At issue in this case was California Trout's petition for review of a Federal Energy Regulatory Commission (FERC) order that denied California Trout a rehearing regarding FERC's reissuance of an annual license to Southern California Edison (Edison) for operation of Project 1933, the Santa Ana River Hydroelectric Project (Project). Edison's license for the Project expired in 1996. Prior to the license expiration, Edison filed an application for a new license and requested water quality certification from the California State Water Resources Control Board (Board) pursuant to section 401 of the Clean Water Act (CWA).[1] In 1995, the Board denied water quality certification for Edison's new license. In 1996, FERC issued an annual license that would renew automatically until a new license was issued to Edison. In 2002, Edison filed an application for a new license from FERC and again requested water quality certification from the Board.

California Trout challenged the issuance of the annual license because Edison had not obtained water quality certification from the Board. California Trout requested a rehearing regarding FERC's issuance of Edison's annual license extending from May 1, 2000 to May 1, 2001. FERC denied California Trout's request for a rehearing on the grounds that section 15(a)(1) of the Federal Power Act (FPA)[2] "mandate[d] issuance of an annual license on the terms and conditions of the existing license,"[3] FERC's duty to issue the license was nondiscretionary, and FERC denied rehearing of the order.

The Ninth Circuit reviewed FERC's interpretation of the CWA de novo. The court afforded Chevron deference[4] to FERC's interpretation of the FPA. Under section 313(b) of the FPA,[5] the Ninth Circuit explained that it had jurisdiction to review a FERC order because the statute provided that "'[a]ny party to a proceeding . . . aggrieved by an order issued by [FERC] in such proceeding may obtain a review of such order in the United States Court of Appeals[.]'"[6] The Ninth Circuit found that the issuance of each annual license to Edison was the equivalent of an order, and therefore, California Trout met the statutory requirements to obtain review of the annual license issuance even though California Trout failed to challenge the original order providing for the automatically renewing annual license. The court explained that FERC's issuance of an annual license was "an exercise of [FERC's] authority"[7] even though the license issued automatically. In addition, the court explained that if it denied review of the issuance of annual licenses because California Trout failed to challenge the original order, all annual licenses subsequent to the original order could be denied judicial review, which would be illogical as a policy matter. Thus, the Ninth Circuit concluded that it had jurisdiction to review California Trout's petition.

With regard to the annual license at issue, Edison did not request water quality certification from the Board for the annual license. California Trout argued that "the issuance of annual licenses after the expiration of the original fifty-year license [was] subject to the requirement of State water quality certification under CWA § 401(a)(1)."[8] FERC rejected California Trout's argument because FERC found that its duty to issue annual licenses under section 15(a)(1) of the FPA[9] was "a ministerial and nondiscretionary act, a statutory mechanism that require[d FERC] to authorize continued project operation under the terms and conditions of the original license."[10] The Ninth Circuit affirmed FERC's conclusion because FERC's interpretation was entitled to Chevron deference and was consistent with prior case law.

The Ninth Circuit explained that FERC had a nondiscretionary duty to issue annual licenses to existing licensees. In addition, the court explained that only where existing licenses allowed for the imposition of new conditions may FERC add conditions to an annual license. Thus, because the existing Edison license contained no such provision, FERC was not allowed to require Edison to obtain water quality certification as a condition of renewing the annual license. Finally, the Ninth Circuit, relying on Lac Courte Oreilles Board v. Federal Power Commission,[11] explained that the legislative purpose of imposing such a nondiscretionary duty on FERC was to prevent interrupted services that might harm industries if annual licenses could be held up due to newly imposed conditions. Thus, Congress intended to protect dependent industries by requiring FERC to issue annual licenses on the same terms as the licensee's initial license.

Therefore, California Trout's petition for review of FERC's order denying rehearing was denied. However, the Ninth Circuit made clear that it had not addressed the situation where issuance of annual licenses had become a de facto renewal.