Udall v. Federal Power Commission

PETITIONER:Udall
RESPONDENT:Federal Power Commission
LOCATION:El Paso Natural Gas Co. Headquarters

DOCKET NO.: 463
DECIDED BY: Warren Court (1965-1967)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 387 US 428 (1967)
ARGUED: Apr 11, 1967 / Apr 12, 1967
DECIDED: Jun 05, 1967

Facts of the case

Question

  • Oral Argument – April 12, 1967
  • Audio Transcription for Oral Argument – April 12, 1967 in Udall v. Federal Power Commission

    Audio Transcription for Oral Argument – April 11, 1967 in Udall v. Federal Power Commission

    Earl Warren:

    Number 462, Washington Public Power Supply System versus Federal Power Commission, et. al.

    Mr. Ely.

    Northcutt Ely:

    May it please the Court.

    In Number 462, we are concerned also with the High Mountain Sheep project.

    The antagonist here however are the Washington Public Power and Supply System, an applicant for a license, a public agency of the State of Washington in a municipality, and the Power Company.

    The Washington Public Power Supply System is composed of 16 public utility districts operating in its many counties in the State of Washington and the serving of — about half of the state’s population.

    Byron R. White:

    We’re dealing here with Idaho, wasn’t it?

    Northcutt Ely:

    The dam is about 15 miles upstream from the Washington line on the boundaries between Idaho and Oregon.

    Potter Stewart:

    Is your client authorized under Idaho law?

    Northcutt Ely:

    No, sir.

    The State of Idaho asserts that it has the power to veto the selection by the Federal Power Commission of this public agency of the State of Washington as a licensee and we denied a veto power of the State of Idaho.

    We say that under this Court’s decisions in the Tacoma case —

    Tom C. Clark:

    I don’t want to hear into your — into details of your argument.

    But your argument is that being a public agency of the State of Washington, it has a standing over the Federal Power Act to be a licensee of a dam in Idaho?

    Northcutt Ely:

    Yes, sir.

    That we have a capacity that we are licensed to carry out all of the terms of the license within the State of Idaho and the State of Oregon.

    Tom C. Clark:

    But to such, you have to be a municipal?

    Northcutt Ely:

    A municipality in order to claim the preference under Section 7 (a) that we do claim.

    Tom C. Clark:

    Yes.

    Do you brief the point as to whether or not you are a municipality?

    Northcutt Ely:

    Yes.

    So held in the court below and so held by the Commission so to speak.

    A map behind me shows the Snake River in this area as Mr. Claiborne told you that flows north toward the top of the map and is joined by two major tributaries in this area.

    The Salmon — I mean in the — from the east, the Imnaha coming in from the west.

    The issue before the Court is whether this municipality is or is not entitled to a preference under Section 7 (a) of the Act which directs that the Commission in granting permits and in granting licenses for a no preliminary permit has been issued, shall give preference to the application of a state or a municipality and it goes on to say provided that the plans are the same or equally well-adopted or may shall within a reasonable time to be fixed by the Commission be made as well-adopted as also its competitor.

    We are not concerned here with the proviso of the Section 7, namely the opportunity it gives us to make our plants as well adopted and so as the Power Company for the reason that the power that the plants submitted here by the municipality provided a power installation of more than 30% larger than that which the company proposed.

    And while the Commission upon its initial opinion held that the company’s plant, this smaller plant, was vested after to the development of the resource.

    On rehearing, it found specifically that the plan exactly as we had proposed for the larger plant, 1,200,000 in kilowatts was vested after and substituted that description but licensed the plant which we had developed to the company solely under the compulsion of a permit, a permit which have been issued to the company as Chairman Swidler said in his dissent for the investigation of an entirely different project upon which the Commission itself had rejected their license application.

    The primary question before the Court is whether this permit issued for the investigation of another project indeed was intended to encompass the High Mountain Sheep project.

    May I have the red overlay here?

    Northcutt Ely:

    This permit has the following background.

    The Corps of Engineers starting in 1947 and down to 1954 when the company applied for this permit had published four reports on the power potentialities of the Snake River.

    It had pointed out that there are three mutually inconsistent power projects for the development of this reach of the river.

    The three, I should interrupt to say that neither the company, nor we nor the Secretary can claim to be pioneers or discoverers of anything in this area.

    The Corps of Engineers had fully investigated, drilled, designed projects, all the ones I am going to describe and all that we are doing is to modify and improve on the Corps’ plans.

    This is a thoroughly known resource.

    This is no unknown river.

    The three plants that the Corps had proposed which are mutually exclusive, we provide first for the construction of a dam at the Nez Perce dam site which would impound the waters of both the Salmon and of the Snake.

    These are great rivers.

    The Snake flows about 13 million acre feet.

    The Salmon about 8 — about a 22 million acre-foot resource.

    This is substantially larger than the flow of the Colorado River (Inaudible).

    The dam in Nez Perce would impound both of these streams and would be the best place for a power dam.

    Beyond doubt any single dam could be built upon the stream.

    It had the great disadvantage of blocking the Salmon River, which is the source of some 25% or more of all the salmon on the Columbia River system.

    And their problem was whether you could or could not get fish over a high dam and get the fingerlings back down.

    The next report or the next project that the Court reported on was an alternative, which was to build a dam at the High Mountain Sheep dam site, which is above the Salmon and consequently avoids interference with the fish runs on the Salmon, but this is below the confluence of the Imnaha which is itself a fish stream of some importance.

    The third alternative is to build a dam at the Pleasant Valley dam site, which is far or less attractive than the other two but does have the advantage and it avoids both the Imnaha and the Salmon and the controversy with fisheries.

    All of these potentialities have one limiting factor.

    That is an elevation of 1,510 feet above sea level is about the maximum that you can raise any of these reservoirs to without too much interference with the Hells Canyon Dam.

    As I say, these three mutually inconsistent potentialities were well-known prior to 1954 when the company with the co-reports before it the latest of them being the 1954 report as suggested the Pleasant Valley scheme decided to apply for a permit.

    Now the choice was deliberate.

    This is not a case in which you are parsing the terms of a contract to the — to discover its interpretation.

    This is a ticket bought for a specific destination and not — and for none other.

    The company as it has explained in a document filed with the Commission in the licensee proceedings that grew out of this Pleasant Valley application deliberately chose this project to avoid trouble with the fish industry on the Salmon and Imnaha Rivers.

    The statute directs that upon the filing of an application for a preliminary permit, the Commission before acting upon that application shall “at once give notice in writing” to the states and the municipalities likely to be affected by it and shall publics — publish that notice in the counties where the project is located.

    The reason for this, as a legislative history develops in our brief so amply demonstrates is a very simple one.

    The issuance of a preliminary permit upon a specific project nullifies a public preference upon that project from that day forward.

    It cannot be revived at the licensing stage.

    If a permit issues and if the project is within the — encompass of the permit, the public preference is nullified upon that particular project and for this reason, the statute and the Commission’s regulations are very specific as to what that notice shall say.

    Northcutt Ely:

    They require the — that the notice be accompanied by a map.

    This map shall show the project boundaries whether or not public lands are involved and if public lands are involved, then the map must show not only down through the corner-to-corner sections but to 10 acres lots, what the area encompassed by the project boundaries is.

    The company applied for a permit and attached the necessary map.

    The map deliberately excluded the High Mountain Sheep site by three and seven-tenths miles.

    It avoided the Armageddon at Nez Perce by five miles.

    The reservoir boundaries are shown in red upon the map behind me.

    These are the elevations taken for the two dams from the notice given pursuant to the statute by the Commission to the public agencies whose preferences might be affected.

    These are reprinted as appendices to our opening brief, a public notice.

    The application has been specific.

    The map has been specific.

    And the Commission’s notice was even more so.

    It tied down the locations of the dams themselves by reference to the public land surveys.

    It described the elevations above sea level as I’ve shown them on this map, it described the project specifically.

    This was not an application for a general permit to investigate all three of these projects.

    They didn’t want the two sticky ones.

    This was an application for a permit to investigate the more bland, upstream one — the Pleasant Valley one.

    Now as Mr. Claiborne has told you, it included also a re-regulating reservoir at Mountain Sheep.

    Now, Mountain Sheep Dam contributes nothing to this case except the confusion, the names, it was to be a lower dam of this site not to be confused with this — with the site we’re now in controversy about the High Mountain Sheep site.

    Below Mountain Sheep dam, would have been a relatively low one, the major dam was the Pleasant Valley to be matched against Nez Perce and High Mountain Sheep.

    The — nobody objected to the issuance of that permit.

    The public agencies as Commissioner Chairman Swidler points out where intensely interested and anything done about the Nez Perce site to some extent about the High Mountain Sheep site, but nobody wanted this inferior Pleasant Valley site.

    The public agencies took their chance that the Commission would reject the license upon that site.

    The Commission did reject the license on it in 1958.

    The — if I may interrupt again to say here that the issue I must keep coming back to is whether or not the permit, when issued in 1955 on that one magic day, did or did not nullify the preference within not only within the red area shown as the boundary of the permit but outside that boundary upon any and all potentially competing projects.

    That is the issue in this case.

    Does the issuance of a preliminary permit for a specifically described project with specifically limited boundaries so defined in the public notice automatically give the permitee some extra lateral kind of a privilege upon public lands and navigable waters that he has not asked for and has not modified any public agency claims?

    Did or did not this notice of the application for the permit put the public agencies upon notice that if this permit issued for the project shown in red, it would automatically terminate the preference not only within the red area but beyond it.

    Now, may I have the horizontal line?

    The Commission in 1958 denied a license application upon the Pleasant Valley project which I’ve just described the areas shown in red.

    It did so upon the ground that the — it was not adequately adopted to the development of the resource that to any project, referring to the same Corps of Engineer’s reports that I’ve mentioned, that any project which excluded Nez Perce, was inferior to any project which included Nez Perce and that the Commission entertained great confidence that the fishery problem at Nez Perce could and would be solved.

    Northcutt Ely:

    They denied the application for a license therefore upon the Pleasant Valley.

    The company applied a petition for rehearing and its petition said that it wanted additional time.

    It had only less than a month to go before the three-year term of its permit would expire.

    It would need 10 more months to investigate other possibilities that it pointed out to the Commission that no consideration had been given to a dam at — on a site between the Salmon and the Imnaha.

    That is the very site we’re now quarreling about, High Mountain Sheep.

    And it wanted adequate time to investigate to that, to Nez Perce and other possibilities and that it made the point that by denying our application without saying something about the priority of our permit, our rights may be lost.

    We want assurance that our permit will apply to the new project we hope to bring before you in 10 months.

    Now the Commission has denied that petition for rehearing and they wrote in opinion denying it after the application which is now before the Court was filed by the company on March 31.

    On March 31, 1958, the last day of the life of the permits, the company filed the application which are — you now have before you.

    It was for a project at the High Mountain Sheep site.

    Now, it is quite apparent with the no part — no investigation of any moment had been made of the High Mountain Sheep site within the three-year term of the permit.

    We have in Volume 3 of the record, 29 maps that the company annexed to its application for that license, the license now before you.

    These appear beginning at page 883.

    And if you’ll examine these, you will find that they are all maps, location maps, designs, borings of sites, relating to the two dams that are just been rejected, Pleasant Valley and Mountain — and Low Mountain Sheep.

    They had nothing to do with any High Mountain Sheep project and indeed the company did not file for some 18 months, the application which is truly before you, one with the designs, plans, specifications, and the language of the Act conforming to the requirements of license application.

    Now in the meantime, this is what happened.

    Now, I may say that not until 19 months have gone by after these three-year period of the permit did the Commission issue the license of Section 4 (e) of the Act, requires it to give again to public agencies upon the filing of a license application.

    Now on March 31, 1958 the application of the company filed and completed in 18 months later show this.

    This map shows again, in the area in red, the reservoir elevations of the original notice of the permit application to us given in 1954 -1955.

    The area above the Pleasant Valley is not greatly different because the reservoir elevations are about the same.

    This map shows the area specifically in controversy here.

    The area in red is the permit area, the permit notice area.

    The area in blue is the additional area of the reservoirs which would be flooded — the reservoir which would be flooded by the High Mountain Sheep dams disclosed for the first time in the license application.

    Now the problem is whether the permit or the area in red and more specifically the notice to public agencies, the applications for that permit, did or did not preempt the High Mountain Sheep resource.

    And in 1955 therefore, some three years before this plan was first disclosed, did it or did it not kill for all time our preference right upon the High Mountain Sheep site.

    Here, we reached the two conflicting philosophies of what the Federal Power Act is intended to do.

    We say that the dominant purpose of the Act is the development of the nation’s waterways, the discovery of the best adopted plans to do so and the direction that this development shall be carried out by public agencies, preference to public agencies if their plans are as well-adopted as those offered by private competitors.

    Here, the two policies are converged.

    We say that the preference is nullified only within the single narrow exception that the Act points out, namely, within the area circumscribed encompassed by a preliminary permit.

    We say that, given a case in which we presented a project within the red area in competition with the project proposed by the company within the red area, then our preference would prevail still if our project were superior to theirs.

    Northcutt Ely:

    But we don’t have to show superiority.

    But if the permit would give the — a priority to the company within the red area, what we say that outside of the red area, outside the area encompassed by the permit, the preference to public agencies remained intact, unscathed, and that we were entitled to come forward with a project for the High Mountain Sheep site relying upon our preference, totally unaffected by any priority which the company might have acquired within the red area by a permit to that red area.

    The opposing view is that the Act was designed to promote the development of the nation’s waterways by private enterprise, private capital that its purpose was to protect the investment of the entrepreneur and that consequently the permitee in general and specifically in this case, is — has not only the right, he has the obligation to develop, to discover, to investigate all the competing mutually exclusive projects affecting the same reach of the river.

    And that therefore, since he has this obligation, he has this right, the issuance to him of a permit for a single and inferior site here, the Pleasant Valley site, gave him by implication of law a permit, a right to occupy the Nez Perce site, the High Mountain Sheep site and that from the beginning therefore, our preference was nullified as to these exterior sites.

    Now the legislative history we think is very clear that this sort of an option was never conferred by the statute upon a permitee.

    This would be a truly remarkable public resource statute.

    If an applicant who is required to describe by metes and bounds reference to the public land surveys, the lands, the dam sites that he wants to occupy and upon which he demands a priority, somehow got from the United States a right greater than any asked for and greater than was described in the grant giving.

    It would be a remarkable thing if Congress have been carefully spelled out the preference for public power in the statute and given only one exception to that preference, namely where a permit had been issued intended by application to give a permitee a right to paralyze a public preference upon any site where he elected to transfer his option.

    At the end of the three years, mind you, at the end of the three years and not at the beginning when he makes this election and gives his notice.

    We think that Chairman Swidler’s characterization of the majority of the Commission’s construction of the Act is unanswerable.

    He says that he declines the act (Inaudible) in an interpretation of the statute to that unfair that the notice given us in 1954 or 1955 of the limited scope for this permit, we were entitled to believe.

    And since the statute and the Act of the Commission made it specific, it was indeed specific that we’re not dealing here with the question of whether the Commission can or cannot grant an indefinite permit to investigate all the sites on the great stretch of the river.

    It’s — is to simply limit this, the permit here.

    This was definite.

    Now, the legislative history also makes clear that Congress intended that this preference might be asserted either at the permit stage when the permit is issued or asserted at the licensing stage.

    That a public agency is not bound, slow moving as these political bodies are is not bound to guess when it receives a notice describing one project that a priority may be claimed displacing the preference on an entirely different project and therefore at its peril come in and apply for a permit on that same project or a competing project at the permit stage.

    The legislative history shows the recognition that these public agencies moved slowly and they must have an opportunity at a later time.

    Now the argument made against this is really circular.

    It’s that it goes like this.

    That since the permitee has the obligation to investigate all competing sites to discover which was the best-adopted, to develop the resource, therefore, his permit must be given an elastic set of rubber boundaries to encompass everything that might be better than — that he selected in the first place and that therefore the notice he gave to public agencies must be similarly elongated and that the application itself must be stretched in this way.

    Now this procrustean theory of the operation of a federal grant of an interest in this precious resource is a noble construction of the statute, particularly where it is used as a device to nullify, to kill-off a major purpose of the statute, the recognition of the public preference in areas other than those encompassed by the permit itself.

    The — as I said at the beginning, we’re not truly concerned here with the question of parsing the words, the nouns and verbs of the permit of the application and the notice because the company’s own petition for rehearing and its supporting documents in the Pleasant Valley case made it perfectly clear that they weren’t buying any ticket on the — to the High Mountain Sheep or Nez Perce sites.

    They wanted to avoid those destinations and it would be only inadvertence if we now find in the permit that’s so carefully excluded them language which now includes what was then excluded.

    But because they do make such a point, that the permit on its face was intended to include these other two sites, we have in our briefs spelled this out to some care, the — especially in our reply brief and we find that this specific project is defined, it’s referred to and named 21 times the two sites, the Pleasant Valley and Low Mountain Sheep are defined and referred to five times, not once as to the High Mountain Sheep site referred to, not once as Nez Perce referred to.

    The map, the only map we’re entitled to rely on deliberately excludes these two sites.

    And how else would you exclude them more explicitly unless the Commission put it — the foot of the permit, we really mean this.

    A word or two about the equities involved here.

    The company has — and the Commission, make much of the fact that the Power Company has spent a great deal of money in investigating — first, the Pleasant Valley project and now, High Mountain Sheep and this is true.

    Its testimony shows that it spent some two and a half million dollars in working up its plans for the Pleasant Valley site which the Power Commission found was inferior.

    Following the decision of the Power Commission saying that Nez Perce was the best site, both the company and ourselves spent a great deal of money.

    Northcutt Ely:

    We relied upon the Commission’s determination, the finding to that effect and filed an application for a license on Nez Perce and spend a great deal of money on it to discover as the trial went along that the fish problems did indeed seem to be insurmountable for the immediate future.

    Although we had put into our Nez Perce plans some 33 million dollars of proposed investment as we take care of fish and the most modern devices as any experts could think of.

    So we transferred — we have moved to substitute High Mountain Sheep ourselves.

    We both got through it the hard way.

    Now, it’s true one or the other of this is going to lose several million of investment in planning projects if the other gets the license.

    We don’t think that that is a criteria of the statute, the fact that the company spent two and a half million dollars to investigate a project that the Commission rejected, Pleasant Valley doesn’t necessarily give it a first right upon the next project.

    The fact that we spent money on a project now abandoned, Nez Perce, we don’t claim gives us an equity or first right on the Nez Perce either.

    We rely upon the statutory of preference to public agencies.

    Now it’s an ironic fact that the project which the company first proposed for High Mountain Sheep after the rejection of Pleasant Valley would have provided less, install capacity less, capability in kilowatts and less production of energy in kilowatt hours than the Pleasant Valley project that the Commission had just rejected.

    Its only virtue was that it provided for ultimate installation which would have been larger than the rejected project.

    And our project is, as I said, some 37% larger than the — than that proposed by the company for this same site.

    So that — I do not think the equities bear against us.

    Now, as to —

    William J. Brennan, Jr.:

    (Inaudible)

    Northcutt Ely:

    That is correct.

    On the original opinion, the Commission approved the smaller project proposed by the company, 875,000 kilowatts.

    We had proposed a 1,200,000 kilowatt plant.

    On rehearing, the Commission found that the larger plant was “best adapted” —

    Hugo L. Black:

    Was what?

    Northcutt Ely:

    — in the language of Section 10 (a) — pardon me?

    Hugo L. Black:

    Was what?

    Northcutt Ely:

    Best-adapted, best adapted to the development of the resource as the Commission said, under the criteria of Section 10 (a).

    But it licensed the larger plant which the company had never proposed and which we had designed.

    It licensed that plant to the company on the ground that its priority gave it the High Mountain Sheep site that this was a plan best-adapted for that site, the company is entitled with.

    William J. Brennan, Jr.:

    But I suppose but for your priority, there’s nothing wrong with that, isn’t it?

    Northcutt Ely:

    Pardon me?

    William J. Brennan, Jr.:

    But for your priority, it would be —

    Northcutt Ely:

    Yes, that is right.

    William J. Brennan, Jr.:

    — nothing’s wrong with that, would it?

    Northcutt Ely:

    Well, except that — but for Public Powers coming in to this picture.

    William J. Brennan, Jr.:

    That’s what I say.

    Northcutt Ely:

    This project — this magnificent site would be underdeveloped.

    William J. Brennan, Jr.:

    Yes, but my — I suppose that — the question I should’ve put, your reliance though was not on that.

    Your reliance is on your preference?

    Northcutt Ely:

    Preference.

    You’re quite correct —

    William J. Brennan, Jr.:

    Yes.

    Northcutt Ely:

    — Your Honor.

    Yes.

    If we had never come into the picture and if the Commission on its own motion had discovered that 1,200,000 kilowatts was best, it should have demanded the company to build it.

    That’s correct.

    Now, with respect to the Government’s case or the Solicitor General’s that you’ve heard, our strong belief is that both of these cases should be reversed and remanded.

    The Secretary’s case and ours as the Commission has said are inextricably entwined.

    We propose a project which would pour its entire output into the Bonneville system.

    We were going to build transmission lines from this plant to connect with Bonneville.

    We proposed that the plant be integrated into the Bonneville system, the power dispatched by the United States.

    We believe that the criterion that is written into the Water Canyon Project Act that the Secretary shall control all water passing the dam for all purposes is in the public interest.

    There is more to the integration of this resource than simply an agreement among companies if they’ll somehow trade power.

    Hugo L. Black:

    When was that agreement made?

    Northcutt Ely:

    Pardon me?

    The coordination agreement?

    Hugo L. Black:

    Yes.

    Northcutt Ely:

    This was — I cannot give you the specific dates.

    William J. Brennan, Jr.:

    Well, it’s dated September 1965, so I was going to ask later, ask what the 1964 — was that ever before the examiner?

    Northcutt Ely:

    No, the — go ahead, Mr. Solomon.

    Richard A. Solomon:

    The original coordination agreement was September 1961.

    This is the Fourth Amendment of the Coordination Bill.

    Northcutt Ely:

    We feel —

    William J. Brennan, Jr.:

    Perhaps, not the last one.

    Hugo L. Black:

    What?

    William J. Brennan, Jr.:

    Perhaps, not the last one.

    Richard A. Solomon:

    This one wants the (Inaudible).

    Northcutt Ely:

    We feel, Your Honor, that if the Commission has another opportunity to act upon a fresh record instead of a stale one, it is bound to reach a better result.

    If that should —

    William J. Brennan, Jr.:

    Well, does this mean, Mr. Ely that if it goes back and the Secretary is right, that even you win on your priority points, you may lose out to the Federal Government.

    Northcutt Ely:

    That is correct.

    If the Commission on its wisdom should decide on a new and fresh record that the project should be built by the United States, I think you would find the Washington Public Power Supply System actively supporting the legislation to do that and I’m sure you’d find the power company actively opposing it.

    Thus, it would have a right to do.

    I think what is more probable, if I may be permitted to say so, is that on a fresh record with the information before the Commission of the Great Pacific Intertie with the Southern California, with the Canadian entitlement power coming in with the projection of a load that was not before the Commission then, that time, the Secretary as Mr. Solomon said was urging the Commission, the power is not needed.

    Today, the reverse is true, that the — a new record will show that a million kilowatts a year of atomic energy plants are being planned for the Northwest because hydro won’t be enough.

    This supply system has built and is operating the greatest nuclear power plant in the United States, 800,000 kilowatts in partnership with Bonneville as far goes into the Bonneville system.

    And we think that given opportunity, the Commission can certainly find a better solution, one consistent with the purpose of the Act then dedicating this resource to exclusively to the benefit of this company.

    And consequently, we don’t think that necessarily, it’s a question of Federal Power versus Public Ownership, Local Public Ownership or Federal Power versus entirely against a private company.

    The difficulty with this case is that it’s been decided upon a — an inadequate record, we think the Secretary’s right in his objections to it and by a — totally ignoring the statutory preference to public agencies.

    The fact is, you’ll find great difficulty in discovering in this record the Public Power application for a license.

    The examiner for High Mountain Sheep, the examiner denied our application to amend our Nez Perce application to substitute High Mountain Sheep.

    The Commission overruled it — reversed it.

    But in his report to the Commission, he adhered to this.

    He said the amendments should not be allowed.

    The Commission in its final opinion reversed them again.

    But in the opinion, it granted the license to our competitor a little late to do us very much good.

    What we were committed to do is to put in, in bits and pieces in rebuttal to the company’s case our objection to this feature of their project, to that feature, it should be bigger, a 1,200,000 kilowatts, should have a different design.

    And our rebuttal evidence scattered to the record is all we have to point to as an application because the examiner excluded it.

    Now, we think upon our fresh record a better and more fair result will be obtained and one more to the public interest.

    May I reserve the balance of my time Mr. Chief Justice?

    Earl Warren:

    You may.

    Mr. Solomon.

    Richard A. Solomon:

    May it please the Court.

    I may say I am slightly surprised by the final peroration of counsel for the Supply System here.

    I had thought up to the time of about ten minutes ago that the Supply System thought that if it were to get a license that it could do a job in the public interest which would be meet the test of Section 10 (a) of the Act and by hypothesis would be as good as anybody else.

    Richard A. Solomon:

    I gather now they had some doubts about that.

    The issue in this case is whether the preliminary permit issued to Pacific Northwest served to give it priority for an application at the High Mountain Sheep site as the Commission held.

    If it did — pardon me — if it did not, if there was no priority which followed to this new application, then we would agree that the case has to be remanded not for the reason Mr. Ely suggested at the very end but because as the Commission held, Mr. Ely’s client, the Supply System, is a municipality and has certain rights of second chance rights under the statute.

    There are very serious questions in this record as the Commission found as to the qualifications of the Supply System.

    The Commission found as Mr. Justice Douglas had mentioned before that although they were a municipality of Washington, they had not demonstrated that they were qualified to build and operate a dam in this area.

    The Commission also found that on the record made before it, they had not shown their market for the power or they had not shown their financial qualifications to build it.

    But this —

    Hugo L. Black:

    Would they —

    Richard A. Solomon:

    What?

    Hugo L. Black:

    Would they have to show that?

    I’m just asking you now —

    Richard A. Solomon:

    That’s what I’m saying.

    What — under the statutory scheme —

    Hugo L. Black:

    What — that the other company had shown, that is what I meant.

    Richard A. Solomon:

    Well, they have to show it but under the statutory scheme, as a preference applicant, assuming they’re otherwise legally qualified, they would have a second chance and therefore —

    Tom C. Clark:

    I sense your Commission don’t — didn’t actually decide whether they were or were not.

    Richard A. Solomon:

    That’s right because they would have this second chance.

    They said there’s grave doubts about it.

    They haven’t shown it now but that is not grounds for denying these people if there is no priority here then these people have a second chance.

    And this is true, they have this second chance.

    Although throughout most of this proceeding, they were bitterly opposing the application for a dam at the High Mountain Sheep site on the grounds that it was not the best way of comprehensive development.

    Now the Commission’s reasons for believing that Pacific Northwest has a priority for the High Mountain Sheep project, rest are our views of the statutory structure of the Act as applied to the facts of this case.

    Specifically, we think that in order to make any sense out of the preliminary permit part of the Act, you must reach the conclusion that the three-year permit issued to Pacific Northwest in 1955, though it in terms described a proposed project consisting of two dams at Mountain Sheep and Pleasant Valley, necessarily provided priority for any application filed by Pacific Northwest within the statutory period in the relevant — into the river.

    And this what the language of Section 4 or 5 of the Act is talking about.

    It is a person who owned — holds a preliminary permit as a statutory priority for subsequent license applications within the term of that permit.

    As I indicated in my argument in the previous case, we’re dealing here with an essential licensing standard under Section 10 (a) of the Act, which impresses a specific planning function on the Commission and would be applicants.

    Operations in the public interest, a normal licensing or certificate standard just aren’t good enough best adapted to a comprehensive plan for a waterway is what somebody has to show.

    And while Congress was convinced that in most cases, these objectives could be met by issuing licenses to non-federal entities, be they private groups or public groups.

    It also recognized that there is a planning that has to be (Voice Overlap) undertaken and that a reasonable degree of priority is absolutely essential if this planning is going to be undertaken.

    It’s for this reason that we have this otherwise estranged dual structure in this Act.

    Richard A. Solomon:

    We don’t’ really have a licensing scheme, we have superimposed on this licensing scheme the separate procedure for preliminary permits to provide priority for subsequent license applications.

    And it’s for the same reason, we think, that the suggestions by the Supply System that the scope of a permit must be limited to the discreet form of project with the applicant for a permit tentatively think is going to be the best one before he makes his investigations would work against the statutory scheme not in favor.

    One minor problem with that is that if the permits are going to be narrowly limited then the whole idea of limiting the term of permits is — can be avoided.

    You can issue successive permits tying up a river for slightly different areas.But more important, more important, if you require the person seeking a permit to know before he gets his permit, the exact location he’s going to build in, at the risk, if he moves from there or if he builds a higher dam or if he otherwise changes his proposal, he loses his priority —

    William O. Douglas:

    How far up or down can he go?

    Richard A. Solomon:

    We believe that a permit covers the reach, the common reach of the stream.

    This case, as I would get into in the few minutes, it covered Nez Perce, it covered the High Mountain Sheep site, it covered the Mountain Sheep site and it covered this combination thing, it covered — to put it more specifically, the area which was in dispute, which everybody knew was in dispute from all time.

    Now obviously —

    William O. Douglas:

    Well, I —

    Richard A. Solomon:

    — a permit — obviously —

    William O. Douglas:

    I understand that the — if the Corps of Engineers has on file plans for 19 dams on the middle port of the Salmon.

    Richard A. Solomon:

    Yes, but (Voice Overlap) —

    William O. Douglas:

    Would it cover —

    Richard A. Solomon:

    — obviously, it does not cover the Salmon River at all.It is true.

    It is true that some of the projects within this reach of the river, specifically the Nez Perce project, if it had been built, would have been mutually inconsistent with some of the dams on the Salmon.

    But we do not suggest and nobody has suggested that a permit to explore the Snake River covers with it a priority on the Salmon River.

    Now, let me make it clear that I am not talking theory.

    William O. Douglas:

    What is the theory then of your regulations that permit an amendment of these temporary permits?

    You do have provisions for —

    Richard A. Solomon:

    Oh!

    Yes, we do make provisions for amendments of the permits and I’ll get to that later in my argument to where that’s appropriate, where it isn’t but —

    William O. Douglas:

    In your own time.

    Richard A. Solomon:

    Yes.

    William O. Douglas:

    In your own time.

    Richard A. Solomon:

    It’s obviously an important part of the picture.

    What I will try to argue is that amendments are not intended to get an amendment to a permit every time you change your plans or at least if it is intended for this, nobody has ever known.

    This licensing scheme has been in effect for 47 years.

    And as we have pointed out in our brief with example, the fact is that change and significant change, sometimes as much as putting in completely new dams, change between the times somebody applies for a permit and the times somebody applies for a license, is the norm, not the exception.

    William O. Douglas:

    Is there anything in this record that adopts the sedimentation rate in this Snake River?

    Richard A. Solomon:

    I’m sure there is, but you have to ask Mr. Smith.

    William O. Douglas:

    What is the expected life of one of these dams, ten years, twenty years?

    Richard A. Solomon:

    Oh, no.

    The license is issued for 50 years but the dam last a hundred years.

    At least, as far as I know, with very exceptional —

    William O. Douglas:

    That — that’s true.

    I know it’s — I really have something upon that on the situation in Texas the other day, those licenses also at issue, but the dams lasts about 10, 15, 20 years.

    Richard A. Solomon:

    Well, this is a very unusual situation.

    William O. Douglas:

    Well, I think it’s a very heavy silt river too.

    Richard A. Solomon:

    The — nobody suggest that this dam will not to be there at the end of a license period 50 years from now and the —

    William O. Douglas:

    But, the reason I asked —

    Richard A. Solomon:

    — the normal — I understand, but the normal depreciation on this type of dam which is worked out by the engineers in the light of everything you’re saying is approximately 75 to a 100 years.

    William O. Douglas:

    The reason I asked because I — I happen to know the Wanachi dam.

    It’s a clear water stream and I think it was finished — well, when I was a young man and it’s all silt in it already.

    Richard A. Solomon:

    Well, you have to add — there are — you’re beyond my competence.

    I can only tell you that everything we know is that this dam like all other major projects has a life at least the length of the license and probably closer to twice the length of the license.

    Now, I’ve said the change is standard between the time you apply for a permit and the time you get — you apply for a license.

    But that really understates the situation.

    Actually, change in the planning mechanism that’s involved in getting a license from the Federal Power Commission doesn’t stop with the license application.

    It continues throughout the licensing process.

    In fact, and so insistent are we that what is built is consistent with a — latest developments that change goes on after the licensing proceeding.

    The only type of situation in fact in which it can be expected that there will be no change between the time somebody applies for preliminary permit and the time he gets — applies for a license is in the circumstances where there’s no need for any further investigation because the plans were already made.

    And in this type of situation, the Commission has held in the Georgia Power case which is cited on page 82 of our brief that there’s no basis for granting a permit at all.

    Now, in our opinion, there’s nothing inconsistent with this necessary plan to give a permit to explore and change and do what has to be done during the licensing process with the provisions, the equally important provisions of Section 7 (a) of the Act, which give preference to state and municipal bodies.

    Now on the contrary, as Mr. Ely quite rightly said, the one area in which they do not have permit is where there is an outstanding preliminary permit covering the area.

    Preference bodies have and it’s very important to have, preference for getting permits.

    And this is not a theoretical right.

    Our records indicate that of the 20 outstanding permits at the present moment, no less than eight of them are held by preference bodies, including a number of preference bodies who are part of the Supply System itself.

    And there have been a number of cases during the course of the history in which there have been actual conflicts between a private group and a preference group, seeking a preliminary permit and where, pursuant to the preference the permit for the exploration giving it the priority has gone to the preference body.

    Moreover, it is incorrect to say that the granting of a permit and the priority it carries guarantees a license to the party who has got the priority, this is well-illustrated, probably as well-illustrated as any given case by the facts of this proceeding.

    In our judgment, as we made clear in our brief, and I’ll find may clear in this argument, Pacific Northwest had a priority as I said for the stretch of the river here and this included the Nez Perce site for all the confluence of the Salmon and the Snake River.

    Richard A. Solomon:

    However, it did not file an application for any project based at Nez Perce within the three-year period of its permit.

    Who did?

    The Supply System did and we had a comparative case between the Supply System that was seeking and continued to seek right through this proceeding a license for Nez Perce and Pacific Northwest which had applied for High Mountain Sheep.

    Now despite the fact that the priority would’ve covered a timely filed license application for the Pacific Northwest for Nez Perce, since they didn’t file one, perfectly clear that if the Commission had agreed with the basic premise of the Supply System in this case, that a dam on the Nez Perce was the best way of comprehensive development, that the power matters there, outweighed the fish matters which the Commission doesn’t agree with, that the Supply System would have won this case.

    In fact, in our opinion, they would have won the case.

    Despite the priority, despite the priority for the Nez — for the High Mountain Sheep site, if in fact Pacific Northwest had filed a license application for an inadequate development based on High Mountain Sheep, and if in fact the belated application filed by the Supply System for High Mountain Sheep had prescribed a superior plan of operation, this —

    (Inaudible)

    Richard A. Solomon:

    Well, I’m getting to that right now.

    Yes.

    William J. Brennan, Jr.:

    Good.

    Richard A. Solomon:

    Mr. Ely does suggest that exactly that happened.

    In fact, very strong words were used by the Commission, we’re alleged to have expropriated the superior plan that the Supply System had for High Mountain Sheep and give it to unwillingly I guess to Pacific Northwest.

    Now the facts of this whole discussion are very simple.

    Both parties here, in the beginning of their — at least from the time they applied for High Mountain Sheep have applied for major comprehensive dams where the eventual power supply of 2,000,000 kilowatts.

    The Supply System’s application was filed two years after Pacific Northwest almost the end of the hearing, called for generators with a higher capacity than the generators which the Supply — in which Pacific Northwest had originally applied for.

    But the Commission held that this was not a significant difference between the two parties.

    Expressly held, it’s not a significant difference between the two parties since it was also clear on this record that Pacific Northwest had stated that while they had included in their application generators of the type which were then be available at the time they made their application that they are in fact were prepared to include in the dam when they got it, whatever the highest rating, the feasible generator was at that time.

    So that the Commission, contrary to what Mr. Ely said, expressly finds that as between the two High Mountain Sheep plants, there was no material difference.

    Now, let me get to the problem of the permit and the situation when the permit was issued.

    I would agree with most to what Mr. Ely said about facts here with one minor exception.

    Everybody knew that there was going to be one major project somewhere in the area here and there were three or four potential sites for it.

    All of which had been discussed.

    There was the Nez Perce site, which had the fish problem, turned out it has some geological problems also.

    There was the High Mountain Sheep site, which had a lesser fish problem but still a fish problem and there were the sites above the Imnaha and again I have to use the term Mountain Sheep because that — it happens to be a site that a name which goes both above and below the Imnaha.

    I wouldn’t agree with Mr. Ely when he said it was clear at the time of the permit that any site above the Imnaha would have to be a two dam site with the major dam at Pleasant Valley.

    There was dispute as to this.

    One of the two reports included in the Chief of Engineer’s Report had said a high dam at the Mountain Sheep site above the confluence of Imnaha was feasible, the other one had suggested there were grave doubts as to the geology there whether it would support a high dam.

    It was an issue as far from resolved and in fact one of the major things that was done by Pacific Northwest during the permit was to study this problem.

    And they found out that of these two reports, the one that said there were geological faults was quite right and that a high dam just above the Imnaha was not feasible.

    Now, the permit application that was filed by Pacific Northwest here, in conformance with the expressed Commission rules, specified a very detailed proposed project.

    Richard A. Solomon:

    The reason for this, the reason for this is because Section 24 of the Act provides an automatic land withdrawal of all lands affected by any application for a preliminary permit.

    This has created a very serious problem of land management which the Commission over the years in cooperation with the federal agencies involved in land management has resolved by requiring a very detailed and limited application for preliminary permit to avoid unnecessary land withdrawals.

    This of course is a compromise that means you don’t have land withdrawals beyond the best estimate — guesstimate of where the most likely side is but the Commission’s policy which the Secretary as I understand his footnote in his brief strongly supports is that it is essential that these land withdrawals be kept to an absolute minimum.

    The traditional Commission notice of application during the 47 years of operation under the statute has similarly been limited to the specific terms of the permit application and up to this time, despite the fact as I said, change between the application permit and the license application say nothing of the license as the norm, nobody has suggested that anybody lost their priority because of this problem.

    The notice — the legislative history of the Act as we point out in our brief indicates that the notice provisions were not intended to be jurisdictional.

    But I don’t rest on that because I recognize that over and beyond the jurisdictional issue, if there was — there can be a problem of fairness and if in fact the way this notice was written, the way the notice has been traditionally written, if in fact it misled people and caused the potential preference parties represented by Mr. Ely to operate in a different manner in which they in fact operate, I would think over and beyond the jurisdictional matter, there’d be a question of a common garnered variety fairness which would be very serious one.

    But in fact, it’s clear from the facts of this case, the nature of a notice didn’t mislead anybody at all.

    Contrary to what Mr. Ely said, when the notice was issued, there was an immediate protest by the Public Power Groups which he says are the predecessors of his applicant.

    And why did they protest?

    They protest because they were experienced people in this business and they knew what was going on.

    And they were interested in a dam at the Nez Perce site and they knew that they weren’t going to get a dam at the Nez Perce site if they got a dam where the preliminary permit was.

    Now, it suggested that if the Commission’s notice had made more clear what everybody knew, what the — what certainly the notice didn’t — in the terms make clear.

    If the notice had expressly said this permit while for this proposed area obviously includes exploration within the reach of the thing that may be they would have done something different.

    But the record shows that they wouldn’t have done anything different and couldn’t have done anything different because of what they were interested in.

    But they were interested in what they said they were interested in was not a dam any place except that Nez Perce and not only is this shown by what they said in response to the notice, but its shown by what they did when there was an application for High Mountain Sheep three years later.

    They were very scornful of it.

    They opposed it.

    They weren’t interested in High Mountain Sheep and there isn’t — they filed for Nez Perce.

    They fought in a complete, hard-fought battle before the Commission for a license for Nez Perce.

    They didn’t accept when it finally became clear towards the end of the licensing proceeding that this fish problem was more serious than they felt it once, only then that they come in for High Mountain Sheep.

    And any suggestion that as a practical matter, they would have exercised any different preference rights if this notice had said in red letters, “This may include a dam at High Mountain Sheep as well just below the Imnaha as well as the one three miles upstream above the Imnaha, thus, doesn’t make any sense.

    Hugo L. Black:

    How far was it to the (Inaudible)?

    Richard A. Solomon:

    About three and a half miles, I think, something.

    This gets me to the final point that I have and that is a matter which I don’t think is somewhat a matter of law, as a matter of color, and it does give one first looks at the case considerable superficial color to the argument of unfairness which I think is really the essential argument that Mr. Ely is making here.

    I don’t — unless this Court wants to really change the whole structure of the Act and really inhibit the planning function which is so essential, I don’t think that there’s any real doubt that if the permit had been followed by an initial application for a dam at the High Mountain Sheep site, that would have been — there would have been any real doubt about the matter.

    The coloring that makes this look unfair, if it looks unfair, is the fact that the original application that Pacific Northwest filed was not for High Mountain Sheep.

    That they filed only for High Mountain Sheep at a later stage after the Commission had turned down what they thought was a better plan but wasn’t.

    Hugo L. Black:

    Where?

    Richard A. Solomon:

    What?

    Hugo L. Black:

    How far was it from High Mountain Sheep?

    Richard A. Solomon:

    Well, as a matter of definition, it is (Inaudible) High Mountain Sheep and the — one of the two dams was three and a quarter miles from it and the other one, the Pleasant Valley dam, which is a two-dam thing was much further down, maybe 24 miles down.

    Hugo L. Black:

    (Inaudible)

    Richard A. Solomon:

    Upstream, excuse me.

    I think, when you look at the actual situation that Pacific Northwest was faced, you’ll see that they acted quite reasonably in this situation.

    It had been convinced by it studies the reasons which proves Salmon, that fish protection problems at Nez Perce precluded any dam for that site.

    Also known that there were other problems, less significant turned out but real problems with the dam at High Mountain Sheep because of the Imnaha River.

    It knows result of its studies that you couldn’t build a high dam for geological reasons above the Imnaha.

    William J. Brennan, Jr.:

    But we call it the Imnaha?

    Richard A. Solomon:

    Imnaha?

    Excuse me.

    I always have difficulty with these Western names, so I’ll have to go out there more frequently.

    So that despite the fact that it knew that both the Commission staff and the public groups out there felt very strongly at that time that the best plan was a Nez Perce plan, it went ahead and file its original application for these two dams prospect.

    By 1957, while the permit was still very much alive, it became clear that the matter was going to be ‘touch and go’ as to whether the Commission go along with it.

    So, proposed — and it ordered and the record makes this clear, then ordered additional studies of the entire situation, the entire reach of the river, including studies of the dam at the High Mountain Sheep site.

    It didn’t take any action to modify its license application and I should imagine that the main reason it didn’t do that is just about this time, the examiner came down with an opinion recommending that it should be granted for the license application.

    More importantly, it didn’t file for an amendment to its permit, not only because it didn’t think that this was necessary but because if there was any doubt about it, the Commission on June 17th, 1957, just at this critical time, came down with a decision, it appears at 17 F.P.C. 834 and which is discussed at great length both the Commission decision and in our brief, came down with the decision in the Montana Power case and Montana Power after all is one of the constituent bodies of Pacific Northwest so very much before them, came down with a decision which said, “We will not allow you.

    We are precluded by the statute from amending a permit to allow you to explore within the reach of the river where you already have a permit to allow you to explore within the reach of the river”.

    Under these circumstances, it is not surprising that Pacific Northwest did not file an amendment to their permit because the Commission had just said that if they did, it would be turned down and was unnecessary, a permit necessarily covered the reach of the river.

    Hugo L. Black:

    What did that mean?

    Richard A. Solomon:

    In the Montana Power case, it meant —

    Hugo L. Black:

    I meant, “The reach of the river”?

    Richard A. Solomon:

    It means the part of the river system where any dam which would be put in one place would be mutually exclusive with the dam in another place.

    In context of this case, it means any dam on the Snake River from approximately the Nez Perce site or sites to — or down all the way to Hills Canyon but if you get anywhere clear around here, you’re not developing the thing anywhere as nearly completely and nothing else would have been appropriate.

    It means there — it means the reach of the river which had been agreed upon by these parties at the beginning of their proceeding as being exactly what I just said.

    So when the Commission in 1957 said, “You can’t file an amendment to your permit or anything which will merely investigate the reach of the river because that’s already in cover by your permit.

    There was no doubt that Pacific Northwest have let it, it had meant you cannot file an amendment to your permit to specify High Mountain Sheep because that isn’t the reach of the river and covered by your permit.

    Hugo L. Black:

    May I ask a question —

    Richard A. Solomon:

    What?

    Hugo L. Black:

    — practically in thought, I am not familiar with this.

    Richard A. Solomon:

    Go ahead.

    Hugo L. Black:

    That was the three and a half to four miles apart, suppose the public agency had filed one for the Nez Perce here and then the one, the three and a half to four miles below there was claimed by somebody else.

    Both of them would have a pretty far reach as to whom (Inaudible) what they did.

    But could the Commission if it desired, give that to either one or must it necessarily restrict itself giving to the one that had filed at Nez Perce, Nez Perce and then deny the other?

    Richard A. Solomon:

    Well, as we see the statutory scheme, here is where – we’re in an estrange situation although we are strongly of the view that the permit here covered High Mountain Sheep, we don’t treat permits as the absolute guarantees of licenses that the Supply System does.

    We treat a permit as giving priority to the man who has the permit for license applications within the reach of the stream if, but only if, it turns out in any competition with other people that their license application is at least as good and by necessity, the best for comprehensive development.

    Does that answer your question?

    Earl Warren:

    On a stream below there, I understood there were nine federal dams and if suppose some — someone had applied for one of those dams and he had been granted a certificate, would that have preempted all those nine dams sites along there so nobody else could have come in and applied for any specific one?

    What is the difference between that and the reach of this stream?

    Richard A. Solomon:

    Well, I don’t know the geology or the length of the river or what have you.

    Certainly, the distance between Nez Perce and the lowest dam on the river, that I guess it’s the original Bonneville dam, the tremendous difference in miles and you don’t have any mutual exclusivity between the dams say at China Gardens, one stream, and a dam at Bonneville at the other stream.

    Earl Warren:

    Well, let’s take it this way —

    Richard A. Solomon:

    Yes.

    Earl Warren:

    — but wouldn’t preempt the nine, would it preempt any other sites on the stream there?

    Richard A. Solomon:

    Well, if somebody had applied for a high dam at China Gardens which is the next dam down below the Nez Perce, I should imagine that that would have been mutually exclusive with the dam at Nez Perce but it depends on what they applied for and what the — it is conceivable.

    You cannot, in other words I think we understand, you cannot talk in general terms about what is the common reach in the river and nobody tried to.

    First thing they did in this case was get together and stipulate what the common reach of the river is they were talking about because it varies depending on factual situation.

    Earl Warren:

    But you were a little general in saying what the common reach of this stream was.

    Richard A. Solomon:

    Well, I didn’t mean to — what I am saying — what was agreed here and what I don’t think anybody has disputed that the common reach of this river for this case goes from the Nez Perce site below the confluence of the Salmon and the Snake, up to whatever was necessary to develop that region in the Snake, the one undeveloped region of the Snake as Mr. Ely said up to the head waters of the Brownlee Dam which had already been licensed.

    And the reach involved here — the whole problem and maybe problem and reach are synonymous here, the problem here was how best to develop this area of the Snake River.

    Well, I might have exceeded my time.

    I’ll have to let Mr. Smith answer —

    Earl Warren:

    Very well.

    William O. Douglas:

    I wonder, Mister — could you conveniently gives the records citation to this sedimentation problem?

    Earl Warren:

    Mr. Smith.

    Hugh Smith:

    Mr. Chief Justice, may it please the Court.

    I might mention sedimentation first if I could Mr. Justice Douglas.

    I can’t give you any record citation because there aren’t any, but I think that because it’s not an issue of the case, no one will object if I will tell you the story.

    We did a study on sedimentation on the earlier project to determine whether we were anticipating a problem in the Pleasant Valley reservoir that would affect its economic value over the life of the license or the probable economic life of the project.

    We ran this out to 100 years.

    We discovered that at 100 years that we were not at that point affecting the power generation of the storage space so we stopped at that point.

    Hugh Smith:

    Now, I can’t really say to you there’s no problem but at 100 years, we had so little deposit of sediment in that reservoir that it was completely insignificant.

    So I think we have no sedimentation problem.

    What happens on the Snake if I might take one more moment, it looks awfully dirty when you look at it.

    And you’d think you have sedimentation.

    Actually, that river, the sediment in it, so called sedimentary is so finely ground up that it runs right straight through.

    It doesn’t fall out in these reservoirs.

    The other thing is that those particles that do fall out, there are as you probably know, Mr. Justice, a great number of reservoirs upstream in this area.

    So they are picking this up.

    I might say our sedimentation study assumes sedimentation of these upper reservoirs up to a 100 period.

    The argument that Mr. Ely presents to you — what I think be a very persuasive argument if we were dealing here with the (Inaudible) —

    William O. Douglas:

    The reason I asked you was, I want to continue this.

    The reason I asked you is some of our earlier cases here, all that began 15 years ago.

    The engineers were predicting that the life of these is around a 150 years, in the specific Northwest area.

    Hugh Smith:

    Yes, and we do have some dams of that sort.

    I might say, Mr. Justice, later studies, since those studies have indicated that was a little bit pessimistic.

    Even 150 years is pessimistic and not that most of those projects that were involved in that would probably go up to 200 and 250, which point that gets beyond the area in which at least I’m worried about it.

    The — excuse me.

    William O. Douglas:

    Have you seen the dam on the Wanachi?

    Hugh Smith:

    I know of it, sir.

    I have not seen it.

    I’m not been on the Wanachi but I know of the dam.

    I know of the situation and we do have some coastal streams also where the sedimentation question is substantial, where we’re going to — some of those will fill up within the economic life of the project and they’ll then operate as one of their projects.

    But in this area, it doesn’t look like a problem.

    What Mr. Ely has presented to you would be an effective argument if we were dealing here with the deed.

    We were dealing here with a mineral lease under the minerals laws or an entry of any sort under the land laws of the United States.

    But we’re not dealing with the deed or mineral lease or an entry.

    We’re dealing with something else.

    I think it is used of something like the mineral leases is useful.

    There’s nothing in the federal laws that give you any protection to preliminary exploration that you make before you locate your plant.

    The protection that you get is after you locate plants, so you’re at the risk whatever you spend to decide where you’re likely to find mineralization.

    Hugh Smith:

    That’s the specific purpose of the preliminary permit, however, under the Federal Power Act is to give you protection of the investment that you are making when you go out to see if you can find a project.

    Well, that investment can be quite heavy and our problem I think, the split between us here is that Mr. Ely seeks to read the Act as being one specifically to promote public ownership.

    This is the purpose that I have been unable to perceive either in the language of the Act or any part of the congressional history nor certainly has this Court perceived it on previous occasions when it’s had occasion to examine the provisions of the Federal Power Act.

    Instead, this Court has said that the purpose of this Act is to encourage investment, the private capital.

    Now I think we’ve got to make clear when we say private capital here that we’re including public capital of agency such as Mr. Ely’s clients.

    This is non-federal capital when we say private.

    I think also it’s clear if you read the congressional record that members of Congress did not consider that bodies such as Mr. Ely represents we’re going to be a significant element in the development of the natural resource of the country.

    And that they in fact rather expected that if this Act was successful in encouraging investment of capital, it would be successful primarily in encouraging what is normally thought of as private company.

    Now, if there is preference in this Act, the other problem we have with Mr. Ely is that he thinks this is a problem of preference.

    Now, we do not regard the question of public preference and the policy that lies behind this as involved in this case.

    The preference in the Federal Power Act is unequivocal.

    There’s no discretion given to the Commission as to whether the grant or denial assuming that the preference applicant isn’t otherwise a qualified applicant.

    Incidentally so, I don’t lose this point towards at the end of the time, it should be clear, we deny that Mr. Ely’s client are a qualified preference applicant for a number of reasons.

    This has never been passed upon by the Commission, has it already been indicated to you so that matter is not actually before this Court.

    But if there is a qualified applicant, the Commission has absolutely no discretion at all.The preference applicant gets the permit.

    Now, Mr. Ely cited to you in his main brief before it, series of statutes which he referred to as the seamless web of power policy.

    I have been unable to weave a web out of that myself.

    The different provisions of those different Acts all which have to do with marketing — federal power, doesn’t seemed to be relevant, go off in various directions.

    There are different emphases upon different thing.

    There’s one thing that’s rather clear, however throughout all those Acts they specify a point in time for the preferences to be – is to be exercised, and that, gentlemen, is the whole issue of this case.

    We submit that the Congress has made quite clear that the way in which they are going to put together the problem of encouraging private capital to come in, of encouraging them to spend money which may be a substantial amount of money to go out and explore for and investigate an engineer and develop a project that will be best adapted to a comprehensive plan as superlative requirement of the Federal Power Act.

    That the way to match this with their desire to accord a preference to those rare occasions when a municipality, a city might want to build is to say to the city, “Come in before the private company has spent all of this money”.

    Another passages that we cite to you in our brief from the congressional history in this is the testimony of Mr. Merrill, who was then the chief engineer of the Forest Service as indicated as the author of this Act and became the first Secretary of the Commission, where Mr. Merrill pointed out that a private company might spend even as much as a $100,000 or $200,000 on going in to explore in developing a project and then it would be quite unfair, quite unfair to let a city come in and push them out at the last moment.

    Well, this is the issue.

    This is — depends on how you’re going to regard this Act.

    If you start off looking at this Act as being passed and adopted by Congress with the purpose of developing a resource, in other words, if you look at the resource we’re talking about, we have no problems.

    The resource we’re talking about comes from approximately Nez Perce to approximately High Mountain Sheep.

    It can be done by engineering structures.

    We’ve been talking about three of them as though there are only three alternatives, actually there are dozens of other alternatives up there.

    This place is just rightful as dam sites all the way.

    Hugh Smith:

    But it can be done anyway, but the resource that we’re talking about is that.

    And the issue that we’re talking about or that we were talking about before the Commission is not really exactly how you develop this from power and flood control.

    Those issues were well-defined.

    They were how important this fish.

    From the very first Government report that we have on record which incidentally was from High Mountain Sheep not from Nez Perce, this is a report of the District Engineer in 1947 down to the present.

    The issue on that river has been how do you find a project whereby you can provide all of the public purposes that we have available here and still get adequate protection to fish.

    Now this quickly defined itself into the fact that either you build below, which is Nez Perce, there are three or four sites where you might put Nez Perce dam depending on just what its engineering is.

    Or you build above, the mouth of the Salmon River.

    Now the reason you go on and focus on the Salmon is that this is the enormous spawning stream for the salmon resource.

    In terms of relative magnitude, there is something around — well, let me put it this way, two thirds of all of the salmon that pass the McNary Dam come up to the Nez Perce project.

    It’s about 200,000, of that — about 220,000 — now that 220,000, about 180,000 turn and go up the Salmon River.

    About 25,000 used to go up the Snake and somewhere between 5,000 and 9,000 go up the Imnaha.

    Now that’s our resource.

    What do you do with that?

    Obviously, the critical one is the Salmon River.

    Obviously, the critical question is above or below the Salmon River?

    Now, this has always been the issue.

    We have a subsidiary issue because you can — you got several places above the Salmon River which in turn or above the Imnaha River which are all called “Mountain Sheep” in various variations which have storage in various variations.

    We have the one that’s licensed that has 3,100,000 acre feet of storage.

    There’s a High Mountain Sheep site right above the mouth of the Imnaha that has about 2,800,000 acre feet of usable storage.

    Then there’s the Pleasant Valley, then there’s a Low Mountain Sheep with the storage in that case — Pleasant Valley that had about 500,000 acre feet of storage.

    Alright, these are the problems.

    We got a preliminary permit.

    Mr. Ely says that we make some choices, that we make some exclusion in this.

    All we did was that we follow the rules of the Commission.

    Same rules the Commission has had ever since 1922.

    It says that you pick out a project and describe it.

    It’s specific.

    It doesn’t say that we can come in and then list the alternatives.

    It says a project.

    Hugh Smith:

    With what we then knew, we thought Mountain Sheep, Pleasant Valley was the most likely frontrunner and we described that.

    We got a permit that said that we proposed to build a project in the Snake River.

    This was the definition of our project.

    A project located on the Snake River, in the counties of Idaho — in Idaho County, Idaho and Wallowa County, Oregon.

    Now at this point, the question is what did we have?

    It’s not a question of retroactivity or anything like that.

    The question is, what did that document vest us with?

    One of the things which is not fully irrelevant here is what did we understand?

    We did not understand this document the way in which Mr. Ely now professes to understand it because we didn’t confine the work that we did to those two particular projects.

    We spent a great deal of money examining the geology of the high dam above the Imnaha, which was not on the same axis at all as the Mountain Sheep Dam that was described in the preliminary permit.

    We found that it was geologically imprudent to build a dam there.

    We did not ignore what we now know as the High Mountain Sheep Dam and we so testified.

    We gave serious consideration on whether we should undertake engineering studies of the dam below the Imnaha and we concluded, as we have testified, that at that time that it should not be undertaken because of the interest of protecting fish in the Imnaha River.

    I should know the Commission disagreed with us.

    But essentially, we find out they are during our permit period was a — this — that is that the only place we could find it and that is that our judgment on the fish was not the one that was going to prevail in the public interest here by the only agency that can make it, which is the Federal Power Commission.

    So having explored and found out all of the necessary things during the permit period, we then filed exactly what the statutory plan calls for his to file, that was an application for license on the project which is now been held to be with this project.

    I must make a few further points very quickly.

    Let me say that we have suddenly faced in this Court was an argument by Mr. Ely that his alleged better project justifies itself a reversal and a remand.

    Now, there’s been very little said about this argument below or in the briefs to this Court because it had never been presented as being a subsidy question before.

    I’ve got to say to this Court flatly as a matter of fact that statement is wrong.

    We filed two different designs with the Commission.

    One was for 1,225,000 kilowatts, the larger project and the one that’s finally licensed.

    The other was for 875.

    The difference is between those or in peaking not in energy and we maintain and we explain to the Commission that the reason was that for a temporary period of time of about five years, there was a surplus of machine capability in the Northwest which made this extra 400,000 kilowatts of peaking of no significant economic value.

    We also stated that we would propose to put in the largest — that we had taken the largest projects that were then available for use that we could design into this project, that would be supplying to us by the generating companies as of the time that is on it.

    There has been progress in the art.

    By the time we got the hearing, WPPSS had a larger generator.

    We would — then went back to the generating companies and discovered they were then willing to put in even a larger one.

    Figures here are 200,000 kilowatts for a (Inaudible), the one that we found that were larger were 250,000.

    The Court may be interested to know that up to a few weeks ago, we had tended — we’ll settle on 471,000 kilowatt units that would go in in the initial installation because the art has just been leaping ahead quickly.

    Hugh Smith:

    It’s leaped so fast that even a few weeks ago, we went back to our engineering company and told them to restudy this in view of the announcement of the 600,000 units that would go into Grand Cooley.

    Now, this is the only thing that is similar at all to the — this is the only thing that it’s similar at all to the design.

    It’s been provided by the WPPSS in this proceeding is the size of the image because the initial installation is our plan, the ultimate installation is our plan.

    Mr. Ely has some figures that he may give you on rebuttal that would — seems to say the ultimate installation is larger but this isn’t quite true because his units cannot actually produce the —

    William O. Douglas:

    Is the Lower Canyon project at all at issue here?

    Hugh Smith:

    No, sir.

    The Lower Canyon project is part of what is known as the High Mountain Sheep plant and in demonstrating that independent of fish, the High Mountain Sheep project was better than Nez Perce.

    It was necessary for us to demonstrate that you could develop the Salmon River with a — with an economic project.

    Now, that — where the two projects would be better than Nez Perce, but we have specifically said that we would not take a license for Lower Canyon until and if the fish passage problem is conclusively solved and finally solved.

    Earl Warren:

    We’ll recess now.

    Hugh Smith:

    Thank you very much sir.