In renewing federal hydropower licenses, The Federal Energy Regulatory Commission does not have to consider the hypothetical question of what the environmental conditions would be if the dams in question were never built, the Ninth U.S. Circuit Court of Appeals has ruled. The Ninth Circuit also ruled that while FERC must consider environmental concerns raised by the Interior and Commerce Departments, the commission has final discretion to address those concerns. But in writing the unanimous opinion, Ninth Circuit Judge Kim McLane Wardlaw, went out of her way to make it clear that while FERC's environmental decisions were legal, they were not necessarily good. "We express no opinion on the merits of the Commission's environmental findings," she wrote. "Moreover, we stress that nothing we have said should be construed as eviscerating the pro-environmental object beneath the ECPA amendments." ECPA is the Electric Consumers Protection Act of 1986, which established the relicensing procedures. The ruling came in a case in which several environmental groups and the Interior Department challenged FERC's decision to renew the federal hydropower permits for two dams located on the McKenzie River in Lane County, Oregon. The environmental groups argued that FERC had not conducted adequate environmental analysis under the National Environmental Policy Act, and also had violated sections of the Federal Power Act that require construction of fishways when the Interior and Commerce Secretaries claim those fishways are appropriate. In 1997, FERC renewed the hydropower licenses of the 14.5-megawatt Leaburg Hydroelectric Project, originally built in 1930, and the 8-megawatt Walterville Hydroelectric Project, originally built in 1911, for a period of 40 years. The Leaburg project, which creates a 57-acre backwater, has two fish ladders, only one of which is operational. The Walterville project has no fish screens. Together the projects divert water out of the McKenzie River for a total of 13 miles. The proposal to renew the license called for a slight increase in the project's generation capacity, as well as increases in the water level at Leaburg Lake and minimum flows in the bypasses. The Interior Department and the Commerce Department proposed a total of 56 environmental mitigation measures. FERC adopted some of them, including the construction of fish ladders and fish screens. But the commission rejected many others as being outside the scope of the FPA provisions that give Interior and Commerce the power to require "fishway prescriptions." In considering the license renewals, FERC prepared an environmental impact statement under NEPA. The EIS included five alternatives, including a "no-action" alternative that contemplated a continuation of the existing operation. Other alternatives included issuing the permit with more environmental mitigations, issuing a non-power permit that would have retained the dams without generating power, or retiring the project. After issuing the final EIS, FERC initiated an "alternative dispute resolution" effort in an attempt to reach a negotiated solution. These meetings narrowed the points of controversy to three areas: (1) whether to raise the water level of Leaburg Lake, (2) whether to install diversion dams at the Walterville facility, and (3) what the appropriate minimum flows at the bypasses should be. FERC resolved these issues to its satisfaction, but Interior Secretary Bruce Babbitt subsequently filed modifications requiring more fish screens. Claiming that it was not required to abide by this modification, FERC rejected these additional requirements. Subsequently, the Interior Department, the National Marine Fisheries Service, Oregon Department of Fish & Wildlife, and a group of environmental organizations filed suit. In court, the resource agencies and the environmental groups argued that FERC had chosen the wrong "baseline" scenario for the EIS analysis. They claimed that rather than using existing conditions, FERC should have chosen a theoretical reconstruction of what the McKenzie River would be like at present if the two dams had not been built. The court rejected this argument. Among other things, Judge Wardlaw noted that the congressional conference report on the ECPA in 1986 stated that "[i]n exercising its responsibilities in relicensing, the conferees expect FERC to take into account existing structures and facilities in providing for these nonpower and nondevelopmental values." Even if the dams had not been erected, the valley would not be the same place today as it was before 1911, the court said. Judge Wardlaw wrote: "It defies common sense and notions of pragmatism to require the Commission of license applications to ‘gather information to recreate a 50-year-old environmental base upon which to make present day development decisions.' The past fifty years of development in the McKenzie River Valley has reconfigured its environmental makeup, introducing changes that include differences in land use, water flows, water quality, river geomorphology, fish species composition, and fishery management practices. To the extent a hypothetical pre-project or no-project environment can be recreated, evaluation of such an environment against current conditions at best serves to describe the current cumulative effect on natural resources of these historical changes." The Ninth Circuit panel also rejected the argument of the resource agencies and environmental groups that FERC did not adequately consider the alternative of removing the dams. The resource agencies and environmental groups also argued that FERC, under § 10(j) of the Federal Power Act, must accede to the Interior and Commerce secretaries on "fishway prescriptions." The court disagreed. "The Commission must afford ‘significant deference to recommendations made by state (and federal) fish and wildlife agencies for the "protection, mitigation, and enhancement" of fish and wildlife,'" wrote Wardlaw, quoting from Kelly v. Federal Energy Regulatory Commission, 96F.3d 1482 (D.C. Cir. 1996). "Nevertheless, Congress clearly has ordained that this deference must yield to the Commission's reasoned judgment in those instances where the parties cannot agree." The Case: American Rivers v. FERC, No. 98-70079, and Oregon Department of Fish & Wildlife v. FERC, No. 98-70084, 99 C.D.O.S. 6411. The Lawyers: For American Rivers: Todd D. True and Kristen L. Boyles, Earthjustice Legal Defense Fund, Seattle. For Oregon Department of Fish & Wildlife: Jas Jeffrey Adams, Oregon Department of Justice, Salem, Oregon. For U.S. Department of the Interior: Sean H. Donahue, U.S. Department of Justice, Environmental & Natural Resources Division, Washington, D.C. For FERC: John H. Conway and John S.L. Katz, FERC, Washington, D.C.