After reviewing competing applications for a preliminary permit to investigate development of a hydroelectric facility, the Federal Energy Regulatory Commission (the Commission) determined that the two proposals submitted by parties of equal statutory priority were equally well adapted to serve the public interest and in accordance with its regulations awarded the preliminary permit to the party whose application was filed first. We hold that substantial evidence supports the Commission's decision and that it did not act arbitrarily or capriciously in granting the preliminary permit to the applicant that filed first.

The George W. Andrews Lock and Dam on the Chattahoochee River that forms the boundary between Georgia and Alabama is operated by the United States Army Corps of Engineers (the Army Engineers). On March 7, 1979, Alabama Electric Cooperative, Inc. (Coop) filed an application for a preliminary permit for a proposed hydroelectric power project at the existing Andrews dam site. Nine days later on March 16, 1979, Municipal Electric Authority of Georgia (Georgia) filed a competing permit application for a project at the same dam site. On August 23, 1979, the Commission issued public notice of the two competing applications. In response to that public notice, the Army Engineers wrote to the Commission and gave its approval to the issuance of preliminary permits provided that the applicants adhered to the Corps' "General Requirements for Non-Federal Hydroelectric Plant Construction at U.S. Army Corps of Engineers Water Resources Projects." Those requirements necessitate that the "(d) esign, construction and operation of all power facilities that will be an integral part of (a) dam" be approved by the Army Engineers. Brief of Commission at Addendum A3. The Army Engineers also recommended that applicants "closely coordinate their studies" for the projects with the Corps. Id. at A2.

On October 25, 1979, the City of Dothan, Alabama (Dothan) filed a protest against the Coop and Georgia applications and petitioned for intervention in both dockets. The following day Dothan filed a notice of its intent to file its own competing application. And on December 21, 1979, over nine months after Georgia's application, Dothan filed a competing application for a preliminary permit at the same dam site. Under the controlling statute Dothan was entitled to the same statutory preference for a permit as Georgia because both are instrumentalities of states. Where two municipalities or states apply for preliminary permits for the same project, the Commission favors the applicant whose plans are better adapted "to develop, conserve, and utilize in the public interest the water resources of the region ...." 18 C.F.R. § 4.33(g)(1) (1981). If the Commission finds that the proposals of two municipalities or states are "equally well adapted" to the objectives of the Act, then it grants the preliminary permit to the applicant that filed first. 18 C.F.R. § 4.33(g)(2) (1981).1 Coop did not actively participate in the subsequent proceedings, presumably because it was a cooperative corporation, not a state instrumentality, and therefore of a lower statutory priority than either Georgia or Dothan. See 18 C.F.R. § 4.33(g)(3) (1981).

Dothan's application included a description of its own proposed project and, as required by 18 C.F.R. § 4.33(d)(2) (1981), contained a detailed statement of why its proposal was allegedly better adapted than Georgia's to developing, conserving and utilizing in the public interest the water resources of the region. Dothan raised a number of points but the most important ones related to two variations from Georgia's proposal:

(1) Georgia's application proposed locating the powerhouse on the Georgia side of the river. Dothan proposed the Alabama bank which provides advantages in terms of cost savings, convenience of construction, efficiency of dam operations and navigational concerns;

(2) Georgia's proposed project design was based on a mistaken assumption of the amount of available "head," i.e., the elevation of the water behind the dam. Georgia's plan assumed an average head of 24 feet whereas 14 to 16 feet was the more correct estimate and Dothan used that.

Commission regulations allowed Georgia 30 days from the date of submission of Dothan's application in which to file, if it so desired, a rebuttal showing that its plans were at least as well adapted as Dothan's. 18 C.F.R. § 4.33(e) (1981). Georgia elected not to file such rebuttal. On May 29, 1980, however, Georgia filed a "Protest in Opposition to and Motion to Deny Application for Preliminary Permit Filed by City of Dothan, Alabama" (App. 18-27.) In its protest statement, Georgia agreed with Dothan that the powerhouse would be best located on the Alabama side of the river and revised downward its calculation of the available head. (App. 22-23.) Georgia did not make any other changes in its project design. It did argue, however, that its proposal was at least equal to, if not better than Dothan's because (1) its preliminary engineering study was substantially completed and (2) had produced six alternative proposals incorporating varying sized generating units. Georgia also argued that (3) its proposal would serve many more customers than Dothan's (App. 21.), (4) that it would be better able to integrate the power produced by the Andrews project into an existing power transmission system (App. 22), and (5) that it was in a stronger financial position than Dothan and therefore could assure that the project would be developed (App. 23-24.) and at an earlier date (App. 28-29). Several days later Georgia filed an "Amendment to Protest and Motion" in which it recognized the reduced energy production capability of its proposed project. Id. We find the dissent's contention that this amendment should justify a remand to be without merit and to involve a misconstruction of a post hoc regulation, 18 C.F.R. § 4.35.2

On March 27, 1981, the Director of the Commission's Office of Electric Power Regulation (the Director), acting pursuant to authority delegated him by the Commission, issued a preliminary permit to Georgia and denied the competing applications. (App. 44-53.) The Director determined that the proposals of Georgia and Dothan were both equally well adapted to achieving the public interest purposes of the Federal Power Act, and therefore awarded the preliminary permit to Georgia because its application was filed prior to that of Dothan. Article 11 of the preliminary permit specifically directed that Georgia coordinate the studies for the proposed project with the Army Engineers. (App. 49.)

On May 27, 1981, the Commission issued an Order Denying Dothan's Appeal and affirming the decision of the Director. (App. 72-76.) The Commission explained that because applications for preliminary permits deal with flexible and speculative plans it did not strictly hold applicants to their initial plans. The Commission considered the applications of Georgia and Dothan together as competing applications and concluded that the differences between Georgia's and Dothan's proposals reflected "not a different scheme of development but rather a different level of refinement and specificity." (App. 73.) The Commission concluded that Georgia was not required to file a statement rebutting Dothan's asserted claims of having a superior proposal.3 Finally, the Commission held that it had fully complied with the rationale of Ashbacker Radio Corp. v. FCC, 326 U.S. 327, 66 S. Ct. 148, 90 L. Ed. 108 (1945), which requires that the Commission consider competing applications together, because the applications of Dothan and Georgia were consolidated and considered together. (App. 75.)4II.

The rule is clear that judicial review of agency action is narrow. The provisions of the Administrative Procedures Act, 5 U.S.C. § 706(2)(A), (E), require a reviewing court to set aside agency action found to be arbitrary, capricious, an abuse of discretion or unsupported by substantial evidence. Accordingly, the role of this court is not to make its own independent assessment as to whether one of the two competing applications is superior, rather our role is to consider whether the Commission's determination that the plans of Georgia and Dothan are equally well adapted to the public interest objectives of the Act is supported by substantial evidence. If substantial evidence supports the determination that the two competing applications are equally well adapted, then our inquiry ceases.

The record shows that Georgia did alter its proposal in two respects: the site of the powerhouse and the available head estimate. Both Georgia and Dothan attach wholly different significance to those changes. The Commission and Georgia assert that Georgia's changed plans represent only a modification of its original application-an expected and acceptable occurrence in the initial planning stages. Georgia further claims that once those changes were made no significant differences remained to distinguish the two proposals; therefore, as the first applicant to file it was properly awarded the preliminary permit.

Dothan, on the other hand, contends that Georgia's change in position represents an abandonment of its original proposal. Brief of Petitioner at 9, 18. Dothan also implies that Georgia used information disclosed by the competing applicant, Dothan, to cure the deficiencies in its proposal so as to make the two applications equally well adapted. Brief of Petitioner at 18.

The Commission applied the wealth of its experience in hydroelectric projects and found that the differences in the two applications reflected "not a different scheme of development but rather a different level of refinement and specificity." (App. 73.) Both parties planned to build powerhouses on the same already constructed dam, using basically the same kind of generators. In the initial application the location of the powerhouse and the estimate of the available head-although important considerations-were not deemed by the Commission to be controlling factors in determining the relative superiority of the two proposals. In view of the Commission's very considerable expertise in hydroelectric matters, including handling applications for permits, and in view of the statutory discretion with which it is vested, we cannot conclude on the record before us that the Commission acted arbitrarily, capriciously or abused its discretion.

The Commission's decision is supported by substantial evidence. First, the Commission stressed that the preliminary permit stage is an exploratory period, often characterized by modifications resulting from the acquisition of fuller information:

The purpose of a preliminary permit is to study the feasibility of the project and to crystalize those factors which at the permit application stage may have been uncertain. Project features are subject to modifications based upon information developed during the preliminary permit studies. Therefore, at the preliminary permit stage, the plans of the applicants must be considered both flexible and speculative.

(Footnotes omitted) (App. 73.).

Second, this is not a case in which Georgia "pirated" ideas from Dothan to cure deficiencies in its proposal. Dothan's proposal was based in large measure on studies of the Army Engineers. "Application of City of Dothan, Alabama for Preliminary Permit" (App. 114, 119.); see Brief of Petitioner at 14. The information about optimal powerhouse site and the available head originated with the Army. (App. 119.) Because it was anticipated from the outset that whichever applicant was successful in obtaining the preliminary permit would work closely and "coordinate their studies" with the Army Engineers,5 and because this implicit expectation was made an express condition of the preliminary permit (App. 49.), we believe that it was reasonable for the Commission to conclude that both applicants proposed "essentially the same scheme of development." (App. 73). Questions about powerhouse location and available head were found to be but refinements that would be resolved satisfactorily in essentially the same manner in conjunction with the Army Engineers by either party. The record confirms that the refinements about the powerhouse site and available head were made prior to the issuance of the preliminary permit. For these reasons, the Commission's order is affirmed.

Judgment accordingly.

Federal Energy Regulatory Commission (FERC) regulations that govern the grant of preliminary permits for hydroelectric development ostensibly favor the applicant whose plans are better adapted "to conserve and utilize in the public interest the water resources of the region." 18 C.F.R. § 4.33(g)(1) (1981). If FERC concludes that competing applications are "equally well adapted" to advance these objectives, however, it breaks the tie by granting the preliminary permit to the applicant that filed first. Id. § 4.33(g)(2). Although I agree that FERC's application of these regulations to particular situations must be upheld if the agency's decisions are supported by substantial evidence, such evidence is entirely lacking in this case. Instead, the record now before us paints a dismal picture of an agency so understaffed or swamped by work that it appears to be institutionally incapable of giving all but the most obvious problems the attention required by law. Because FERC's reasons for awarding the preliminary permit to MEAG rather than Dothan smack of a reflexive application of the "first-in-time" rule, I cannot join the majority's decision.

A brief review of the facts illustrates the difficulties involved in affirming FERC's action in this case. MEAG filed a permit application in March 1979 for the east side of the Chattahoochie River, basing its project design on a gross miscalculation of the potential elevation of the water behind the dam (the "head"). In December 1979, Dothan filed a competing application for the same site1 that differed from MEAG's in two material respects. Dothan's application was for the west side of the river, and assumed an average head of 14 to 16 feet rather than the 24 feet contemplated by MEAG. In May 1980, MEAG implicitly agreed that Dothan's proposal was superior; it now proposed to locate its powerhouse on the west side of the river, and reduced its calculation of the available head and the energy production capability of the project.2 Notwithstanding these concessions-which meant that almost nothing of MEAG's original proposal remained intact-FERC found that MEAG's application "as originally filed" was essentially equivalent to Dothan's. In language strikingly similar to that used in numerous other cases, the Commission stated that because the two proposals were "equally well adapted under the criteria that are appropriate at the preliminary permit stage," it would grant the permit to MEAG because MEAG's application was "first in time." Order, 15 FERC P 61,168 (1981), Joint Appendix (J.A.) 74-75.

There are three independent reasons to doubt that FERC's "findings" were anything more than empty boilerplate. The first is empirical: in 120 comparable instances canvassed by Dothan, FERC has never granted a preliminary permit based on the "better adapted" approach of 18 C.F.R. § 4.33(g)(1), and has always relied on the mere matter of filing date and the "first-in-time" approach of 18 C.F.R. § 4.33(g)(2).3 When the tie-breaking rule is invoked in each and every case, one must conclude that FERC's definition of a "tie" is somewhat extraordinary.

The second reason is the inference suggested by FERC's recent revision of its regulations governing preliminary permit applications. See Order No. 183, 46 Fed.Reg. 55,245 (Nov. 9, 1981) (17 FERC P 61,083). Under the new regulation, 18 C.F.R. § 4.35, material amendments to an application for a preliminary permit will change the date of acceptance of the permit to the date on which the amendment is filed. Had FERC applied this regulatory change retroactively, MEAG's "material amendments" to its application would probably have given the "first-in-time" preference to Dothan.4 The new regulation seems commendable; what is shocking is FERC's bald explanation for the change:

In the case where an applicant that did not file first-in-time nevertheless has a clearly better plan of development and its competitor then seeks to utilize those ideas to make its plan equally well adapted, fairness militates against allowing the first-filed application to retain its priority in-time for its amended application.

Id., 46 Fed.Reg. at 55,249 (emphasis added). If the second applicant truly has "a clearly better plan of development," the question of filing date should be absolutely irrelevant; FERC has no reason to invoke the "tie-breaking" rule of section 4.33(g)(2) if one application is "better adapted" under section 4.33(g)(1). The regulatory change essentially constitutes an admission that FERC prefers to grant preliminary permits by virtue only of filing date. The change as to how the filing date will be determined, although apparently motivated by "fairness," would be unnecessary if FERC made the effort to determine which applications were better adapted in the first place.

Finally, FERC has structured its administrative procedures in such a way that there is every incentive to grant permits based on filing date rather than on the quality of the competing applications. In Order No. 132, 46 Fed.Reg. 14,119 (February 13, 1981), the Commission delegated to the Director of the Office of Electric Power Regulation (OEPR) the authority to grant preliminary permits if competing applicants "do not propose and substantiate materially different plans." Id. at 14,120. This order does not give the OEPR Director authority to grant permits under more complex circumstances, however; that task is for the Commission. In other words, a finding that projects are essentially equal is purely ministerial, and the permit will be awarded to the applicant that filed first; a finding that the second application is "better adapted" cannot even be made at the OEPR level. As a result, the deck is stacked in favor of initial applicants. Even a passing familiarity with the administrative process suggests the unlikelihood that a field director will burden his overworked home office when he can terminate a matter within his own authority, even if one-sidedly. The biases inherent in FERC's approach are further demonstrated by the "background" discussion in Order No. 132, which explains that the purpose of this delegation of authority to the OEPR Director is to clear FERC's backlog of competing preliminary permit applications.

It is true, as FERC noted below when it granted the permit to MEAG, that the Commission's rules "are grounded in both public interest considerations and a pragmatism necessary in light of the unprecedented increase in permit applications, adding to a case load that must be handled with limited resources." Order, May 27, 1981, at 4, J.A. 175. Courts must respect and defer to agency efforts to deal with scarce resources and clogged dockets-but not to the extent of permitting agencies to ignore their own regulations.5 Ultimately, of course, these concerns also must raise doubts about how well FERC fulfills its statutory responsibilities under Part I of the Federal Water Power Act, 16 U.S.C. §§ 791a et seq., to promote development of the nation's water resources in the public interest. The central and still unanswered question here concerns the relevance of a preliminary permit to the Commission's licensing of water projects under section 7 of the Act, 16 U.S.C. § 800(a). FERC's statements in this regard have been consistently murky and often contradictory. Commission counsel stated during the oral argument of this case that preliminary permits have little ultimate import because "competition lives on. Dothan can come in with a better license application and ultimately win the license regardless whether the permit is granted to MEAG or not." This contention, which seems mandated by the competitive licensing scheme contemplated by Congress in section 7 of the Act, has not been proven.6 More important, the contention ignores the public interest considerations that Congress expected would be used in granting preliminary permits under the Act.7

If the award of a preliminary permit controls the award of the final license, then capriciousness at the first stage means capriciousness at the second. The resulting detriment to the public interest should be self-evident. I would remand this case for FERC to explain (i) why the OEPR Director should be able to grant the initial application but not subsequent ones; (ii) why the new regulations governing "material amendments" to permit applications should not be given retroactive effect;8 (iii) whether FERC does automatically apply the "first-in-time" rule; and (iv) the consequences that granting preliminary permits on such an arbitrary basis have for the ultimate licensing of water projects. As this court observed in Connecticut Light & Power Co. v. FERC, 627 F.2d 467, 473 (D.C.Cir.1980), "reciting only nonexplanatory boiler plate" cannot possibly substitute for the reasoned administrative decisionmaking required by law. The majority opinion refers to "the wealth of (FERC's) experience in hydroelectric projects." Maj. op. at 164. Based on the record now before us, however, that experience might better be described as bankrupt.

I respectfully dissent.