[00:00:00] Speaker 00: Case number 16-1296, Duke Energy Carolina's LLC petitioner versus Federal Energy Regulatory Commission. [00:00:08] Speaker 00: Mr. Whitaker for the petitioner, Ms. [00:00:10] Speaker 00: Chu for the respondent. [00:00:43] Speaker 04: Mr. Whitaker, I think we're ready for you. [00:00:52] Speaker 03: Good morning. [00:00:55] Speaker 03: Duke is challenging Ferg's decision below to provide only a 40-year license to Duke and the new license for the Catawba Watery project instead of the 50 years that Duke request. [00:01:09] Speaker 03: FERC's policy is to provide 40-year terms when the measures on their new license are moderate and 50-year terms when they are extensive. [00:01:22] Speaker 03: FERC below decided in this case that the measures were only moderate and not extensive. [00:01:29] Speaker 03: Duke believes that the record demonstrates beyond all doubt that the measures Duke is going to implement under the new license are extensive and therefore that first decisions are arbitrary and capricious and not supported by substantial evidence. [00:01:46] Speaker 02: I'll ask counsel for the commission, but I'd like to ask you as well. [00:01:51] Speaker 02: In the rehearing order in paragraph 23, the commission is [00:01:58] Speaker 02: speaking where it says, while project measures and related costs might arguably appear to be similar in given cases, it's not possible to compare the measures and related costs required in one license with those of others. [00:02:11] Speaker 02: In the absence of a thorough analysis comparing size, circumstances, et cetera, [00:02:19] Speaker 02: Where in the record would we find that analysis? [00:02:23] Speaker 03: It's not in the record, Your Honor. [00:02:24] Speaker 03: There isn't no analysis. [00:02:26] Speaker 02: So what I'm trying to understand is Duke presented its application and then what came back to your client? [00:02:41] Speaker 02: just a conclusory statement or some type of report and analysis? [00:02:46] Speaker 03: Yes, Your Honor. [00:02:48] Speaker 03: Do follow this free license application. [00:02:51] Speaker 03: And in comments on a draft environmental impact statement during the proceeding, Duke laid out his argument for why it should be entitled to a 50-year license. [00:03:01] Speaker 03: relying on cases where other cases where FERC had granted 50-year licenses, and Duke explained the extensive costs it would incur in implementing the new license. [00:03:15] Speaker 03: But when FERC got around to issuing the license, the ordering paragraph dealing with license terms, it set out in standard policy, which is [00:03:27] Speaker 03: If you have a moderate amount of measures, you get a 40-year term. [00:03:31] Speaker 03: Extensive measures, you get a 50-year term. [00:03:33] Speaker 03: And then it summarized the measures that Duke would have to implement under the new license and concluded that these are only moderate, and therefore you get a 40-year license. [00:03:46] Speaker 03: So that was the only thing Perks said in its original order. [00:03:51] Speaker 02: Right. [00:03:52] Speaker 03: And we follow requests for rehearing, pointing out the errors in FERC's ways, some of which are Duke is not treated like similarly situated applicants. [00:04:07] Speaker 03: FERC's policy where they use this new qualitative assessment where they don't look at costs to determine [00:04:15] Speaker 03: The licensed term is nothing more than a we-know-it-when-we-see-it approach that this Court has twice said agencies can't rely on to make their determinations. [00:04:26] Speaker 03: And then FERC, in its re-hearing order, essentially reiterated is we get to rely on, from what you were reading, we get to make our qualitative decision, and don't bother us with trying to make us compare to the facts in previous cases. [00:04:49] Speaker 02: So I guess my next question is you understand the nature of the projects that your client is going to undertake. [00:05:06] Speaker 02: And that was all revealed to the agency. [00:05:11] Speaker 02: What I'm trying to understand is [00:05:15] Speaker 02: I didn't see any comparison other than what I'll call sort of a legal argument going on, that one project is different from another. [00:05:25] Speaker 02: But suppose somewhere there must have been a staff analysis saying, well, in this particular instance, hypothetically, your client only has to build eight habitats. [00:05:40] Speaker 02: In the Niagara project, they had to build 12. [00:05:44] Speaker 02: and that type of back and forth. [00:05:47] Speaker 02: Is that? [00:05:49] Speaker 03: There is no such analysis in the record. [00:05:52] Speaker 03: But summarized, did a summary of the measures under Duke's license, and then it made its conclusion it was monitoring. [00:06:04] Speaker 01: So the re-hearing order has some analysis of competing of prior projects, right? [00:06:12] Speaker 03: Some comparisons. [00:06:14] Speaker 03: It referenced a couple of projects, a Douglas County PUD case and a case for progress energy. [00:06:21] Speaker 03: It said the measures under Duke's license were comparable to the measures under those licenses. [00:06:26] Speaker 03: But once again, Perk just did a summary of the measures in other projects and compared it with the summary that they've already done in Duke's project. [00:06:36] Speaker 03: Perk doesn't get into [00:06:39] Speaker 03: now apparently they don't they're saying one's comparable one isn't comparable and they're now saying they don't even look at costs [00:06:47] Speaker 03: You would think that they actually want to compare them. [00:06:50] Speaker 03: They would look at things, well, is one project providing comparable benefits to the fishery resources, or is one providing different benefits for the recreational user days are going to be enhanced more in that case, or one's going to enhance water quality more than the other? [00:07:09] Speaker 03: In other words, actual facts. [00:07:11] Speaker 03: The purchase didn't identify any facts. [00:07:14] Speaker 03: It just made general conclusions. [00:07:17] Speaker 02: Well, but it has the facts your client submitted. [00:07:23] Speaker 03: That's correct. [00:07:23] Speaker 02: All right. [00:07:24] Speaker 02: And it has knowledge of what's in the other cases as to what information was submitted that's before the commission. [00:07:34] Speaker 02: And the fact that it has a summary doesn't necessarily mean it's arbitrary and capricious. [00:07:41] Speaker 03: Well, Your Honor, I don't know how this court or any court could review [00:07:46] Speaker 03: review a FERC decision when they dis-summarize the measures and declare them moderate or extensive. [00:07:51] Speaker 03: It seems to me they have to provide a more reasoned explanation for their action instead of just a generic summary. [00:07:59] Speaker 03: You know, we admit FERC has expertise and we admit that it's entitled to deference, but it still has to explain itself, and it hasn't done that. [00:08:09] Speaker 04: Are you saying there has to be some objective numerical measure? [00:08:13] Speaker 03: Well, it doesn't necessarily have to be a numerical measure, but something you can actually [00:08:21] Speaker 03: Quantify in some respect. [00:08:23] Speaker 03: For example, maybe our project is bigger and should have done, we'll look at the benefits of price recreation, and a smaller project wouldn't have to provide that many benefits. [00:08:35] Speaker 03: It doesn't have to be precision in terms of numbers, but you've got to kind of give a fair way of the difference. [00:08:44] Speaker 03: different actual facts in each case. [00:08:46] Speaker 04: The problem is we have a statute that I guess could not be vaguer. [00:08:50] Speaker 04: It just says any license issued by the Commission under this section shall be for a term which the Commission determines to be in the public interest but not less than 30 nor more than 50. [00:09:07] Speaker 04: sort of leaves a lot of room to the commissioner. [00:09:10] Speaker 03: It does, Your Honor. [00:09:11] Speaker 03: I agree with you entirely. [00:09:13] Speaker 03: But even where an agency like Ferch is granted discretion, it still has to explain itself, and we don't think Ferch explains itself. [00:09:20] Speaker 03: For example, [00:09:22] Speaker 03: In FERC's 2008 break to this Court in the Eastern Niagara Procedure, where FERC was trying to defend issuance of a 50-year license for the Niagara Project, FERC said that its established policy was to base license terms on the cost of the measures to be implemented in the new license, either on a standalone basis or in terms of their impact and their benefits. [00:09:52] Speaker 03: And then we think, in that situation, Perk has not treated us like similarly situated applicants. [00:10:01] Speaker 02: Let me ask you, though. [00:10:03] Speaker 03: Pardon me? [00:10:03] Speaker 02: The way I'm reading the rehearing order is the Commission does have a footnote where it talks about how it's distinguishing the Niagara Project [00:10:14] Speaker 02: And then it goes on to say, first, some of the cost figures that your client submitted are unsupported. [00:10:24] Speaker 02: Then it says, the reliance on the agreement between the parties overstates the language of the agreement. [00:10:36] Speaker 02: So that's different. [00:10:38] Speaker 02: It says, you haven't indicated [00:10:44] Speaker 02: that at least Fert drops another footnote saying, it's not clear that all the enhancements and mitigation measures required constitute new measures. [00:10:54] Speaker 02: Some have already been implemented. [00:10:57] Speaker 02: And then it says, in any event, you haven't made any showing of agreement. [00:11:03] Speaker 02: And as a result of only getting the 40-year license, [00:11:11] Speaker 02: So those are four reasons and at least first distinctions. [00:11:22] Speaker 02: So I mean, to that extent, it's given reasons as to why it's concluded that what your client has to do is moderate as opposed to extensive. [00:11:35] Speaker 03: Well, if I understand your question, Your Honor, [00:11:38] Speaker 03: In terms of the cost, FERC said it had problems with the cost information that we provided. [00:11:47] Speaker 03: But I'll note one initial thing on that is FERC agreed entirely with Duke that our estimate of the lost generation costs we're going to have every year of over $7.6 million is 100% accurate. [00:12:04] Speaker 03: And that amount, $7.6 million, exceeds the annual amount of cost that was incurred by the licensee in the Niagara Project proceeding and the other four projects that FERC cited in support of itself in that proceeding. [00:12:21] Speaker 03: To the point about where FERC said it didn't think... In the rehearing order? [00:12:26] Speaker 01: I'm sorry? [00:12:26] Speaker 01: In the rehearing order, I read the rehearing order basically to be saying that FERC thought Niagara was an outlier. [00:12:34] Speaker 01: they use that word, and they just thought, yeah, and in fact, in the footnotes that Roger's referenced, the commission said, although the commission that I agree with your hearing order did use cost as a significant part of the analysis, the commission does not generally treat costs as dispositive. [00:12:48] Speaker 01: And then it goes on to say that that [00:12:53] Speaker 01: Let's see. [00:12:55] Speaker 01: While we agree with Duke Energy, the measures required with respect to the substantially larger Niagara project do not appear greater than those required for this project, which is your point. [00:13:02] Speaker 01: We view that older case as an outlier that is not consistent with the majority of more recent orders. [00:13:07] Speaker 01: So it's just saying, yeah, actually you're making a fair point about Niagara if you just look at cost, but that what we did there is just an outlier. [00:13:15] Speaker 03: Well, that's a convenient way for them. [00:13:17] Speaker 03: They don't have any answer to nag or something called an outlier, but I don't think it's an outlier at all. [00:13:24] Speaker 03: I think if you look at the consumer's power case, this is the case that FERC always cites for its license term policy. [00:13:33] Speaker 03: It's extra to set out at pages 45 and 46 of our initials brief. [00:13:40] Speaker 03: explains why it's licensed term policy, and by my count there are like eight references to cost and adverse impacts to the economics of the project. [00:13:56] Speaker 03: So I view that as [00:13:58] Speaker 03: FERC does always rely on costs, and if you look at, and so, Niagara really isn't an outlier. [00:14:05] Speaker 03: I think FERC's action below where they do a qualitative analysis and don't take cost into account at all, that's the outlier. [00:14:13] Speaker 01: So suppose that I'm not saying that you're wrong about that, but let's just suppose that we don't deal with that part of the argument. [00:14:19] Speaker 01: And all we're talking about is your submission that it can't be squared with Niagara. [00:14:24] Speaker 01: If FERC just says in its order, just with respect to Niagara, you know, you're making a reasonable point. [00:14:31] Speaker 01: We just got that one wrong. [00:14:33] Speaker 01: We just, it wasn't consistent with what we usually do. [00:14:37] Speaker 01: We just don't follow that approach as a general matter, and we're not going to follow it here. [00:14:41] Speaker 01: That one was an outline. [00:14:43] Speaker 01: Do they need to do something more than that? [00:14:46] Speaker 03: Well, it's not just Niagara. [00:14:49] Speaker 03: It's the cases that FERC relied on in its briefness court where it says, look, these other four cases, they're precedent for us granting a long-term license, a 50-year license to Niagara. [00:15:02] Speaker 03: And it sets out the annual cost of each of those projects. [00:15:06] Speaker 03: And it ranged from $2.5 million to $6.25 million. [00:15:11] Speaker 03: And here in Catawba, we have the annual cost of $25 million. [00:15:16] Speaker 01: Right. [00:15:16] Speaker 01: But that presumes that cost is the overriding consideration. [00:15:19] Speaker 01: And I think your point is Niagara is the best example of a situation in which costs were really, really significant. [00:15:26] Speaker 01: The other cases, FERC would say, yeah, you can look at the costs, but costs aren't the overriding consideration. [00:15:32] Speaker 01: Niagara is the one where costs might appear to have been an overriding consideration. [00:15:36] Speaker 01: We grant you that. [00:15:38] Speaker 01: We just didn't do what we usually do in that case, and it's just an outlier. [00:15:43] Speaker 01: And so we're just not going to do that. [00:15:45] Speaker 03: And with all due respect, Your Honor, I think it's really not outlier, because if you go back to the genesis of their license term policy, consumers' power, it's all about cost. [00:15:54] Speaker 01: So I get that part of your argument, which is that, in fact, they're wrong to call it an outlier. [00:15:58] Speaker 01: It's, in fact, consistent with the elements, in which case you'd have your argument. [00:16:06] Speaker 04: OK. [00:16:07] Speaker 04: Questions? [00:16:07] Speaker 04: Thank you. [00:16:19] Speaker 00: May I please support Susanna Chu for the Commission. [00:16:23] Speaker 00: The Commission here, responding to Judge Rogers' question initially, the Commission here made a factual determination based on its knowledge of the measures involved in the Catawba license versus its knowledge of [00:16:37] Speaker 00: numerous other hydroelectric license orders. [00:16:43] Speaker 00: And the commission found that the nature and extent of the license measures here are not unusual for a large-sized project and were comparable to measures in two recent cases where licensees received 40-year terms. [00:16:57] Speaker 00: This is in paragraph 13 of the hearing order at JA-789, footnote 14. [00:17:04] Speaker 00: And Duke does not argue on brief that the Catawba measures exceed the scope of the measures in those two cases. [00:17:12] Speaker 00: One of them involves the Yadkin PD dam, which is operated by a Duke affiliate and is located [00:17:20] Speaker 00: in an adjacent water basin in the same state. [00:17:23] Speaker 00: It's also in North Carolina, along a river that also originates in the Blue Ridge Mountains. [00:17:29] Speaker 00: The Douglas County project is in Washington state, and the commission also found that that project was comparable. [00:17:37] Speaker 00: This goes to the heart of the commission's discretion under this statute to use its informed judgment [00:17:46] Speaker 00: to make these kinds of licensing calls. [00:17:51] Speaker 00: Here, the commission was well within its discretion when it found that this particular set of measures is more like Yadkin and Douglas County and less like Niagara and the other cases cited by petitioner. [00:18:04] Speaker 02: Well, I understand the site to Douglas County, because that was decided in 2012 and then reaffirmed on re-hearing it in 2013. [00:18:15] Speaker 02: But of course, the other affiliate Duke case, that was decided when the rehearing request was pending. [00:18:24] Speaker 02: So at the point Duke files its application, you have this Douglas case, and you have Niagara. [00:18:33] Speaker 02: And so following up on Judge Srinivasan's comments, [00:18:40] Speaker 02: in terms of the rehearing orders treatment of Niagara. [00:18:46] Speaker 02: What struck me, and maybe I'm just wrong in focusing on this, in paragraph 23, the commission seems to acknowledge that it does have to make some analysis, all right? [00:19:01] Speaker 02: And my question is, where is that analysis? [00:19:07] Speaker 00: Well, Your Honor, [00:19:09] Speaker 00: So the analysis, it is in paragraph, I believe it's in paragraph 13 and in that footnote citing Yadkin and Douglas County. [00:19:22] Speaker 00: And also, just to put this in context, typically the commission sets a license term at the end of its license order. [00:19:30] Speaker 00: So by the time that you reach the license term decision, [00:19:34] Speaker 00: there has been extensive discussion of all of the measures that are required under the new license. [00:19:41] Speaker 00: So the commission has already done this extensive analysis. [00:19:45] Speaker 00: In this particular case, it's examined the comprehensive settlement agreement and has decided to adopt certain of its measures. [00:19:52] Speaker 02: So on getting at this, maybe you, I'm sure you understand this better than I do, but Duke wants to do something in two states, all right? [00:20:03] Speaker 02: Duke owns a lot of this property already. [00:20:08] Speaker 02: So it's hooking up things, and it has to make some adjustments. [00:20:13] Speaker 02: This is hypothetical, but I'm just trying to understand this. [00:20:16] Speaker 02: So these hookups, they're going to cost Duke some money, but it's really not a big deal. [00:20:22] Speaker 02: Whereas in Niagara, or in some of these other [00:20:27] Speaker 02: cases. [00:20:28] Speaker 02: You're talking about taking two different systems, putting them together. [00:20:32] Speaker 02: There's a lot more going on. [00:20:36] Speaker 02: And at least it was a commission's judgment at that point that those were extensive, whereas Duke, in my hypothetical, is just some fairly straightforward hookups. [00:20:47] Speaker 02: Now, you may understand that. [00:20:50] Speaker 02: Duke's Council may understand that, I just couldn't find anything like that. [00:20:55] Speaker 02: It's not a question of where everybody knows that the Duke Project is just a moderate one and everybody knows that these others were major undertakings. [00:21:07] Speaker 02: Otherwise, we're close to deferring blindly, is what I'm getting at. [00:21:13] Speaker 00: I think I understand the question, Your Honor. [00:21:17] Speaker 00: I don't think the Court is deferring blindly. [00:21:20] Speaker 00: I understand that the [00:21:24] Speaker 00: the analysis may seem brief here. [00:21:29] Speaker 00: I think the court understands, too, that it is extremely difficult to compare these projects. [00:21:36] Speaker 00: Niagara is, of course, Niagara Falls. [00:21:39] Speaker 00: It's a single installation on a relatively short stretch of river. [00:21:44] Speaker 00: And here we have a project that involves 11 installations along a 300-mile stretch of river. [00:21:52] Speaker 00: It's certainly true that it's always possible for the Commission to have a more extensive discussion, but I think that the discussion in these orders is adequate under the standards that are applicable, especially under the statute. [00:22:11] Speaker 02: It doesn't – the Commission hasn't said that it's redoing consumer power until it comes out with its October 2017 order saying now it has a default of 40 years. [00:22:24] Speaker 02: And I don't read the commission to be saying cost is not a serious consideration. [00:22:33] Speaker 02: It's just not determinative necessarily. [00:22:37] Speaker 02: And if that's so and it's going to do this qualitative approach, doesn't it have to give us some analysis of the qualitative differences? [00:22:47] Speaker 00: Well, Your Honor, I think the Commission did do that here. [00:22:50] Speaker 00: It did provide examples of the most significant measures involved in this project, and those are the bladder dam and the fish passage facilities. [00:23:03] Speaker 00: That's in paragraph 13 at JA 789. [00:23:06] Speaker 00: So I think here, the commission was considering everything before it. [00:23:11] Speaker 00: It considered the facts before it, the facts of the measures. [00:23:15] Speaker 00: And it also considered Duke's costs. [00:23:17] Speaker 00: And it said that Duke's costs do not override the factual determination here, that this project is more similar [00:23:25] Speaker 00: to Yadkin and Douglas County than it is to these other cases in which 50-year licenses have been granted. [00:23:31] Speaker 00: I would like to point out something about Niagara as well. [00:23:36] Speaker 00: The order, of course, as you know, acknowledges that the commission defended its issuance of a 50-year license in Niagara [00:23:45] Speaker 00: at least significantly on cost grounds. [00:23:48] Speaker 00: But the order also points out that the Niagara case is an outlier, and also that the license order in that case, which granted a 50-year term, didn't actually discuss costs. [00:23:59] Speaker 00: Costs came up on the hearing in response to an argument that the 50-year term wasn't justified. [00:24:05] Speaker 00: And I will also note on background that Niagara involved a settlement agreement in which the parties all agreed to a 50-year term. [00:24:14] Speaker 01: I mean, costs might not have come up until the rehearing in kind of crystallized form in Niagara, but the way the costs were discussed in rehearing, it seems different from the way that costs are discussed in the mine run of situations as you yourselves describe. [00:24:30] Speaker 00: That's right, Your Honor. [00:24:31] Speaker 00: The Commission did acknowledge that and said that that discussion really is an outlier. [00:24:36] Speaker 00: It really isn't consistent with all of its precedent. [00:24:39] Speaker 00: Since consumers power issued in 1994, the Commission has consistently applied a fact-sensitive determination to every hydrolicensing project license term decision it's made. [00:24:52] Speaker 04: What is the underlying point [00:24:57] Speaker 04: or a rationale for a 50-year license rather than a 40? [00:25:02] Speaker 04: Is it based on how much of a investment, whether you measure it qualitatively or quantitatively, the company makes, and therefore how long it needs or is entitled to, either economically or in some other way, to earn it back or to have justified the initial investment, or is there something else? [00:25:25] Speaker 00: Your Honor, I think that's a fair consideration. [00:25:28] Speaker 00: I think consumer power points out that part of the rationale for longer term licenses, that is 40 or 50 years, 40 years is considered a longer term too. [00:25:40] Speaker 00: Those longer term licenses are designed to encourage licensed applicants to be better environmental stewards and to take a long term comprehensive approach to improving the waterways. [00:25:53] Speaker 00: This is all designed to kind of [00:25:54] Speaker 00: have projects that are best adapted to the development and the beneficial use of a particular waterway. [00:26:03] Speaker 04: So if Duke Energy wanted to be sure that they were doing enough to get a 50-year license, how would they know what they needed to do? [00:26:16] Speaker 00: Well, Your Honor, I'd say that they would know that it relates to the extent of the measures that are being implemented. [00:26:23] Speaker 00: And Duke could have negotiated a 50-year license term with the settlement parties, and the Commission would have taken that into consideration. [00:26:31] Speaker 00: It wouldn't have been dispositive, but it would have been considered if all 70 parties who signed on to that settlement agreement had actually agreed to a 50-year term. [00:26:41] Speaker 00: In fact, they agreed to 40 to 50 years. [00:26:43] Speaker 04: Is there a back and forth with the commission? [00:26:46] Speaker 04: Can Duke come in and say, we're ready to invest any amount necessary to get this to 50 years. [00:26:53] Speaker 04: What do you want? [00:26:55] Speaker 04: Is there such a thing? [00:26:56] Speaker 04: And here's what we've done so far. [00:26:58] Speaker 04: What more need we do? [00:27:00] Speaker 00: It is an iterative process. [00:27:04] Speaker 00: believe that Duke could have submitted something to the commission, making that very clear. [00:27:11] Speaker 00: I'll also point out that one factor in this case was the commission ordered a bladder dam. [00:27:17] Speaker 00: And Duke, in certain cost estimates, provided estimates for a gate instead, which is substantially more costly, $40 million versus $10 million for the bladder dam. [00:27:28] Speaker 00: So if Duke really believes that a gate is [00:27:32] Speaker 00: necessary or desirable, it could come in. [00:27:37] Speaker 00: It, in fact, would have to come in and seek an amendment of the license to authorize that gate. [00:27:42] Speaker 00: But it could come in and ask for an extension. [00:27:44] Speaker 00: They could ask for an extension of the term. [00:27:46] Speaker 04: But I'm asking, what is it that they could have asked for that the Commission would have said, okay, this is 50-year value rather than 40-year value? [00:27:57] Speaker 00: It's hard to say standing here now, but [00:28:01] Speaker 00: There are certainly measures that would be more extensive, more costly. [00:28:06] Speaker 00: I think petitioner points out that fish passage facilities, I mean, there are ranges of fish passage facilities. [00:28:13] Speaker 00: This particular case involved the trap and transport facility, and there are more expensive measures such as fish ladders or even fish elevators. [00:28:22] Speaker 01: I'm a little confused by the premise of this. [00:28:23] Speaker 01: Is it true that if a licensed applicant wants to get 50 years, [00:28:29] Speaker 01: that FERC would negotiate with them to award a 50-year license as long as they did enough, or is it the case that in some situations the nature of the project is just such that 50 years isn't in the offing? [00:28:43] Speaker 00: That's a good point, Your Honor. [00:28:45] Speaker 00: I think that's right. [00:28:47] Speaker 00: The Commission doesn't negotiate with the licensed applicant over the term. [00:28:50] Speaker 01: I don't know the answer. [00:28:50] Speaker 00: I'm just curious to know what's... Right, right. [00:28:52] Speaker 00: But I think it is an important point that it's not that the Commission is negotiating with the licensed applicant, but if there are indeed more extensive measures that, say, Duke and other signatories had agreed to, [00:29:06] Speaker 00: that the commission found to be justified. [00:29:09] Speaker 00: And if the commission actually incorporated those agreements, like those more extensive measures into the license, then it's certainly possible that a 50-year term could have been awarded. [00:29:21] Speaker 00: But it's really fact-specific. [00:29:22] Speaker 04: I suppose there might be something on the other side, this difference between the bladder and the ladder. [00:29:27] Speaker 04: The more Duke spends, the more they're going to need back from the ratepayers. [00:29:34] Speaker 04: Is that right? [00:29:35] Speaker 00: Yeah, so this is kind of a different analysis in terms of the length of the license term. [00:29:44] Speaker 04: It's a different, but I suppose in addition to wanting to encourage environmental things, you don't want to encourage expenses for the sake of expenses. [00:29:54] Speaker 00: That's right, Your Honor. [00:29:56] Speaker 04: So I'm back on the question of how people know what it is [00:30:03] Speaker 00: is necessary for the fifty year the commission has acknowledged uh... that [00:30:09] Speaker 00: that certainty is important to the industry. [00:30:12] Speaker 00: And so as the court may be aware, the commission has very recently issued a licensing term policy statement. [00:30:22] Speaker 00: And that new policy statement, which sets a 40-year default term with the ability to grant terms less than or greater than 40 years, that's designed to give [00:30:37] Speaker 00: industry participants and stakeholders additional certainty and clarity. [00:30:42] Speaker 00: The Commission recognizes that this is a difficult area. [00:30:47] Speaker 00: I mean, it's very fact-intensive and it's [00:30:52] Speaker 00: hearing from stakeholders that additional certainty is important. [00:30:57] Speaker 02: OK, you heard me say what I read to be the four reasons that the commission gave on rehearing. [00:31:05] Speaker 02: Yes. [00:31:05] Speaker 02: You may not agree with those and let me know if I'm wrong about them. [00:31:08] Speaker 02: But in any event, it said some of the information provided by Duke has been shown to be unsupported [00:31:19] Speaker 02: or at least some degree inconsistent with the license. [00:31:24] Speaker 02: Yes, Your Honor. [00:31:25] Speaker 02: All right. [00:31:25] Speaker 02: So we have no idea whether that's 1% of a problem or 51% of a problem. [00:31:33] Speaker 02: Then it says, Duke is overreading this agreement. [00:31:41] Speaker 02: So the commission says there's no basis for us [00:31:47] Speaker 02: accepting that, as I read it. [00:31:49] Speaker 02: Then it says, furthermore, some of these measures aren't new. [00:31:54] Speaker 02: And that's in footnote 45. [00:31:58] Speaker 02: And then the fourth reason is, Duke hasn't shown why it is agreed. [00:32:07] Speaker 02: So I took the commission to say, [00:32:10] Speaker 02: Those four grounds were the basis on which it was relying for saying it would not grant a 50-year license. [00:32:20] Speaker 02: Was there more? [00:32:22] Speaker 00: Yes, Your Honor. [00:32:23] Speaker 00: So I think those are additional reasons. [00:32:27] Speaker 00: I think the heart of the commission's rationale is paragraph 13, which talks about [00:32:37] Speaker 00: The most costly new measures required by the new license, which require fish and eel passage facilities, the construction of a bladder dam, new minimum flow and recreational flow release requirements, water quality and quantity monitoring, and various recreation rights. [00:32:52] Speaker 02: That's back to Douglas and the Duke. [00:32:54] Speaker 00: Right, right. [00:32:54] Speaker 00: So that's the heart of it, I think. [00:32:56] Speaker 00: And I think that the Commission made that factual determination and then found that Duke's reasons for a 50-year term, which are primarily cost-driven, do not override that factual determination. [00:33:09] Speaker 00: And on review, I don't believe that Duke has [00:33:14] Speaker 00: put forward any reasons why the substantive factual determination is erroneous. [00:33:20] Speaker 01: Can I just ask a conceptual question? [00:33:22] Speaker 01: So that's in the Rehearing Order of Paragraph 13, and that's where the affirmative justification for 40 years lies, in your view, because it's comparable to other projects that also have 40 years in the degree of measures that are contemplated by the project. [00:33:36] Speaker 01: So if you look at the initial grant of the license, then the way that this works is if you have [00:33:43] Speaker 01: Some measures, it's 30. [00:33:44] Speaker 01: If you have moderate measures, it's 40. [00:33:46] Speaker 01: If you have extensive measures, it's 50. [00:33:48] Speaker 01: That's our standard. [00:33:49] Speaker 01: Here's the measures that you have, ABCDEFG. [00:33:52] Speaker 01: Therefore, it's moderate. [00:33:54] Speaker 01: That doesn't sound like much of an analysis as to why the measures that are listed fit into one category or the other in terms of the initial order. [00:34:02] Speaker 00: I understand, Your Honor, but again, putting it in context, that determination in the initial order comes after a very extensive discussion of all of the measures. [00:34:12] Speaker 00: So it is summary in nature that typically is how the Commission has done it in the past. [00:34:24] Speaker 00: It really, you know, by the time you've gotten to that point, there's been so much discussion about the specific measures, specific environmental construction requirements. [00:34:32] Speaker 02: And so if we go back. [00:34:34] Speaker 02: Yeah, there's lots. [00:34:34] Speaker 02: Yeah, go ahead. [00:34:34] Speaker 02: No, go ahead. [00:34:36] Speaker 01: There's definitely lots of that, I guess, on classifying that lots as moderate. [00:34:41] Speaker 01: That's the bridge that, I guess, you're looking principally at paragraph 13 of the Rehearing Order to do that work, yeah. [00:34:49] Speaker 00: Right, right. [00:34:50] Speaker 00: I mean, the Commission here is exercising its expertise and its judgment. [00:34:54] Speaker 00: I mean, the Commission administers numerous hydroelectric licenses. [00:34:59] Speaker 00: There are numerous cases in which the Commission has awarded licenses of terms between 30 to 50 years. [00:35:06] Speaker 00: And there are so many factors that come into play that it's really an extremely difficult endeavor to compare each of these particular projects. [00:35:16] Speaker 00: They're just extremely different. [00:35:20] Speaker 04: Okay, thank you. [00:35:21] Speaker 00: Thank you, Your Honor. [00:35:24] Speaker 04: Does she have more time? [00:35:25] Speaker 04: I'm afraid to use them up, but we'll let you have another two anyway. [00:35:32] Speaker 04: What the heck? [00:35:36] Speaker 03: Just a couple points. [00:35:39] Speaker 03: Council for FERC said that FERC discussed the cost angle in that one paragraph where they said the most expensive measures are the bladder dam and the fish passage facilities. [00:35:54] Speaker 03: When you look at the record, it's clear they didn't get a close read of this because there were $57 million worth of facilities that Duke is going to be implementing under the license. [00:36:06] Speaker 03: And these were the bold and italicized thing on page 18 of our initial brief. [00:36:12] Speaker 03: Those items are more expensive than the items that FERC referenced in their – in their ORRAs being the most expensive thing. [00:36:23] Speaker 02: More, more. [00:36:24] Speaker 02: What's the end of your sentence? [00:36:25] Speaker 02: I couldn't hear it. [00:36:26] Speaker 03: I'm sorry, Your Honor. [00:36:29] Speaker 02: Could you repeat what you just said? [00:36:30] Speaker 02: The last sentence. [00:36:32] Speaker 02: I just didn't hear the end of it. [00:36:35] Speaker 03: Yes, in paragraph 13 of the Rehearing Order, Perch says, the most costly new measures required by the new license include the anaginous fish and eel passage facilities, construction of the bladder dam on the water spillway, new mineral flow, recreation and flow release requirements. [00:36:53] Speaker 03: Those are not the most expensive things. [00:36:56] Speaker 03: The most expensive things are the $57 million of facilities [00:37:01] Speaker 03: in terms of minimum flow turbines, new turbine runners, things like that. [00:37:07] Speaker 03: Those are the things we set out on italicized and emboldened on page 18 of our initial brief. [00:37:13] Speaker 02: So they just overlooked some things. [00:37:15] Speaker 03: It overlooked it, and we made a point. [00:37:16] Speaker 03: And this is $57 million. [00:37:18] Speaker 03: You missed. [00:37:20] Speaker 03: And we pointed that out to them in our re-hearing request. [00:37:24] Speaker 03: And early FERC missed it again. [00:37:27] Speaker 02: Well, but FERC's response is, [00:37:31] Speaker 02: They don't credit some of these numbers. [00:37:36] Speaker 03: They said these numbers on were unreliable. [00:37:38] Speaker 03: They had they pointed to three things one was The thing that per council mentioned about the bladder dam we estimated a forty million dollars in it And we did that because we thought based on our experience we might have to do a more complicated structural Mechanism in place of the bladder dam and that would cost forty million as opposed to ten million but [00:38:02] Speaker 03: We also pointed out that even if you take away those 30 extra million dollars, the amount of money we're spending is still $124 million, and the annual hit to us is $22 million, which still far exceeds the ones in Niagara and the other projects that we relied on in its brief in the Niagara Seed. [00:38:27] Speaker 03: And Judge Darla, I'm glad you asked the question about how [00:38:33] Speaker 03: How is Duke supposed to know what it needs to propose to get a 50-year license? [00:38:38] Speaker 03: I mean, that's the danger that we know when we see it approach, that the regulated class can't figure out what it has to do to get a result that it wants. [00:38:50] Speaker 03: Here we are, two orders and one appellate briefing of this procedure. [00:38:55] Speaker 04: But other than relying just on cost, which is, of course, a number, [00:39:00] Speaker 04: which can be compared, but you agreed it doesn't have to be based on cost. [00:39:05] Speaker 04: If instead the agency wanted to do it the way it's doing it, how would it help you other than saying here's two previous ones and if you want to get it, you have to be like them? [00:39:20] Speaker 03: Well, it wouldn't have to be a cost, but it has to be on something that FERC can identify and some kind of objective criteria in terms of [00:39:29] Speaker 03: better than making a decision and that they can articulate. [00:39:33] Speaker 04: Well what, can you give an example of what those would be, or are you saying it's not possible to articulate any criteria? [00:39:38] Speaker 03: They can do, like I said before, they can compare things like the benefits of fishery resources, both in access to habitat and populations, the actual, not only just you're doing 58 recreational facilities, but how will that actually increase recreational user days, and things like that. [00:39:59] Speaker 03: I mean, they can articulate both types of things. [00:40:04] Speaker 02: So what you think they need to do is instead of in footnote 14 listing these construction measures, they have to go into sort of architectural specification. [00:40:27] Speaker 03: No, I think they have to assess the benefit of these various measures. [00:40:33] Speaker 03: What's the actual impact? [00:40:34] Speaker 03: They don't have to look at the designs, but in terms of what benefit it's going to provide. [00:40:39] Speaker 03: And we should reward you in a longer-term license if you're going to provide more environmental benefits. [00:40:47] Speaker 03: So kind of look at the results of those items. [00:40:56] Speaker 03: Okay, thank you very much. [00:40:57] Speaker 04: We'll take the matter under submission.