American Rivers Pacific Rivers Council Oregon Natural Resources Council Waterwatch of Oregon and Friends of the Earth, United States Department of Interior, Petitioner-Intervenor v. Federal Energy Regulatory Commission, Eugene Water and Electric Board, Respondent-Intervenor. Oregon Department of Fish and Wildlife v. Federal Energy Regulatory Commission, Eugene Water and Electric Board, Respondent-Intervenor

Sean H. Donahue, United States Department of Justice, Environmental & Natural Resources Division, Washington D.C., for petitioner-intervenor United States Department of Interior.

John H. Conway and John S. L. Katz, Federal Energy Regulatory Commission, Washington, D.C., for the respondent.

Donald A. Haagensen, Haagensen & Lloyd, Portland, Oregon and Gail A. Greely, Alameda, California, for the respondent-intervenor Eugene Water & Electric Board.

Mason D. Morisset, Morisset, Schlosser, Ayer & Jozwiak, Seattle, Washington, for amicus curiae Skokomish Indian Tribe;

David J. Cummings, Nez Perce Tribe Office of Legal Counsel, Lapwai, Idaho, for amicus curiae Nez Perce Tribe.

Brian J. McManus, Jones, Day, Reavis & Pogue, Washington, D.C., for amici curiae American Public Power Association et al.

Mark L. Bubenik, Chief Assistant City Attorney, Tacoma, Washington, for amicus curiae City of Tacoma, Washington.

Petitions for Review of an Order of the Federal Energy Regulatory Commission Before: Edward Leavy, M. Margaret McKeown, and Kim McLane Wardlaw, Circuit Judges.

At stake in these consolidated petitions is the continued operation of two

Hydroelectricpower facilities located in Lane County, Oregon along a twenty-five mile stretch of the McKenzie River. The petitioners,1 a coalition of conservation/environmental organizations and the Oregon Department of Fish and Wildlife, challenge the decision of the Federal Energy Regulatory Commission ("FERC" or the "Commission") to reissue a hydropower license to the incumbent licensee, the Eugene Water and Electric Board ("EWEB").2 Specifically, the petitioners contend that the Commission granted the disputed license (i) without conducting the requisite environmental analysis under relevant provisions of the Federal Power Act ("FPA"), 16 U.S.C. S 791a et seq., and the National Environmental Policy Act ("NEPA"), 42 U.S.C. S 4321 et seq., and (ii) in violation of sections 10(j) and 18 of the FPA. For the reasons set forth below, we grant in part and deny in part the petitions for review.

* The license under review authorizes the continued operation of the 14.5-megawatt Leaburg Hydroelectric Project and the 8-megawatt Walterville Hydroelectric Project for a duration of 40 years. See Eugene Water & Elec. Bd., 78 Fed. Energy Reg. Comm'n Rep. (CCH) P 62,207, at 64,693 (Mar. 24, 1997) ("Order Issuing New License").3 The Leaburg and Walterville facilities have operated since 1930 and 1911, respectively. The Commission's predecessor, the Federal Power Commission, granted original FPA hydropower licenses to the Walterville development in 1967 and the Leaburg development in 1968. See In re City of Eugene, 37 F.P.C. 979 (May 23, 1967); In re City of Eugene, 39 F.P.C. 904 (June 3, 1968). Both licenses expired by their terms on December 31, 1993. After the licenses expired, EWEB managed both developments under separate annual licenses by operation of FPA section 15(a).4

The Leaburg development, the project's upstream facility, consists of a dam, canal, powerhouse facilities, a tailrace, and a power substation. The dam creates a fifty-seven acre backwater called Leaburg Lake which extends approximately 1.5 miles upstream. On each side of the dam are fish ladders, only one of which is operational. On the upstream side of the dam, intake gates divert water through a downstream migrant fish screen into the five-mile Leaburg power canal. The diverted water passes through the power plant forebay into the two turbine Leaburg powerhouse. The water returns to the McKenzie River through a 1,100-foot tailrace. The bypassed reach of the McKenzie between the entrance to the Leaburg canal and the point where the diverted water rejoins the river is 5.8 miles long.

Six miles downstream, headworks divert water from the McKenzie into the unscreened, four-mile Walterville power canal. The Walterville canal feeds into a single-turbine powerhouse from which water returns to the McKenzie through a two-mile tailrace. The Walterville canal bypasses a 7.3 mile stretch of the McKenzie.

The Director issued the disputed license on March 24, 1997, pursuant to the FPA.5 Section 4(e) of the FPA empowers the Commission to issue licenses for hydroelectric projects on waterways that are subject to congressional regulation under the Commerce Clause. See 16 U.S.C.S 797(e) (1994). Section 10(a) of the FPA authorizes the Commission to issue such licenses subject to conditions that the Commission finds best suited for power development and other public uses of the nation's waters. See 16 U.S.C. S 803(a) (1994). In the mid-1980's, Congress amended these provisions to realize an increased sensitivity to environmental concerns, directing the Commission to devote greater consideration to a project's overall effect on fish and wildlife. See Electric Consumers Protection Act of 1986 ("ECPA"), Pub. L. No. 99-495, 100 Stat. 1243 (1986) (codified principally at 16 U.S.C.SS 797(e), 803(a)(1), 803(j)).6 The new license reflects many of these concerns and would require EWEB to construct several new facilities and provide other measures for the benefit and protection of the fish populations that pass through and reside in the project area. See Order Issuing New License, 78 Fed. Energy Reg. Comm'n Rep. (CCH) at 64,706-719.7 From a power standpoint, the new license authorizes EWEB to increase the project's generation capacity from 22.5 megawatts to 23.2 megawatts. See id. at 64,708. Under the terms of the license, EWEB would achieve this increased generation capacity by raising the water level at Leaburg Lake by 18 inches, constructing fixed sill dams or other diversion structures at the head of the Walterville power canal, replacing the turbine runners at both powerhouses, and excavating the Walterville tailrace. See id. at 64,701-703. The license also would increase the minimum flows8 in the bypassed reaches below the diversions of both developments to1,000 cubic feet per second. See id. at 64,703.

During the relicensing deliberations, the Director considered the final environmental impact statement prepared by the Commission's environmental staff.9 The Commission's staff issued the final environmental impact statement on January 8, 1997, after soliciting and receiving comments on a draft. The staff had evaluated the proposed project conditions set forth in EWEB's application, alternatives to the proposals, resource agency recommendations, Commission staff-developed recommendations, and public comments. Specifically, the staff considered EWEB's relicensing proposal and five alternatives: (1) the "no action" alternative; (2) issuing a new license to EWEB with all of the modifications and enhancement measures proposed by the resource agencies; (3) issuing a new license which would combine some of the measures recommended by resource agencies with others developed by Commission staff; (4) issuing a nonpower license; and (5) project retirement. The final environmental impact statement defined the "no action" alternative as the existing projects as "operate[d] under the terms and conditions of their original licenses." Leaburg-Walterville Hydroelectric Project (FERC Project No. 2496), Oregon, Final Environmental Impact Statement, S 2.3, at 2-6 (Dec. 1996). Under this alternative, "[n]o new environmental protection or enhancement measures would be implemented." Id. The final environmental impact statement stated that it had "use[d] this alternative to establish baseline environmental conditions for comparison with other alternatives." Id.

The Commission's staff also examined the conditions submitted by the state and federal fish and wildlife agencies under color of FPA sections 10(j) and 18.10 The staff adopted many of the fifty-six recommendations designated pursuant to section 10(j). The final environmental impact statement, however, stated that twenty-one of the fifty-six recommendations were outside the scope of section 10(j). The Commission's staff concluded that these recommendations either did not serve to protect fish and wildlife resources or conferred final authority over the level of enhancement and project operations upon the agencies rather than the Commission. The final environmental impact statement nevertheless considered and adopted many of these submissions under FPA sections 10(a) and 4(e) which grant the Commission broader latitude to balance environmental and development interests. The Commission's staff also recommended the outright adoption of the federal agencies' section 18 conditions which required implementation of fish ladders and fish screens but determined that the remaining conditions lodged under color of section 18 did not constitute "fishway prescriptions." Again, the Commission analyzed and adopted many of these measures under sections 10(a) and 4(e).11

After issuing the final environmental impact statement, the Commission's staff convened a meeting with several of the parties, attempting to resolve inconsistencies between the petitioners' recommendations and the requirements of FPA section 10(j). The Commission's efforts proved successful, for after the meeting, only three major areas of disagreement remained: (1) whether to raise the water level of Leaburg Lake; (2) whether to install diversion dams at the Walterville facility; and (3) the appropriate minimum instream flows in the Leaburg and Walterville bypass reaches. The Director's order answered the first two questions in the affirmative and set the minimum instream flow at 1,000 cubic feet per second. See Order Issuing New License, 78 Fed. Energy Reg. Comm'n Rep. (CCH) at 64,701-703.

Two months after the section 10(j) dispute resolution meeting between the resource agencies and Commission staff, the Secretary of Interior filed modifications to its section 18 prescriptions for the Director's consideration. These modified prescriptions met with substantially the same results as the resource agencies' earlier submissions. Like the Commission staff before him, the Director found that the Secretary's prescriptions relating to fish ladders and fish screens constituted section 18 fishways but nevertheless did not incorporate the submissions as prescribed, electing instead to establish a plan under which EWEB would "consult with the agencies in developing final designs and monitoring plans for Commission approval." Id. at 64,699 (implementing license articles 416, 418, and 420). As to the remaining prescriptions, the Director held that the submissions, even as modified, were beyond the scope of section 18. See id. at 64,700. The Director explicitly stated for the record the basis for the rejection or reclassification of most of the submissions. See id. at 64,699-700.

American Rivers, the United States Department of the Interior, the National Marine Fisheries Service ("NMFS"), and ODFW timely sought rehearing, forwarding the same arguments which had divided the parties since the issuance of the final environmental impact statement.12 On November 26, 1997, the Commission considered and rejected the rehearing requests. See Eugene Water & Elec. Bd., 81 Fed. Energy Reg. Comm'n Rep. (CCH) P 61,270, at 64,706 (Nov. 26, 1997) ("Order on Rehearing"). These petitions followed. Because the petitioners renew on this appeal the specific objections proffered in their administrative petitions for rehearing, this Court has jurisdiction pursuant to 16 U.S.C. S 825l(b).13

As a preliminary matter, we discuss the methodology we employ in reviewing the Commission's licensing decision. The petitioners contest the Commission's decision under two statutes, the FPA and NEPA. The petitioners first challenge the sufficiency of the Commission's environmental analysis under the FPA and NEPA, arguing that the terms of the new license exacerbate the already degraded conditions in the McKenzie River basin. The petitioners next contend that the FPA does not authorize the Commission to make threshold determinations of whether a given agency recommendation or proposed license condition satisfies the requirements of FPA section 10(j) or section 18. The petitioners' FPA contentions require consideration of substantive issues of statutory construction, whereas the petitioners' NEPA challenges require analysis of the Commission's compliance with NEPA's various procedural requirements. These two lines of inquiry proceed along different analytic paths which are subject to separate standards of review.

Under the FPA, we grant conclusive effect to the Commission's findings of fact if such findings are supported by substantial evidence. See 16 U.S.C. S 825l(b); Muckleshoot Indian Tribe v. Federal Energy Regulatory Comm'n, 993 F.2d 1428, 1430 (9th Cir. 1993). Where, however, the petitioners call into question the Commission's understanding of its statutory mandate, our review is de novo. See Skokomish Indian Tribe v. Federal Energy Regulatory Comm'n, 121 F.3d 1303, 1306 (9th Cir. 1997). The Commission's interpretation of the FPA implicates the now familiar process of reviewing agency actions exemplified by the Supreme Court's watershed opinion in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). Chevron set forth the two-part test against which courts review an agency's construction of the statute it administers. See id. at 842-43, 104 S. Ct. at 2781-82. Under the Chevron formulation:

First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter . . . . If, however, the court determines Congress has not directly addressed the precise question at issue, the . . . question for the court is whether the agency's answer is based on a permissible construction of the statute.

Id.; accord Rain song Co. v. Federal Energy Regulatory Comm'n, 106 F.3d 269, 272 (9th Cir. 1997). The two-step Chevron framework thus allows this Court to defer to the Commission's interpretations of the statutory provisions it administers, but we remain "the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent." Natural Resources Defense Council v. United States Dep't of Interior, 113 F.3d 1121, 1124 (9th Cir. 1997) (citing Chevron, 467 U.S. at 843 n.9, 104 S. Ct. at 2781 n.9) (internal quotations omitted).14

A different set of principles guides our review under NEPA because "NEPA does not mandate particular substantive results, but instead imposes only procedural requirements." Laguna Greenbelt, Inc. v. United States Dep't of Transp., 42 F.3d 517, 523 (9th Cir. 1994) (citing Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 558, 98 S. Ct. 1197, 1219, 55 L. Ed. 2d 460 (1978)). Our task under NEPA therefore "is simply to ensure that [FERC] has adequately considered and disclosed the environmentalimpact of its actions . . . ." Association of Pub. Agency Customers, Inc. v. Bonneville Power Admin., 126 F.3d 1158, 1183 (9th Cir. 1997) (citing Baltimore Gas & Elec. Co. v. Natural Resources Defense Council, Inc., 462 U.S. 87, 97-98, 103 S. Ct. 2246, 2252-53, 76 L. Ed. 2d 437 (1983). For NEPA actions challenging the adequacy of an environmental impact statement, this circuit has fashioned a "rule of reason" to determine whether the agency has engaged in a "reasonably thorough discussion of the significant aspects of probable environmental consequences." Oregon Natural Resources Council v. Lowe, 109 F.3d 521, 526 (9th Cir. 1997) (internal quotations and citation omitted). Under this standard, "[o]nce [we are] satisfied that a proposing agency has taken a `hard look' at a decision's environmental consequences, [our] review is at an end." Idaho Conservation League v. Mumma, 956 F.2d 1508, 1519 (9th Cir. 1992) (quoting California v. Block, 690 F.2d 753, 761 (9th Cir. 1982)); see also Neighbors of Cuddy Mountain v. United States Forest Serv., 137 F.3d 1372, 1376 (9th Cir. 1998) ("The rule of reason analysis and the review for an abuse of discretion are essentially the same.").

These standards reflect the axiomatic distinction between "the strong level of deference we accord an agency in deciding factual or technical matters [and] that to be accorded in disputes involving predominantly legal questions." Alaska Wilderness Recreation and Tourism Ass'n v. Morrison, 67 F.3d 723, 727 (9th Cir. 1995). It is with these principles that we turn to merits of the petitions.

The petitioners first object to the Commission's use of existing environmental conditions at the Leaburg-Walterville Project as a "baseline"15 against which to evaluate alternatives to the EWEB relicensing proposal. The petitioners argue that the Commission's use of such a baseline preordained its adoption of the EWEB proposal. The Commission rejected this argument. As the Commission explained in the Order on Rehearing, "[n]either the labels placed on alternatives, nor the choice of baseline will, in our judgment, alter the determination of the reasonable alternatives at relicensing." 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,327. We conclude that the Commission's choice of baseline and analysis of alternatives complied with the substantive and procedural requirements of both the FPA and NEPA.

Petitioners contend that FERC ignores continuing impacts and the environmental impacts caused by ongoing operation. In effect, the petitioners contend that the FPA requires the Commission to evaluate the EWEB proposal against a baseline embodying a theoretical reconstruction of what the McKenzie River basin would be like today had the Leaburg and Walterville projects not been in place for the greater part of this century. To evaluate this argument under Chevron, we first must determine whether Congress has spoken with sufficient clarity to foreclose the Commission's alternative interpretation. See Rainsong, 106 F.3d at 273.

Our construction of the FPA commences, as it must, with the statute's text. See United States v. Hockings, 129 F.3d 1069, 1071 (9th Cir. 1997). The FPA, however, nowhere defines or even mentions the concept of an environmental baseline. Therefore, as the statutory language evinces no specific congressional directive, we look next to its legislative history. See Northwest Forest Resource Council v. Glickman, 82 F.3d 825, 830-31 (9th Cir. 1996).16

The legislative history of the FPA supports, but does not directly sanction, the Commission's decision to use an existing-project baseline. The ECPA conference report comes nearest to evidencing congressional intent on this issue. The report states that "[i]n exercising its responsibilities in relicensing, the conferees expect FERC to take into account existing structures and facilities in providing for these nonpower and nondevelopmental values." H.R. Conf. Rep. No. 99-934, at 21-22 (1986), reprinted in 1986 U.S.C.C.A.N. at 2537, 2538. More emphatically, the report "noted that the Commission must take into account existing structures and facilities . . . in relicensing proceedings under section 15." Id. at 2543 (emphasis added). The petitioners acknowledge this legislative imperative but assert that the Commission altogether excluded from consideration the environmental harms caused by these existing structures and facilities, thereby precluding "equal consideration" of non-power values as mandated by FPA section 4(e).17 This contention lacks merit, for the record demonstrates numerous instances where the Commission diligently evaluated the adverse environmental impacts on the McKenzie River basin caused by the operation of the Leaburg and Walterville projects.

The petitioners also proffer excerpts from the ECPA house report in support of their position that the Commission must evaluate relicensing issues "in light of today's standards and concerns," and that "procedures and substance applicable to original licenses, including the treatment of nondevelopmental values, apply fully in relicensing." H.R. Rep. No. 99-507, at 33-34 (1986), reprinted in 1986 U.S.C.C.A.N. 2496, 2521. This Court's review, however, does not turn on single words or phrases in the legislative record, see United States ex rel. Fine v. Chevron, U.S.A., Inc., 72 F.3d 740, 744 (9th Cir. 1995) (en banc), especially when they are taken out of context. When read conjunctively with the surrounding text, these quotations--and indeed the entire house report-display nothing more than Congress' intent to emphasize that the Commission's section 4(e) "equal consideration" responsibilities apply to relicensing as well as original licensing proceedings.18 A fair reading of the report as a whole thus precludes the petitioners' treatment of the legislative history and convinces us that "Congress has not directly addressed the precise question at issue." Chevron, 467 U.S. at 843, 104 S. Ct. at 2782. We therefore proceed to the second strand of our inquiry under Chevron.

This prong of Chevron instructs us that where Congress implicitly leaves a gap for the agency to fill, there is a "delegation of authority to the agency to elucidate . . . the statute." Chevron, 467 U.S. at 843-44, 104 S. Ct. 2782. We will not substitute our own construction of the statute unless we determine that the Commission's interpretation is unreasonable. See Rainsong, 106 F.3d at 272-73 (citing Chevron, 467 U.S. at 844, 104 S. Ct. at 2782-83); accord Association of Pub. Agency Customers, 126 F.3d at 1169 ("When relevant statutes are silent on the salient question, we assume that Congress has implicitly left a void for an agency to fill. We must therefore defer to the agency's construction of its governing statutes, unless that construction is unreasonable."). Applying these principles here, we must determine whether the Commission's decision to employ an existing project baseline fills the interstices of the FPA in a permissible fashion. The Commission concluded in the Order on Rehearing that "it is highly doubtful that attempts to ascertain the status of various resources prior to the time a 50-year-old project was constructed would result in the development of any useful information." 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,327 (citations omitted). We believe that this conclusion furnishes a reasonable interpretation of the FPA. It defies common sense and notions of pragmatism to require the Commission or license applicants to "gather information to recreate a 50-year-old environmental base upon which to make present day development decisions." 54 Fed. Reg. at 23776. The past fifty years of development in the McKenzie River Valley has reconfigured its environmental makeup, introducing changes that include differences in land use, water flows, water quality, river geomorphology, fish species composition, and fishery management practices. To the extent a hypothetical pre-project or no-project environment can be recreated, evaluation of such an environment against current conditions at best serves to describe the current cumulative effect on natural resources of these historical changes.19 Moreover, weagree with the Commission that the adoption of an existing project baseline does not preclude consideration and inclusion of conditions in a license that enhance fish and wildlife resources and reduce negative impacts attributable to a project since its construction. See Order on Reh'g, 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,327 ("[P]ast environmental impacts are relevant in determining what measures are appropriate to protect, mitigate, and enhance natural resources. . . . Enhancement may in many cases constitute a reduction of the negative impacts attributable to the project since its construction."); see also City of Tacoma, Washington, 71 Fed. Energy Reg. Comm'n Rep. (CCH) P 61,381, at 62,492 (June 22, 1995) ("[U]se of existing conditions as the starting point for analysis is reasonable, . . . is not precluded by either the language or legislative history of the FPA, . . . [and] does not preclude us from considering, in appropriate cases, available information concerning resources affected by a project. . . ."). We find it more than reasonable, however, for the Commission to conduct its "evaluation and consideration of the appropriateness of requiring enhancement measures . . . in the context of today's environment and not in the context of the world as it existed 50 years ago." Order on Reh'g, 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,327. Simply stated, nothing in the FPA suggests that the only acceptable future for the McKenzie River basin is a recreation of its past.

Nor are we persuaded by any of the petitioners' other challenges to the reasonableness of the Commission's baseline analysis. First, ODFW submits that the FPA implicitly requires a baseline consisting of a no-project minimum instream flow. This argument conflates the baseline issue with a proposed section 10(j) recommendation and must be rejected.20 As the Commission accurately notes, the FPA does not mandate "that all past damage to fish and wildlife caused by a project . . . be `mitigated' in a relicensing proceeding." 54 Fed. Reg. at 23,792. More significantly, as discussed in greater detail below, the FPA establishes a delicately balanced process by which the Commission decides whether or how to incorporate a given agency recommendation into a license. Requiring the Commission to establish a baseline containing every fish and wildlife recommendation would undermine the Commission's mandate to consider numerous conflicting interests, rendering sections 4(e), 10(a), 10(j), and 18 superfluous. This approach cannot stand. It would place the Commission in an untenable position and require us to adopt an approach violative of the precept that "[s]tatutes should not be construed to make surplusage of any provision." Wilshire Westwood Assocs. v. Atlantic Richfield Corp., 881 F.2d 801, 804 (9th Cir. 1989) (quoting Pettis ex rel. United States v. Morrison-Knudsen Co., 577 F.2d 668, 673 (9th Cir. 1978)).

The petitioners premise their final argument upon a novel reading of our decision in Confederated Tribes and Bands of the Yakima Indian Nation v. Federal Energy Regulatory Comm'n, 746 F.2d 466 (9th Cir. 1984). This Court has held that, in the context of an original FPA hydropower licensing, "once a project begins, the `pre-project environment' becomes a thing of the past. Evaluating the project's effect on preproject resources is simply impossible." LaFlamme v. Federal Energy Regulatory Comm'n, 852 F.2d 389, 400 (9th Cir. 1988). The petitioners, however, contend that Yakima compels a different result when the Commission considers a relicensing proposal. The petitioners' reliance on Yakima is misplaced.

Yakima presented the questions of whether the Commission violated the FPA or NEPA either when it bypassed the preparation of an environmental impact statement or when it deferred consideration of fishery protection until after it relicensed the hydropower project. See 746 F.2d at 470-75. In Yakima, we resolved both questions against the Commission, holding that the Commission must consider the environmental impacts of relicensing before issuing a new license. See id. at 475-77. In the Order on Rehearing, the Commission noted that it repeatedly has addressed the confluence between the Yakima opinion and the baseline issue. See 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,326-27. Indeed, as early as 1989, in its regulations implementing the relicensing provisions of the ECPA, the Commission observed that:

[W]hile Yakima clearly requires the Commission to evaluate resource impacts prior to licensing, the Commission sees nothing in that decision that requires it either to pretend that current projects do not exist, or to require applicants to gather information to recreate a 50-year old environmental base upon which to make present day development decisions.

54 Fed. Reg. at 23776.

We agree with the Commission's sensible application of Yakima, and the petitioners have cited no authority to suggest a contrary reading. Indeed, no such authority exists. Our conclusion is consistent with the opinion of the District of Columbia Circuit in United States Department of Interior v. Federal Energy Regulatory Commission in which the court described the limited reach of our decision in Yakima, stating:

Yakima at most imposes on the Commission the duty to consider and study the environmental issue before granting a license. . . . Yakima simply endorses the unstartling principles that an agency must establish a record to support its decisions and that a reviewing court, without substituting its own judgment, must be certain that the agency has considered all factors required by the statute.

952 F.2d 538, 546 (D.C. Cir. 1992).

Accordingly, because the Commission's construction of the FPA offends neither the Chevron reasonableness standard nor the intent of Congress, we defer to the Commission's decision to use an existing project environmental baseline.

Having upheld the reasonableness of the Commission's baseline, we set aside our Chevron lens and turn to the rule of reason to determine whether the Commission faithfully discharged its duties under NEPA when it evaluated alternatives to the EWEB proposal. The petitioners contend that the Commission erred when it endorsed its staff's identification of the "no-action" alternative in the final environmental impact statement as the continued operation of the Leaburg and Walterville developments under the terms of their original licenses. The petitioners assert that the proper "no-action" alternative under NEPA instead should have been the alternative of not issuing a license at all. Alternatively, the petitioners contend that the Commission violated NEPA because the range of alternatives examined by the Commission did not include license denial and subsequent project decommissioning and dam removal. These contentions fail. As discussed below, the Commission's identification and evaluation of alternatives satisfied NEPA's procedural requirements.

Under NEPA, an environmental impact statement must include "the alternative of no action." 40 C.F.R. S 1502.14(a) (1998); Association of Pub. Agency Customers, Inc., 126 F.3d at 1188. An environmental impact statement also must discuss "reasonable alternatives" to the proposed agency action. 42 U.S.C. S 4332(2)(C)(iii); Alaska Wilderness Recreation and Tourism Ass'n, 67 F.3d at 729 (quoting 40 C.F.R.S 1502.14) (explaining that consideration of alternatives "is the heart of the environmental impact statement"). The rule of reason guides "both the choice of alternatives as well as the extent to which the Environmental Impact Statement must discuss each alternative." City of Carmel-By-The-Sea v. United States Dep't of Transp., 123 F.3d 1142, 1155 (9th Cir. 1997) (citations omitted). Under the rule of reason, the Commission "need not consider an infinite range of alternatives, only reasonable or feasible ones." Id. (citing 40 C.F.R. S 1502.14 (a)(c)). "[F]or alternatives which were eliminated from detailed study, [the environmental impact statement must] briefly discuss the reasons for their having been eliminated." 40 C.F.R. S 1502.14(a)(emphasis added).

In the Order on Rehearing the Commission acknowledged that "[i]n the relicensing context, defining a logical `no action' alternative is difficult, because the Commission is legally required to take some action on the application for a new license, pursuant to Section 15 of the FPA." 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,326 (quoting Public Serv. Co. of New Hampshire, 68 Fed. Energy Reg. Comm'n Rep. (CCH) P 61,177, at 61,866-67 (Aug. 1, 1994)). We conclude that the statutory scheme sustains the Commission's no action definition and betrays the predominantly semantic nature of this dispute. As the Commission explained, by operation of FPA section 15(a), the effect of the Commission's taking "no action" on EWEB's relicensing application would have been to permit EWEB to continue operating the project indefinitely subject to the terms and conditions of its expired original license. See id. Section 15(a) authorizes the Commission to impose upon the relicensed party "such terms and conditions as may be authorized or required under the then existing laws and regulations." 16 U.S.C. S 808(a)(1). The Commission also may issue a "non-power license" if the public interest requires that "all or part of any licensed project should no longer be used . . . for power purposes." 16 U.S.C. S 808(f); see 18 C.F.R. S 16.11 (1998). Here, the Commission logically questioned "whether license denial could appropriately be considered `no action' in the case of a relicensing . . . . [as d]enial would require action, rather than inaction, and would presumably be coupled with other proposed actions, such as federal takeover, issuance of a nonpower license, or project decommissioning." Order on Reh'g, 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,326 (quoting Public Serv. Co. of New Hampshire, 68 Fed. Energy Reg. Comm'n Rep. (CCH) at 61,866-67); see also Edwards Mfg. Co., 81 Fed. Energy Reg. Comm'n Rep. (CCH) P 61,255 (Nov. 25, 1997) (explaining that the decision to deny relicensing and to require dam removal constitutes a major federal action). In view of this regime, the Commission logically concluded that the "definition of the no action alternative as continued operation of the project under the same terms and conditions as the existing license simply reflects this statutory reality." Order on Reh'g, 81 Fed. Energy Reg. Comm'n Rep. (CCH) at 62,326 (quoting Public Serv. Co. of New Hampshire, 68 Fed. Energy Reg. Comm'n Rep. (CCH) at 61,867).

The Commission's choice of the terms of the original license as the no action alternative finds additional support from the Council on Environmental Quality's ("CEQ") response to Question No. 3 of its NEPA guidance memorandum.21 The response states, in pertinent part:

[W]here ongoing programs initiated under existing legislation and regulations will continue, even as new plans are devel