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Friends of Columbia Gorge v. Energy Facility Siting Council

Supreme Court of Oregon

August 1, 2019

FRIENDS OF THE COLUMBIA GORGE, Northwest Environmental Defense Center, Oregon Natural Desert Association, Oregon Wild, Hood River Valley Residents Committee, Columbia Riverkeeper, Wildlands Defense, Greater Hells Canyon Council, and Oregon Coast Alliance, Petitioners,
v.
ENERGY FACILITY SITING COUNCIL and Oregon Department of Energy, Respondents.

          Argued and submitted December 5, 2018

          On judicial review from the Energy Facility Siting Council EFSC 52017. [*]

          Gary K. Kahn, Reeves Kahn Hennessy & Elkins, Portland, argued the cause and fled the briefs for petitioners. Also on the briefs were Nathan J. Baker and Steven D. McCoy, Friends of the Columbia Gorge, Portland, Peter J. Broderick, Northwest Environmental Defense Centers, Portland, and Peter M. Lacy, Oregon Natural Desert Association, Portland.

          Denise G. Fjordbeck, Assistant Attorney General, Salem, argued the cause and filed the brief for respondents. Also on the brief were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

          Before Walters, Chief Justice, and Balmer, Nakamoto, Flynn, Duncan, Nelson and Garrett, Justices. [**]

         [365 Or. 372] Case Summary: Petitioners challenged the validity of rules modified by the Energy Facility Siting Council. The modified rules governed the process for amending a site certificate. Petitioners argued that rules were invalid because the council failed to comply with required rulemaking procedures and because the rules exceeded the council's statutory authority. Held: (1) When adopting, amending, or repealing a rule, an agency must substantially comply with the requirements of ORS 183.335; (2) ORS 183.335(3)(e)(C) requires an agency to maintain a record of the agency's responses to certain comments, but the statute does not require the agency to create a response if the agency has not already done so; (3) to invalidate rules based on the argument that subsequent notices failed to comply with ORS 183.335(2)(d), a petitioner must establish that the agency's earlier notice failed to provide adequate notice of the rules adopted, amended, or repealed by the agency; (4) oral statements discussing how an agency might determine whether rules are accomplishing their objective are insufficient to substantially comply with ORS 183.335(3)(d); (5) the council did not exceed its statutory authority when it permitted its staff to determine, with respect to a request to amend a site certificate, whether there would be a public hearing and whether the public could request a contested case hearing; (6) the council exceeded its statutory authority by adopting rules that limited the scope of judicial review of an order amending a site certificate.

         [365 Or. 372]BALMER, J.

         The Energy Facility Siting Council modified its rules that govern amending site certificates. Petitioners challenge the validity of the new rules, arguing that the council failed to comply with required rulemaking procedures and that the rules exceed the council's statutory authority. For the reasons that follow, we agree with some, but not all, of those grounds and conclude that the rules are invalid.

         I. BACKGROUND

         The council consists of seven public members, ORS 469.450(1), who oversee the development of large energy facilities in Oregon, including electric power generating plants, high-voltage transmission lines, gas pipelines, and radioactive waste disposal sites, among other projects, ORS 469.300(11). The council carries out that task by issuing site certificates to developers. See ORS 469.320(1) ("[N]o facility shall be constructed or expanded unless a site certificate has been issued for the site."). A site certificate authorizes the certificate holder to construct, operate, and retire a facility on an approved site, subject to the conditions that the council includes in the certificate. ORS 469.401(1); see ORS 469.300(26) (defining "site certificate").

         Because site certificates address how and where large energy facilities will operate, applications for site certificates are often long, with many technical details that raise complicated questions of law and policy. To help resolve those complexities, the legislature has tasked the Oregon Department of Energy (ODOE) to provide "clerical and staff support" for the council. ORS 469.450(6); see also ORS 469.040(1)(b) (requiring the director of ODOE to "Supervise and facilitate the work and research on energy facility siting applications at the direction of the [council]").[1] The legislature has also created an extensive statutory framework governing the site certificate application process. See ORS 469.330-370 (setting out the numerous steps in the certificate application process).

         [365 Or. 374] This case involves the process for amending a site certificate after a certificate holder already has completed that extensive application process and received a site certificate. In contrast to the detailed statutory framework governing the site certificate application process, the statutory provisions for amending a site certificate are brief. We discuss those provisions below. Because of the limited statutory direction, the council created the process for amending a site certificate through its administrative rules. See ORS 469.470(2) (authorizing the council to "adopt standards and rules to perform the functions vested by law in the council"). Those rules appear in Chapter 345, Division 27, of the Oregon Administrative Rules.

         In January 2017, after years of considering changes, the council began the formal process to modify its rules that govern amending a site certificate and proposed what the council called a "wholesale re-write" of Division 27. The council continued its rulemaking activities until October 2017, when the council adopted new rules. Over the course of that time, the council issued six public notices about the rulemaking process, extended the comment period four times, held three public hearings, circulated three draft versions of the proposed rules, and considered more than 150 written comments.

         We detail below the procedural steps in the rulemaking process and the changes to the rules over the three draft versions, as relevant. A brief overview of those changes is helpful as background. Before the revisions, the rules provided for two procedural paths for reviewing requests for amendment (RFAs): a standard process and an expedited process.[2] OAR 345-027-0060, 00070, 0080 (2017). The standard process could also be extended, which was frequently necessary because of the complexity and public interest in site certificate applications. See OAR 345-027-0070(2) (2017) (standards for extended standard process). In the years leading up the rule changes, about 70 percent of RFAs were reviewed under the extended standard process.

         [365 Or. 375] The first draft of the proposed rules eliminated the expedited review process and added steps to make the standard process longer (more like the extended standard process) and to allow greater public participation. Among other additions, the proposed rules required staff to prepare a draft proposed order (DPO) recommending that the council grant, deny, or modify the RFA and required a public hearing and comment period on the DPO. Additionally, under the standard process in the proposed new rule, people could request contested case proceedings as they could under the existing rules. The council would evaluate those requests and allow them only if the requests raised a significant issue of law or fact, which was the same standard that the council applied under the then-existing rules.[3] OAR 345-027-0070(7) (2017).

         The second draft retained the new standard process and re-inserted an expedited review process, which a certificate holder could request. Staff would initially rule on such a request, based on a nonexclusive list of factors set out in the rules. If staff denied the request, the certificate holder could ask the council to reconsider that decision. Cases reviewed under the expedited process would follow many of the same steps as the proposed new standard process. Notably, however, the expedited process allowed only written comments on the DPO, so no public hearing was required. And the expedited process did not allow interested persons to request a contested case proceeding.

         The third draft retained the new standard and new expedited processes and added an even more expedited process. That draft also applied a new naming convention: The standard process was called type A review; the expedited process was called type B review; and the new "truly expedited" process was called type C review. The type C review was intended for a narrow range of amendments. It had fewer steps and much shorter deadlines for decision than the other types of review. ODOE would initially determine whether to process an RFA under type C review. But, before [365 Or. 376] making a final decision on the RFA, the council would have the opportunity to direct an RFA to proceed under type A or type B review.

         The council approved the third draft of the proposed rules at its October 2017 meeting. The rules became effective October 24, 2017.

         II. DISCUSSION

         Petitioners challenge the rules directly in this court under ORS 469.490. Petitioners contend that the rules are invalid because the council adopted them without following the procedures in the Oregon Administrative Procedures Act (APA), ORS 183.310-183.750, and because the rules exceed the council's statutory authority. We begin with the procedural objections.

         A. Procedural Objections

         Petitioners raise three procedural objections. First, petitioners argue that the council violated ORS 183.335 (3)(e)(C) by failing to respond to petitioners' comments recommending other options for achieving the substantive goals of the rulemaking. Second, petitioners argue that the council violated ORS 183.335(2)(d) by failing to provide copies of the rules that they proposed to adopt, amend, or repeal that show all proposed changes to the existing rules. And third, petitioners argue that the council violated ORS 183.335(3)(d) by failing to provide a statement identifying how the council will subsequently determine whether the rules are in fact accomplishing the stated objectives of the rulemaking.

         1. Standard of review

         The parties dispute what standard this court applies when deciding whether to invalidate rules based on a petitioner's procedural objections. The council argues for a substantial-compliance standard. Under ORS 469.490, "rules adopted by the Energy Facility Siting Council *** shall be adopted in the manner required by ORS chapter 183." And chapter 183 requires only "substantial compliance" with the notice procedures contained in ORS 183.335. Specifically, ORS 183.335(11)(a) provides that "a rule is not [365 Or. 377] valid unless adopted in substantial compliance with the provisions of [ORS 183.335]." Because each of petitioners' procedural objections arises under ORS 183.335, the council urges this court to assess its compliance under that substantial-compliance standard.

         Petitioners argue for a strict-compliance standard that, according to petitioners, also stems from ORS 469.490. Under that statute, "[t]he review by the Supreme Court of the validity of any rule adopted by the council shall otherwise be according to ORS 183.400." A subsection of ORS 183.400 governs judicial review of agency rulemaking, directing courts to declare a rule invalid if the rule "[w]as adopted without compliance with applicable rulemaking procedures." ORS 183.400(4)(c). Petitioners characterize that provision as implicitly setting out a strict-compliance standard, which they ask the court to apply instead of the substantial-compliance standard set out in ORS 183.335 (11)(a).

         Petitioners' reliance on ORS 183.400(4)(c) begs the question of what an agency must do to comply with applicable rulemaking procedures. At least with regard to the procedures in ORS 183.335, an agency satisfies those statutory requirements by substantially complying with the procedures set out in the statute. In that sense, a rule adopted in substantial compliance with ORS 183.335 is a rule adopted in "compliance with applicable rulemaking procedures."

         Consistent with the council's position, this court has previously applied the substantial-compliance standard in reviewing challenges arising under ORS 183.335. In Don't Waste Oregon Com. v. Energy Facility Siting, 320 Or. 132, 881 P.2d 119 (1994), the petitioners argued that the council violated a provision of ORS 183.335 requiring that an agency '"consider fully any written or oral submission' in a rulemaking." Id. at 146 (quoting ORS 183.335 (3)(a)). The petitioners argued that the council failed to comply with that provision because, rather than considering the petitioners' written submissions, the council had considered summaries of the submissions that the hearing officer had prepared.

         [365 Or. 378] This court rejected the petitioners' interpretation of that provision and then concluded that, even if that interpretation were correct, the petitioners would lose because ORS 183.335 "requires only 'substantial compliance' with its provisions." Id. (quoting former ORS 183.335(10)(a) (1993), renumbered as ORS 183.335(11)(a) (2003)). The court noted that "[n]either during the rulemaking hearing nor in their post-hearing brief in the contested case proceeding did [the] petitioners assert that the hearing officer failed to consider fully their testimony or that the hearing officer failed to summarize their testimony accurately in his written and oral reports to [the council]." Id. at 147. Under those facts, the court held that the petitioners could not "establish that the procedure employed by [the council] failed to comply substantially with the requirement that the agency fully consider petitioners' submissions." Id.

         We agree with the council and assess petitioners' procedural objections for the council's substantial compliance with ORS 183.335.

         2. Responding to comments recommending options

         Petitioners first argue that the amended rules are invalid because the council failed to respond to petitioners' comments recommending other options for achieving the substantive goals of the rulemaking. Under ORS 183.335 (2Xb)(G), an agency's notice of intended action must include a "request for public comment on whether other options should be considered for achieving the rule's substantive goals while reducing the negative economic impact of the rule on business." And under ORS 183.335(3)(e)(C), an agency must "maintain a record of the data or views submitted" during the rulemaking process, including "[a]ny public comment received in response to the request made under subsection (2)(b)(G) of this section and the agency's response to that comment." Petitioners maintain that they submitted comments in response to the request made under subparagraph (2)(b)(G) and that the council failed to respond to those comments, thus invalidating the resulting rules.

         Petitioners, however, misunderstand the obligation that subparagraph (3)(e)(C) imposes on an agency. For the reasons we discuss below, we conclude that the terms of that [365 Or. 379] statutory provision impose a recordkeeping obligation only. Thus, if an agency has provided a response to a public comment submitted under subparagraph (2Xb)(G), then the statute requires the agency to "maintain" a record that includes "the agency's response to that comment." But if the agency has not provided a response to such a public comment, the statute does not require the agency to create one.

         The fact that the statute imposes only a recordkeeping obligation is clear from both the text of the statute and its context. The provisions on which petitioners rely, paragraph (3)(e), expressly address only recordkeeping:

"(e) An agency that receives data or views concerning proposed rules from interested persons shall maintain a record of the data or views submitted. The record shall contain:
"(A) All written materials submitted to an agency in response to a notice of intent to adopt, amend or repeal a rule.
"(B) A recording or summary of oral submissions received at hearings held for the purpose of receiving those submissions.
"(C) Any public comment received in response to the request made under subsection (2)(b)(G) of this section and the agency's response to that comment.
"(D) Any statements provided by the agency under paragraph (d) of this subsection."

ORS 183.335(3Xe).

         Nothing in that text directs an agency to create an agency response to a comment to be included in the required record. Petitioners' argument, instead, rests on the premise that a recordkeeping statute necessarily entails an obligation to create an agency response in the first place. Context, however, precludes that argument in this case. In addition to the requirement on which petitioners rely, paragraph (3)(e) also directs agencies to maintain a record of "[a]ny statements provided by the agency under paragraph (d) of this subsection." ORS 183.335(3)(e)(D). And paragraph (d), which we discuss further below, requires an agency, under certain circumstances, to provide a statement identifying a rule's [365 Or. 380] purpose and how the agency will measure its success. ORS 183.335(3)(d). So the document-creation and ...


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