Review of U.S. Court of Appeals Decisions and Actions Interpreting Federal Law
- Energy Regulation. On January 25, 2016, the U.S. Supreme Court reversed the D.C. Circuit Court of Appeals and held, in FERC v. Electric Power Supply Association, that the Federal Power Act (FPA) authorizes the Federal Energy Regulatory Commission (FERC) to regulate market operators’ compensation related to “the sale of electric energy at wholesale in interstate commerce.” This directly affects wholesale electricity rates and action that affects such rates, but does not regulate retail sales or “any other sale” of electricity, which is left to the states to regulate. Because electricity rates rise dramatically during peak periods, market operators had created demand-response programs whereby they paid consumers to reduce power use during peak periods. FERC had decided that demand-response providers were to be compensated for conserving energy at the marginal locational price—or the same price paid to generators for producing energy—instead of at the marginal locational price less the rate for electricity, so long as the bids accepted by the providers saved consumers money. The D.C. Circuit vacated the “demand-response” rule, deciding that FERC lacked authority to directly regulate the retail electricity market, and that the compensation scheme was arbitrary and capricious. The Court determined that the rule was not arbitrary and capricious given FERC’s detailed explanation for its decision and lengthy response to competing views, and Chevron deference played no role in this decision; the “Chevron deference” test is set forth in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The Court noted that if FERC could not regulate wholesale demand-response rates, it would run afoul of the FPA’s core purposes of ensuring the effective transmission of electric power and protecting against excessive prices.
- Energy Regulation. On April 19, 2016, the Court, in Hughes v. Talen Energy Marketing, affirmed a decision that struck down a Maryland regulatory program that encouraged development of in-state power generation as being preempted by the FPA. The FPA vests exclusive jurisdiction over interstate wholesale electricity rates with the FERC. As part of the program, Maryland selected a company to construct a new power plant, and required that electric utilities enter into a twenty-year pricing contract with the company at a rate specified by the company. If the company was unable to clear certain prices at regional transmission organization (RTO) auction, the utilities had to cover the difference of the company’s full contract price (via a “contract for differences”). However, FERC has exclusive jurisdiction over wholesale electricity pricing and has approved the RTO auction as the sole rate-setting mechanism, thereby deeming its price just and reasonable. Because Maryland’s program adjusted interstate wholesale rates, the program infringed upon FERC’s authority and the division between state and federal regulators. The Court noted that no state is precluded from encouraging new or clean energy generation, but that it cannot do so by conditioning payment of funds on clearing certain prices at an RTO auction.
- Public Lands/Statutory Interpretation. In Sturgeon v. Frost, decided on March 22, 2016, the Court unanimously rejected a Ninth Circuit Court of Appeals interpretation of the Alaska National Interest Lands Conservation Act. However, the Court did not offer its own interpretation of the Act, instead vacating and remanding to the lower court what many have referred to as a “very hard” case. The National Park Service (NPS) had tried to enforce a nationwide ban on hovercrafts on public lands against John Sturgeon, who had used a hovercraft on a navigable river in Alaska, because the river was part of a federally delineated conservation service unit. Sturgeon claimed that river was non-public land and thus not within NPS’s jurisdiction. He cited a provision in the Act that states that “[n]o lands which ... are conveyed to the State, ... or to any private party shall be subject to the regulations applicable solely to public lands within such units.” Thus, the issue of the case was whether waters flowing through federally managed preservation areas constituted public or non-public land. The Ninth Circuit, emphasizing the word “solely,” interpreted the provision as limiting NPS’s jurisdiction over non-public lands only when dealing with an Alaska-only rule. The Court rejected this “topsy-turvy” interpretation of the statute as “implausible when read in context with the rest of the statute,” but declined to offer further guidance before remanding the case.
- Land Regulation/Tribal. Also on March 22, 2016, the Court affirmed a lower court’s decision that an 1882 law that authorized the Secretary of the Interior to open up the sale of approximately 50,000 acres of reservation land to non-Indian purchasers did not diminish the size of an Omaha Indian Reservation. Justice Thomas wrote the majority opinion in Nebraska v. Parker, and confirmed the Court’s oft-stated precedent that only Congress has the authority to regulate the size of Indian reservations, and that there was no evidence here that Congress had pared down the size of the land through the authorization.
- RICO/Offenses Committed Abroad. In the latest ruling in a case that has been litigated for many years, the federal government secured a partial victory when the Court, in RJR Nabisco v. The European Community, unanimously agreed on June 20, 2016, that the Racketeer Influenced and Corrupt Organizations Act (RICO), a law that was enacted to target organized crime, can apply to offenses committed abroad, so long as the government is prosecuting the offenses and they violate a predicate statute that has extraterritorial effect. The Court noted that although RICO, by its terms, does not explicitly apply in foreign countries, many statutory predicate acts apply to overseas conduct. However, the Court divided 4 to 3 in its decision that private plaintiffs filing civil suits must prove a domestic injury. With respect to RICO’s private right of action, the Court held that the Congress, in enacting RICO, did not clearly indicate that it intended to provide a private right of action for injuries suffered outside of the United States. Unlike the ruling in Kiobel v. Royal Dutch Petroleum Company in 2013, the presumption against extraterritorial effect of U.S. laws can be overcome.
Download: Supreme Court’s Environmental and Administrative Law Decisions in 2015-2016 Term
* Pillsbury summer clerk Brittney Sandler made significant contributions to this article. Sandler is currently enrolled at Georgetown University Law Center where she serves as editor for the Georgetown Law Journal and as a legal research and writing fellow.