Appeals court: FERC hydro license trumps state damage claims

A federal appeals court has ruled that state law-based property damage claims against a hydropower licensee are pre-empted by the Federal Power Act if the licensee acted in compliance with its Federal Energy Regulatory Commission license.

The 5th U.S. Circuit Court of Appeals rejected an appeal by 28 owners of property located downstream of the 81-MW Toledo Bend hydroelectric project on the Sabine River in Louisiana and Texas. The property owners had appealed the lower court dismissal of their lawsuit against a project co-licensee and an operating utility due to property damage caused by flood gate releases from Toledo Bend Dam (No. 2305) in October and November 2009.

The Sabine River Authority of Texas and the Sabine River Authority, State of Louisiana, are joint licensees for the Toledo Bend project located on the Texas-Louisiana border.

The plaintiffs, led by property owner Jeff Simmons, sued the Sabine River Authority, State of Louisiana; Entergy Corp., which buys project power and operates the project for the co-licensees; and the Louisiana Department of Transportation and Development. In addition to seeking damages, the plaintiffs asked the lower court for a permanent injunction preventing the defendants from opening Toledo Dam flood gates “in such a manner as will cause the inundation of the downstream properties of the plaintiffs.”

In an Oct. 9 ruling the 5th Circuit upheld the lower court’s dismissal of the case, noting first of all that FERC initially had been asked to modify project operations during floods. Finding the dam had no significant effect on flooding and could not provide significant flood control benefits, FERC refused to change project operations.

The subsequent lawsuit was filed in Louisiana state court, but the defendants won an order moving it to federal court because federal courts have jurisdiction over duties and liabilities created by the Federal Power Act. The federal district court dismissed the case, finding the FPA pre-empts property damage claims based on state law. The appeals court agreed with the dismissal.

“Our analysis leads us to conclude that the FPA pre-empts property damage claims based in state tort law where the alleged damage is the result of ‘negligently’ operating in compliance with a FERC-issued license,” the 5th Circuit said.

The judges quoted the Supreme Court case First Iowa v. Hydro-Electric Co-op v. Federal Power Commission of 1946, noting state permits cannot be required for FERC-licensed projects because that would allow a state agency a veto power over a federal project, subverting FERC’s comprehensive control over a project.

“Because the state law property damage claims at issue here infringe on FERC’s operational control, we hold that they are conflict pre-empted,” the appeals court said. “Essentially, the plaintiffs allege that defendants were negligent because they failed to act in a manner FERC had expressly declined to require. But FERC, not state tort law, must set the appropriate duty of care for dam operators.”

The court did say property owners could sue a hydro licensee for damages in a circumstance in which the licensee failed to conform to FERC’s guidelines, since that would not conflict with FERC’s operational control of the project.

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