his application.
Copies of the correspondence between the parties and other relevant documents were
included as exhibits to the affidavit.
FERC denied NCDEQ’s rehearing request. See J.A. 633-58. In its order, FERC
acknowledged that the first withdrawal “was initiated by McMahan.” J.A. 645.
Nonetheless, FERC stated that it still was
not persuaded that this was a unilateral action by the applicant. North
Carolina DEQ instructed McMahan Hydro to send a letter indicating that
McMahan Hydro would like to withdraw and reapply and also indicated that
no additional review fee was necessary. McMahan Hydro’s February 20,
2018 withdrawal-and-resubmittal letter did not convey any substantive
information to North Carolina DEQ, but merely withdrew and resubmitted
the very same water quality certification request that had been pending before
North Carolina DEQ on that date.
J.A. 645 (footnote omitted). FERC concluded that McMahan and NCDEQ had engaged in
a “coordinated withdrawal and resubmission scheme,” J.A. 646 (internal quotation marks
omitted), for “the purpose of avoiding waiver,” J.A. 648, such that a waiver finding was
10
proper under Hoopa Valley. As to Higgins’ affidavit, which FERC described as only
addressing whether there was a formal agreement between NCDEQ and McMahan, FERC
dismissed it as “unconvincing and irrelevant.” J.A. 649. FERC explained that whether
or not there was a formal agreement, NCDEQ’s “coordination” with McMahan was enough
to establish waiver. J.A. 649.
PK Ventures also filed a request for rehearing with FERC, arguing, inter alia, that
FERC lacked jurisdiction over the Project because the Haw River is not navigable and the
Project does not affect interstate commerce. FERC determined that it properly exercised
jurisdiction and denied PK Venture’s petition for rehearing. NCDEQ and PK Ventures
both petition this court for review of FERC’s orders.
III.
We turn first to Case No. 20-1671, the petition for review filed by PK Ventures. PK
Ventures contends that FERC lacked jurisdiction under the FPA to issue the license to
McMahan and that McMahan’s § 401 application to NCDEQ was not valid under North
Carolina law because McMahan was not the owner of the Project.
A.
Before addressing the merits, we first consider FERC’s contention that PK Ventures
lacks standing to challenge the License Order. See Outdoor Amusement Bus. Ass’n, Inc. v.
Dep’t of Homeland Sec., 983 F.3d 671, 680 (4th Cir. 2020) (“Because standing implicates
our Article III power to hear the case, we must resolve it first.”).
The FPA authorizes a party “aggrieved” by a FERC order to seek judicial review.
16 U.S.C. § 825l(b). “Parties are aggrieved under the Federal Power Act if they satisfy
11
both the constitutional and prudential requirements for standing. The requirement of
aggrievement serves to distinguish a person with a direct stake in the outcome of a litigation
from a person with a mere interest in the problem.” New York Reg’l Interconnect, Inc. v.
FERC, 634 F.3d 581, 586 (D.C. Cir. 2011) (citations and internal quotation marks omitted);
see U.S. ex rel. Chapman v. Fed. Power Comm’n, 191 F.2d 796, 800 (4th Cir. 1951)
(explaining that to have standing under § 825l, “some right or interest of a complaining
party must be invaded to justify him in asking relief in court”), aff’d, 345 U.S. 153 (1953).
“[T]he irreducible constitutional minimum of standing contains three elements: (1)
the [litigant] must have suffered an injury-in-fact, which (2) must be causally connected to
the conduct complained of, and that (3) will likely be redressed if the [litigant] prevails.”
Baehr v. Creig Northrop Team, P.C., 953 F.3d 244, 252 (4th Cir.) (internal quotation marks
omitted), cert. denied, 141 S. Ct. 373 (2020).
In our view, PK Ventures’ ownership of the Project gives it a direct stake in the
outcome of the licensing proceeding and satisfies the requirements for Article III standing.
If FERC does not have jurisdiction over the Project, as PK Ventures contends, PK Ventures
would be free to operate the Project as it sees fit, without a FERC license or oversight. But
if FERC does have jurisdiction and the license to McMahan stands, the FPA authorizes
McMahan to take title to the Project from PK Ventures through eminent domain. See 16
U.S.C. § 814 (“When any licensee cannot acquire by contract . . . the right to use . . . the
lands or property of others necessary to the construction, maintenance, or operation of any
dam, reservoir, diversion structure, or the works appurtenant or accessory thereto, . . . it
may acquire the same by the exercise of the right of eminent domain . . . .”). Because the
12
issuance of the license to McMahan threatens PK Ventures’ continuing use and ownership
of the Project, PK Ventures has suffered a concrete injury-in-fact that would be redressed
were we to rule in its favor. We therefore conclude that PK Ventures is an aggrieved party
with standing to challenge FERC’s issuance of the License Order.
B.
We turn now to PK Ventures’ challenges to FERC’s jurisdiction over the Project.
As previously noted, a FERC license is required to operate a hydroelectric project that
affects interstate commerce and is located on a body of water “over which Congress has
jurisdiction under its authority to regulate commerce with foreign nations and among the
several States,” 16 U.S.C. § 817(1), as long as some “construction” of the project occurred
after 1935, see Aquenergy Sys., 957 F.2d at 228. In its petition for review, PK Ventures
contends FERC lacks jurisdiction to license the Project because the Haw River is not
navigable, the dam was built before 1935, and the Project does not affect interstate
commerce. We disagree.
Whether or not the Haw River is itself navigable, it is a tributary of the Cape Fear
River, which itself is a navigable waterway. See J&T Hydro Co., 50 FERC ¶ 62079, 63082
at n.4 (1990). Accordingly, the Haw River qualifies as a body of water over which
Congress has Commerce Clause authority. See L.S. Starrett Co., 650 F.3d at 24 (“[T]he
headwaters and tributaries of navigable waters are Commerce Clause streams.”) (internal
quotation marks and alterations omitted).
Moreover, the record supports FERC’s determination that qualifying “construction”
of the Project occurred after 1935. Although the dam was built in the late 1800s, a turbine
13
was added in 1940 that converted “a mechanical energy facility with no hydroelectric
generation to a hydroelectric project with 600 kilowatts . . . of new hydroelectric generating
capacity.” J.A. 637. That is enough to satisfy the requirement of post-1935 construction.
See Aquenergy Sys., 857 F.2d at 229 (“Congress did not intend § [817] to apply to ordinary
maintenance, repair and reconstruction activity. . . . At the same time, the statute could
hardly be construed to authorize work which would substantially enlarge or change an
existing plant.”); accord L.S. Starrett Co., 650 F.3d at 26-27 (concluding that post-1935
construction work that increased the project’s power-generating capacity satisfied the
requirements of § 817); Puget Sound Power & Light Co. v. FPC, 557 F.2d 1311, 1316 (9th
Cir. 1977) (project enlargement resulting in increased generating capacity satisfies
construction requirement).
We also reject PK Ventures’ claim that FERC lacks jurisdiction because the Project
has no effect on interstate commerce given that it has not operated for over a decade and is
not presently producing electricity. As FERC explained, it is the proposed use of the
Project that is relevant to FERC’s licensing jurisdiction, not the manner in which the
unlicensed Project is presently being used. See 16 U.S.C. § 817(1) (requiring license for
proposed project on non-navigable Commerce Clause waters if FERC’s investigation of
the “proposed construction” shows that “the interests of interstate or foreign commerce
would be affected by such proposed construction”) (emphasis added).
Because FERC properly exercised jurisdiction over the Project, we deny this portion
of PK Ventures’ petition for review.
C.
14
Finally, we turn to PK Ventures’ claim that McMahan’s § 401 applications were not
valid under North Carolina law.
When McMahan filed its § 401 applications, North Carolina law provided that a
“valid” § 401 application must be signed by “a responsible officer of the company,
municipal official, partner or owner,” and that the signature “certifies that the applicant has
title to the property, has been authorized by the owner to apply for certification or is a
public entity and has the power of eminent domain.” 15A N.C. Admin. Code 2H.0502(f)
(2018). 3 Because McMahan is not the owner of the Project, PK Ventures contends that
McMahan’s applications for a § 401 certification were not valid and that the certification
issued by NCDEQ is likewise not valid.
This claim is, at bottom, a challenge to the propriety of actions taken by NCDEQ.
This court, however, is only authorized to review the actions of FERC, see 16 U.S.C. §
825l(b), and the FPA does not require applicants for a FERC license to own the property
involved in the proposed project. Whether NCDEQ erred by accepting an application filed
by a non-owner is a question of state law for the state courts; we have no authority to weigh
in on the issue or invalidate McMahan’s license on that basis. See City of Tacoma v. FERC,
460 F.3d 53, 67 (D.C. Cir. 2006) (“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.”);
Roosevelt Campobello Int’l Park Comm’n v. EPA, 684 F.2d 1041, 1056 (1st Cir. 1982)
3
By the time NCDEQ issued the § 401 certification, a new version of the
regulation omitting the owner-signature requirement had taken effect. See 15A N.C.
Admin. Code 2H.0502(f) (effective June 1, 2019).
15
(“The courts have consistently . . . rul[ed] that the proper forum to review the
appropriateness of a state’s certification is the state court, and that federal courts and
agencies are without authority to review the validity of requirements imposed under state
law or in a state’s certification.”). Because we lack jurisdiction to review NCDEQ’s
acceptance of McMahan’s § 401 applications, we dismiss that portion of PK Ventures’
petition for review.
IV.
We now turn to the petition for review filed by NCDEQ in Case No. 20-1655.
NCDEQ argues that FERC’s approach to the question of waiver is inconsistent with the
plain language of the CWA and with the purpose of the CWA. Alternatively, NCDEQ
contends that even if FERC’s understanding of the statute is correct, the waiver finding
must be set aside because FERC’s key factual findings are not supported by substantial
evidence.
Our narrow scope of review permits this court to set aside the License Order if it
was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,
or unsupported by substantial evidence.” Appomattox River Water Auth. v. FERC, 736 F.2d
1000, 1002 (4th Cir. 1984) (citation omitted); see 5 U.S.C. § 706(2)(A); 16 U.S.C. §
825l(b). Because FERC does not administer the Clean Water Act, we owe no deference to
its interpretation of § 401. See AES Sparrows Point LNG v. Wilson, 589 F.3d 721, 730 (4th
Cir. 2009) (declining to defer to FERC regulation addressing § 401 because “FERC is not
charged in any manner with administering the Clean Water Act”); Ala. Rivers All. v. FERC,
325 F.3d 290, 296–97 (D.C. Cir. 2003) (“The Commission’s interpretation of the CWA is
16
not entitled to the usual judicial deference, however, because the Environmental Protection
Agency (EPA)—and not FERC—is charged with administering the statute.”).
A.
Under the CWA, a State waives its water-quality certification authority if it “fails
or refuses to act on a request for certification, within a reasonable period of time (which
shall not exceed one year) after receipt of such request.” 33 U.S.C. § 1341(a)(1). 4 On
February 20, 2019, McMahan withdrew and resubmitted its application; NCDEQ granted
that application seven months later on September 20, 2019. FERC nonetheless determined
that NCDEQ waived its certification authority because it failed to timely act on McMahan’s
initial application filed on March 3, 2017. In FERC’s view, McMahan’s withdrawal and
refiling of that application did not re-start the review clock because NCDEQ coordinated
with McMahan on the withdrawal-and-resubmittal for the purpose of evading § 401’s one-
year review period.
In its petition for review, NCDEQ argues that FERC’s approach to the waiver
question is inconsistent with the plain language of the CWA. NCDEQ asserts that because
the period for state review begins upon “receipt of such request,” 33 U.S.C. § 1341(a), the
4
In AES Sparrows Point LNG v. Wilson, 589 F.3d 721 (4th Cir. 2009), this
court held that § 401 was ambiguous as to whether the review period began when the
application was initially filed or when the application was finally complete, and we gave
Chevron deference to a regulation of the Army Corps of Engineers providing that the
period started when the Corps deemed the application to be complete. See id. at 729-30.
The holding of Sparrows Point has no application here, as Sparrows Point did not involve
withdrawn and resubmitted applications, and NCDEQ does not contend that McMahan’s
initial application was incomplete.
17
statutory waiver provision is “request-specific,” in that it applies only “to the request that
is actually pending and awaiting action from the agency”; once an application is
withdrawn, there is nothing pending before the agency, and therefore nothing for the
agency to act on. Brief of NCDEQ at 28. Accordingly, NCDEQ argues that when
McMahan withdrew the March 2017 application and then the February 2018 application,
those applications were no longer pending before the agency and have no effect on the
question of waiver. NCDEQ timely acted on the application that McMahan filed on
February 11, 2019, by issuing the § 401 certification (with conditions) on September 20,
2019. Because NCDEQ neither failed nor refused to act upon a pending certification
request, NCDEQ contends that FERC’s waiver determination is inconsistent with the plain
language of the statute. NCDEQ argues that Hoopa Valley’s holding is narrow and based
on specific facts wholly absent from this case and that FERC therefore erred by relying on
Hoopa Valley to disregard the effect of the application withdrawals.
As NCDEQ contends, the language of § 401 makes the one-year review period
specific to each application request—the state agency must act on an application within a
year of the filing of that application. See Hoopa Valley, 913 F.3d at 1104 (“Implicit in the
statute’s reference ‘to act on a request for certification,’ the provision applies to a specific
request. This text cannot be reasonably interpreted to mean that the period of review for
one request affects that of any other request.”). Ordinarily, then, the applicant’s withdrawal
of its certification request would end the agency’s obligation to review that application,
and the prior withdrawal would have no effect on the review period available for a
subsequent application. When the new application comes weeks or months after the
18
withdrawal and returns in better developed, more complete form, it seems clear that the
one-year review clock should restart upon receipt of the new application. The issue
becomes a bit murkier in cases like this one, involving the withdrawal and immediate
resubmission of the same application. FERC relies on Hoopa Valley to explain why
McMahan’s withdrawal of its applications did not restart the one-year review clock.
Hoopa Valley involved the Klamath Hydroelectric Project, a series of dams located
on the Klamath River in California and Oregon. In 2004, PacifiCorp sought relicensing of
the project, proposing to relicense only the upper dams and to decommission the others.
See Hoopa Valley, 913 F.3d at 1101. As required by § 401, PacifiCorp also sought water-
quality certifications from Oregon and California. In 2008, a consortium of interested
parties began settlement negotiations to resolve the procedures and the risks associated
with the dams’ decommissioning. By that time, the § 401 certification was the only
requirement of the relicensing process that had not been satisfied. The settlement
negotiations culminated in a written contract that targeted a decommission date of 2020
and placed various environmental and financial obligations on PacifiCorp. The settlement
contract included an agreement to defer the § 401 one-year review period through a process
where PacifiCorp would annually withdraw and resubmit the water quality certification
requests just before the expiration of the one-year review period. See id.
In 2012, the Hoopa Valley Tribe, which was not a party to the settlement agreement,
sought a declaratory order from FERC that PacifiCorp had failed to diligently prosecute its
application and that the States had waived their certification authority. FERC denied the
petition, and the Tribe sought review by the D.C. Circuit. See id. at 1102. The court held
19
that the states had waived their § 401 certification authority by entering into the agreement
with PacifiCorp:
The record does not indicate that PacifiCorp withdrew its request and
submitted a wholly new one in its place, and therefore, we decline to resolve
the legitimacy of such an arrangement. We likewise need not determine how
different a request must be to constitute a “new request” such that it restarts
the one-year clock. This case presents the set of facts in which a licensee
entered a written agreement with the reviewing states to delay water quality
certification. PacifiCorp’s withdrawals-and-resubmissions were not just
similar requests, they were not new requests at all. The [settlement contract]
makes clear that PacifiCorp never intended to submit a “new request.”
Indeed, as agreed, before each calendar year had passed, PacifiCorp sent a
letter indicating withdrawal of its water quality certification request and
resubmission of the very same request . . . in the same one-page letter . . . for
more than a decade. Such an arrangement does not exploit a statutory
loophole; it serves to circumvent a congressionally granted authority over the
licensing, conditioning, and developing of a hydropower project.
While the statute does not define “failure to act” or “refusal to act,”
the states’ efforts, as dictated by the [settlement contract], constitute such
failure and refusal within the plain meaning of these phrases. Section 401
requires state action within a reasonable period of time, not to exceed one
year. California and Oregon’s deliberate and contractual idleness defies
this requirement. By shelving water quality certifications, the states usurp
FERC’s control over whether and when a federal license will issue. Thus, if
allowed, the withdrawal-and-resubmission scheme could be used to
indefinitely delay federal licensing proceedings and undermine FERC’s
jurisdiction to regulate such matters.
....
The record indicates that PacifiCorp’s water quality certification request has
been complete and ready for review for more than a decade. There is no
legal basis for recognition of an exception for an individual request made
pursuant to a coordinated withdrawal-and-resubmission scheme, and we
decline to recognize one that would so readily consume Congress’s generally
applicable statutory limit. Accordingly, we conclude that California and
Oregon have waived their Section 401 authority with regard to the Project.
913 F.3d at 1104-05 (emphasis added).
20
Thus, Hoopa Valley is a very narrow decision flowing from a fairly egregious set of
facts, where the state agencies and the license applicant entered into a written agreement
that obligated the state agencies, year after year, to take no action at all on the applicant’s
§ 401 certification request. Under those facts, the D.C. Circuit rejected the parties’ attempt
to camouflage the “contractual idleness” through the annual withdraw-and-resubmit
scheme and determined that the states had waived their certification authority under § 401.
The facts of this case, however, bear little relation to those of Hoopa Valley.
Although McMahan twice withdrew and then immediately resubmitted its certification
requests, those actions were not part of a contractual agreement for agency idleness.
Indeed, there was no idleness on the part of NCDEQ. After McMahan filed its first request
in 2017, NCDEQ’s staff met and corresponded frequently with McMahan. They reviewed
McMahan’s submission and informed it that a water-quality monitoring plan would be
required. They gave McMahan advice about what should be included in the monitoring
plan and reviewed the plan internally when it was finally submitted. These are significant
actions, and they were all taken less than a year after the certification request was filed.
NCDEQ continued to take significant action after McMahan withdrew and resubmitted its
applications in 2018 and 2019. During those times, NCDEQ staff continued to correspond
and meet with McMahan and help in the development of the water-quality monitoring plan.
Once FERC finally issued the EA of the Project, NCDEQ met with McMahan and moved
forward with the statutorily mandated public-notice-and-comment process. And after that
process was completed, of course, NCDEQ proceeded to grant the § 401 certification.
21
Because NCDEQ did in fact take action on McMahan’s applications, FERC is
forced to defend its waiver determination by arguing that § 401 requires final agency action
within one year. That is, FERC contends that to avoid waiver, the state agency must either
grant or deny certification within a year of the filing of the certification request. We are
not convinced FERC’s reading of the statute is correct.
Section 401 requires the state agency to certify or deny compliance with water-
quality standards. The waiver portion of the statute, however, uses a different verb and
provides that a state waives its certification authority if it “fails or refuses to act on a request
for certification” within a year. 33 U.S.C.A. § 1341(a)(1) (emphasis added). If Congress
had intended for the states to take final action on § 401 applications within a year of filing,
the statute could have made that clear by providing that waiver occurs if the agency “fails
to certify or deny compliance with water quality standards within one year.” Since
Congress instead hinged waiver on the agency’s failure “to act” on a certification request,
traditional rules of statutory construction would generally require us to interpret “acting”
on a certification request as meaning something other than certifying or denying
compliance with water-quality standards. See, e.g., Russello v. United States, 464 U.S. 16,
23 (1983) (“Where Congress includes particular language in one section of a statute but
omits it in another section of the same Act, it is generally presumed that Congress acts
intentionally and purposely in the disparate inclusion or exclusion.”) (internal quotation
marks and alteration omitted); United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir.
1972) (per curiam) (“[W]here Congress has carefully employed a term in one place and
excluded it in another, it should not be implied where excluded.”).
22
If this reading of the statute is correct, a state would not waive its certification
authority if it takes significant and meaningful action on a certification request within a
year of its filing, even if the state does not finally grant or deny certification within that
year. Such a reading of the statute would be consistent with the legislative history of the
amendment to § 401 that added the waiver provision, which indicates that the review period
was added to prevent States effectively vetoing federal projects by taking no action on §
401 applications. See Alcoa Power Generating Inc. v. FERC, 643 F.3d 963, 972 (D.C. Cir.
2011) (“[T]he Conference Report on Section 401 states that the time limitation was meant
to ensure that ‘sheer inactivity by the State . . . will not frustrate the Federal application.’”).
This understanding of the statute would also be consistent with the purposes of the
Clean Water Act generally and § 401 specifically. As this court explained in Sierra Club
v. United States Army Corps of Engineers, 909 F.3d 635 (4th Cir. 2018), the CWA reflects
a “carefully prescribed allocation of authority between federal and state agencies” that
preserves “‘the primary responsibilities and rights of States to prevent, reduce, and
eliminate pollution, to plan the development and use (including restoration, preservation,
and enhancement) of land and water resources.’” Id. at 647 (quoting 33 U.S.C. § 1251(b))
(emphasis added). And while the purpose of § 401’s one-year review period was to prevent
States from delaying federal projects by taking no action on certification requests, the
purpose behind § 401 itself and its certification requirement is “‘to assure that Federal
licensing or permitting agencies cannot override State water quality requirements.’” Id.
(quoting S. Rep. 92–414, at 69 (1971)). Under this reading of the statute, a State that in
good faith takes timely action to review and process a certification request likely would
23
not lose its authority to ensure that federally licensed projects comply with the State’s
water-quality standards, even if it takes the State longer than a year to make its final
certification decision. 5
Nonetheless, despite our reservations about FERC’s reading of the statute and its
approach to the waiver question, we need not definitively resolve those questions in this
appeal. As we will explain, even if we accept FERC’s expansive reading of Hoopa Valley
and assume that FERC’s standard for finding waiver is consistent with the plain language
of the CWA, we agree with NCDEQ that FERC’s key factual findings underpinning its
waiver determination are not supported by substantial evidence. Accordingly, we leave
the statutory-interpretation question for resolution in a case where the outcome depends on
the precise meaning of the statute.
B.
FERC contends that it reasonably concluded that North Carolina waived its water-
certification authority by not taking final action on McMahan’s § 401 application because
“(1) [NCDEQ] coordinated with McMahan, arranging for it to withdraw and resubmit its
5
We are not aware of any circuit that has adopted this interpretation of § 401.
In NY State Dep’t of Env’t Consv. v. FERC, 991 F.3d 439 (2d Cir. 2021), the Second Circuit
rejected this reading of the statute by concluding that the state waived its certification
authority under § 401 when it asked the applicant to agree to revise the date of receipt of
its certification request by 36 days in order to give the agency time to comply with the
required notice-and-comment period before acting on the certification. See id. at 443, 447-
48. However, interpreting § 401 as requiring meaningful action, but not necessarily final
action, would not be inconsistent with the decision in Hoopa Valley, which simply held
that whatever “fails or refuses to act” in § 401 means, the agencies there had not acted. See
Hoopa Valley Tribe v. FERC, 913 F.3d 1099, 1105 (D.C. Cir. 2019).
24
certification request on two occasions after receipt of the request, in an effort to avoid the
one-year deadline, and (2) the ‘resubmissions’ were neither new nor significantly
modified.” Brief of Respondent at 24. FERC contends its factual findings are supported
by the record and that our deferential standard of review therefore requires us to uphold the
waiver finding.
Our narrow scope of review permits us to “set aside the FERC’s order only if we
find it to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law, or unsupported by substantial evidence.” Appomattox River Water Auth., 736
F.2d at 1002 (4th Cir. 1984) (citation and internal quotation marks omitted); see 5 U.S.C.
§ 706(2)(A); 16 U.S.C.A. § 825l(b). “Substantial evidence review is an objective
assessment of the sufficiency of the evidence.” Pirelli Cable Corp. v. NLRB, 141 F.3d 503,
514 (4th Cir. 1998). When conducting this review, we must consider the “whole record”
and “take into account whatever in the record fairly detracts” from the agency’s factual
findings. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951). “Substantial
evidence” means “such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.” T-Mobile Ne. LLC v. City Council of City of Newport News, Va.,
674 F.3d 380, 385–86 (4th Cir. 2012) (internal quotation marks omitted). Substantial
evidence is more than a mere scintilla of evidence, but it need not be a preponderance of
the evidence. See id. at 385.
We will assume for purposes of this opinion that FERC’s approach to the issue is
correct, such that a finding of waiver under § 401 is appropriate if the applicant and state
agency, in order to avoid the one-year review period, coordinate on a withdrawal-and-
25
resubmission scheme and the resubmitted applications do not differ significantly from the
withdrawn applications. After a careful review of the record and mindful of the deference
to which agency decisions are entitled, we nonetheless conclude that FERC’s factual
findings are not supported by substantial evidence.
(1)
As previously explained, FERC concluded that NCDEQ and McMahan had agreed
to a coordinated withdrawal and resubmission scheme “directed” by NCDEQ in order to
avoid waiver. J.A. 439. While FERC acknowledged that McMahan “initiated” the first
withdrawal, FERC was “not persuaded” the action was really a “unilateral action” by
McMahan because NCDEQ had sent an email “instruct[ing] McMahan Hydro to send a
letter” withdrawing and resubmitting its certification request. J.A. 645. FERC concluded
that, whether or not there was a formal agreement between NCDEQ and McMahan, the
“coordination” between the parties was enough to give rise to waiver under § 401. J.A.
646.
In support of its petition for rehearing, NCDEQ submitted an affidavit from Karen
Higgins, who supervised the staff members reviewing McMahan’s application. Higgins
stated in the affidavit that
NCDEQ never ordered or otherwise required McMahan Hydro to withdraw
and resubmit [its] application. Furthermore, NCDEQ never formed any
agreement with McMahan Hydro pursuant to which McMahan Hydro
withdrew and resubmitted any application. Rather, it is NCDEQ’s
understanding that McMahan Hydro voluntarily chose to withdraw and
resubmit its application, presumably based on its understanding that NCDEQ
could not issue a 401 certification prior to the expiration of the one year
statutory period.
26
J.A. 507-08. Although Higgins had relevant knowledge about the McMahan application,
FERC dismissed her affidavit out of hand. Describing the affidavit as “stating that
[NCDEQ] did not have a formal agreement with McMahan,” FERC dismissed the affidavit
as “unconvincing and irrelevant” because a formal agreement was not required to show
coordination between NCDEQ and McMahan. J.A. 649 (emphasis added).
As the block quote above shows, however, Higgins did not simply say that there
was no formal agreement between NCDEQ and McMahan; she specifically denied any
type of coordination with McMahan and stated that the withdrawals and resubmissions
were voluntary actions by McMahan. When presented with this legally competent and
relevant evidence, FERC mischaracterized it and dismissed it as irrelevant. While FERC
is the fact-finder, it cannot “arbitrarily ignore[]” “unrebutted, legally significant evidence”
or “base [its] decision on only isolated snippets of that record while disregarding the rest.”
Baharon v. Holder, 588 F.3d 228, 233 (4th Cir. 2009).
Moreover, the correspondence submitted with Higgins’ affidavit support her
assertion that McMahan initiated the withdrawals and resubmissions. Shortly after
McMahan filed its first § 401 certification application, NCDEQ requested that McMahan
submit a water quality monitoring plan and the environmental assessment being prepared
by FERC. McMahan responded on May 12, stating that it did not know when the
environmental assessment would be available and requesting an extension of a previous
deadline to permit submission of the assessment when it was released by FERC. On
December 21, 2017, McMahan emailed NCDEQ the water-quality monitoring plan and
also asked “to discuss refiling [the] 401 application since [McMahan] still hadn’t received
27
[the] Environmental Impact Assessment from FERC.” J.A. 524. NCDEQ acknowledged
receipt of the monitoring plan by email on January 3, 2018, and explained that “to refile
your application, you will need to send a letter stating that you would like to withdraw your
application and reapply prior to March 3, 201[8].” J.A. 537.
A similar sequence of events preceded McMahan’s second withdrawal and
resubmission in February 2019. FERC finally issued the environmental assessment in
October 2018. After reviewing the assessment, NCDEQ notified McMahan that, because
of the public notice-and-comment requirements, it would not be able to issue a § 401
certification by the end of the one-year review. At a meeting in December 2018, McMahan
informed NCDEQ that it intended to withdraw and resubmit its application. See J.A. 507-
08. As part of the follow-up from that meeting, NCDEQ sent McMahan an email on
February 7, 2019, stating that the agency had no further comments on the water-quality
monitoring plan and reminding McMahan to “remember to send Karen a request to
withdraw and reapply (I think the deadline is by February 20th).” J.A. 547.
FERC relied on the January 2018 email to support its finding of coordination
regarding the first withdrawal and resubmission of the application and the February 2019
email to show coordination over the second withdrawal and resubmission. When those
emails are considered in their full context, however, they simply do not support FERC’s
coordination finding. See Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 378
(1998) (An agency “engaged in simple factfinding . . . is not free to prescribe what
inferences from the evidence it will accept and reject, but must draw all those inferences
that the evidence fairly demands.”). The emails do not establish that NCDEQ directed
28
McMahan to withdraw and resubmit its application or coordinated with McMahan on a
scheme intended to thwart the statutory review period. Instead, the full record shows that
in both instances, McMahan, for its own purposes, raised the prospect of withdrawing and
resubmitting its application. NCDEQ did not broach the subject, but merely answered
questions and reminded McMahan of the time frame if it intended to proceed.
Indeed, FERC has since refused to find coordination in the face of very similar
evidence. In KEI (Maine) Power, 173 FERC ¶ 61069 (2020), FERC concluded that a
withdrawal-and-resubmission by the applicant did not give rise to a waiver of the state’s
certification authority because the withdrawal was not done “at the behest” of the state
agency. Id. at 61497. Instead, the purpose of the withdrawal and refiling was “to give KEI
Power the opportunity to avoid receiving a certification with conditions to which it objected
and instead to allow it to negotiate further to achieve an outcome to its liking.” Id. at
61497-98. FERC reached this conclusion despite the existence of an email from the agency
telling the applicant to “[s]ubmit what you have, along with the statement regarding
withdraw and resubmit. Once you’ve withdrawn and resubmitted, you can then submit
additional comments.” Id. at 61498 (internal quotation marks omitted). FERC explained
that the email
shows that Maine DEP worked with KEI Power, but does not demonstrate
that the state either encouraged or supported withdrawal and resubmittal....
While Maine DEP may have provided KEI Power information as to process,
we do not find this email chain to reflect that Maine DEP sought withdrawal
and resubmittal to circumvent the one-year statutory deadline for the state
agency to act. Unlike instances where state agencies sent unsolicited
reminder emails for licensees to withdraw and resubmit to allow the state
more time to complete its processing and review, here the record reflects the
genesis of the withdrawal and resubmittal to be on KEI Power.
29
Id.
We see no meaningful difference between the emails sent by NCDEQ in this case
and the emails sent by the Maine agency in KEI Power, and the record is devoid of any
other evidence that would support FERC’s decision to draw opposite inferences from
similar evidence. The correspondence from McMahan contains no hint that NCDEQ
initiated or directed McMahan’s withdrawal-and-resubmissions. In its February 2018
letter formally withdrawing the first application, McMahan noted FERC’s delay in
preparing the environmental impact assessment for the Project, but did not suggest that
NCDEQ had any role in its decision. See J.A. 311. McMahan’s second withdraw-and-
resubmit letter, in February 2019, included a timeline of the application process. The letter
simply states that McMahan “is withdrawing its current application, and re-applying for
the 401 Certification,” and goes on to note that in February 2018, “McMahan submitted a
request for [NCDEQ] to withdraw and re-apply its application for a 401 Water Quality
Certificate.” J.A. 427. Nothing in the letter or timeline provides any basis for concluding
that NCDEQ coordinated or was otherwise involved in any nefarious way with McMahan’s
withdrawal and resubmission of its applications for § 401 certification.
In support of its finding of coordination, FERC notes that, after McMahan’s first
withdrawal and resubmission in February 2018, NCDEQ told McMahan that it would not
be able to issue the § 401 certification by February 2019 and that McMahan withdrew and
resubmitted its application for a second time in response to that information and after a
reminder email from NCDEQ. In our view, the inferences FERC is attempting to draw
from this thin evidence are not reasonable.
30
As we have explained, FERC’s environmental assessment of the Project was a
critical part of the information NCDEQ needed to evaluate McMahan’s certification
request. FERC did not issue the EA, however, until the fall of 2018. After reviewing the
EA, NCDEQ informed McMahan that it could not grant the certification by February 2019,
in part because of public-notice requirements. NCDEQ, however, did not follow up that
statement with a request that McMahan withdraw and re-apply so to give the agency more
time, nor is there any other evidence in the record suggesting that NCDEQ was informally
seeking McMahan’s help in avoiding the one-year deadline. Absent other evidence
indicating an improper motive or showing that McMahan understood the agency to be
pressuring it to withdraw and resubmit the application, NCDEQ’s factual statement about
how long it would take to issue the certification does not support FERC’s finding of
improper coordination.
If NCDEQ could not have granted the certification by February 2019, it quite easily
could have denied certification, which is what NCDEQ contends it would have done had
McMahan not chosen to withdraw and resubmit its application. FERC has previously held
that no waiver arises when an applicant withdraws and resubmits its application in the
hopes of avoiding a certification that imposes unfavorable conditions. See Village of
Morrisville, Vermont, 173 FERC ¶ 61156, 61940 (2020) (“[W]here the licensee withdraws
and refiles its application in order to avoid potentially unfavorable water quality
certification conditions, the licensee acts unilaterally for its own benefit and by its own
initiative, which is not a sufficient basis to find waiver.”); KEI (Maine), 173 FERC at
61497-98 (finding no waiver where applicant unilaterally withdrew and resubmitted its
31
certification request in order “to avoid receiving a certification with conditions to which it
objected and instead to allow it to negotiate further to achieve an outcome to its liking”).
We see no basis for FERC to take a different approach to McMahan’s withdrawals and
resubmissions, given that a denial of certification prevents the granting of a federal license
and thus works to the disadvantage of the applicant, perhaps even more so than the granting
of § 401 certification that includes unfavorable conditions. McMahan thus withdrew and
resubmitted its certification requests for the same reason as the applicants in KEI and
Village of Morrisville—to avoid undesirable agency action.
The only evidence in the record addressing the full circumstances of McMahan’s
withdrawal of its certification applications are the affidavit and exhibits submitted by
NCDEQ in support of its petition for rehearing. McMahan did not request the waiver
finding during the course of the FERC licensing proceeding, nor did it object to NCDEQ’s
rehearing petition or submit any evidence showing that NCDEQ requested or directed
McMahan to withdraw its applications. FERC, however, never grappled with this
significant quantity of evidence showing that McMahan acted independently when
withdrawing and resubmitting its applications. Instead, it focused primarily on two emails,
stripped of all context, and dismissed all other evidence as “unconvincing and irrelevant.”
J.A. 649.
As we have explained, NCDEQ’s emails from February 2018 and February 2019
cannot be viewed as evidence of improper coordination between NCDEQ and McMahan.
Those emails—as demonstrated by the evidence that FERC declined to consider—were
responses providing procedural information after McMahan stated its intention to withdraw
32
and resubmit its applications. If (as we are assuming) mere coordination between an
applicant and the state agency can lead to a finding of waiver under § 401, then it must take
more than routine informational emails to show coordination. Were the rule otherwise,
applicants could manipulate state agencies into inadvertently waiving their certification
authority just by asking questions. The States’ rights and responsibilities to ensure
compliance with their own water-quality standards are too important to be so easily
stripped away. Accordingly, after reviewing the record as a whole, we are constrained to
conclude that FERC’s finding of improper coordination is not supported by substantial
evidence. See Universal Camera, 340 U.S. at 488 (“[A] reviewing court is not barred from
setting aside a Board decision when it cannot conscientiously find that the evidence
supporting that decision is substantial, when viewed in the light that the record in its
entirety furnishes, including the body of evidence opposed to the Board’s view.”); Ai Hua
Chen v. Holder, 742 F.3d 171, 181 (4th Cir. 2014) (granting petition for review because
the agency failed to account for strong contradictory evidence “in a meaningful way” and
the agency opinion failed “to demonstrate that the agency gave [the contradictory evidence]
more than perfunctory consideration”).
(2)
FERC contends a relevant factor when deciding the waiver question is whether the
new application filed after withdrawal included substantial changes from the application
that was withdrawn. In this case, FERC argues that McMahan’s resubmitted applications
were identical to those withdrawn, which supports its conclusion that McMahan and
33
NCDEQ were engaged in a sham withdrawal-and-resubmit scheme to avoid the one-year
review period of § 401.
Although FERC did discuss the “new application” issue in the orders issued in this
case, it is apparent from the orders that the supposed coordination between McMahan and
NCDEQ was the dispositive factor in its waiver finding. Indeed, FERC made this point
explicitly in its recent decision in Village of Morrisville. In that case, FERC explained that
whether the refiled applications were materially different from the original applications
alone is not dispositive in determining whether there is waiver. . . . [A] state
waives its certificate authority under section 401 if it deliberately
circumvents the one-year deadline or agrees with the applicant to do so. If,
instead, the applicant voluntarily delays the issuance of a water quality
certificate by withdrawing and refiling its application, absent an agreement
with the state, then waiver is not warranted, regardless of whether or to what
extent the refiled application changes from the original. Here, Morrisville by
its own initiative withdrew and refiled the applications to obtain more
favorable conditions and give itself more time to consider various studies
and alternatives, so we need not consider the extent to which the various
applications differed.
173 FERC at 61941 (emphasis added). Accordingly, even if the applications here were
identical, the dispositive issue under FERC’s own standard is whether the state agency
encourages the withdrawal or otherwise coordinates with the applicant on a process of
withdrawing and resubmitting the applications. As we have explained, FERC’s
coordination finding is not supported by substantial evidence. Because the evidence does
not establish coordination, FERC’s waiver finding cannot be sustained even if the
resubmitted applications were identical to the withdrawn applications.
V.
34
Assuming without deciding that a State may waive its certification authority under
§ 401 by coordinating with an applicant in a scheme to defeat the statutory review period
through a process of withdrawing and resubmitting the certification application, we
conclude that FERC’s finding of coordination between McMahan and NCDEQ is not
supported by substantial evidence. And without evidence of improper coordination, FERC
erred by concluding that North Carolina waived its certification authority under § 401.
Accordingly, in Case No. 20-1655, we hereby grant NCDEQ’s petition for review, vacate
the License Order, and remand the matter to FERC with instructions that the McMahan
license be re-issued to include the conditions imposed by NCDEQ in its § 401 certification.
See 33 U.S.C. § 1341(d).
In Case No. 20-1671, we dismiss for lack of jurisdiction that portion of PK
Ventures’ petition for review challenging the validity of McMahan’s state applications for
a § 401 certification. Finding no merit to the remaining claims, we otherwise deny PK
Ventures’ petition for review.
No. 20-1655: Petition for review granted; order
vacated and remanded with instructions
No. 20-1671: Petition for review dismissed in part and
denied in part
35