[00:00:00] Speaker 00: Case number 14-1153, Western Minnesota Municipal Power Agency at L, Petitioners vs. Federal Energy Regulatory Commission. [00:00:11] Speaker 00: Ms. [00:00:11] Speaker 00: Kalin for the petitioners, Ms. [00:00:12] Speaker 00: Cather for the respondent. [00:01:06] Speaker 02: Good morning, Your Honors. [00:01:11] Speaker 02: My name is Sam Kalin, and I represent the petitioners in this case, the Western Minnesota Municipal Power Agency, along with the American Public Power Association and the Public Power Council. [00:01:23] Speaker 02: This case is about the Commission's decision to subdivide municipal preference and create a superclass of municipalities under Section 7 of the Federal Power Act when affording municipal preference. [00:01:36] Speaker 02: It's not about the wisdom of whether or not all municipalities should get preference or should not. [00:01:41] Speaker 02: After all, as the Supreme Court noted in the Utility Air Resources Group case in 2014, and I quote, an agency has no power to tailor legislation to bureaucratic policy goals [00:01:53] Speaker 02: by rewriting unambiguous statutory terms." [00:01:57] Speaker 02: End quote. [00:01:58] Speaker 02: This case, therefore, is about whether or not the language of Section 7 of the Federal Power Act is ambiguous, and assuming that this Court does find that it's ambiguous, whether or not the Federal Energy Regulatory Commission provided a rational explanation for the choice that it made and whether or not its interpretation of the statute was a reasonable construction of the statute. [00:02:19] Speaker 02: On the first point, Section 7A of the Federal Power Act requires or provides that the Commission shall give preference to applications by, quote, states and municipalities provided that their plans are equally well adapted when issuing a preliminary permit. [00:02:35] Speaker 02: This is not a case like Chevron, where you have a statutory term that is ambiguous. [00:02:41] Speaker 02: In Chevron, as we know, it was a question of what does the term source mean. [00:02:45] Speaker 02: Here, the statute specifically provides that there is a definition of the term municipality in Section 3.7 of the Federal Power Act. [00:02:55] Speaker 02: Congress defined municipalities as political subdivisions, and I quote, of a state competent under the laws thereof to carry on the business of developing, transmitting, utilizing, or distributing power. [00:03:07] Speaker 02: And it's important there to note that Congress chose the phrase a state [00:03:11] Speaker 02: It didn't say the state in which the resources are located. [00:03:14] Speaker 02: It did not say the state nearby. [00:03:17] Speaker 02: It did not say the state nearby resources. [00:03:21] Speaker 02: It said a state. [00:03:22] Speaker 02: So neither the language of Section 7A of the Federal Power Act or the definition in Section 3.7 of the Federal Power Act has any geographic limitations on it. [00:03:33] Speaker 02: So how does the Commission get to conclude that the language is ambiguous? [00:03:36] Speaker 02: It seemingly provides two justifications. [00:03:40] Speaker 02: First, it suggests that perhaps the absurdity doctrine might apply. [00:03:44] Speaker 02: But of course, the absurdity doctrine really is not a justification here. [00:03:49] Speaker 02: To begin with, the Commission in its original order didn't say anything about the absurdity doctrine. [00:03:54] Speaker 02: The entire analysis is contained in paragraphs 17 and 18 of the original order. [00:03:58] Speaker 02: And at that time, the Commission's justification was simply that they did not believe that granting the municipal preference to all municipalities would be appropriate. [00:04:06] Speaker 02: So then they invoke in their rehearing order at paragraph 20, the absurdity doctrine. [00:04:12] Speaker 02: But they really, again, really don't mean absurdity because along in the same breath of saying absurdity, they use terms like mischievous, undesirable, they're not likely intended. [00:04:22] Speaker 02: And there's no proper application of the absurdity doctrine in a case like this anyway. [00:04:28] Speaker 02: As this court knows, the absurdity doctrine is when the language is completely unambiguous, when the language is clear and the drafters could not have intended, that there was no conceivable way that the drafters could have intended the results. [00:04:43] Speaker 02: So for example. [00:04:44] Speaker 02: Yes, Your Honor. [00:04:45] Speaker 02: Yes, Chief Johnson. [00:04:46] Speaker 04: I'd like to distract you from your argument just for a moment. [00:04:50] Speaker 04: Imagine you won. [00:04:52] Speaker 04: That's your hypothetical. [00:04:53] Speaker 04: It's probably a good hypothetical for you. [00:04:55] Speaker 04: And then the example that Furt gives, there's a Hawaii public utility and there is a Boston public utility. [00:05:07] Speaker 04: Under those circumstances, would the agency be able to take that into account with respect to the equally well-adapted analysis? [00:05:16] Speaker 02: Without a doubt, Your Honor. [00:05:17] Speaker 04: They could. [00:05:18] Speaker 02: Yes. [00:05:19] Speaker 02: The regulations, the statute says that under Section 7A, the preference is a tiebreaker. [00:05:24] Speaker 02: It only comes into play if, in fact, [00:05:26] Speaker 02: The commission has determined that the applications are equally well adapted. [00:05:31] Speaker 02: If the commission really did believe that the result would be absurd here, it has the tools available to it. [00:05:37] Speaker 02: It could decide that the Vermont municipality that wants to develop in Hawaii, and I'm not sure that would happen, but even assuming that it could or would happen, [00:05:46] Speaker 02: And if that were to happen and the commission thought that was a deleterious result, well, the commission has available to it the ability to say, you know what, we think for the following factors or reasons that we think that the local developer in Hawaii [00:06:01] Speaker 02: would have a better adapted plan to develop the resources in Hawaii. [00:06:06] Speaker 02: So it clearly has available to it already the tools to avoid any kind of deleterious or absurd result that might apply. [00:06:16] Speaker 02: And going back to the absurd result, as I was noting, that it really only applies when the language is unambiguous. [00:06:23] Speaker 02: And the classic case is when the drafters prohibit, this is the old ancient case, when the drafters prohibit the drawing of blood in the streets, and a doctor has to draw blood in order to save a patient, and a court's able to effectively rewrite the statute by saying that there is no conceivable way in which the drafters could have intended that result. [00:06:46] Speaker 02: The doctrine is fully explained by Professor John Manning. [00:06:49] Speaker 02: In the article that we say and so the last justification and the Commission Well, the reason I focused on it your honor is that it really took me off took us off guard to even raise that It's the last justification that the Commission gives us is it says you know what? [00:07:11] Speaker 02: There's another provision of the statute. [00:07:13] Speaker 02: It's a notice provision. [00:07:14] Speaker 02: The last part of section 4F, the proviso in section 4F, is a notice provision. [00:07:20] Speaker 02: And what that suggests, they say, is that somehow that implicates section 7A. [00:07:27] Speaker 02: But it's kind of curious how the commission does this. [00:07:30] Speaker 02: Because on the one hand, the commission says that, and this is a paragraph, [00:07:36] Speaker 02: 21 of the Rehearing Order that we have to read per Section 4F together, together with Section 7A. [00:07:46] Speaker 02: And in the Commission's brief at page 21, it talks about Section 4F. [00:07:51] Speaker 02: as providing qualifying language, somehow suggesting that that's qualifying language to Section 7A. [00:07:59] Speaker 02: But of course, that's not true, because the commission goes out of its way on page 30 of its rehearing order, as well as footnote 47, to say that our interpretation of Section 7A is not related to Section 4F. [00:08:13] Speaker 02: We are bound by the language in 4F. [00:08:16] Speaker 02: So it's really not reading the two together. [00:08:19] Speaker 02: And in fact, it's not really suggesting that for F qualifies section 7A because otherwise the Commission wouldn't be able to do what it's doing here, which is essentially saying that we have carte blanche flexibility now once we found ambiguity to then interpret it section 7A however we wish. [00:08:40] Speaker 03: Yes, Judge. [00:08:44] Speaker 03: The Commission precedent suggested that they have said the proximity could not be considered under the equally well adapted promise. [00:08:55] Speaker 02: The commission has the available. [00:08:57] Speaker 03: Their precedent does not- I thought there was precedent that said they will not do that. [00:09:02] Speaker 02: There's practice that the commission has that they typically do not do that. [00:09:07] Speaker 02: That does not mean that they cannot do it. [00:09:10] Speaker 03: I understand your argument that they surely, your argument is that they surely cannot do it in the Hawaii and Washington case. [00:09:17] Speaker 03: You're saying they surely could do it. [00:09:19] Speaker 03: I'm just asking you, do they have precedent which says they don't read the statute? [00:09:24] Speaker 02: They do have cases that suggest, Your Honor, you're correct, they do have cases that suggest that they do not do that. [00:09:30] Speaker 02: But I call your attention then to section 4.37 of their regulations. [00:09:36] Speaker 02: And the reason I say that is that the regulations even talk about if a non-municipal applicant comes in and a municipal applicant comes in at the same time, and now we have electronic systems, so they're usually tied. [00:09:51] Speaker 02: So if that happens, [00:09:52] Speaker 02: The municipal applicant under 4.37, and I think it's B3, talks about the ability of a municipality to come back in and make their application better adapted or equally well adapted so the commission's own regulation [00:10:11] Speaker 02: sort of suggests that they have to be able to do that. [00:10:14] Speaker 02: And that would mean that they'd have to read it. [00:10:16] Speaker 02: So I think it's a little disingenuous for the commission to really raise the specter of the fact that we have the potential of someone trying to develop in Hawaii with a municipality from Vermont because they can't look at the well-adapted, because clearly the regs contemplate that. [00:10:34] Speaker 02: That's what Congress contemplated. [00:10:37] Speaker 01: Well, let me just be clear. [00:10:38] Speaker 01: This 4.37f, it talks about if one of the two applicants is a municipality or a state and the other is not. [00:10:46] Speaker 02: Yes. [00:10:47] Speaker 01: So that doesn't quite meet the hypothetical of Boston and Hawaii. [00:10:53] Speaker 02: Yeah, it does in the sense, Your Honor, if in fact you have a local non-municipal applicant in Hawaii. [00:10:59] Speaker 02: and you have, let's say, a city of Burlington from Vermont going and trying to develop in Hawaii, then the commission has available to it under Section 7A and its regulations the ability to make a judgment about whether or not it thinks that the local developer in Hawaii has a better adapted plan. [00:11:23] Speaker 01: So that would fit this case in the sense that [00:11:27] Speaker 01: There is a private entity and a municipal entity. [00:11:32] Speaker 01: Yes, Your Honor. [00:11:33] Speaker 04: And if there are two municipal entities under the statute, couldn't they decide not to give preference to the further away one over the closer one on the grounds that they're not equally well adapted? [00:11:47] Speaker 02: Yes, Your Honor, they have an authority. [00:11:49] Speaker 02: Congress gave them that authority. [00:11:50] Speaker 02: It is only when the municipal preference is only a tiebreaker. [00:11:56] Speaker 02: It kicks in only once the commission is determined that the two projects are equally well adapted. [00:12:02] Speaker 02: So the commission, if it wanted to, and it wanted to avoid what it's now claiming are deleterious results, it has the ability to effectively avoid that. [00:12:13] Speaker 04: uh... further questions that you may want to preserve your time uh... you may want to be able to respond to what the other side [00:12:23] Speaker 02: Uh, that's fine. [00:12:25] Speaker 02: I did reserve some time, your honor, but this is part of the time. [00:12:29] Speaker 02: Um, the, uh, I would just make one final point. [00:12:32] Speaker 02: We also believe that even if, if in fact the court does find it, uh, the language is ambiguous that we do believe, though, that there is no justification. [00:12:41] Speaker 02: The commission really hasn't given a rational explanation for its decision. [00:12:45] Speaker 02: So thanks. [00:12:49] Speaker 04: Okay. [00:12:54] Speaker 05: Good morning, Your Honors. [00:12:54] Speaker 05: Holly Kaver for the Commission. [00:12:57] Speaker 05: Perhaps we should start where we left off, which is the municipal versus municipal hypothetical. [00:13:03] Speaker 05: That's really precisely the situation that's driving the Commission's concern here with the development of long-distance transmission lines, with the development of regional markets. [00:13:16] Speaker 04: Why can't that be resolved by the equally well-adapted language? [00:13:19] Speaker 05: First, the Commission has already said, it's quite clear in the precedent, as Judge Edwards indicated, that proximity is not a factor. [00:13:27] Speaker 04: I know, but I don't see why. [00:13:29] Speaker 04: That's the question. [00:13:30] Speaker 04: Maybe those decisions are wrong. [00:13:32] Speaker 04: And particularly if we were to hold, as your opponent wants now, you would want to reconsider those questions. [00:13:39] Speaker 04: So what about the language says you can't? [00:13:42] Speaker 04: By states and issuing permits, the Commission shall give preference to applicants by states and municipalities provided the plans are equally well adapted to conserve and utilize in the public interest the water resources of the region. [00:13:59] Speaker 04: So that sounds like [00:14:02] Speaker 04: At the minimum, that sounds sufficiently ambiguous to permit a regulation that would prefer, or even an individual education, that a municipality in the region would beat a municipality outside the region. [00:14:18] Speaker 05: And the Commission has answered that question in the case cited in the petitioner's reply brief on page 11 of NEW Hydro, which led to the second Akanto Falls case here, where the Commission said that many licensees are headquartered a distance away from their projects to no ill effect. [00:14:35] Speaker 05: And so it did not choose to make proximity of basis. [00:14:38] Speaker 04: Ill effect isn't the question, though. [00:14:39] Speaker 04: It's equally well adapted, not no ill effect. [00:14:42] Speaker 04: And it's in the public interest. [00:14:43] Speaker 05: The Commission saw that there was, in that case, that there's no [00:14:47] Speaker 05: and generally speaking, it's applied to precedent going forward. [00:14:51] Speaker 05: That proximity is not a basis to distinguish whether a project would be best suited to the development of the water resources. [00:14:58] Speaker 04: If we rule against you, are you committing yourself to never changing that regulation? [00:15:02] Speaker 05: Of course the Commission has the discretion to be able to change its mind as long as it acknowledges the change and supports the change, of course. [00:15:11] Speaker 05: I don't think that it's necessary to even get there because the Commission has chosen to deal with this problem by looking to the preference, which it can do under the terms of the statute when read in the proper context. [00:15:27] Speaker 04: To begin with 800A, there's nothing in that which permits the reading that you ask, is there? [00:15:35] Speaker 05: There's nothing in that that addresses this question at all. [00:15:38] Speaker 05: What the commission said is it just doesn't provide any guidance on what to do in circumstances where there's a distant municipality. [00:15:45] Speaker 04: Well, I wonder about that. [00:15:46] Speaker 04: Your position has to be in the vicinity, correct? [00:15:49] Speaker 05: Yes. [00:15:50] Speaker 04: The statute says you're to look at public interest in the water resources of the region. [00:15:56] Speaker 04: Yes. [00:15:56] Speaker 04: That sounds like you're wrong, at least with respect to the scope of the vicinity. [00:16:02] Speaker 04: Why is that wrong? [00:16:04] Speaker 05: The commission used the phrase vicinity. [00:16:05] Speaker 05: It also used the phrase nearby. [00:16:09] Speaker 04: But are you saying they're not within the region here? [00:16:14] Speaker 04: Nearby doesn't sound like within the region. [00:16:16] Speaker 05: The multi-commission didn't address the use of the term region. [00:16:21] Speaker 05: I think that [00:16:23] Speaker 05: vicinity and nearby suggests something more narrow than region, but the Commission hasn't addressed that. [00:16:28] Speaker 05: It, of course, will address this on a case-by-case going forward, just as it has addressed the equally well-adapted standard, just in reasonable rates. [00:16:37] Speaker 05: There are all sorts of standards that the Commission essentially adds to as it proceeds. [00:16:40] Speaker 04: If you think there's nothing in 800 that resolves the question, where is the thing that does resolve the question statutorily? [00:16:49] Speaker 04: You said 800 doesn't resolve the question, but there's something else. [00:16:51] Speaker 05: When you read 7A in context with 4F, which provides for notice to any state or municipality likely to be interested in or affected by such an application, the commission believes that that raises a question about whether some limitations should also apply to 7A. [00:17:11] Speaker 05: And that's based on the purpose of 4F. [00:17:14] Speaker 05: The purpose of 4F, as this Court has held, is to identify those municipalities that are entitled to the preference under 7A. [00:17:21] Speaker 05: 4F is the provision of the statute that authorizes the Commission to issue the permits in the first place. [00:17:29] Speaker 04: Hold on one second here. [00:17:31] Speaker 04: You've made a lot of leaps. [00:17:32] Speaker 04: The first question is... You did it with a straight face, too. [00:17:36] Speaker 04: So we didn't say that. [00:17:38] Speaker 04: We didn't say that it identifies the only ones that are entitled. [00:17:42] Speaker 04: You're talking about the Colorado case? [00:17:43] Speaker 04: Right. [00:17:43] Speaker 04: Well, that's not what we said. [00:17:46] Speaker 05: What Colorado says is that the purpose of 4F is to allow municipalities who are notified to assert and protect their municipal preference. [00:17:56] Speaker 04: Yes, but it doesn't say it defines the only municipalities that have the preference. [00:18:00] Speaker 04: It just says, [00:18:01] Speaker 04: It's to allow that. [00:18:03] Speaker 04: That's all it says. [00:18:04] Speaker 05: Right. [00:18:04] Speaker 05: And the commission doesn't dispute that. [00:18:06] Speaker 05: As the commission said itself, that the scope of municipalities eligible for the preference under 4F is likely narrower than... That again assumes that 4F has anything to do with entitlement of the preference. [00:18:21] Speaker 04: But just let me ask you about the language. [00:18:23] Speaker 04: Is something within the vicinity affected? [00:18:29] Speaker 04: Is that where it comes under the affected by? [00:18:32] Speaker 05: Yes, the commission has in its regulations implementing 4F used a proximity standard to determine whether a municipality deserves notice, that is, whether it's likely to be interested in or affected by. [00:18:46] Speaker 04: No, I'm asking about the affected part. [00:18:47] Speaker 04: I understand the argument that they are affected, but that leaves a separate or those that are interested in. [00:18:56] Speaker 04: So what if this agency sent you a letter [00:18:59] Speaker 04: and said, not just likely, we are interested in. [00:19:04] Speaker 04: It doesn't strike me there's anything in F that precludes them then. [00:19:09] Speaker 04: They've satisfied, even on your view of F, which is it's an entitlement rather than a notice provision, you are now on notice that they are interested. [00:19:21] Speaker 04: Why are they excluded if they're interested? [00:19:26] Speaker 05: The Commission has consistently used proximity to determine... I don't care. [00:19:30] Speaker 04: For the purpose of this back and forth, I don't care what the Commission said because that's what we're trying to decide, whether the Commission's view is the appropriate one. [00:19:37] Speaker 04: So now I want to know why is it that if somebody tells you they're interested under the language of F, strictly on the plain language, why don't they come with an F? [00:19:50] Speaker 04: If the petitioners in this case send FERC a letter and they say, we are desperately, not just likely, desperately interested in this, don't they come within F? [00:20:01] Speaker 05: They come within F for the purpose of notice. [00:20:04] Speaker 04: Okay. [00:20:05] Speaker 04: So now you have neither the principal statutory section nor F to support FERC's position. [00:20:12] Speaker 04: So now what's FERC's position? [00:20:14] Speaker 05: I think that we do still have F. We are conceding that the scope of municipalities under 4F is not necessarily the same as the scope of municipalities under 7A. [00:20:29] Speaker 04: I thought you were saying that F defines which municipalities are the ones that are entitled to the province. [00:20:37] Speaker 04: That's not your position? [00:20:38] Speaker 05: We're saying that's a piece of the puzzle. [00:20:40] Speaker 05: We're saying proximity defines which municipalities. [00:20:43] Speaker 04: But the words proximity are not in the statute. [00:20:46] Speaker 04: So I'm asking you which statutory provisions you are relying on. [00:20:51] Speaker 04: There aren't that many here. [00:20:53] Speaker 04: This is a pretty limited case, unlike some of the other cases we face. [00:20:57] Speaker 04: And I'm just asking you which section you are relying on. [00:21:01] Speaker 05: The idea of proximity definitely comes from 4F. [00:21:06] Speaker 05: And we do think that what the court has said about that, about the connection. [00:21:10] Speaker 04: I assume we don't agree with you on what the court said. [00:21:12] Speaker 04: Just assume you can't rely on the Colorado case, because obviously we're going to read it, and we don't defer to your reading of it. [00:21:19] Speaker 04: So now you're left with only the statute. [00:21:22] Speaker 04: The statute says, [00:21:23] Speaker 04: The first part of the statute has no proximity limitation, the one we talked about before, right? [00:21:31] Speaker 04: Right. [00:21:31] Speaker 04: The preference section just doesn't say anything about it. [00:21:34] Speaker 04: OK, so now you've then told me to take a look at F. I looked at F, and I'm telling you that the petitioner in this case advises you that they are interested. [00:21:44] Speaker 04: So they have now appeared to come within F. So where do we go next? [00:21:48] Speaker 05: Where we go next is to, with an ambiguous statute, the commission's understanding and its role in balancing the competing interests at stake here between public and private. [00:21:58] Speaker 05: Congress intended for the statute to provide a balance between public development and private development. [00:22:04] Speaker 03: I mean, the problem you have is that 800 is so clear. [00:22:09] Speaker 03: It's a slam dunk. [00:22:10] Speaker 03: It says, shall be given preference provided their plans are equally well adapted. [00:22:15] Speaker 03: You've said their plans are equally well adapted. [00:22:18] Speaker 03: And the F, I don't know how you get the F, because if anything, all F is suggesting is the commission is wrong in another way. [00:22:27] Speaker 03: Proximity can be relevant with respect to an equally well adapted inquiry. [00:22:34] Speaker 03: That's the force of 4F as far as I can see. [00:22:38] Speaker 03: That is, you could read 4F to simply say proximity is relevant to who gets notice. [00:22:44] Speaker 03: And these folks, certain folks may not get noticed if they're out of what you think is reasonable proximity. [00:22:50] Speaker 03: It doesn't foreclose on compiling number 800, but it may be relevant to an inquiry as to who's equally well adapted. [00:22:59] Speaker 03: So the commission seems wrong on all counts. [00:23:01] Speaker 03: But I mean, the language is so straightforward. [00:23:03] Speaker 03: Childhood preference provided their plans are equally well adapted. [00:23:07] Speaker 03: You can't rewrite the policy, that's congressional. [00:23:09] Speaker 05: This Court has said, Sierra Club v. EPA, 551, Feather, 1019, 2008, that even if the statute is superficially clear, we still go to the traditional tools of statutory construction. [00:23:21] Speaker 03: That's superficially clear. [00:23:22] Speaker 03: It's more than superficial. [00:23:24] Speaker 01: How could Congress be clearer? [00:23:26] Speaker 04: I thought you told us in your own brief that the Congressional legislative history is mixed and in a way nondispositive. [00:23:34] Speaker 04: Isn't that what you said? [00:23:35] Speaker 05: It's mixed. [00:23:36] Speaker 05: We think that on balance, it favors us, just as in Aconto Falls, really. [00:23:41] Speaker 04: Is that enough to get over the first, when you say under the first step of Chevron, we look at the legislative history, it's not enough just to say, if you have a statute that on its face appears one way, and then you're, now you're driven to, that is superficially, and then you're driven to the legislative history, and the best you can say about the legislative history is that it's [00:24:04] Speaker 04: unclear, goes both ways, that doesn't really get you to the first step of Chevron, doesn't get you past it. [00:24:13] Speaker 05: The Commission thinks that it does with 4F. [00:24:17] Speaker 05: Again, 4F is intended to, I'm sorry to say it, but as this Court has said, 4F is intended to identify those municipalities that want to assert and protect their right to the municipal preference. [00:24:32] Speaker 05: We are guided by that language, particularly coming from this circuit. [00:24:37] Speaker 05: It was not an unreasonable choice to make. [00:24:40] Speaker 05: And yes, I don't think that the legislative history has to be a slam dunk for the commission in order for the language to be considered ambiguous, particularly when you consider that the court has found [00:24:54] Speaker 05: the application of the preference for orphan projects to be, for the language there to be ambiguous. [00:25:03] Speaker 05: Same thing in Clark Cowlitz Joint Operating Agency. [00:25:07] Speaker 05: The commission obviously has struggled with the preference and nothing demonstrates that more than Clark Cowlitz where the commission was affirmed on one interpretation that it did apply and then on the interpretation that it didn't apply in different circuits. [00:25:21] Speaker 05: It's a difficult question. [00:25:22] Speaker 05: Congress did not anticipate [00:25:24] Speaker 05: the extent of development of long-distance transmission and regional markets as the Commission points to in its orders when it was crafting this language in 1920. [00:25:34] Speaker 05: And this court knows that perhaps better than any other court from cases like its review of Order 88 in Transmission Access Policy Study Group that led to New York versus FERC, where the courts have acknowledged, the Supreme Court has acknowledged that the statute and the congressional intent [00:25:53] Speaker 05: simply don't match with where we are today. [00:25:56] Speaker 05: Where we are today is where a main municipality can become a super competitor, talk about coming super competitors, can become a super competitor to deprive a municipal utility in a place like Hawaii or in a place like Alaska that is disconnected from the rest of the system. [00:26:15] Speaker 04: This argument only works if you're right about the well-adapted [00:26:21] Speaker 04: And if you're wrong about the well adapted position, they don't become a super competitor over a Hawaii public utility. [00:26:28] Speaker 05: I don't think the question is whether I'm right or wrong. [00:26:30] Speaker 05: It's that the commission is bound to follow its own precedent. [00:26:33] Speaker 05: Now, if the court tells us that that's incorrect, that's different, obviously. [00:26:39] Speaker 04: Well, if the court tells you if the premise of your previous decision is a premise based on vicinity as the way to resolve the question of preference, and we tell you that that premise is wrong, [00:26:56] Speaker 04: That certainly gives you an opportunity to reconsider the decision about what well-adapted means, right? [00:27:02] Speaker 04: That seems like an obvious rationale for reconsidering. [00:27:06] Speaker 05: Right. [00:27:08] Speaker 04: Yeah. [00:27:09] Speaker 05: The commission is trying to avoid a problem here with the municipal versus municipal competition. [00:27:15] Speaker 05: I think that your honors can see that the ability of a distant municipality to essentially take a project from a local municipality is not something that the commission thinks is in the public interest. [00:27:29] Speaker 05: We think that we made a reasonable choice to get there to solve that problem through the municipal preference. [00:27:37] Speaker 04: But the consequence is, it's like overdoing it in a certain way, right? [00:27:43] Speaker 04: So yes, it is a one way to prevent, I'm going to use my hypotheticals, I don't know why I'm picking Boston, but it's in my mind. [00:27:51] Speaker 04: It's one way to prevent a Boston utility from beating a Hawaii utility. [00:27:55] Speaker 04: But it has the consequence of also knocking out a Hawaii utility on another island of Hawaii. [00:28:02] Speaker 04: And in this case, it has the consequence of knocking out a utility that already serves Iowa. [00:28:10] Speaker 04: So maybe there's a better way to do that. [00:28:13] Speaker 04: And another way which it could be done without the consequence is to use the well-adapted language rather than to say even a close but not in the vicinity utility doesn't get the preference, which is where you are now. [00:28:30] Speaker 05: The standard the Commission has adopted, I don't see where we necessarily get to another island of Hawaii being precluded from competing for that project. [00:28:39] Speaker 04: Well, you do get to a situation here where a company that already serves Iowa, correct? [00:28:46] Speaker 04: I believe so. [00:28:47] Speaker 04: That's what they say. [00:28:49] Speaker 04: That's what's represented in the briefs. [00:28:52] Speaker 04: Doesn't get a preference in for a dam in Iowa, correct? [00:28:56] Speaker 05: Right, they are over 400 miles or about 400 miles away. [00:29:00] Speaker 05: The Commission has only ever addressed a, you know, from the cases that the petitioner has identified, from the Commission's cases that the Commission has identified. [00:29:09] Speaker 05: municipalities are essentially pushing the limits here. [00:29:12] Speaker 05: There is only one other case, that's City of Tacoma cited in the briefs, where a municipality was further away than Western Minnesota is now. [00:29:22] Speaker 05: And in that case, there were two municipalities joined together as a team. [00:29:28] Speaker 05: I don't think that the preference was actually even applied in the end. [00:29:31] Speaker 05: However, if you're looking at pure mileage, [00:29:34] Speaker 05: The second municipality made it 150. [00:29:38] Speaker 05: So I don't think that there should be an idea that Western Minnesota is doing something here that's commonplace if even they have been unable to identify a municipality that received a preference for something further away or even quite frankly close to it. [00:29:54] Speaker 05: That's just not what we have here what we have here is the because of the development of long-distance transmission Transmission because of the evolution of the markets the Commission has to look at the statutory language in that context I'd say that the court does to context is controlling we all know that and [00:30:13] Speaker 05: It needs to address this problem as far as the choice of whether it could have better done that. [00:30:18] Speaker 04: The language about context is controlling refers to the statutory context. [00:30:22] Speaker 04: It doesn't refer to developments in industries, right? [00:30:26] Speaker 04: The language you're talking about is from the Supreme Court case about Justice Scalia's opinion about looking at the entire statute in the context. [00:30:34] Speaker 04: It doesn't say let's look at how the industry has developed and [00:30:39] Speaker 05: But we do look at whether the statute can function in a way that makes sense in light of what Congress knew at the time. [00:30:48] Speaker 05: I think this is actually quite not dissimilar to the King versus Burwell circumstance that came up just last term. [00:30:57] Speaker 05: And there, the court also relied on looking at does the statute function the way that Congress intended it to. [00:31:06] Speaker 05: And here, we think that Congress [00:31:08] Speaker 05: Frankly could not have anticipated in 1920 the development of independent system operators regional transmission organizations the extent of long-distance transmission Development this court has cited itself that Congress did not see this coming No one really did even if they thought that there would be you know a 400 mile line or something like that That's not where we are today and the Commission is forced to look at that [00:31:37] Speaker 05: factual context when it understands the statutory terms. [00:31:50] Speaker 02: There's a lot there. [00:31:52] Speaker 02: And I guess I would like to begin, though, by noting the first that the Section 4F, which is a notice provision, was passed obviously in 1920. [00:32:02] Speaker 02: It made a lot of sense to put a notice provision in there. [00:32:05] Speaker 02: The Federal Register Act was passed in 1935. [00:32:08] Speaker 02: The second point is that as this court was talking about, as you were noting in terms of region versus nearby or vicinity, [00:32:27] Speaker 02: The commission uses a whole bunch of different terms throughout. [00:32:30] Speaker 02: And in fact, it's deliberately telling us we don't know what that test in the vicinity means. [00:32:34] Speaker 02: It's saying it's going to be flexible, and it's going to evolve over time, and we have no real guidance. [00:32:39] Speaker 02: But they even said, again, distant. [00:32:41] Speaker 02: They used the word distant. [00:32:44] Speaker 02: All of Western Minnesota Municipal Power Agency's power is going to MRES. [00:32:49] Speaker 02: MRES has 17 members in Iowa. [00:32:52] Speaker 02: So there are members in Iowa that get a pro rata share of this power. [00:32:56] Speaker 02: So the commission, when it's talking about distant, isn't even looking at this particular project. [00:33:02] Speaker 02: It looked at the fact that it was 400 miles. [00:33:05] Speaker 02: The problem with that kind of analysis is the commission's own order, their own order, says at paragraph 26, they suggest at paragraph 26 that of course any municipality in a state [00:33:19] Speaker 02: where the projects located will get preference. [00:33:21] Speaker 02: The difficulty with that is you've got Buffalo that's 470 miles from New York City. [00:33:26] Speaker 02: I think El Paso is roughly about 700 miles from Houston. [00:33:30] Speaker 02: Who knows the distance, but it's well over 400 between northern part of California and southern part of California, so they're not [00:33:36] Speaker 02: even consistent with their own opinion about using the idea of distance. [00:33:40] Speaker 02: And they clearly aren't saying in any place that we can only limit it to in state, regardless of distance, because you have areas like here in the Mid-Atlantic region, where Maryland, Virginia, and Pennsylvania are fairly close by. [00:33:53] Speaker 02: And they're not going to limit the municipal preference there. [00:33:56] Speaker 02: The last point, Your Honor, is that when the Commission talks about the fact that they're worried about... On that first point, it seems like their argument is not so much [00:34:05] Speaker 04: distance as the people who live in the state in which the dam is, either via a municipality which is chartered by the state or by a city which is itself chartered by a state or by the state itself. [00:34:22] Speaker 04: It seems more like a desire on the part of the commission to limit [00:34:28] Speaker 04: the preference to this, you know, the state that has the natural resource, not just to be something that's close by. [00:34:35] Speaker 02: That could be, Your Honor, but we really don't know because they haven't told us much about what the infacinity means. [00:34:40] Speaker 02: And they've also neglected to point out that all the power here goes to MRES and MRES. [00:34:47] Speaker 02: will ultimately distribute that power to 17 of its members in Iowa. [00:34:51] Speaker 02: And there's one, my time is up, but there's one last point I would like to make. [00:34:54] Speaker 02: The commission talks a lot about the fact that in 1920, Congress didn't envision the grid evolving. [00:35:01] Speaker 02: Well, there's two problems with that. [00:35:02] Speaker 02: They say the statute of ints has no awareness of that. [00:35:05] Speaker 02: Section 20 of the Federal Power Act has a provision in there that allows the commission to regulate interstate rates. [00:35:12] Speaker 02: And clearly, in the 1920s, the evolution of the interstate grid was growing. [00:35:17] Speaker 02: One can take a look at Felix Frankfurter and Mr. Landis's famous 1925 Yale Law Journal article about compacts. [00:35:25] Speaker 02: And there are three or four pages in that law review article that talks about the notion of what they call the superpower. [00:35:32] Speaker 02: It was going to be a grid going from all the way from Boston in the New England area down to the Mid-Atlantic region. [00:35:37] Speaker 02: How many members of Congress read the Yale Law Journal? [00:35:39] Speaker 02: Well, they probably read Mr. Landis as well as Mr. Frankfurter, Justice Frankfurter, but they probably also listened to Mr. Hoover, who was giving speeches about the superpower concept. [00:35:53] Speaker 02: The point, though, is that it was so well known at the time that the grid was evolving that it even made its way into one of the most famous law review articles in our time. [00:36:02] Speaker 02: So, unless there are any other questions? [00:36:05] Speaker 04: We'll take the matter under submission. [00:36:07] Speaker 02: Thank you very much. [00:36:07] Speaker 04: We'll also take a brief break while the new lawyers move out.