UDALL v. FPC

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Argument of Hugh Smith

Chief Justice Earl Warren: Washington Public Power Supply System, Petitioner, versus Federal Power Commission et al.

Mr. Smith.

Mr. Hugh Smith: Mr. Chief Justice, may it please the Court.

In the few minutes remaining to me, I should like to discuss the question of notice which is the essential nexus of the argument made by Mr. Ely in this particular case.

In accordance with the statute in 1955, the Federal Power Commission gave notice of our application for a preliminary permit.

And the question that Mr. Ely raises is what at that point happens.

Now whatever that notice meant to anybody or to Mr. Ely or anyone else, there's one thing quite clear.

It did not mean that we were going to build the project described in that notice because as Mr. Solomon explained to you at some length yesterday and as I've commented, this is the one thing you do know, and that experience is shown that everybody involved in this particular activity knows that it is so unlikely that anything is going to come up, its exactly what's describe.

Anyone reading that notice knew that whatever else it might mean it did not mean that that was the project that was going to be built.

Now we say that the notice served its statutory purpose.

And that is that there had been set in motion this statutory process which would eventuate in a project best adapted to a comprehensive plan within the standards of Section 10 (a).

And, that consequently anyone who had purposes or plans or ambitions that would be affected by that eventuality were on notice that the time had come for them to come in and take the obligation, undertake the obligation if they wished to assert a preference to undertake the obligation to carry out the expirations to develop the particular project.

Now, viewed in light of this statutory purpose, I think that it is clear that the scope that the Commission has given to a preliminary permit is a very sensible and workable rule.

Because what the Commission has said in this case is that a permit applies to the project described, to any project that is mutually exclusive so long as it occupies substantially the same reach of the river and substan -- and develops substantially the same head.

Now the phrase is substantially the same, are concepts that are very familiar to lawyers, something that violate is not an exact rule.

It is something that lawyers are accustomed to apply.

Reach and head are of course more engineering terms but they're very familiar to engineers, and the engineers are the people who are involved in this kind of a thing we're talking about.

And it's very workable to them, and mutually exclusive as something that anybody even the layman can easily see once they look at the map.

Even this map by Mr. Ely shows immediately what we've got in this little area up here that I can cover with my hand is mutually exclusive and that consequently this is what is now involved.

Now this is a very workable thing, you see.

It's a very easy thing, the nature of the resource automatically tells anybody that this is what is about to happen.

Now, of course Mr. Ely argues this isn't what the notice was.

That all it was, was that this is like a illegal process which were not – this isn't really illegal process, it's the process of developing a resource.

But let's for the moment look at his argument which is a technical argument on notice, it's almost black letter law, that a person who asserts a right -- be on the ground of faulty notice has got to come in and show at least three things, that he has a right to notice, that notice was given, that he saw that notice, that he relied upon that notice to his injury.

Now, it's quite evident that as far as the particular petitioner in this case is concerned, no one of those requirements can be met because WPP -- the supply system was not even in existence in 1954 when this all started.

When it came into existence and came into this case, the claim of Pacific Northwest that we were operating under -- our preliminary permit was abundantly claimed and consequently it seems to me that as far as the supply system is concerned, they've got to stand or fall on the legal effect of the permit that was granted to us.

They have no technical right to assert notice.

But let us even pass that by for the moment and assume that the supply system can stand on the shoes of either what they call their predecessors and interests which doesn't really do them much good because their predecessors and interests were not construction agencies.

They obviously were not agencies that had the capacity to start so that -- they had no interest in the notice or even -- or leading that and going back to the individual public utility districts of which they are composed.

Let's say that they could assert faulty notice there.

Now, the one clear thing that we could see in this record is this.

If any public util -- if any qualified public agency in the Northwest had in 1954 any ambitions to build High Mountain Sheep and it sat back as Mr. Ely says they would and had not come in because they were misled by this notice, what would have happened was that the first pleading that ever came into this case, somebody would have said so.

We would have had some evidence.

This is the kind of thing on which evidence is the easiest thing to produce, the most persuasive, of the most easy thing, and we have no such evidence at all.

There's a broad generalized statement made by Mr. Ely where he says they, the whole area.

But in fact, nobody relied on this and we all know that they didn't.

Chief Justice Earl Warren: Your time is up.

Mr. Hugh Smith: Thank you very much.

Chief Justice Earl Warren: Mr. Ely.

Argument of Northcutt Ely

Mr. Northcutt Ely: May it please the Court.

Mr. Chief Justice, as I shall not have time to cover all of the points that I would like to -- remaining, now I should like to --

Justice Hugo L. Black: May I ask you one question --

Mr. Northcutt Ely: Pardon me, yes sir.

Justice Hugo L. Black: -- before you start?

Mr. Northcutt Ely: Yes sir.

Justice Hugo L. Black: Suppose your application has been granted and the other one had been denied, could they then have gotten a new dam at the point they wanted it?

Or would that have excluded any other dam at that point?

Mr. Northcutt Ely: Had our application for a license on the High Mountain Sheep been granted?

Justice Hugo L. Black: Yes.

Mr. Northcutt Ely: That would have excluded the granting of a license to the company for any project in conflict with ours.

Justice Hugo L. Black: Would that have been in conflict?

Mr. Northcutt Ely: They were applying for exactly the same site, Your Honor, High Mountain Sheep.

If you're referring to the earlier context --

Justice Hugo L. Black: The earlier one –-

Mr. Northcutt Ely: In which the –-

Justice Hugo L. Black: The one --

Justice William O. Douglas: The one covered by the preliminary permit.

Justice Hugo L. Black: Yes, the one covered --

Mr. Northcutt Ely: The preliminary permit, we did not have a preliminary permit, our opponents did.

Justice William O. Douglas: Yes.

Mr. Northcutt Ely: If they had built a project, had the Commission licensed the project at Pleasant Valley, the high dam there, this would have been in conflict with the -- any project that High Mountain Sheep or Nez Perce and it would've been physically impossible thereafter build a project to either of those places, that is correct.

Justice Hugo L. Black: If that's true, why should one be exclusive of the other, if they are there at the same time --

Unknown Speaker: Here's the other one.

Mr. Northcutt Ely: If why should one application be exclusive of the other one?

Justice Hugo L. Black: Yes, by priority.

Mr. Northcutt Ely: The statute Your Honor in Section 7 (a), directs that in the event of conflicting applications preference shall be given to the application of a mini state or a municipality.

The company relies upon the single exception to that preference which is -- makes the preference inoperative where a preliminary permit has been issued.

They will -- they say that the permit which was granted to them for the Pleasant Valley project shown in red on the map behind me gave a priority which displaced an old -- our preference upon the High Mountain Sheep site and upon the Nez Perce site as well as upon the sites encompassed by the permit.

Justice William O. Douglas: But they also claimed that your -- the agency or group, whatever you want to call it doesn't qualify as a municipality.

Mr. Northcutt Ely: That is not in the case Mr. Justice Douglas.

The Commission below declined to agree with them this -- the Commission and the court below both had specifically (Voice Overlap) --

Justice William O. Douglas: That's before the Ninth Circuit now, isn't it?

Mr. Northcutt Ely: No, the issue before the Ninth Circuit is not whether we are a municipality.

The issue before the Ninth Circuit is an appeal from a decision of a district judge to the effect that we were not qualified to do business in Idaho and Oregon, not upon our status under Washington law.

Justice William O. Douglas: Well, that would have bear upon this perhaps.

Mr. Northcutt Ely: Well, if that question is ever -- that question in the Ninth Circuit is taken off the docket awaiting the decision upon this review of the Commission's decision.

Now on remand if the Commission decides if this is an issue which contrary to this Court's holdings in the first Iowa case or in the Tacoma case does mean that a state can veto a federal licensee, done that as a matter for another day in litigation.

It is not right for litigation now.

Your Honor, we offered a -- pardon, I may say at the outset that we claim a preference which the court below said was clearly applicable in the absence of a preliminary permit.

We have offered in our briefs two reasons why this permit is not applicable at the High Mountain Sheep site.

One is the reason I have argued, the major reason that as a matter of statutory construction and by the language of the permit, it never did apply to the High Mountain Sheep site.

But we also point out in our briefs which I do not have time to argue, that if this particular permit would encompass this particular site, the permit was a dead permit by the time the license application was filed.

And I should like to simply refer to the points in the brief -- briefs where that point is discussed.

This is point number eight in our opening brief, beginning at page 53 where we give in some detail a sequence -- in events the citations of the record and is covered in our reply brief at pages 48 and 50.

Pardon me, yesterday Mr. Solomon indicated -- they told the Court quite candidly that the permit did indeed as a matter of law encompassed the High Mountain Sheep site and the Nez Perce site -- may I have the blue overlay.

The permit is indicated in red on this map, these are the areas shown in the notice and upon the face of a permit.

What you're about to see is a reproduction of the information on the maps opposite page 3 of our opening brief.

And this shows the legal consequences of Mr. Solomon's assertion yesterday.

If indeed the issuance of a permit in 1955 for the area shown in red mainly for the Low Mountain Sheep and Pleasant Valley Dam sites did as a matter of law give this permitee the option, the right to transfer this priority to annul as of the date of issuance of that permit.

The High Mountain Sheep and the Nez Perce da -- site, then these were the consequences from the day that permit issued in 1955 describing as I would show in a moment by metes and bounds and records of Public Land Surveys only the area in red.

The permitee got without ever asking for it, without ever giving notice to anyone and without the permit saying -- so on its face these rights, the exclusive right of occupancy for three years, for three years of the High Mountain Sheep site and Nez Perce to the effect that he got the exclusive right from the Imnaha River and the exclusive right upon the Salmon River up to the Freedom Dam site, these are the areas that would have been flooded by the Nez Perce Dam.

Now then this disclosure of the permitee's claim was not made until the last day the three years of the permit.

On the day it expired, he filed this license application which for the first time, disclosed that he claimed the priority for the High Mountain Sheep site.

We are now told and that as a candidate, in proper admission by Mr. Solomon that as a matter of law, it also encompassed the Nez Perce Dam site, it didn't encompass High Mountain Sheep.

Now the problem is transposing this issue to Alaska or any other unknown rivers does a granting of a permit strictly limited to a specific site, give the permitee that kind of an option.

No one can know from reading the permit, reading the application, reading the map that a company's permit, what is encompassed by that permit?

Yesterday Mr. Chief Justice Warren asked a question that I don't think was answered and referring to the dams on the cascade map of the Government.

This I believe is at page 525 of the record in volume 2.

And the Chief Justice asked whether if a permit had been issued for one of the nine dams that are federal dams as it happens.

The downstream from High Mountain Sheep whether the permitee would have got the option, an exclusive right on all nine, the answer Mr. Chief Justice says yes.

The answer however depends with this qualification upon the permitee's ingenuity, engineering ingenuity in designing a dam.

If you'll pick out again, assume we transpose this problem to Alaska, the Yukon, or wherever you like, we're dealing with the interpretation of the statute.

But to keep these names of dams for easy identification and pick out the fits, the middle dam of the nine.

If we refer to this map, then this means that a permitee for that dam automatically got a preemptive option, a right which displace the public preference on the number one dam upstream even though his plans, his designs, his notice didn't show any interference because of the relative heights of the dams, because he read the right to increase the height of his dam.

This was a minor modification, a right that needed no amendment according to the Power Commission Council.

Similarly he had an exclusive option upon the downstream dams even though if you look at the map at page 525, the Government's cascade series of maps.

It would appear that the dams downstream could have no interference, no relationships to the middle dam.

This is because the permitee if he comes in and says “No, I have found a way to build a dam at the downstream site, site number nine, downstream, three times the height that anyone else had thought of.

My engineering is better.

I've drilled the foundations.

Then that dam will -- would indeed have interfered with the one that I named in my permit then because they are mutually exclusive, because they would interfere with each other.

I got the option upon that downstream site too.

Now this is a strange way to interpret a right in a navigable stream.

Mr. Solomon said yesterday that the requirements of a specificity and application for a permit, and the permit itself do mean that you must apply for a specific project and you must describe it.

But the reason says he is that this -- the Congress was concerned about excessive land withdrawals under Section 24.

Now, mechanically under the regulations, the withdrawal under Section 24 as established by the Commission sending to the Secretary of Interior a copy of its notice that it gave to public agencies, the one notice handed to the Secretary effects ipso facto, a withdrawal of the public lands affected by that project, a rare instance where an individual by filing an application withdraws the lands for his private benefit.

The carbon copy of the same notice sent to the public agencies and published in the counties where the project lies, do not have this effect according to the counsel for the Commission.

The lands that are covered by the notice of the Secretary are indeed withdrawn and no other lands are withdrawn but the notice of public agencies does not have a meaning on the face of the permit.

It is not limited in the withdrawal against the preference right under Section 7 (a) to the lands the power sites described.

It extends up and down the river to all competing sites.

Now the question of a notice to which I have referred, I should like to simply say here what I say at page 29 of my opening brief, the question is not whether the issuance of a permit or receive a notice of an application puts everyone on notice that the permitee hopes to build a project and that if he does, this will foreclose the development of competing projects.

And the question is not whether the municipality learns somehow of what is going on after that permit issues.

It's too late.

His preference right upon the competing site, High Mountain Sheep and Nez Perce was killed off the day that permit issued and can never be revived while that permit is alive.

The question is whether the Commission's issuance of a statutory notice to public agencies of a permit application for a specific site on a navigable stream puts them on notice that a permitee is to get an affirmative priority upon all other sites in competition with those that he has preempted.

Now to translate this to any other field of a public land and navigable streams laws of which the Court is familiar, this means that under the Mineral Leasing Act enacted by the same Congress in 1920, if you apply for a prospecting permit on the public lands, they're good for a limited time just as these permits were described in specific areas, just as this permit did.

And if you drill your well four miles outside the boundaries of your permit which is the distance of High Mountain Sheep was from the nearest boundary of this permit and affect the discovery that somehow you have acquired under the 1920 Mineral Leasing Act a right to a lease.

Now Congress never before has granted any options, any floating easements upon either the public lands or this -- the navigable streams of the United States.

And it did not intend we say to disable and cripple the public preference who have carefully made mandatory in the legislative history by giving the permitee this option to roam to transfer his priorities.

Reference was made yesterday to the legislative history and again this morning.

I should like to call the Court's attention to a rather careful review of the legislative history in Appendix C to my opening brief, this is at page 19A.

And on the specific point that has made this morning and yesterday as to whether this priority of preference agencies must be asserted at the permit stage.

Congress specifically took up this proposal by utility spokesman and did not adopt it.

Instead, it adopted language that preserved the preference for assertion either at the permit stage or three years later at the licensing stage.

And it specifically made it clear -- pardon me, I should give you the citations of this.

This point is covered in our reply brief under my heading number 6 beginning to page 29.

Congress refused to limit their preference to the permit stage.

It preserved it to the licensing stage.

Why should a public agency interested in the High Mountain Sheep or Nez Perce be forced to come in with a preemptive permit application because it receives a notice of an application for the project which it feels is worthless and is not going to get a license which is exactly what happened here.

Now bear in mind that under Section 7 (a), a public agency fairly warned, fairly warned, can wipe the (Inaudible) clean of the competing permit application of the company instantly by filing a preemptive permit application of its own.

There's no conditions to that, whatever.

If the State of Washington --

Justice Hugo L. Black: Would you explain -- will you explain exactly what you mean by that?

Mr. Northcutt Ely: Yes sir.

Justice Hugo L. Black: As it works.

Mr. Northcutt Ely: Yes.

Section 7 (a) is the statute time relying upon.

And that section says in terms that a public agency shall have preference --

Justice Hugo L. Black: Who shall have preference?

Mr. Northcutt Ely: -- to the public agency, the state or municipality, the language of the statute is, in issuing preliminary permits hereunder or licenses where no preliminary permit has been issued the Commission shall give preference to applications therefore by states and municipalities.

Justice Hugo L. Black: Are you saying that if a private agency applies to in proper form under 7, thereafter a municipality appear -- applies that the preference to the municipality overcomes the preference, if there are a preference of the company?

Mr. Northcutt Ely: We refrain -- let me divide this into two parts.

Justice Hugo L. Black: Yes.

Mr. Northcutt Ely: If your question refers to the permit stage --

Justice Hugo L. Black: That's right.

Mr. Northcutt Ely: If a permit application notice fairly discloses what the company asks, and if a public agency responding to that notice files a competing application for a permit, the mandate is flapped.

The --

Justice Hugo L. Black: Would you say then that the municipality (Voice Overlap) --

Mr. Northcutt Ely: Gets the permit --

Justice Hugo L. Black: Even though the company applied first?

Mr. Northcutt Ely: That is correct.

There is no question about that in our legislative history.

That's its purpose.

The problem arises that if the company gets the permit as it did here on the phase of a notice restricting the application to a project in which we had no interest.

Then three years later, as it did here on the last day of the permit say we changed our minds now.

We now claim under that permit projects that we disclaimed when we asked for the permit the question is now whether at the licensing stage our preference has survived so that we may assert that preference against the project excluded on the day the permit was applied for but now purportedly included on the day that the company applies for a license on the new project.

Justice Hugo L. Black: How can you say that you had no interest in the one the company applied for if it was one that would exclude you from getting the one that's close by to it?

Mr. Northcutt Ely: Because the public agencies of the Northwest had confidence that the application for the Pleasant Valley project would be rejected as an inferior project and it was rejected.

The Commission turned it down.

We're under no necessity to come in with the elaborate engineering and the expense of filing a prematurely, a competing application on some other site when the one being applied for on its phase didn't deserve a license.

They took the gamble properly that the Commission would reject that application and it did.

Now the question, one of the questions in the cases, did the permit survive the rejection of that license application?

It was rejected on grounds which we say precluded its reassertion on the High Mountain Sheep site.

And indeed the company asked for time to substitute the High Mountain Sheep site to make new investigations.

The Commission denied this application on rehearing.

But --

Justice William J. Brennan: Oh, I gather you concede however that the -- that if the Commission had -- if the company applied for a license on Pleasant Valley, that they would have had priority on that site?

Mr. Northcutt Ely: Yes, that is correct.

The Pleasant Valley was within the red area, within the announced boundaries of their permit.

No question about that.

And the question is whether they got an extra --

Justice William J. Brennan: And the fact that they'd been granted the permit would give them a priority over you on that site?

Mr. Northcutt Ely: On that site because it was within the boundaries --

Justice Byron R. White: That's right.

Mr. Northcutt Ely: -- of the notice.

Now may I just point out in the record where you'll find some of the things to which I have referred here.

First I should say now but I'm sure the Court realizes that this was a three to two decision by the Federal Power Commission dissent on the original opinion filed by Chairman Swidler joined by Vice Chairman Black on rehearing assigned by Vice Chairman Black joined by Swidler.

These are powerful dissents and they appear in the record beginning at page 687 as it refers to the comments which I'd like to refer.

Yesterday a great deal was made of the Commission's intent to deal fairly and of course it does intend to deal fairly.

But two members of the Commission thought the result here was grotesquely unfair and it was a distortion of a statute.

And Mrs. Chairman Swidler at page 701 of the record, the majority's position is unreasonable because of the inadequate notice.

Indeed the wholly false and misleading notice provided by a preliminary permit under this interpretation and the resulting failure to get potential competing applicants and other interested parties, the statutory notice to which they are entitled.

And he said at page 701 the majority position is mystifying because it interprets a permit application as meeting something other than what it says whereas to some compelling reason of congressional purpose advanced in support of this transmutation I might be persuaded but no reason is given.

Now, I'd like to ask your attention to the particular permit application and the map which a company did.

The --

Justice John M. Harlan: Mr. Ely can I ask you a question?

Mr. Northcutt Ely: Yes.

Justice John M. Harlan: Is this view, this interpretation as to the scope of the claimant wasn't before the Commission and incurred in other cases before it?

Mr. Northcutt Ely: Never in a contested case, Your Honor.

There had been a number of uncontested cases in which as a matter of internal housekeeping.

The Commission has sometimes required amendments, other times rejected them.

But this is a case of first impression.

This is the first time there's been a coalition between a preference claim and a claim of priority under a permit.

As Chairman Swidler says, this is a benchmark case that in which the Commission gives vast and sweeping effect to the priority of permit and on unjustifiably restricts the preference Congress intended for public agencies.

Justice William J. Brennan: This clearly did -- did your client fight for a permit or a license on Nez Perce?

Mr. Northcutt Ely: Applied for a license.

Justice William J. Brennan: For a license?

Mr. Northcutt Ely: Yes.

Justice William J. Brennan: When?

Mr. Northcutt Ely: This was in 1960, about five months after we received a notice of license application by the company upon High Mountain Sheep.

While a file pro forma application on March 31, 1958 accompanied by maps of the rejected dams, it filed finally 18 months later the papers you now have before you and then the Commission gave notice.

And then within five months after that we filed our application.

Justice William J. Brennan: In what position did the company take on your Nez Perce application, I take it, of opposition?

Mr. Northcutt Ely: Yes.

Justice William J. Brennan: Because it conflict of High Mountain Sheep?

Mr. Northcutt Ely: That is right.

Justice William J. Brennan: Yes.

Justice Byron R. White: Well, that they -- that they had priority or what?

Mr. Northcutt Ely: No, this priority issue was muted at that time.

It was really -- came in rather later if I may say so.

The notion that this permit did indeed give them priority was a very touchy one.

They filed a petition for that.

Justice William J. Brennan: Well, I take it that would -- that probably didn't come to ahead until (Inaudible), we're losing out Nez Perce, went for High Mountain Sheep.

Mr. Northcutt Ely: Yes, I don't think it had occurred to anybody --

Justice William J. Brennan: Yes.

Mr. Northcutt Ely: -- that the permit in fact gave a priority on Nez Perce.

The first time --

Justice William J. Brennan: Well, I gather their position would be if this were Nez Perce rather than High Mountain Sheep that it did.

Mr. Northcutt Ely: Yes, sir that's -- and Mr. Solomon is correct.

If the priority extended by extra laterally beyond the permit to encompass High Mountain Sheep it did indeed include Nez Perce.

But we never heard of that at the time.

Justice William J. Brennan: Well, what -- your application rejected on Nez Perce?

Mr. Northcutt Ely: No, we -- well, yes by the examiner.

We did not push it after it became apparent that the fishery problems were (Voice Overlap) --

Justice Byron R. White: (Inaudible)

Mr. Northcutt Ely: Pardon me?

Justice Byron R. White: It is to mend the drafts.

Mr. Northcutt Ely: Yes, we sought to it, the examiner denied the -- our privilege.

The Commission finally affirmed it on their final opinion to substitute High Mountain Sheep.

Justice Byron R. White: In what grounds did the examiner reject this?

Mr. Northcutt Ely: Well, he did not feel that Public Power had any right to come in with this late in the day and move to amend to substitute High Mountain Sheep.

He was just anti and the Commission overruled it, but too late to do as much good, the case was over by that time.

I thank you, Mr. Chief Justice.

Justice Hugo L. Black: May I ask you just one --

Mr. Northcutt Ely: Yes.

Justice Hugo L. Black: You say it's not material yet on -- is that it, on your viewpoint that -- Justice Douglas have asked you several times about whether your company was a municipality.

Mr. Northcutt Ely: Yes.

Justice Hugo L. Black: What is -- what kind of company is yours?

Mr. Northcutt Ely: We are called a joint operate -- joint operating agency created by a statute of the State of Washington.

Mr. Justice Douglas, this is a response to your question, I understand Mr. Justice Black.

The Washington Public Power Supply System is created as a joint operating agency under a statute of the State of Washington that authorizes public utility districts to exercise their powers jointly.

We are also a successor by Act of the Washington legislature to the Washington Power Commission which it had been set up initially to do this kind of a job to build great projects perhaps outside the state's boundaries.

The joint operating agency is a -- as a subsequent creation device of the Washington legislature described as a municipality by the Washington statute, by the Commission, and by the court below.

It is a municipal corporation comprised of 16 public utility districts within the State of Washington exercising their joint powers in this way.

Justice Hugo L. Black: It's a joint effort on the part of municipality.

Mr. Northcutt Ely: That is correct.

Justice Hugo L. Black: To take advantage of the preference provisions of the Act.

Mr. Northcutt Ely: That is right.

To do what is beyond the financial powers or anyone of them alone.

Justice Hugo L. Black: Are these districts somewhat like the rural electrification?

Mr. Northcutt Ely: In a broad sense, yes, they are locally created, locally managed by board of three elected officers within each county.

And they build and operate projects.

The State of Washington is unique in this form of organization.

About half of the population of Washington is served by the 16 public utility districts who are here exercising their joint powers.

Before I leave, may I say I haven't said anything about the fish because the fish to my mind are indeed a red herring here, this subject is covered in my reply brief.

Chief Justice Earl Warren: Well --