Under the decision of the Supreme Court in F. P. C. v. Union Electric Co. (Taum Sauk), 381 U.S. 90, 85 S. Ct. 1253, 14 L. Ed. 2d 239 (1965), hydroelectric developments situated on the headwaters and tributaries of navigable waterways, and previously thought to be beyond the licensing authority of the Federal Power Commission because they did not affect "downstream navigability," were brought within the ambit of the Commission's jurisdiction if they "generate energy for an interstate power system."1

Petitioner's facilities were built before Taum Sauk and the Commission had erroneously held them free from the licensing and provisions of section 23(b) of the Federal Power Act, 16 U.S.C. § 817(b),2 because of the Commission's view of the law at that time that since they did not affect "downstream navigability," it followed that they could not bear the necessary relationship to interstate commerce. The question for decision is whether these facilities may now be subjected to the licensing provisions if they in fact affect interstate commerce, thus satisfying the expanded jurisdictional base announced in Taum Sauk.

From 1940 to 1949, Nantahala Power and Light Company, a wholly-owned subsidiary of the Aluminum Company of America (ALCOA), filed with the Commission in accordance with section 23(b) "declarations of intention" to construct seven hydroelectric developments in the Little Tennessee River basin. After investigation, the Commission found that none of the proposed developments would affect "the interests of interstate or foreign commerce," which, at that time, meant only that the Commission apprehended no effect on downstream navigability. Construction of the facilities without licenses was accordingly authorized by the Commission, upon compliance with state law. The last of the seven developments was completed in 1955.

Shortly after the decision in Taum Sauk, the Commission wrote to owners of unlicensed hydroelectric developments, including the petitioner, requesting them to file license applications for facilities which that decision brought within the purview of the Commission. Nantahala responded with a petition for a declaratory order that its seven developments were exempt from the licensing provisions of the Act. Accepting for purposes of decision the facts as set forth in Nantahala's petition, the Commission held that licenses were obligatory. The present appeal followed denial of Nantahala's petition for reconsideration.

In our court, Nantahala renews the three arguments it presented to the Commission, and we shall deal with each in turn.3

* Petitioner's principal contention is that a Commission finding under section 23 (b) that a proposed facility would not affect commerce clothes the developer with irrevocable congressional permission to construct and operate the development, without his ever needing to apply for and obtain a license.

Nantahala acknowledges the principle, as indeed it must, that it is within the power of Congress to delegate to the Commission authority periodically to review and revise the status of developments earlier found not to affect commerce;4 if a change in the facts or the law warranted, the Commission could then require that licenses be secured.5 It maintains, however, that a uniform course of Commission interpretation, as well as the legislative history of the Act, supports the view that Congress expressly refrained from vesting the Commission with continuing supervisory jurisdiction, once it has determined that the development would not affect commerce.

In harnessing the latent power in our thousands of waterways, complex problems emerge regarding the most efficient methods of creating and channeling into a unified system the immense volume of kilowatt hours of energy required to meet the needs of the nation. Through the imaginative exercise of its broad regulatory authority, which in significant measure is implemented by the imposition upon licensees of various terms and conditions of operation, the Commission plays a vital role in insuring that our power supply is kept apace with the demand.6 The recent black-out of the northeastern section of the United States furnishes dramatic illustration of the vital national interest in the proper regulation of facilities for the generation of electricity. It is therefore not without good reason that a court will hesitate to read into section 23(b) a congressional purpose to grant to Nantahala, and similarly situated owners, an indefeasible right to be free from the licensing provisions of the Act.

To counter the force of these considerations, petitioner mounts the argument, based upon early statements by the Commission and its employees and testimony before Congress, that in order to foster private investment in the development of electrical energy, Congress deliberately chose to offer to investors the incentive of license-free operation, after an initial Commission determination that the proposed facilities would not affect commerce. Nantahala states that it constructed the seven developments with which we are here concerned in reliance upon the prospect of independence from the burdens of licensed operation, and that this reliance interest is entitled to protection.

A sampling of the statements and testimony stressed by Nantahala as underpinning its position is helpful in illuminating the present controversy. The First Annual Report of the Commission, published in 1921, contained the following observation:

"If the Commission finds that the interests of interstate or foreign commerce are not affected, the act grants authority to proceed in compliance with State law, and the declarant is freed from any subsequent liability to the United States under any existing or future acts of Congress regardless of conditions that may thereafter arise * * *. It is only when a declaration [of intention] is filed and a decision rendered in the manner prescribed in the act that the finding of the Commission becomes conclusive and binding both upon the declarant and the United States."7

Three years later the Commission commented:

"Under these earlier statutes and decisions there was reserved a continuing power to the Secretary of War to require the removal or alteration of obstructions to accommodate changes in the mode of navigation or in the extent of use dependent upon economic conditions. [Citation omitted.] Section 23 of the Federal water power act was an evident effort to give to power structures in nonnavigable streams a more certain tenure. Once the structure was authorized under this section it becomes impossible for the Secretary of War to order changes to accommodate a traffic created by changed conditions."8

In 1927, the Chief Counsel of the Commission identified two purposes to be served by section 23, as follows:

"(1) to protect the interests of navigation * * * (2) to protect applicants by providing a means whereby they can have an authoritative ruling before investment is made."9

The views expressed in the above quoted statements were, petitioner asserts, presented to, and accepted by, Congress in 1935 during consideration of the Federal Power Act. They were submitted by the Solicitor of the Commission in the following language:

"The effect of section 23 is to permit a proper determination in advance of the construction of the project as to whether or not it will affect interstate and foreign commerce. That determination having been made, a license is required or it is not required under the act according to the facts that are shown. If it is a fact that interstate or foreign commerce will not be affected the construction work can be done, without a license. If the facts show that interstate or foreign commerce will be affected the construction work cannot be done without a license."10 (Emphasis added; the significance of the italicized language is discussed later in this opinion.)

Petitioner also points to testimony before a House Subcommittee in 1947, some years after the passage of the 1935 Act, by the General Counsel of the Commission, to the effect that:

"The Commission cannot reserve jurisdiction under the Federal Power Act. If they find the proposed development does not affect interstate commerce, it cannot reserve jurisdiction."11

We are not persuaded that these expressions establish a consistent course of Commission interpretation, or provide substantial support for a finding that the last sentence of section 23 (b) manifests congressional approval of the position urged upon us. More significant, more precise and more authoritative than the observations of the Commission and its employees is the unadorned language of the Act.12 With respect to a development whose operation the Commission has determined will affect commerce, the penultimate sentence of section 23(b) provides that the developer "shall not construct, maintain, or operate such dam or other project * * * until it shall have applied for and shall have received a license * * *." In striking contrast, if the Commission finds that the project will not affect commerce, the final sentence of that section only authorizes the developer to "construct such dam * * * upon compliance with State laws."

Interpreted literally, deletion from the latter phrase of the words "maintain or operate" would support the conclusion that Congress meant to permit license-free "construction" only of developments found to have no presently discernible effect on commerce; "maintenance and operation" would still be subject to the licensing provisions. With Nantahala, however, we are of the view that a purely linguistic approach would not fully satisfy the search for the congressional scheme. But we do not agree with the suggestion in petitioner's brief that the words "maintain or operate" were deleted because "Congress assumed that if there were no effect on interstate or foreign commerce, the proposed dam would not be subject to any of the numerous requirements imposed upon licensees." One should hesitate to attribute to Congress a vision so shortsighted, designedly excluding the possibility that changed circumstances may create an effect on commerce where none previously existed. It is more reasonable to inquire whether, in the circumstances, there is justification for refusing to give any tangible effect to the obvious modification of parallel clauses in consecutive sentences.

It requires no subtle straining to arrive at a more sensible interpretation of section 23, in light of the history and purpose of the Act. Our view can be succinctly stated in the following propositions:

(1) Once a finding of lack of effect on commerce is made, section 23 (b) authorizes the developer to construct the facility without a license.

(2) Construction having been completed, the Commission is without authority later to say that the finding of lack of effect on commerce was in error and that therefore the developer violated the law by failing to obtain a license.

(3) As long as the Commission adheres to the view that the development has no effect on commerce, license-free maintenance and operation of the facility is authorized.

(4) When, however, the Commission determines that a change in the underlying facts, or a correct exposition of the applicable law, discloses that the facility does affect commerce, continued maintenance and operation is conditioned upon the procurement of a license.

Once the development is found to affect commerce, no grant of immunity from licensing can fairly be implied for maintenance and operation, as well as construction.

"[t]he outgrowth of a widely supported effort of the conservationists to secure enactment of a complete scheme of national regulation which would promote the comprehensive development of the water resources of the Nation, * * * instead of the piecemeal, restrictive, negative approach of the River and Harbor Acts and other federal laws previously enacted.

It was the major undertaking involving a major change in national policy. (Footnote omitted.)"

First Iowa Hydro-Elec. Co-op. v. F.P.C., 328 U.S. 152, 180, 66 S. Ct. 906, 919, 90 L. Ed. 1647 (1946).

Consistent with this felt need, section 23(b) amended section 23 of the Federal Water Power Act to impose a mandatory requirement for declarations of intention prior to construction.13 As the Commission declared in the declaratory order in this case, "[s]ection 23(b), * * *, was added to the Act in 1935 to give the Commission more effective control of the hydroelectric industry."14 To attribute to pre-1935 statements controlling effect in determining the scope of that section would undermine this congressional purpose,15 for developments once exempted by the Commission from its licensing authority could never be subjected to any sort of supervision or regulation, and the goal of "comprehensive development of the water resources of the Nation" would be severely frustrated.16

The abbreviated excerpt from the General Counsel's 1947 remarks, made after the Act was amended, concerning the Commission's power to reserve jurisdiction, in no way undermines our position, for the General Counsel went on to say that in his opinion the language of section 23(b), which gives consent

"for the construction of a proposed development upon compliance with State laws [was] unnecessary because if the stream is subject to Federal jurisdiction it is so regardless of what the Federal Power Commission may or may not do. If it is not subject to Federal jurisdiction Congress or the Federal Power Commission or any other Federal agency cannot make it so."17

There is no indication that the General Counsel thought that the Commission lacked jurisdiction over developments which, while initially not found subject to federal regulation, subsequently are determined to exert an influence on commerce.

The Commission, itself, has provided the complete answer to the Company's claim that that body has uniformly declined to reserve jurisdiction over developments once found not to affect commerce. In approving unlicensed construction of four of petitioner's seven developments here involved, the Commission said:

"However, it should be plainly stated that further development of the watershed of the Little Tennessee River may so change the material facts upon which we based our findings as to individual projects, that reexamination of the effect upon the navigable capacity of the Little Tennessee River of a series of developments in combination may be required. It is conceivable, therefore, that while there may be no basis at the time a declaration of intention is filed for requiring a license for a single development, such a development in combination with others in the watershed may later be found to affect the interest of interstate commerce and hence Federal licenses might then be required for all the developments in the headwaters."

8 F.P.C. 1117, 1119 (1949). The Commission accordingly qualified its formal finding with the proviso that

"these findings shall not be construed as relating to any effects upon the interests of interstate commerce which might be caused by any other hydroelectric developments, existing or prospective, individually or in combination with the developments involved herein, within the basin of the Little Tennessee River."

The Company argues that the above quoted proviso did not reserve jurisdiction, but merely gave notice that the Commission's findings of no effect on commerce "should not be construed as barring the possibility that licenses might be required for other developments." Plainly, this misconceives the thrust of the proviso. In unequivocal language the Commission was admonishing the applicant that while Nantahala's facilities might not then have the necessary impact on commerce, these facilities plus those that might later be constructed (by Nantahala or by others) could in combination well exert a substantial enough effect. In that event, Nantahala might be required to apply for licenses covering developments already built and in operation.

In concluding this part of our discussion, it is worth recalling that, as heretofore noted on page 8, the Commission's Solicitor, in his testimony before Congress, alluded to "construction work" only as being freed from the licensing provisions of the Act, by a finding of lack of effect on commerce.

We turn next to petitioner's asserted reliance upon license-free operation. The ready answer is provided by the Supreme Court, which said in Louisville Bridge Co. v. United States, 242 U.S. 409, 420, 37 S. Ct. 158, 161 (1917):

"It is true that Congress must have contemplated that a large investment of private capital would be necessary, and that the bridge when once constructed could not be abandoned or materially changed without a total or partial loss of value. This is a very grave consideration, and we have not at all overlooked it; but we cannot deem it controlling of the question presented. It may be assumed that the parties foresaw, what experience since has demonstrated, that it would be many years before changing conditions of navigation would render the bridge out of date, and that the investors were satisfied with the prospect of the profit to be gained from the use of the bridge in the meantime."

There a bridge owner failed in its attack on an order of the Secretary of War requiring it to undertake major structural changes in the bridge, which when built exceeded the minimum clearances mandated by statutes in force at the time of construction. In the present case, the burden imposed on Nantahala is no greater — indeed it would seem less onerous — for it need only conform its future operations to the reasonable regulations promulgated by the Commission and imposed alike upon all owners of developments that affect commerce.

In view of the national interest in regulating our natural resources of electrical power, we are justified in protecting only those "reliance" interests that are based upon exemptions clearly delineated by Congress. Unless the inference is unambiguous and compelling, a court would not be warranted in upholding a claim that Congress meant to create an indefeasible private right springing from an initial exercise of the Commission's regulatory authority, that would survive and remain immune from future regulation under any circumstances. This thought finds authoritative expression in the following language of the Court in Louisville Bridge:

"* * * when private rights of an indefeasible nature are sought to be derived from regulatory provisions established in the exercise of this power [to regulate commerce], the case is peculiarly one for the application of the universal rule that grants of special franchises and privileges are to be strictly construed in favor of the public right, and nothing is to be taken as granted concerning which any reasonable doubt may be raised. As this court, speaking through Mr. Chief Justice Waite, declared in Newport c & C. Bridge Co. v. United States, 105 U.S. 470, 480, [26 L. Ed. 1143, 1147:] `Congress, which alone exercises the legislative power of the government, is the constitutional protector of foreign and interstate commerce. Its supervision of this subject is continuing in its nature, and all grants of special privileges, affecting so important a branch of governmental power, ought certainly to be strictly construed. Nothing will be presumed to have been surrendered unless it was manifestly so intended. Every doubt should be resolved in favor of the government.'"

242 U.S. at 417-418, 37 S. Ct. at 160.

Nantahala misconstrues the impact of Louisville Bridge when it attempts to distinguish that case on the ground that there

"* * * the question was whether Congress could revoke by statute earlier special acts granting permission to construct a bridge across a navigable water of the United States. In the instant case Congress has not taken any action to revoke its permission. It is the Commission, created by the same Act that provides the Congressional permission, that is attempting to revoke such permission without Congressional authorization and in derogation of specific provisions of the statute."

In Louisville Bridge, the investor argued that the earlier statute gave him an "irrevocable franchise" to construct and maintain the bridge. Paralleling the Bridge Company's argument, almost in its very words, the Power Company here contends that section 23(b) affords it "indefeasible permission" to operate its developments without licenses. The task here, as in Louisville Bridge, is to ascertain the extent of the immunity conferred by Congress. We reject as irrelevant the issue framed by Nantahala, whether the Commission is empowered unilaterally to retract a congressional grant.

Nantahala suggests that acceptance of the Commission's position carries with it the "anomalous result" that developers whose projects were initially found to affect commerce would be in a more enviable position than those whose projects were initially found not to affect commerce, but found to affect commerce sometime after construction. Only in the former case, Nantahala reasons, would the developer have had the opportunity to weigh all relevant considerations, including licensed rather than unlicensed operation, before construction.

The anomaly is more fanciful than real. The greater latitude afforded the developer who enjoys a period of years of license-free operation,18 may, in terms of financial reward, be more than adequate to offset the uncertainty said to attend the development's future status. However this may be, on the record before us, it cannot be said that the utility is being shortchanged, or stands in danger of being seriously disadvantaged in the future. That investors have not hesitated to construct facilities which from their inception were subject to licensing is evidence that the financial yield of regulated developments is sufficiently attractive to overcome any actual, as opposed to theoretical, unfairness to Nantahala.

What we have said to this point answers the Company's contention that the Commission may not employ its ancillary administrative powers, conferred in section 4(g) of the Act,19 or the doctrine that an administrative agency has inherent power to correct mistakes of law,20 to "extend the scope of Commission jurisdiction under section 23(b)." Since, as shown, Congress never intended that a determination of lack of effect on commerce would forever oust the Commission of jurisdiction, it follows that the Commission had authority to issue the order under review.

It is therefore not necessary to rest decision on the ground that section 4(g) affirmatively reflects a strong congressional purpose to vest broad continuing power in the Commission to regulate the use of navigable streams and "to issue such order as it may find appropriate, expedient, and in the public interest * * *." In no event would we be disposed to accept the Company's view that the section is merely procedural. Not only is the section physically separated from the procedural provisions,21 but it evinces a meticulous design to conserve the national interest. In Union Electric Co. v. F.P.C., 326 F.2d 535 (8th Cir. 1964), reversed on other grounds, 381 U.S. 90, 85 S. Ct. 1253, 14 L. Ed. 2d 239 (1965), the Eighth Circuit, while denying Commission jurisdiction on the theory of interstate transmission of electricity, nevertheless stated that:

"If in the operation of the project it later develops at any time in the future that the navigability [the traditional basis of Commission jurisdiction, see note 1, supra, to which the Eighth Circuit erroneously held the Commission was restricted] of the Black River is impaired or threatened to be impaired, the Commission would have authority under § 4(g) of the Act to issue an appropriate order, including an order to prevent further operation of the project without a license." (Emphasis added.)

326 F.2d at 553.

The second line of defense interposed by Nantahala is that to require it to obtain licenses covering the seven developments would amount to an unconstitutional taking of property without just compensation, in violation of the Fifth Amendment.

The argument is rather involved. It is premised upon section 14 of the Act, 16 U.S.C. § 807, which provides that the United States may, at the expiration of the license period, "take over" any development, in return for which it shall pay "the net investment of the licensee * * * not to exceed the fair value of the property taken, * * *."22 (Emphasis added.) The difference between the net investment in the seven developments and their fair value at the time of recapture is the amount by which it is asserted that just compensation might be denied.23

The recapture provisions of the Act have survived constitutional attack when applied to developments in navigable waterways, or facilities so situated as to affect them.24 The rationale of these decisions, according to petitioner, is that with respect to navigable waterways, there exists a dominant federal servitude that gives the federal government the unfettered right to prohibit all construction.25 On the theory that the greater right includes the lesser, petitioner acknowledges that the federal government may therefore grant the right to construct on any terms it chooses, including recapture at less than fair value.

With respect to the seven developments involved in this appeal, however, petitioner maintains that the Commission's finding that they exert no influence on down stream navigability negates the existence of a dominant federal servitude. According to petitioner's contention, no property right of the federal government being at stake, the assertion of federal authority is based exclusively upon the government's right to regulate commerce — specifically the interstate transmission of electricity. Where, as here, the activity in commerce has not been found injurious to the public health, the argument runs, Congress may not prohibit it entirely but may subject it to reasonable regulation only, which, it is asserted, does not encompass recapture at less than fair value.

We do not find it necessary to evaluate this labored argument, which is based upon a conceptual distinction bearing no relationship to the realities in the regulation of the national power system, for we think that, on the record before us, decision of the fine-spun Fifth Amendment question would be premature.

On oral argument of this appeal, we were informed that in 1968, upon expiration of the earliest licenses, granted for not exceeding 50 years, the Commission will have its first opportunity to consider license renewals. No indication is available as to what the Commission's policy may then be in this regard. If Nantahala now applies for and obtains licenses, they will not expire for a number of years.26 There is absolutely no basis for a reasoned prediction that the Commission will attempt to invoke the recapture provisions upon expiration of the licenses to be issued for the seven developments. Neither can one predict with any measure of assurance that if recapture is sought, the fair value at the time of recapture will exceed the net investment. Also, possible future changes in the bed of the Tennessee River, or its tributaries or the use of riparian lands, may create an effect on "downstream navigability," and the developments may thereby become subject to what even Nantahala acknowledges as the government's limited right of recapture at less than fair value. Thus, not only the possibility of recapture, but the possibility of recapture upon terms raising Fifth Amendment questions, is so speculative that the constitutional question is obviously not ripe for decision.

The petitioner's third and final proposition is that it is exempt from licensing by virtue of section 26a of the Tennessee Valley Authority Act, 16 U.S.C. § 831y-1, because of its relationship to the TVA.27 Petitioner contends that in light of the Fontana Agreement,28 which gives the TVA the right to control the impounding and releasing of water at the seven plants, and also makes available to the TVA all energy generated at the plants, the TVA "operates" the developments within the meaning of the exemptive provision of section 26a.

ALCOA unsuccessfully advanced the identical argument to the Commission in 1954, with respect to other facilities owned by it.29 Nantahala criticizes the earlier decision on the ground that there the Commission unduly restricted the scope of the word "operate" by excluding from its reach all developments except those physically operated by the TVA.

The terms of the agreement disclose no support for the claim to exemption. True, under the agreement petitioner does not retain an unfettered right to generate electricity when, where, and in amounts it chooses, and it is subject to regulations imposed by the TVA in light of that corporation's responsibility to co-ordinate all power operations within the Tennessee River watershed.

However, were we to infer from these incidents of control, an "operation" of the facilities by the TVA in the broad sense advocated, the result would be startling indeed. It would, in effect, exempt from the Power Act's licensing requirements all developments in the Tennessee River system, for anyone wishing to construct a power facility in the Tennessee River watershed must first obtain approval of the governing Board for a plan of operation that will harmonize the activities of the facility with those of other developments in the Tennessee River system.30 All owners would be freed from regulation except to the limited extent outlined in agreements similar to the Fontana Agreement, which is solely concerned with the "coordinated operation of power facilities" in the Tennessee River system.31 The Commission, whose interests are broader than those of the TVA, and certainly no less important, would be precluded from implementing needed improvements or modifications consistent with the national interest.

In addition, under section 20 of the Federal Power Act, licensed utilities are restricted to charging rates "reasonable, nondiscriminatory, and just to the customer * * *."32 The Commission also retains certain supervisory powers under section 10(d) over the financial operations, accounting practices, and rates of return of licensed utilities.33 On the other hand, developments "constructed, operated or maintained" by the TVA, because of their character as "government corporations," are not subject to similar restrictions. We are of the view that the more reasonable construction of the section 26a exemption is that made by the Commission in 1954, namely, that only facilities either owned by the TVA, or whose actual day-to-day physical operation is undertaken by the TVA, are exempt from the licensing provision of the Act. There is no justification for converting what was designed as a limited exemption on behalf of a government corporation into a sweeping exclusion that may be availed of by every private power enterprise operating within the Tennessee River watershed.

We do not overlook the petitioner's earnest representation that to bring its facilities within the Commission's regulatory power would, in light of the control exercised by the TVA under the Fontana Agreement, subject it to two masters, who may not always see eye to eye. We think, however, that the fear is exaggerated. Article VI(1) (a) of the amended agreement, set forth in the margin,34 provides ample basis for an accommodation among the interested parties, which will obligate Nantahala to obey only one set of consistent directives.

We hold that the Commission is empowered to require petitioner to apply for and obtain licenses for the seven facilities here at issue. Because this Company has operated the developments over the past 12 to 25 years in good faith reliance upon Commission findings that they do not affect commerce, a question possibly arises whether the Commission is entitled to back-date the licenses, and thereby shorten their maximum 50 year term, to the respective dates of completion of the projects.35 We refrain from expressing any opinion on this point, or in respect to other adjustments that may appropriately be made in view of the delayed licensing. If, in proceedings following this decision, an issue of this character should be determined adversely to the applicant, it may, of course, seek review.

For the reasons stated, the Commission's order will be enforced.

Enforced.