Commissioner James Danly Concurrence Regarding McMahan Hydroelectric, LLC

Commissioner James Danly Statement
October 8, 2021
Project No. P-14858-003

I concur with today’s order reissuing a license to McMahan Hydroelectric, LLC (McMahan Hydro) which includes the water quality certification conditions required by the North Carolina Department of Environmental Quality (North Carolina DEQ) as mandated by the U.S. Court of Appeals for the Fourth Circuit.  I write separately to express two points.

First, in my view, the court improperly vacated and remanded McMahan Hydro’s license by misapplying the substantial evidence standard and substituting its judgment for that of the Commission’s.  Substantial evidence means “more than a mere scintilla” of “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”[1]  It does not “mean that even as to matters not requiring expertise a court may displace the [agency’s] choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo.”[2]

There is more than a scintilla of evidence to support the Commission’s previous finding that North Carolina DEQ and McMahan Hydro agreed to a withdrawal and refiling process to avoid the Clean Water Act’s one-year time limit.  The Commission relied on North Carolina DEQ’s February 7, 2019 email to McMahan Hydro that stated, “. . . please remember to send [North Carolina DEQ’s section 401 supervisor] a request to withdraw and reapply (I think the deadline is by February 20th).”[3]  Given that “please” is “used as a polite way of asking for something or telling somebody to do something,”[4] one could reasonably infer that North Carolina DEQ encouraged or supported withdrawal and thereby had a functional agreement with McMahan Hydro to restart the statutory one-year clock.      

Contrary to the court’s determination,[5] the Commission also acknowledged the evidence weighing against its finding of coordination—that “North Carolina DEQ characterize[d] this communication as a courtesy email and claims that McMahan Hydro indicated that it intended to withdraw and resubmit its application during a prior meeting.”[6]  However, the Commission found that explanation and evidence unpersuasive in light of “no additional information [having] been submitted to North Carolina DEQ after January 18, 2019, and the only purpose of the communication was to request that McMahan Hydro withdraw and resubmit its request before the impending one-year deadline.”[7]  

The court, however, disagreed with the Commission, finding that the record showed “McMahan, for its own purposes, rais[ing] the prospect of withdrawing and resubmitting its application” and North Carolina DEQ as “not broach[ing] the subject, but merely answer[ing] questions and remind[ing] McMahan of the time frame if it intended to proceed.”[8]  The court also found that the facts of this case were similar to those in two earlier cases in which the Commission found the license applicant voluntarily withdrew and resubmitted its water quality certification application absent coordination with the state.[9]  Yet, the court’s disagreement with the Commission on each of these issues serves only highlight the fact that there are two fairly conflicting views.  The choice between two reasonable alternatives in the face of conflicting evidence was for the Commission, not the court, to make.  

Second, I write to express my concern about the response that will be occasioned by Article 406, which reserves the Commission’s authority to impose financial assurance mechanisms without limiting principle.[10]  I am convinced that the Commission must take a hard look at our financial assurance requirements and deliberately determine what, if any, changes or improvements should be adopted.  It is imperative that licensees have the financial wherewithal to physically maintain their facilities and I have been gravely concerned about this subject for some time.[11]  But how to go about achieving that goal is a complicated question and requires a great deal of thought.  It is especially difficult for the Commission to chart a clear path based on the record we have compiled so far in our Notice of Inquiry, many of the submissions to which have raised complex questions.[12]

In my view, this reservation may have the unfortunate effect of reinforcing the uncertainty faced by licensees in light of what is nevertheless the necessary inquiry the Commission is conducting into financial assurance.  Licensees do not know whether or when we will promulgate new financial assurance requirements, whether imposition of those requirements will require a hearing, what form they will take, or how much they will cost.  This uncertainty may further chill investment and drive up risk premiums—limiting licensee’s access to the very financing we should seek to encourage. 

My hope is that, when we move forward from the Notice of Inquiry, we will convene one or more technical conferences to offer more structured fora in which to explore these questions.  It is my further hope that everyone with an interest participate in the Commission’s generic proceedings on financial assurance, to help us improve the record we have already begun compiling in the Notice of Inquiry and offer the best analysis they can regarding the extent of the Commission’s powers and the most reasonable means by which to employ them.

For these reasons, I respectfully concur.