The sleeping giant awakens: PUD No. 1 of Jefferson County v. Washington Department of Ecology.

• Author: Ransel, Katherine P.
• Position: State water quality standards and hydroelectric project licensed by the Federal Energy Regulatory Commission

1. INTRODUCTION

   The Dosewamps River is a sparkling gem in one of the crown jewels of our National Parks. It originates in the glacial peaks of the Olympic National Park, a World Heritage Site and International Biosphere Reserve. In an era when hydroelectric projects blanket the rivers of the Pacific Northwest, the Dosewallips is one of the few that runs free, from its source to the Puget Sound's Hood Canal. The "DOE-see"(1) might have remained an obscure little treasure, known ordy to those who haunt the Olympic Peninsula's temperate rainforest, had it not become the center of a decades-old struggle between the states and the federal government. Instead, it has caused a dramatic shift in the balance of power struck during the Progressive era in favor of centralized federal authority over the uses of the Nation's navigable waters.

   In PUD No. 1 of Jefferson County v. Washington Department of Ecology,(2) the Supreme Court rejected the long-standing notion that the Federal Energy Regulatory Commission (FERC), by virtue of the Federal Power Act (FPA), has exclusive authority over the regulation of hydroelectric projects.(3) The Court held that states may impose conditions on FERC-licensed hydroelectric projects based on state water quality standards including instream flow requirements--through the water quality certification provision of the Clean Water Act.4 By this decision, the Court laid waste to its previous opinion in California v. FERC.(5) Just four short years ago, Justice O'Connor, in the mirror image of her Jefferson County opinion, wrote for a unanimous Court that FERC, not the states, was charged with setting instream flows in FPA hydroelectric licensing proceedings.

   The first part of this article lays the foundation for understanding the Court's decision. Part II provides background for the Court's decision. Part HI explains the Court's rulings. Part FV describes several possible consequences of the Court's rulings, such as the next logical steps in the application of the Court's decision to FERC proceedings, what other activities may be affected, causes of action that might be spawned, and broader implications for water law and policy generally.

2. BACKGROUND

   1. The Elkhorn Project

      In 1982, Jefferson County Public Utility District Number One and the city of Tacoma, Washington proposed to construct a new hydroelectric power project on the Dosewallips River. The Elkhom Project, named after a nearby Forest Service campground, was to include a diversion dam, a penstock, and a powerhouse.(7) The dam would divert water from the river via a diversion portal and a penstock, run it through a turbine to generate electricity in two generators located in the powerhouse, and discharge the water back to the river from the powerhouse tailrace, some 1.2 miles downriver. The stretch of original river between the diversion portal and the powerhouse is called the "bypass reach."

      Tacoma proposed to divert approximately seventy-five percent of the river's water from the bypass reach for power generation.(8) Depending on the season, this would have been between 65 and 155 cubic feet per second (cfs).(9)

   2. The Federal Power Act

      The Federal Power Act (FPA)(10) requires nonfederal entities, such as Tacoma, that operate hydroelectric projects on navigable waters of the United States to obtain a license from the Federal Energy Regulatory Commission (FERC) (formerly the Federal Power Commission).(11) FERC determines whether a proposed project is in the public interest and, since the amendment of the FPA by the 1986 Electiric Consumers Protection Act (ECPA),(12) must give equal consideration to fish and wildlife resources, recreational values, and energy conservation opportunities in determining whether to grant a license.(13)

      Section 10(j) of the ECPA amendments requires licenses issued by FERC to include conditions designed to protect, enhance, and mitigate damage to fish and wildlife and their habitat.14 These conditions must be based on the recommendations of federal and state resource agencies, and FERC must make specific findings if it rejects those recommendations.15 Typically the resource agencies recommend minimum instream flows, ramping rates,(16) habitat improvements,17 and other protective or mitigative conditions.

      Tacoma argued before both the Washington and U.S. Supreme Courts that the ECPA amendments, and especially section 10(j), constituted a limit on the ability of states to set instream flows under their water quality certification authority.(18)

   3. History Is Indeed Prologue--Relevant Prior Case Law on the Exclusivity" of FERC's Jurisdiction

      Four years ago in California v. FERC (Rock Creek),(19) the Supreme Court addressed whether section 27 of the FPA reserved to the states the right to regulate minimum flows at FERC-licensed dams. Section 27 saves from pre-emption state laws relating to 'the control, appropriation, use or distribution of water used in irrigation or for municipal or other uses, or any vested right acquired therein."(12)

      The issue arose under section 27 because an almost identical provision of the 1902 Reclamation Act--after which section 27 was modeled--had been interpreted by the Supreme Court in 1978 to preserve states' control over water resources impounded by federal reclamation projects.(21) Thus, the western states had become accustomed to protecting the instream uses of their waters from federal encroachment through the state water rights permitting process.

      In Rock Creek, however, the Court was faced with the extreme situation where FERC had issued a license for the Rock Creek project with certain instream flow requirements based on its determination of project economics and fish needs, and several years later, the state, through its state water rights permitting law, attempted to require a stream flow approximately twice as great.(22) The Court found that section 27 of the FPA did not save California's stream flow condition because it was not a proprietary right like the other water uses specifically saved by section 27.23 The Court felt bound, it said, by its 1946 decision in First Iowa Hydro-Electric Cooperative v. Federal Power Commission,(24) interpreting section 27 as saving from pre-emption only proprietary water rights.(25)

      The Supreme Court also said, however, that "[j]ust as courts may not find state measures pre-empted in the absence of clear evidence that Congress so intended, so must they give full effect to evidence that Congress considered, and sought to preserve, the States' coordinate regulatory role in our federal scheme."(26) This nod to the states must have seemed terribly weak at the time.

      During the time between First Iowa and California v. FERC, however, another line of cases was chipping away at FERC's 'exclusive" jurisdiction, weakening the foundation of FERC's position.

      The first important case was Escondido Mutual Water Co. v. La Jolla Band of Mission Indians,(27) which challenged the authority of the federal land management agencies under section 4(e) of the FPA. Section 4(e) states that FERC licenses "shall be subject to and contain such conditions as the Secretary of [the federal land management agencies] shall deem necessary for the adequate protection and utilization of such reservations."(28) FERC and members of the industry challenged license conditions similar to those in Jefferson County which allowed certain Indian Tribes to use a specified quantity of the water that otherwise would have been used by the licensees.

      The industry and FERC, advancing arguments identical to those in Jefferson County,(29) claimed that section 4(e) could not possibly mean what it says because it would frustrate Congress' intent to centralize dam licensing authority in FERC.(30) The Supreme Court did not agree:

      It is thus clear enough that while Congress intended that the Commission

      would have exclusive authority to issue all licenses, it wanted the individual

      Secretaries to continue to play the major role in determining what conditions

      would be included in the license in order to protect the resources under their

      respective jurisdictions.(31)

      In another case, Monongahela Power Company v. Marsk,(32) the power comparty and FERC argued that FERC'S hcensing authority could not possibly contemplate the permitting obligations of section 404 of the Clean Water Act.(33) Again, the industry and FERC contended that such a requirement would frustrate the purposes of the FPA, and again, the federal court did not agree.34 Finding nothing in the Clean Water Act to suggest that FERC licenses were exempt from the permitting requirements of section 404, and finding that the Clean Water Act represented a 'radical change in legislative policy" and a "strong bipartisan movement in Congress 'to restore and maintain the chemical, physical and biological integrity of the Nation's waters'"(35) the D.C. Circuit held that the applicant had to obtain a section 404 permit to construct its FERC-licensed hydroproject.(36)

      The Monongahela court noted that the Second Circuit had also held that section 404 fully applied to licenses granted by FERC's predecessor agency, the Federal Power Commission.(37) The Court in Monongahela Power reasoned that if Congress had not approved of that result, then Congress could have taken the opportunity to register its dissatisfaction in the Clean Water Act, which amended the Federal Water Pollution Control Act in 1977.(38)

      The same reasoning applies to Jefferson County. Congress had the opportunity, when it substantially amended the Clean Water Act in 1987, to limit state authority under section 401 to impose conditions on FERC-licensed hydroprojects, if ECPA, which had amended the FPA a year before, constituted a new limit on the states' authority under section 401.39

   4. The Clean Water Act

      1. Water Quality Certification

         Under section 401 of the Clean Water Act, Tacoma was obliged to obtain water quality certification (a "401 certificate") from the State...