American Forest and Paper Association v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 13, 2008 Decided December 23, 2008
No. 07-1328
AMERICAN FOREST AND PAPER ASSOCIATION ,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION ,
RESPONDENT
COGENERATION ASSOCIATION OF CALIFORNIA , ET AL .,
I NTERVENORS
On Petition for Review of Orders
of the Federal Energy Regulatory Commission
Donald J. Sipe argued the cause for petitioner. With him on
the briefs was Jonathan G. Mermin.
Sara D. Schotland and Wayne R. Bidstrup were on the brief
for amicus curiae Electricity Consumers Resource Council in
support of petitioner.
Robert H. Solomon, Solicitor, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on the
brief were Cynthia A. Marlette, General Counsel, and Judith A.
Albert, Senior Attorney.

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Before: GARLAND and BROWN , Circuit Judges, and
WILLIAMS , Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge BROWN .
BROWN , Circuit Judge: Petitioners insist the term
“markets” as used in the recent amendment to the Public Utility
Regulatory Policies Act (“PURPA”) must always denote a
competitive market. The Federal Energy Regulatory
Commission (“FERC”) interprets the word “markets” to
encompass both competitive and non-competitive markets.
Because FERC’s interpretation is reasonable, we deny the
petition for review.
I. Background
Congress enacted PURPA in 1978, 16 U.S.C. § 824a-3, to
encourage expansion of alternative energy by requiring utilities
to purchase energy from “qualifying facilities” (“QFs”). Id.
§ 824a-3(a); 18 C.F.R. § 292.303(a). FERC was charged with
promulgating rules pursuant to PURPA, which imposed certain
mandatory “obligations to purchase” — situations in which a
utility had to buy energy from a QF. 18 C.F.R. § 292.303(a).
After almost three decades and apparently based on changes
in the energy industry, Congress amended PURPA in 2005
creating exceptions to the mandatory purchase obligation. See
16 U.S.C. § 824a-3(m). If FERC finds the circumstances
specified in section (m)(1) are satisfied, utilities may be relieved
of the obligation to purchase energy from a QF. Id.
§ 824a-3(m)(1).
Section 824a-3(m)(1) refers to “markets” several times. In
a formal rulemaking, FERC interpreted the term “markets” in
subparagraph (m)(1)(A) as encompassing both competitive and

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non-competitive markets. See New PURPA Section 210(m)
Regulations Applicable to Small Power Production and
Cogeneration Facilities, 71 Fed. Reg. 64342, 64345 (Nov. 1,
2006) (to be codified at 18 C.F.R. pt. 292) (“Final Rule”).
American Forest and Paper Assocation (“AFPA”) petitioned for
review, arguing FERC’s interpretation was unreasonable.
II. Discussion
This Court analyzes FERC’s interpretation under the
familiar standard set forth in Chevron v. NRDC, 467 U.S. 837
(1984). Under step one, we ask whether the statutory language
is ambiguous. Id. at 842–43. Under step two, we ask whether
the agency’s interpretation is reasonable. Id. at 843. Section
824a-3(m)(1) is divided into three provisions, creating three
distinct exemptions. Under the statute, a utility is exempt if the
relevant QF has “nondiscriminatory access” to:
(A) (i) independently administered, auction-based day
ahead and real time wholesale markets for the sale of
electric energy; and (ii) wholesale markets for long-
term sales of capacity and electric energy; or
(B) (i) transmission and interconnection services that
are provided by a Commission-approved regional
transmission entity and administered pursuant to an
open access transmission tariff that affords
nondiscriminatory treatment to all customers; and (ii)
competitive wholesale markets that provide a
meaningful opportunity to sell capacity, including
long-term and short-term sales, and electric energy,
including long-term, short-term and real-time sales, to
buyers other than the utility to which the qualifying
facility is interconnected. In determining whether a
meaningful opportunity to sell exists, the Commission

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shall consider, among other factors, evidence of
transactions within the relevant market; or
(C) wholesale markets for the sale of capacity and
electric energy that are, at a minimum, of comparable
competitive quality as markets described in
subparagraphs (A) and (B).
16 U.S.C. § 824a-3(m)(1). AFPA challenges FERC’s
interpretation of the word “markets” in section (A)(ii).
The first step of the Chevron analysis is straightforward.
When “markets” is used in section (A)(ii), no specification is
given as to whether the markets must be competitive or non-
competitive. By contrast, the markets described in both (B)(ii)
and (C) specifically use the word “competitive.” Although
(A)(ii) involves other descriptors, such as “wholesale” and “for
long-term sales,” silence concerning competitiveness in (A)(ii)
creates ambiguity. See Texas Mun. Power Agency v. EPA, 89
F.3d 858, 869 (D.C. Cir. 1996) (“In view of its silence on the
point at issue, we must hold the statute ambiguous.”). See also
Chevron, 467 U.S. at 843 (referring to silence and ambiguity
jointly). The reference in subparagraph (C) to “comparable
competitive quality” suggests that the markets described in (A)
may have some competitive feature, but the language in (C) is
not so strong as to alleviate all ambiguity. Particularly here,
where markets in other sections of the statute are specifically
denoted as “competitive,” silence as to competitiveness in
(A)(ii) leaves open whether Congress intended a
competitiveness requirement in that provision — a prototypical
case for an agency’s gap-filling role under Chevron.
Having completed step one of Chevron, the next question
is whether FERC’s interpretation is reasonable. Several factors
reveal that it is. FERC’s interpretation is consistent with the

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maxim that “[w]here 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.” Russello v. United States, 464 U.S. 16, 23 (1983).
Because the two uses of the term “markets” occur within the
same statute — indeed, in neighboring sentences — the use of
the descriptor “competitive” in subparagraphs (B) and (C)
suggests that no such requirement was meant for subparagraph
(A). “[W]hen Congress uses different language in different
sections of a statute, it does so intentionally.” Shays v. FEC,
528 F.3d 914, 934 (D.C. Cir. 2008).
FERC’s interpretation — that the markets in (A)(ii) can be
competitive or non-competitive — is consistent with the
common usage of the word “markets.” Indeed, this Court has
often referred to non-competitive markets or monopolistic
markets. See, e.g., Columbia Gas Transmission Corp. v. FERC,
477 F.3d 739, 744 (D.C. Cir. 2007) (referring to “non-
competitive markets”); Tenneco Gas v. FERC, 969 F.2d 1187,
1199 (D.C. Cir. 1992) (referring to a “monopolistic market”
attribute). Black’s Law Dictionary defines a market as a “place
of commercial activity in which goods or services are bought
and sold.” B LACK ’ S LAW DICTIONARY 988 (8th ed. 2004).
Notably, this definition has no requirement that a market be
competitive. See also WEBSTER ’ S II NEW COLLEGE
D ICTIONARY 686 (3d ed. 2005) (defining “market” as “a place
where goods are offered for sale”). As the Supreme Court has
said, “the words of statutes . . . should be interpreted where
possible in their ordinary, everyday senses.” Malat v. Riddell,
383 U.S. 569, 571 (1966). A “market,” in the everyday sense of
the word, can be either competitive or non-competitive.
For its part, AFPA cites several cases which refer
specifically to “competitive markets.” See, e.g., Consumers

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Energy Co. v. FERC, 367 F.3d 915, 922 (D.C. Cir. 2004), La.
Energy & Power Auth. v. FERC, 141 F.3d 364, 365 (D.C. Cir.
1998), Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 870 (D.C.
Cir. 1993) (all using the phrase “competitive market”). AFPA
cites these cases in order to advance its argument that courts
have consistently required markets to be competitive under the
Federal Power Act. This argument is flawed for several reasons:
First, the mere usage of the adjective “competitive” in front of
the noun “market” does not mean all markets must be
competitive; it only shows the particular market in question was
determined to be competitive. Indeed, the modifier actually
suggests not all markets are competitive — hence the need to
describe competitive markets as such. Second, as cited earlier,
it is equally easy to find cases which use the phrase “non-
competitive markets.” The fact that courts use both forms
shows that the word “markets,” by itself, says nothing about
competition. Finally, AFPA only cites to usage by courts; none
of the cases cited by AFPA deals with use of the word “markets”
in a statute.
Another factor supporting the reasonableness of FERC’s
interpretation is the structure of subparagraph (A) itself. To
meet the exemption under subparagraph (A), the utility must
satisfy two clauses: (A)(i) and (A)(ii). The first clause, (A)(i),
requires “independently administered, auction-based day ahead
and real time wholesale markets for the sale of electric energy.”
16 U.S.C. § 824a-3(m)(1)(A)(i). The parties agree the
requirements built into (A)(i) contain an inherent level of
competitiveness. Because (A)(i) requires the markets to be
“independently administered” and “auction-based,” there is
some element of competition. On FERC’s view, the inherently
competitive features in (A)(i) were enough for Congress; no
extra requirement of competitiveness was needed in (A)(ii). In
other words, independent administration and auction-based sales
provide sufficient indicia of competition. Of course, we need

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not decide the correctness of this question — only that FERC’s
interpretation was reasonable. It was.
The parties dispute the significance of subparagraph (C),
which refers to markets “of comparable competitive quality as
markets described in subparagraphs (A) and (B).” Id.
§ 824a-3(m)(1)(C). FERC argues the reference to “comparable
competitive quality” refers only to the fact that both
subparagraphs (A) and (B) have competitive features — (A) by
virtue of the features described in clause (A)(i) and (B) by virtue
of the explicit requirement of “competitiveness.” AFPA, on the
other hand, insists the language in subparagraph (C) requires an
equal level of competitiveness in (A) and (B). On its view, the
potentially lower level of competitiveness created by the
features in (A)(i) does not suffice.
As AFPA recognizes in its brief, subparagraph (C) is “not
. . . a masterpiece of legislative draftmanship.” Pet’r’s Br. 42.
Because of the lack of clarity in subparagraph (C), we believe
both FERC and AFPA present reasonable interpretations. Step
two of Chevron does not require the best interpretation, only a
reasonable one. Given that the features described in (A)(i)
contain an inherent level of competitiveness, it is sensible to
read the language in (C) as referencing back to the (A)(i)
features without inserting a competitiveness requirement into
(A)(ii) where Congress did not include it.
Also unpersuasive is AFPA’s argument relating to
§ 824a-3(m)(3), which requires a “factual basis” for utilities to
qualify under subparagraphs (A), (B), or (C). 16 U.S.C.
§ 824a-3(m)(3). AFPA argues that, without a requirement of
competitiveness in (A)(ii), the factual basis requirement is a
nullity. Of course, this argument ignores the other features
required under subparagraph (A). But more importantly,
AFPA’s concern is answered by the system of review enacted by

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FERC. The determinations made by FERC in its final rule are
merely rebuttable presumptions. Final Rule, 71 Fed. Reg. at
64343–44; 18 C.F.R. §§ 292.309(c), (d), and (e). After utilities
submit information to FERC relevant to an exemption from the
mandatory purchase obligation, a QF may rebut the presumption
by showing, for example, that it lacks non-discriminatory access
to the market in question. 18 C.F.R. § 292.309(e). The fact that
FERC chose to adopt certain rebuttable presumptions via
rulemaking, rather than by case-by-case adjudication, does not
violate any of the statute’s requirements. And, as we have long
held in such scenarios, the “decision whether to proceed by
rulemaking or adjudication lies within the [agency’s]
discretion.” N.Y. State Comm’n on Cable Television v. FCC,
749 F.2d 804, 815 (D.C. Cir. 1984). See also NLRB v. Bell
Aerospace Co., 416 U.S. 267, 294 (1974).
Finally, AFPA asserts that, lacking a requirement of
competitiveness in (A)(ii), QFs will be subject to rates not
meeting the “just and reasonable” requirements of 16 U.S.C.
§ 824d(a). However, any rates that may result from § 824a-3(m)
are not presently before us. If and when utilities set rates which
any particular QF considers unjust or unreasonable, that QF can
file an action under § 824d(a).
For these reasons, we conclude FERC’s interpretation of the
term “markets” in 16 U.S.C. § 824a-3(m)(1)(A)(ii) was
reasonable. The petition for review is denied.
So ordered.

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