Marseilles Land and Water Company v. Federal Energy Regulatory Commission

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 18, 2003 Decided October 10, 2003
No. 02-1166
MARSEILLES LAND AND WATER COMPANY,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Elizabeth W. Whittle argued the cause and filed the briefs
for petitioner.
Beth G. Pacella, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were Cynthia A. Marlette, General Counsel, and
Dennis Lane, Solicitor.
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.

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Before: R OGERS and ROBERTS , Circuit Judges, and
SILBERMAN , Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
SILBERMAN .
SILBERMAN , Senior Circuit Judge: Petitioner Marseilles
Land and Water Company (Land Company) challenges the
decision of the Federal Energy Regulatory Commission
(FERC or Commission) to reject as untimely Land Compa-
ny’s notice of intent to submit a development application for a
hydroelectric project, as well as FERC’s decision to reject its
request to waive the deadline for filing the notice of intent.
We deny the petition for review.
I.
A company wishing to investigate an area to determine
whether it is suitable for a hydroelectric project may request
a preliminary permit application from FERC. This permit
gives the holder the right to study the site and a preference
over other companies who may wish to develop the project
within up to three years from the issuance of the permit. See
16 U.S.C. § 798.
The preliminary permit does not itself, however, give the
bearer the right to develop the project. Companies interest-
ed in developing a hydroelectric project must first obtain a
license from FERC by filing a ‘‘development’’ or ‘‘license’’
application. FERC assesses timely filed development appli-
cations, and grants a license to the applicant whose proposal
‘‘is best adapted to serve the public interest.’’ 16 U.S.C.
§ 808(a)(2). Once one interested party files a permit applica-
tion, the Commission publishes notice of the filing in the
Federal Register, along with a prescribed ‘‘intervention dead-
line,’’ by which time other interested parties must file applica-
tions (or notices of intent to file applications) in competition
with the initial permit application. See 18 C.F.R. § 4.36.1
1 Competing permit applications are due on the intervention
deadline, see 18 C.F.R. §§ 4.36(a)(1). Filing a notice of intent,
however, extends the deadline by thirty days. See id. § 4.36(a)(2).

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While a permit grants the holder a preference should it
decide to file a development application, it is not necessary for
anyone to apply for a permit prior to applying for a license;
the permit application process can be bypassed altogether. If
the initial application is a development application instead of a
permit application, FERC follows a similar procedure as if a
permit application had been filed. The Commission publishes
notice of the filing in the Federal Register and sets an
‘‘intervention deadline,’’ by which competing development ap-
plications (or notices of intent) must be received to be consid-
ered.2
Land Company filed a preliminary permit application on
October 31, 2000, to study a site on the Illinois River to
determine whether the site would be suitable for a hydroelec-
tric project. FERC published notice of the application on
November 16, 2000, and set January 16, 2001, as the interven-
tion deadline. On January 14, 2001, two days before the
intervention deadline, Marseilles Hydro Power, LLC (Hydro
Power) filed a notice of intent to file a development applica-
tion for the same site, and it filed the application on May 14,
2001. No other party submitted an application before the
intervention deadline. On August 16, 2001, FERC published
notice of Hydro Power’s filing, and established October 15,
2001, as the deadline for comments about the application.
FERC made clear, however, that the deadline for filing
competing development applications had passed:
Public notice of the filing of the initial development
application [presumably meaning Land Company’s
preliminary permit application], which has already
been given, established the due date for filing com-
peting applications or notices of intent. Under the
2 As in the case of competing permit applications, see note 1,
supra, filing a notice of intent to submit a competing development
application extends the applicable deadline. While the competing
development applications must generally be submitted by the inter-
vention deadline, see 18 C.F.R. § 4.36(b)(1), filing a notice of intent
gives the applicant an additional 120 days. See 18 C.F.R.
§ 4.36(b)(2).

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Commission’s regulations, any competing develop-
ment application must be filed in response to and in
compliance with public notice of the initial develop-
ment application. No competing applications or no-
tices of intent may be filed in response to this notice.
66 Fed. Reg. 44,129 (Aug. 16, 2001).
Notwithstanding FERC’s statement that it would not ac-
cept any more applications, Land Company filed a notice of
intent on October 15, 2001, to file a development application
competing with Hydro Power’s. FERC, viewing the deadline
for all notices of intent to be January 16, 2001, refused to
consider Land Company’s late submission, and this challenge
followed.
II.
Land Company contends that Hydro Power’s filing was an
‘‘initial development application,’’ and that 18 C.F.R. § 4.36(b)
gives developers an opportunity to file development applica-
tions competing with that sort of application. See 18 C.F.R.
§ 4.36(b)(1) (providing that competing development applica-
tions may be submitted by the intervention deadline estab-
lished with the filing of the initial development application);
and id. § 4.36(b)(2) (providing that competing development
applications filed pursuant to a timely notice of intent may be
submitted within 120 days after the intervention deadline).
Land Company points to the definition of an initial develop-
ment application provided in FERC regulations:
Initial development application means any accept-
able application for either a license or exemption
from licensing for a proposed water power project
that would develop, conserve, and utilize, in whole or
in part, water resources for which no other accept-
able application for a license or exemption from
licensing has been submitted for filing and is pend-
ing before the Commission.

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18 C.F.R. § 4.30(b)(11)(i). According to Land Company,
Hydro Power’s filing was an initial development application
because it is an application for a license to use resources for
which no license application was pending—even though a
preliminary permit application had been filed.
FERC, however, contends that Hydro Power’s filing was
not an initial development application, but rather a competing
one—competing, that is, with Land Company’s preliminary
permit application. The Commission directs us to another
definition, the one for a competing development application:
Competing development application means any ap-
plication for a license or exemption from licensing
for a proposed water power project that would de-
velop, conserve, and utilize, in whole or in part, the
same or mutually exclusive water resources that
would be developed, conserved, and utilized by a
proposed water power project for which an initial
preliminary permit or initial development application
has been filed and is pending before the Commis-
sion.
18 C.F.R. § 4.30(b)(1)(i). In the Commission’s view, Hydro
Power’s filing is a competing development application, be-
cause it is an application for a license that would use the same
resources that would be used by the project considered by
Land Company’s then-pending preliminary permit applica-
tion. If FERC is correct, 18 C.F.R. § 4.36(a) (‘‘Deadlines for
filing applications in competition with an initial preliminary
permit application’’), rather than 18 C.F.R. § 4.36(b) (‘‘Dead-
lines for filing applications in competition with an initial
development application’’) applies. And pursuant to 18
C.F.R. § 4.36(a), the operative deadline for competing appli-
cations is the intervention deadline established at the time of
the filing of Land Company’s preliminary permit application,
i.e., January 16, 2001, making Land Company’s development
application late.
We are left in a bit of a quandary because it appears that
Hydro Power’s application fits both definitions. The Com-
mission points out that it actually amended its regulations in

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1985 to alter its prior Georgia Pacific Corp. ‘‘rule,’’ which had
permitted a new round of applications under a new interven-
tion deadline when an initial development application was
filed. See In re: Georgia Pacific Corp., 17 F.E.R.C. ¶ 61,174
(1981). But the preamble to the regulation (Order No. 413),
which states that it intended ‘‘to introduce greater certainty
into the process for all prospective applicants’’ by reversing
the Georgia Pacific rule, does not squarely answer petition-
er’s linguistic argument drawn from the wording of the
regulation itself.
Thus, Land Company contends that the Commission’s in-
terpretation of its regulation is unreasonable (arbitrary and
capricious) because it contemplates necessarily that a permit
applicant would, indeed should, file a development application
competing against itself—which it insists is a logical absurdi-
ty. If a permit applicant does not so file during the interven-
tion period and, as in this case, another party files a develop-
ment application on or near the intervention deadline, the
permit applicant not only loses its preference, it is foreclosed
from even competing with the development applicant. There-
fore, a permit applicant who wishes to ensure it remains in
the game, according to the Commission’s interpretation of its
regulation, must file a development application during the
intervention period even if that application competes only
against itself.
The Commission concedes that petitioner’s analysis is cor-
rect, but points out that in a prior case, In re: Tropicana Ltd.
Partnership, 65 F.E.R.C. ¶ 61,094 (1993), it set forth its
interpretation of its regulations and rejected the very same
argument petitioner raises here—that FERC’s interpretation
is unreasonable because that construction forces an initial
permit applicant to compete against itself. The Commission
explained in Tropicana that it wished to induce all potential
applicants to come in to the process early, and therefore
explicitly held that ‘‘[t]he Commission’s notice of a develop-
ment application filed in competition with an initial permit
application does not establish a new competition deadline for
subsequent development applications.’’ Id.

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Since we gather that it is significantly more time consum-
ing and expensive for a potential applicant to prepare a
development application, as opposed to a mere permit applica-
tion, the Commission’s interpretation of its rule as explained
in Tropicana puts a potential applicant to its choice. If it
wishes to ensure its priority that an initial permit application
gives, it must follow up with a development application (or a
notice of intent to file such application) within the interven-
tion period. Otherwise, it risks losing its priority if a compet-
itor files during the intervention period and it does not.
Although petitioner claims that it did not have adequate
notice of the Commission’s policy, a party before FERC is
deemed to have read relevant Commission cases. Therefore,
we are not faced with a situation such as we encountered in
Satellite Broadcasting Co. v. FCC, 824 F.2d 1 (D.C. Cir.
1987), where we held that an agency’s interpretation of its
regulation, even if reasonable, is not a legitimate basis for
‘‘penalizing a private party—without first providing adequate
notice’’ of its interpretation if the private party’s contrary
interpretation is also reasonable. Id. at 3.
Still, if FERC’s interpretation of its regulation is wholly
unreasonable, it does not suffice to establish that petitioner
was on notice of that interpretation. Even if petitioner
admitted that it examined the Tropicana decision, it could
still prevail if the Commission’s regulation clearly supported
petitioner’s position—and only petitioner’s position. For an
administrative agency may not slip by the notice and com-
ment rule-making requirements needed to amend a rule by
merely adopting a de facto amendment to its regulation
through adjudication. See Air Transp. Ass’n of Am. v. FAA,
291 F.3d 49, 55–56 (D.C. Cir. 2002); Paralyzed Veterans of
Am. v. D.C. Arena, L.P., 117 F.3d 579, 586 (D.C. Cir. 1997),
cert. denied 523 U.S. 1003 (1998). On the other hand, agen-
cies are entitled to great deference in the interpretation of
their own rules. See, e.g., Bowles v. Seminole Rock Co., 325
U.S. 410, 414 (1945); Auer v. Robbins, 519 U.S. 452, 461
(1997); Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512
(1994) Martin v. Occupational Safety & Health Review
Comm’n, 499 U.S. 144, 150–51 (1991); Fina Oil & Chem. Co.

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v. Norton, 332 F.3d 672, 676 (D.C. Cir. 2003). If we conclude
that the Tropicana decision was not a ‘‘plainly erroneous’’
interpretation of the rule, FERC prevails. Bowles, supra, at
414.
Although the Commission’s interpretation of its regulation
does assume rather awkwardly that a permit applicant’s
subsequent development application may compete with itself,
petitioner’s argument rests essentially on the proposition that
Hydro Power’s application meets the definition of an ‘‘initial
development application,’’ and therefore § 4.36(b) guarantees
its right to file a competing development application within a
new intervention period. But—as we have noted—Hydro
Power’s application also perfectly meets the definition of a
‘‘competing development application.’’ And if Hydro Power’s
application is a competing development application then the
original ‘‘deadline’’ created by Land Company’s initial permit
application applies. It is thus hard to find a better paradigm
of an ambiguous regulation. Under the circumstances, we
think FERC was clearly authorized to resolve the ambiguity
in the Tropicana decision.
* * * *
Accordingly, the petition for review is denied.

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