Northern California Power Agency v. United States

          Appeals from the United States Court of Federal Claims in No. 1:14-cv-00817-TCW, Judge Thomas C. Wheeler.

          Jeffrey Schwarz, Spiegel & McDiarmid LLP, Washington, DC, argued for plaintiffs-appellants. Also represented by Lisa Dowden, Katharine Mapes.

          P. Davis Oliver, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Joseph H. Hunt, Robert Edward Kirschman, Jr., Franklin E. White, Jr.

          Before Moore, Bryson, and Chen, Circuit Judges.

          Bryson, Circuit Judge.

         This action was brought in the United States Court of Federal Claims by the Northern California Power Agency and three California cities-the City of Redding, the City of Roseville, and the City of Santa Clara. The plaintiffs all purchase hydroelectric power that is generated by power plants under the jurisdiction of the United States Bureau of Reclamation ("Bureau"), an agency within the Department of the Interior. The plaintiffs are seeking to recover payments that they claim were unlawfully assessed and collected by the Bureau in violation of section 3407(d) of the Central Valley Project Improvement Act ("CVPIA"), Pub. L. No. 102-575, 106 Stat. 4706, 4706-31 (1992).

         The dispute turns on the meaning of a provision in section 3407(d) of the CVPIA that requires that certain payments made by recipients of power and water from the project be assessed in the same proportion, to the greatest degree practicable, as other charges assessed against recipients of water and power from the project. After a trial on liability, the Court of Federal Claims concluded that the Bureau's interpretation of the statute was correct and dismissed the plaintiffs' complaint. N. Cal. Power Agency v. United States, 139 Fed.Cl. 74 (2018) ("NCPA"). We disagree with the court's interpretation of the statute, and we therefore reverse and remand for further proceedings consistent with this opinion.

         I

         A

         In the 1930s, Congress enacted legislation authorizing the federal government to operate a water management program known as the Central Valley Project ("CVP"). The CVP, which is the nation's largest federal water management project, is operated by the Bureau of Reclamation and distributes water throughout California's Central Valley.

         In addition to distributing water, the CVP generates hydroelectric power through dams and power plants built as part of the project. The CVP sells that power to cities and other purchasers through its agent, the Department of Energy's Western Area Power Administration. The rates charged to CVP water and power customers reimburse the Bureau for the proportionally allocated costs of building, operating, and maintaining the CVP. Water customers are responsible for roughly seventy-five percent of those costs. Power customers, including the plaintiffs, are responsible for the remaining twenty-five percent. Those allocations are intended to reflect the relative benefits that water and power customers derive from the CVP. Water customers are responsible for a larger proportion of project costs because the CVP is primarily a water-focused project.

         More than half a century after the CVP was first established, Congress enacted the CVPIA to address the environmental impact of the CVP, among other things. See CVPIA, Pub. L. No. 102-575, § 3402, 106 Stat. 4706 (1992). As part of the CVPIA, Congress created a "Restoration Fund," which was to be used to help pay for CVPIA activities, including the restoration of fish and wildlife habitats that the project had disrupted. In order to raise money for the Restoration Fund, Congress directed the Secretary of the Interior to assess several types of charges to CVP water and power customers. One of those charges, known as Mitigation and Restoration payments ("M&R payments"), is at issue in this case.

         The plaintiffs seek to recover some of the M&R payments that they claim were unlawfully assessed by the Bureau in violation of the CVPIA. Specifically, they allege that the Bureau has ignored the "proportionality requirement" in the statute, which provides that M&R payments "shall, to the greatest degree practicable, be assessed in the same proportion . . . as water and power users' respective allocations for repayment of the Central Valley Project." CVPIA § 3407(d), 106 Stat. at 4727-28. Although the power customers' allocated share of the CVP repayment costs has been only about twenty-five percent of the total repayment costs, the Bureau in recent years has charged the power customers nearly half of the total M&R payments.

         B

         Section 3407(b) of the CVPIA authorizes up to $50 million per year to be appropriated to the Secretary of the Interior from the Restoration Fund to carry out the habitat restoration and other programs authorized by the statute. CVPIA § 3407(b), 106 Stat. at 4726. Sections 3407(c)(2) and 3407(d) govern the amount of M&R payments the Bureau can assess and collect each year to replenish the Restoration Fund. As the parties agree, section 3407(c)(2) describes two methods for calculating M&R payment collections. The parties ...