The Federal Water Power Act of 1920 has not abolished private
proprietary rights, existing under state law, to use waters of a
navigable stream for power purposes, and, in computing the
amortization reserve of the federal licensee in this case, which is
required under § 10(d) of that Act, as amended, the Federal Power
Commission was not justified in disallowing the expenses paid or
incurred by the licensee for the use of such rights along the
Niagara River. Pp.
347 U. S.
240-256.
(a) This Court accepts the Court of Appeals' conclusion that
this licensee's water rights are valid under the law of New York.
Pp.
347 U. S.
245-246.
(b) The water rights claimed by this licensee are usufructuary
rights to use the water for the generation of power, as
distinguished from claims to the legal ownership of the running
water itself, and, under New York law, they constitute a form of
real estate known as corporeal hereditaments. Pp.
347 U. S.
246-247.
(c) Even though this licensee's water rights are of a kind that
is within the scope of the Government's dominant servitude, the
Government has not exercised its power to abolish them.. Pp.
347 U. S.
248-256.
(d) There is a dominant servitude, in favor of the United
States, under which private persons hold physical properties
obstructing navigable waters of the United States and all rights to
use the waters of those streams; but the exercise of that
servitude, without making allowances for preexisting rights under
state law, requires clear authorization. Pp.
347 U. S.
249-252.
(e) The plan of the Federal Water Power Act is one of reasonable
regulation of the use of navigable waters, coupled with
encouragement of their development as power projects by private
parties. P.
347 U. S.
251.
(f) Riparian water rights, like other real property rights, are
determined by state law. The Federal Water Power Act merely imposes
upon their owners the additional obligation of using them in
compliance with that Act. P.
347 U. S.
252.
Page 347 U. S. 240
(g) Neither the United States nor the State of New York claims
such an exclusive right to the waters here in question as to
eliminate the limited use which the licensee here seeks to make of
them. P.
347 U. S.
256.
(h) The expenses in question, whereby this licensee acquired its
water rights, are not shown on this record to have been otherwise
unreasonable. P.
347 U. S.
256.
91 U.S.App.D.C. 395, 202 F.2d 190, affirmed.
On respondent's petition to review an order of the Federal Power
Commission, 9 F.P.C. 228, the Court of Appeals remanded the case to
the Commission with instructions to modify its order. 91
U.S.App.D.C. 395, 202 F.2d 190. This Court granted certiorari. 345
U.S. 955.
Affirmed, p.
347 U. S.
256.
MR. JUSTICE BURTON delivered the opinion of the Court.
The most significant issue raised by this case is whether the
Federal Water Power Act of 1920 [
Footnote 1] has abolished private
Page 347 U. S. 241
proprietary rights, existing under state law, to use waters of a
navigable stream for power purposes. We agree with the Court of
Appeals that it has not. We agree also that, in computing a federal
licensee's amortization reserve, required by § 10(d) of that Act,
as amended, [
Footnote 2] the
Federal Power Commission was not justified in disallowing the
expenses paid or incurred by the licensee in this case for the use
of such rights.
March 2, 1921, Niagara Falls Power Company, a New York
corporation, predecessor in interest of Niagara Mohawk Power
Corporation, a New York corporation, respondent herein, secured
from the Federal Power Commission the federal license with which we
are concerned. It was the first such license issued under the
Federal Water Power Act of 1920. Its term was 50 years. It
authorized the diversion of water for power purposes from the
Niagara River, above the Falls, and the return of it below the
Falls, all in New York. The daily diversion, in the aggregate,
could not exceed 19,500 cubic feet per second (c.f.s.). [
Footnote 3]
Page 347 U. S. 242
Section 10(d) of the Act requires each licensee, after 20 years
of operation under such a license, to establish and maintain
amortization reserves out of any surplus thereafter earned and
accumulated in excess of a reasonable return upon the licensee's
net investment. Section 14 makes such net investment, plus
severance damages, a principal measure of the price the Government
is to pay when and if it takes over all or part of the property.
[
Footnote 4]
Page 347 U. S. 243
In 1942, the Commission expressly held that § 14 applied to this
licensee. [
Footnote 5]
In 1947, Article 11 of the license was amended so as to specify
a 6% rate of return and to require 50% of the licensee's surplus
earnings to be paid into its amortization reserves. As so amended,
the article read:
"After the first twenty (20) years of operation of the project
under this license, namely, after March 1, 1941, six (6) per cent
per annum shall be the specified rate of return on the net
investment in the project for determining surplus earnings in
accordance with the provisions of Section 10(d) of the Act for the
establishment and maintenance of amortization reserves to be held
until termination of the license, or in the discretion of the
Commission, to be applied from time to time in reduction of the net
investment in the project, and one-half of all surplus earnings in
excess of six (6) per cent per annum received in any calendar year
shall be paid into and held in such amortization reserves.
[
Footnote 6] "
Page 347 U. S. 244
In 1948, the Commission began this proceeding to determine the
licensee's amortization reserve liability. It was the Commission's
first such effort under § 10(d). In 1949, pursuant to a revised
staff report, the Commission directed the holder of this license to
show cause why one-half of its surplus earnings from March 2, 1941,
through December 31, 1946, in the amount of $994,521.33, should not
be set aside in an amortization reserve, and why a like proportion
of its subsequent surplus earnings should not be set aside annually
upon a comparable basis. In 1950, the Commission's presiding
examiner recommended that the licensee's initial reserve be
$914,432.04, and the Commission approved that figure in preference
to $515,432.04 proposed by the licensee. One Commissioner filed a
concurring statement and one dissented. 9 F.P.C. 228. However, the
Court of Appeals for the District of Columbia Circuit, one judge
dissenting, upheld the licensee and remanded the case to the
Commission with instructions to modify its order accordingly. 91
U.S.App.D.C. 395, 202 F.2d 190. [
Footnote 7] The decision turned primarily upon the court's
conclusion that neither the Federal Water Power Act nor the
issuance of a license thereunder had abolished the licensee's
private proprietary rights to use the waters of Niagara River for
power purposes. That issue was inescapable, because the Commission,
in computing the licensee's required amortization reserve, had
found that certain annual payments and discounts made by the
Page 347 U. S. 245
license for its use of private water rights, existing under
state law, along the Niagara River, were not allowable expenses for
the reason that the Commission considered those rights no longer
existent. The Court of Appeals held precisely the contrary, and we
granted certiorari because of the important bearing of the decision
upon the Federal Water Power Act. 345 U.S. 955.
The immediate issue thus presented is whether the licensee's
amortization reserve under § 10(d), for the period from March 2,
1941, through December 31, 1946, should be $914,432.04 or
$515,432.04. [
Footnote 8] That
difference of $399,000 is one-half of the $798,000 which the
Commission believes should be included in the surplus earnings of
the licensee for the period. It consists of-
"1. $577,500 paid by the licensee at the rate of $99,000 a year,
for its use, for power purposes, of 730 c.f.s. of the
'International Paper water rights,' and"
"2. $220,500 allowed by the licensee as a discount at the rate
of $37,800 a year, on certain sales of electric power in
consideration of permission to use, for power purposes, 262.6
c.f.s. of the 'Pettebone-Cataract water rights.'"
The Court of Appeals held that, although respondent's
predecessor, in 1921, had received a federal license for this
project, it nevertheless was justified in continuing to meet the
financial obligations which it had assumed in return for permission
to use water rights originally granted and still existing under the
law of New York. That court, accordingly, approved each of the
foregoing items of expense, and fixed the licensee's initial
amortization reserve at $515,432.04.
It was not questioned in the Court of Appeals or here that the
licensee originally had acquired, in return
Page 347 U. S. 246
for the above-stated payments and discounts, some kind or degree
of private proprietary rights under the law of New York to use
water from the Niagara River for power purposes. Accordingly, we do
not consider it necessary to review here the intricate transactions
which resulted in the above-described payments and discounts. We
accept the conclusion of the Court of Appeals "that the
International Paper and Pettebone-Cataract water rights are valid
under the law of New York." 202 F.2d at 202. [
Footnote 9] For further recognition of these water
rights under state law,
see Water Power & Control
Commission v. Niagara Falls Power Co., 262 App.Div. 460, 30
N.Y.S.2d 371,
aff'd, 289 N.Y. 353, 45 N.E.2d 907;
Niagara Falls Power Co. v. Duryea, 185 Misc. 696, 57
N.Y.S.2d 777.
Neither is it necessary for us to discuss the licensee's
expenses in 1947 or thereafter. They must be treated in the same
way as those above mentioned, except to note that the discounts
allowed in return for the Pettebone-Cataract water rights ceased
with the licensee's purchase of those rights in 1947.
See
202 F.2d at 196.
We are not required to determine the nature of the rights
claimed by respondent except to recognize that they are
usufructuary rights to use the water for the generation of power,
as distinguished from claims to the legal ownership of the running
water itself. They are rights to use the force of the fall of the
water, coupled with an obligation
Page 347 U. S. 247
to return the water to the river under specified conditions.
[
Footnote 10] The rights
under consideration originally were attached to riparian lands
above and below the Falls. However, they long have been separated
from such lands and, thus separated, they have been transferred or
leased to respondent. Under the law of New York, they constitute a
form of real estate known as coporeal hereditaments. [
Footnote 11] The Commission does not
how contest the purchase
Page 347 U. S. 248
prices which have been paid for any of these rights. The
Commission's present objection is limited to respondent's
deduction, in the computation of its amortization reserves, of the
annual payments and discounts it has made and which it proposes to
make for the use of such rights. The Commission contends (1) that
Congress not only may constitutionally abolish such local water
rights without compensation, but that it already has done so, and
(2) that, although the licensee's contested expenditures may be
lawful, or even obligatory, between the parties, they must be
disallowed in computing the licensee's amortization reserve under §
10(d).
We conclude, as did the Court of Appeals, that, even though
respondent's water rights are of a kind that is within the scope of
the Government's dominant servitude, the Government has not
exercised its power to abolish them. [
Footnote 12]
Page 347 U. S. 249
While we recognize the dominant servitude, in favor of the
United States, under which private persons hold physical properties
obstructing navigable waters of the United States and all rights to
use the waters of those streams, [
Footnote 13] we recognize also that the exercise of that
servitude, without making allowances for preexisting rights under
state law, requires clear authorization. A classic example of such
a clear authorization appears in
United States v.
Chandler-Dunbar Water Power Co., 229 U. S.
53. The Act of March 3, 1909, there authorized the
exercise of the dominant right of the United States to take all of
a navigable river's flow for purposes of interstate commerce. It
did so in explicit terms. It said:
"SEC. 11. . . . the ownership in fee simple absolute by the
United States of all lands and property of every kind and
description north of the present Saint Marys Falls Ship Canal
throughout its entire length and lying between said ship canal and
the
Page 347 U. S. 250
international boundary line at Sault Sainte Marie, in the State
of Michigan, is necessary for the purposes of navigation of said
waters and the waters connected therewith."
"The Secretary of War is hereby directed to take proceedings
immediately for the acquisition by condemnation or otherwise of all
of said lands and property of every kind and description, in fee
simple absolute. . . ."
"
* * * *"
"Every permit, license, or authority of every kind, nature, and
description heretofore issued or granted by the United States, or
any official thereof, to the Chandler-Dunbar Water Power Company .
. . shall cease and determine and become null and void on January
first, nineteen hundred and eleven. . . ."
35 Stat. 820, 821.
In that case, the Government took the entire flow of the stream
exclusively for purposes of interstate commerce. The Court
accordingly recognized the Government's absolute right, within the
bed of the stream, to use all of the waters flowing in the stream,
for purposes of interstate commerce, without compensating anyone
for the use of those waters. [
Footnote 14]
That decision is not applicable here. The issue here is whether
the much more general and regulatory language of the Federal Water
Power Act shall be given the same drastic effect as was required
there by the language of the Act of March 3, 1909. We find nothing
in the Federal Water Power Act justifying such an interpretation.
Neither it, nor the license issued under it, expressly
Page 347 U. S. 251
abolishes any existing proprietary rights to use waters of the
Niagara River. Unlike the statute in the
Chandler-Dunbar
case, the Federal Water Power Act mentions no specific properties.
It makes no express assertion of the paramount right of the
Government to use the flow of the Niagara or of any other navigable
stream to the exclusion of existing users. On the contrary, the
plan of the Act is one of reasonable regulation of the use of
navigable waters, coupled with encouragement of their development
as power projects by private parties. [
Footnote 15]
The Act --
"discloses both a vigorous determination of Congress to make
progress with the development of the long idle water power
resources of the nation and a determination to avoid
unconstitutional invasion of the jurisdiction of the states. . .
."
"The Act leaves to the states their traditional jurisdiction
subject to the admittedly superior right of the Federal Government,
through Congress, to regulate interstate and foreign commerce. . .
."
First Iowa Hydro-Electric Cooperative v. Federal Power
Commission, 328 U. S. 152,
328 U. S.
171.
The Act treats usufructuary water rights like other property
rights. While leaving the way open for the exercise of the federal
servitude and of federal rights of purchase or condemnation, there
is no purpose expressed
Page 347 U. S. 252
to seize, abolish, or eliminate water rights without
compensation merely by force of the Act itself. [
Footnote 16]
The references in the Act to preexisting water rights carry a
natural implication that those rights are to survive at least until
taken over by purchase or otherwise. [
Footnote 17] Riparian water rights, like other real
property rights, are determined by state law. Title to them is
acquired in conformity with that law. The Federal Water Power Act
merely imposes upon their owners the additional obligation of using
them in compliance with that Act.
The legislative history of the Act discloses no substantial
support for the drastic policy which the Commission seeks to read
into it. To convert this Act from a regulatory Act to one
automatically abolishing preexisting
Page 347 U. S. 253
water rights on a nationwide scale calls for a convincing
explanation of that purpose. We find none. In fact, the legislative
history points the other way. Representative William L. La
Follette, of Washington, a member of the House Special Committee on
Water Power which reported substantially the same bill as that
which in 1920 became the Federal Water Power Act, said of it in
1918:
"This bill is not based on either the Government's ownership or
its sovereign authority, but on the hypothesis that we as
representatives of the States have authority to act for the States
in matters of this character and pass laws for the general good, by
the establishment of a limited trusteeship or commission composed
of officials of the Government, to carry out and administer this
law in such a way as not to infringe any of the rights of the
States nor to impede or restrict navigation, but rather to benefit
it. . . . Under this bill, we only allow the commission a
supervisory power over those functions entirely within the State's
jurisdiction for the period covered by any license, the State
having exercised its rights in advance of issue."
56 Cong.Rec. 9110.
Shortly thereafter, he added:
"If we put in this language [of § 9(b)], which is practically
taken from that Supreme Court decision [
United States v.
Cress, 243 U. S. 316], as to the
property rights of the States as to the bed and the banks and to
the diversion of the water, then it is sure that we have not
infringed any of the rights of the States in that respect, or any
of their rules of property. . . . We are earnestly trying not to
infringe the rights of the States."
Id. at 9810. [
Footnote 18]
Page 347 U. S. 254
In 1930, this Court passed upon the basic question now before us
when it came here in a different connection. In
Henry Ford
& Son v. Little Falls Fibre Co., 280 U.
S. 369, Mr. Justice Stone, writing for a unanimous
Court, held that a riparian owner of a right to use water for power
purposes in the navigable Mohawk River, in New York State, was
entitled to an injunction against the uncompensated destruction of
that right by a subsequent licensee under the Federal Water Power
Act. The New York Supreme Court had granted such an injunction and
awarded damages. This Court affirmed that decision, although the
federal license then before the Court had authorized the licensee
to raise the navigable waters of the Hudson River to such an extent
that they would destroy the value of the riparian owner's right,
under state law, to use the fall of tributary waters of the Mohawk
for power purposes. It was thus held that the Federal Water Power
Act had not abolished the complainant's private proprietary water
rights, existing under New York law, to use navigable waters for
power purposes. [
Footnote
19]
"[E]ven though the rights which the respondents [the riparian
owners] here assert be deemed subordinate to the power of the
national government to control navigation, the present legislation
does not purport to authorize a licensee of the Commission
Page 347 U. S. 255
to impair such rights recognized by state law without
compensation."
Id. at
280 U. S.
377.
After quoting from §§ 10(c) (liability for damages caused by the
licensed project), 27 (saving clause as to proprietary rights under
state law), 21 (condemnation rights) and 6 (licensee's acceptance
of the conditions of the Act), the Court added:
"While these sections are consistent with the recognition that
state laws affecting the distribution or use of water in navigable
waters and the rights derived from those laws may be subordinate to
the power of the national government to regulate commerce upon
them, they nevertheless so restrict the operation of the entire act
that the powers conferred by it on the Commission do not extend to
the impairment of the operation of those laws or to the
extinguishment of rights acquired under them without remuneration.
We think the interest here asserted by the respondents, so far as
the laws of the state are concerned, is a vested right acquired
under those laws, and so is one expressly saved by section 27 from
destruction or appropriation by licensees without compensation, and
that it is one which petitioner [the licensee], by acceptance of
the license under the provisions of section 6, must be deemed to
have agreed to recognize and protect."
Id. at
280 U. S.
378-379.
Parallel reasoning has been applied in a case involving a
conflict between a licensee and the holder of state-recognized
rights to use water from a navigable stream for irrigation
purposes.
United States v. Gerlach Live Stock Co.,
339 U. S. 725,
339 U. S. 734.
See also, as to state-created water rights for power
purposes,
Grand River Dam Authority v. Grand-Hydro,
335 U. S. 359,
335 U. S. 372;
Pike Rapids Power Co. v. Minneapolis, St. P. & S.S.M. R.
Co., 99 F.2d 902;
United States v. Central Stockholders'
Corp., 52 F.2d 322;
Rank v. Krug, 90 F. Supp.
773, 793;
Great
Page 347 U. S. 256
Northern R. Co. v. Washington Electric Co., 197 Wash.
627, 86 P.2d 208.
In
First Iowa Hydro-Electric Cooperative v. Federal Power
Commission, 328 U. S. 152, at
328 U. S.
175-176, § 27 of the Act was discussed in relation to
conditions controlling the approval of projects. The language there
used is applicable to proprietary water rights for power purposes,
as well as those for other proprietary uses. To any extent that
statements in
Alabama Power Co. v. Gulf Power Co., 283 F.
606, cited in the
First Iowa case, indicate a different
interpretation, they are not controlling.
Respondent's private property rights are rooted in state law,
subject to the paramount rights of the State and Nation. In the
instant case, both the State and the Nation have made limited
assertions of their superior rights. New York has done so through
its rental charges, and the Nation through its license. Neither,
however, has laid claim to such an exclusive right to the waters as
eliminates the limited use which respondent here seeks to make of
them.
The findings of the Commission and the action of the Court of
Appeals disclose no sufficient additional circumstances
demonstrating the unreasonableness of the expenses in question.
[
Footnote 20]
The judgment of the Court of Appeals, accordingly, is
Affirmed.
MR. JUSTICE REED withdrew from the consideration and decision of
this case.
MR. JUSTICE JACKSON took no part in the consideration or
decision of this case.
[For dissenting opinion,
see p.
347 U. S.
258.]
Page 347 U. S. 257
[
Footnote 1]
The Federal Water Power Act of 1920, 41 Stat. 1063, as amended,
is now Part I of the Federal Power Act, 49 Stat. 838, 16 U.S.C. §§
791a-825r.
[
Footnote 2]
"SEC. 10. All licenses issued under this Part shall be on the
following conditions:"
"
* * * *"
"(d) That, after the first twenty years of operation, out of
surplus earned thereafter, if any, accumulated in excess of a
specified reasonable rate of return upon the net investment of a
licensee in any project or projects under license, the licensee
shall establish and maintain amortization reserves, which reserves
shall, in the discretion of the Commission, be held until the
termination of the license or be applied from time to time in
reduction of the net investment. Such specified rate of return and
the proportion of such surplus earnings to be paid into and held in
such reserves shall be set forth in the license. . . ."
49 Stat. 842, 843, 16 U.S.C. § 803(d).
[
Footnote 3]
This limit soon was increased to 19,725 c.f.s., 6 F.P.C. 184,
185, and later to 20,000 c.f.s.,
see 9 F.P.C. 228, 244, n.
28. The Treaty between the United States and Great Britain relating
to boundary waters between the United States and Canada,
proclaimed, May 13, 1910, limited the diversion from the United
States side to 20,000 and on the Canadian side to 36,000 c.f.s. 36
Stat. 2448, 2450. As to additional emergency and temporary
diversions,
see 55 Stat. 1276, 1380; 1 U.S. Treaties and
Other International Agreements 694.
[
Footnote 4]
49 Stat. 844-845, 16 U.S.C. § 807.
See also § 16 as to
compensation to be paid for temporary use of the property by the
Government, 41 Stat. 1072, 16 U.S.C. § 809; § 20 as to rate-fixing,
41 Stat. 1073-1074, 16 U.S.C. § 813; and § 26 as to a purchase by
the Government at a judicial sale, 41 Stat. 1076, 16 U.S.C. § 820.
"Net investment" is defined in § 3 as follows:
"(13) 'net investment' in a project means the actual legitimate
original cost thereof as defined and interpreted in the
'classification of investment in road and equipment of steam roads,
issue of 1914, Interstate Commerce Commission,' plus similar costs
of additions thereto and betterments thereof, minus the sum of the
following items property allocated thereto, if and to the extent
that such items have been accumulated during the period of the
license from earnings in excess of a fair return on such
investment: (a) unappropriated surplus, (b) aggregate credit
balances of current depreciation accounts, and (c) aggregate
appropriations of surplus or income held in amortization, sinking
fund, or similar reserves, or expended for additions or betterments
or used for the purposes for which such reserves were created. . .
."
49 Stat. 839, 16 U.S.C. § 796(13).
In the instant case, the Commission explains that --
"Section 10(d) is part of a larger pattern of fairness set up by
the act to induce water power development. Licensees are assured a
'fair return,' but the public is safeguarded against profiteering
by a licensee through profits beyond a fair return. At the end of
the license period and upon 'recapture' by the Federal Government,
earnings throughout the license period are to be tested against a
fair return standard set up in section 3(13)."
9 F.P.C. at 248.
[
Footnote 5]
This resulted from the decision that the "fair value" provisions
of § 23(a), 49 Stat. 846, 16 U.S.C. § 816, applied to licenses to
use water rights previously held under permits from the Federal
Government, whereas this licensee's prior water rights, if any,
arise under the law of New York.
In re Niagara Falls Power
Co., 3 F.P.C. 206, affirmed by the Court of Appeals for the
Second Circuit in
Niagara Falls Power Co. v. Federal Power
Commission, 137 F.2d 787.
[
Footnote 6]
A proceeding seeking the Commission's approval of a further
amendment to Article 11 was consolidated with the show cause
proceedings in the instant case. In response, the Commission, in
1950, ordered that article amended to read:
"After the first 20 years of operation of the project under this
license, 6 percent per annum shall be the specified rate of return
on the net investment in the project for determining surplus
earnings and for the establishment and maintenance of amortization
reserves, pursuant to section 10(d) of the act; one-half of all
earnings in excess of 6 percent per annum shall be paid into such
amortization reserves and such amortization reserves shall be
established, maintained and disposed of in accordance with the
terms of the act and such rules, regulations and orders of the
Commission as may be adopted pursuant thereto."
9 F.P.C. at 259.
Under the above amendment, the method of setting aside the
amortization reserves may be prescribed by the Commission. 9 F.P.C.
at 232-233, 239.
[
Footnote 7]
Per curiam. Kimbrough Stone, Circuit Judge, retired, from the
Eighth Circuit, sitting by designation; Wilbur K. Miller, Circuit
Judge. Dissenting, Bazelon, Circuit Judge.
[
Footnote 8]
For computations,
see Appendix,
infra, p.
347 U. S.
257.
[
Footnote 9]
Respondent's corporate history and the devolution of the title
to the International Paper and the Pettebone-Cataract water rights
are described by the Court of Appeals in 202 F.2d 191 at 194-197,
198-202.
See also Niagara Falls Power Co. v. Federal Power
Commission, 137 F.2d 787. For a detailed examination of the
facts and issues of the instant case,
see Schwartz,
Niagara Mohawk v. FPC: Have Private Water Rights Been
Destroyed by the Federal Power Act?, 102 U. of Pa.L.Rev. 31.
[
Footnote 10]
". . . While the right of its use, as it flows along in a body,
may become a property right, yet the water itself, the corpus of
the stream, never becomes or, in the nature of things, can become
the subject of fixed appropriation or exclusive dominion in the
sense that property in the water itself can be acquired or become
the subject of transmission from one to another. Neither sovereign
nor subject can acquire anything more than a mere usufructuary
right therein, and, in this case, the state never acquired, or
could acquire, the ownership of the aggregated drops that composed
the mass of flowing water in the lake and outlet, though it could
and did acquire the right to its use."
Sweet v. City of Syracuse, 129 N.Y. 316, 335, 27 N.E.
1081, 1084, 29 N.E. 289.
[
Footnote 11]
A riparian owner in New York has a right to use the waters of an
abutting stream as part of his estate.
United Paper Board Co.
v. Iroquois Pulp & Paper Co., 226 N.Y. 38, 123 N.E. 200;
Waterford Electric Light, Heat & Power Co. v. New
York, 208 App.Div. 273, 203 N.Y.S. 858,
aff'd, 239
N.Y. 629, 147 N.E. 225.
Recovery by the International Paper Company for the deprivation
of its use of the instant water rights in 1917 was authorized by
this Court in 1931. Referring to the 730 c.f.s. now before us, Mr.
Justice Holmes said for the Court:
"From this canal, the petitioner, the International Paper
Company, was entitled, by conveyance and lease, to draw and was
drawing 730 cubic feet per second, -- a right that, by the law of
New York, was a corporeal hereditament and real estate."
International Paper Co. v. United States, 282 U.
S. 399,
282 U. S. 405.
The Government was obliged to pay for taking those diversionary
rights by condemnation, and they are the ones for which respondent
is now paying an annual rental of $99,000. The deprivation,
therefore, was not an exercise of the Government's dominant
servitude, but was a compensable taking by condemnation of the
paper company's recognized right to use the water.
"[T]he Government took the property that the petitioner owned as
fully as the Power Company owned the residue of the water power in
the canal."
Id. at
282 U. S. 408.
See also Van Etten v. City of New York, 226 N.Y. 483, 124
N.E. 201, and
People ex rel. Niagara Falls Hydraulic Power
& Mfg. Co. v. Smith, 70 App.Div. 543, 546, 75 N.Y.S. 1100,
1101,
aff'd without opinion, 175 N.Y. 469, 67 N.E.
1088.
[
Footnote 12]
The existence of the Pettebone-Cataract water rights, under the
law of New York prior to the Federal Water Power Act, is recognized
by the courts of that state.
Hydraulic Power Co. of Niagara
Falls v. Pettibone Cataract Paper Co., 112 Misc. 528, 183
N.Y.S. 373,
aff'd, 198 App.Div. 644, 191 N.Y.S. 12.
Furthermore, Article 13 of the license recognizes at least the
possibility of the survival of these rights after the issuance of
the license. It provides that, in the event the United States or a
new licensee shall take over the project,
"Such taking over of the project shall also be subject
to
the rights, if any, of Pettebone-Cataract Paper Company and
Cataract City Milling Company to withdraw water at a rate not
exceeding 265 cubic feet per second from the Hydraulic Canal or
Basin of Licensee, and to the rights, if any, of International
Paper Company."
6 F.P.C. 184, 185.
In 1947, the licensee secured the approval of the New York
Public Service Commission, and of the Securities & Exchange
Commission (under § 12(d) of the Public Utility Holding Company Act
of 1935, 49 Stat. 824, 15 U.S.C. § 79
l(d)) of its purchase
of the Pettebone-Cataract rights from the licensee's parent
corporation for $728,415.48. Having thus completed their purchase,
the licensee petitioned the Commission to amend Article 13 by
striking from it the above italicized reference to these rights.
The Commission declined, and, accordingly, the original reference
to the Pettebone-Cataract rights, as well as that to the rights of
the International Paper Company, remains in the license.
The Commission's denial of the requested amendment was on the
ground that its consent to the omission of the original equivocal
reference to the rights "might be construed as recognizing other
alleged water rights claimed by another company." 6 F.P.C. at 188.
The Commission took the position that the rights in question had no
existence after the enactment of the Federal Water Power Act, and
it now regards itself as controlled by that reasoning. 9 F.P.C. at
252, 258-259. Its action, however, was not considered by the Court
of Appeals to be dispositive of the issue, and it is not binding
upon us.
[
Footnote 13]
United States v. Willow River Power Co., 324 U.
S. 499;
United States v. Chicago, M., St. P. &
P. R. Co., 312 U. S. 592;
United States v. Appalachian Electric Power Co.,
311 U. S. 377.
See also United States v. Kansas City Life Ins. Co.,
339 U. S. 799.
[
Footnote 14]
It was in this connection that the Court pointed out the
inconceivability of private ownership in the running water of
navigable streams as distinguished from private proprietary rights
to the use of such water for power and other purposes.
United
States v. Chandler-Dunbar Water Power Co., 229 U.S. at
229 U. S.
69-70.
[
Footnote 15]
United States ex rel. Chapman v. Federal Power
Commission, 345 U. S. 153,
345 U. S.
167-168;
First Iowa Hydro-Electric Cooperative v.
Federal Power Commission, 328 U. S. 152,
328 U. S.
180-181. The Act was dedicated to "encouraging private
enterprise and the investment of private capital" in power projects
on a basis consistent with the public interest. H.R.Rep.No.61, 66th
Cong., 1st Sess. 3. The bill was to provide
"a method by which the water powers of the country, wherever
located, can be developed by public or private agencies under
conditions which will give the necessary security to the capital
invested and at the same time protect and preserve every legitimate
public interest."
Statement of David F. Houston, Secretary of Agriculture.
Id. at 5.
[
Footnote 16]
Section 14 even provides:
"nor shall the values allowed for
water rights,
rights-of-way, lands, or interest in lands [used in computing a
licensee's net investment] be in excess of the actual reasonable
cost thereof at the time of acquisition by the licensee. . . ."
(Emphasis supplied.) 49 Stat. 844-845, 16 U.S.C. § 807.
[
Footnote 17]
In § 3(11), "project" is said to include "all water rights . . .
necessary or appropriate in the maintenance and operation of such
unit," 49 Stat. 838, 839; § 4(b) empowers the Commission, in
determining the original cost of a project and the net investment
in it, to require licensees to show "the price paid for water
rights" as well as for lands, 49 Stat. 839; § 9(b) requires an
applicant for a license to submit evidence of whatever compliance
he has made with the requirements of state law with respect to "the
appropriation, diversion, and use of water for power purposes," 41
Stat. 1068; § 14 requires, when taking over a licensed project,
that the "values allowed for water rights" shall not be "in excess
of the actual reasonable cost thereof at the time of acquisition by
the licensee" (Commissioner Smith emphasized the significance of
this clause, 9 F.P.C. at 261), 49 Stat. 844-845; § 23(b) recognizes
the application of state laws to projects where interstate or
foreign commerce, public lands and reservations are not affected,
49 Stat. 846; § 27 provides that
"nothing herein contained shall be construed as affecting or
intending to affect or in any way to interfere with the laws of the
respective States relating to the control, appropriation, use, or
distribution of water used in irrigation or for municipal or other
uses, or any vested right acquired therein,"
41 Stat. 1077.
See 16 U.S.C. §§ 796-821.
[
Footnote 18]
In 1917, the Senate Committee on Commerce said:
"[T]he bill is so framed as to protect and maintain the
constitutional power and control of the Federal Government over
navigable streams, as well as the sovereignty of the States and the
rights of riparian proprietors over and in the beds and waters of
those streams, and allow the full exercise and enjoyment of the
latter, subject to the paramount authority of Congress to regulate
the same for navigation purposes."
S.Rep.No.179, 65th Cong., 2d Sess. 4, as to S. 1419.
For a history of the congressional debates and hearings,
see Kerwin, Federal Water Power Legislation (1926).
[
Footnote 19]
The Court refrained from determining whether § 21 of the Act, as
to eminent domain, gave the licensee a further right to condemn,
and thus pay for the preexisting rights.
Id. at
280 U. S. 379.
[
Footnote 20]
Claims of the State of New York, in its own favor, suggested in
its brief or oral argument as
amicus curiae, are not
before us.
|
347
U.S. 239app|
APPENDIX
The Commission's computation, 9 F.P.C. at 258, is reached as
follows:
bwm:
----------------------------------------------------------------------------------------------
Period Base Earnings Specified return Surplus Amortization
(6 percent) earnings credits
----------------------------------------------------------------------------------------------
Mar. 2, 1941 to
Dec. 31, 1941 $36,101.556.74 $2,480,131.61 $1,805,077.84
$675,053.77 $337,526.88
Year 1942 35,817,450.85 2,600,032.64 2,149,047.05 450,985.59
225,492.80
Year 1943 35,464,320.95 2,298,684.44 2,127,859.26 170,825.18
85,412.59
Year 1944 34,925,610.46 1,952,641.25 2,095,536.63
(142,895.38)
Year 1945 34,076,789.61 2,027,324.21 2,044,607.38
(17,283.17)
Year 1946 33,286,819.28 2,689,387.25 1,997,209.16 692,178.09
265,999.77
-------------- ------------- ------------- ------------
-----------
Mar. 2, 1941 to
Dec. 31, 1946 -------------- 14,048,210.40 12,219,337.32
1,828,864.08 914,432.04
----------------------------------------------------------------------------------------------
ewm:
The above computation offsets the deficits of 1944 and 1945
against the surplus earnings of 1946 and reduces the total
amortization reserve from the $994,521.33, recommended in the
revised staff report, to the $914,432.04 approved by the presiding
examiner and Commission. See id. at 248-250.
Respondent's computation, approved by the Court of Appeals, is
reached as follows:
bwm:
----------------------------------------------------------------------------------------------
Period Base Earnings Specified return Surplus Amortization
(6 percent) earnings credits
----------------------------------------------------------------------------------------------
Mar. 2, 1941 to
Dec. 31, 1941 $36,101,556.74 $2,366,131.61 $1,805,077.84
$561,053.77 $280,526.89
Year 1942 35,817,450.85 2,463,232.64 2,149,047.05 314,185.59
157,092.79
Year 1943 35,464,320.95 2,161,884.44 2,127,859.26 34,025.18
17,012.59
Year 1944 34,925,610.46 1,815,841.25 2,095,536.63
(279,695.38)
Year 1945 34,076,789.61 1,890,524.21 2,044,607.38
(154,083.17)
Year 1946 33,286,819.28 2,552,587.25 1,997,209.16 555,378.09
60,799.77
-------------- ------------- ------------- ------------
-----------
Mar. 2, 1941 to
Dec. 31, 1946 -------------- $13,250,201.40 $12,219,337.32
$1,030,864.08 $515,432.04
----------------------------------------------------------------------------------------------
ewm:
This reduces the earnings by deducting from them the payments
and discounts here in controversy.
See 202 F.2d at
193.
Page 347 U. S. 258
MR. JUSTICE DOUGLAS, with whom MR. JUSTICE BLACK and MR. JUSTICE
MINTON concur, dissenting.
Section 10(d) of the Federal Power Act, 41 Stat. 1069, as
amended, 16 U.S.C. § 803(d), requires licensees to set up
amortization reserves out of their surplus earnings. The Commission
enforced this requirement by ordering Niagara to make a book
transfer of surplus earnings to an amortization reserve account. In
determining the amount of earnings available for amortization, the
Commission refused to allow certain water right payments as
expenses. The only question before the Court is whether the
Commission could lawfully disregard these expenses in computing
Niagara's earnings for § 10(d) purposes.
The amortization reserve required by § 10(d) serves the function
of reducing Niagara's net investment. § 3(13). Niagara's net
investment is the measure of the amount of the United States must
pay if it decides to recapture Niagara's plant under § 14 of the
Act. [
Footnote 2/1] By allowing
these water right payments as expenses for this purpose the Court
increases the ultimate obligation of the United States.
It may be that Niagara is under a legal duty to pay for its
water rights under state law. And I agree that the Federal Power
Act was not intended to interfere with water rights created by
state law. But it is not true that the United States can be made to
pay, directly or indirectly, for the use of the waters of a
navigable stream. That has been settled at least since
United
States v. Chandler-Dunbar Water Power Co., 229 U. S.
53. [
Footnote 2/2]
"Ownership of a private stream wholly upon the lands of an
individual is
Page 347 U. S. 259
conceivable; but that the running water in a great navigable
stream is capable of private ownership is inconceivable."
Id. at
229 U. S. 69. If
Niagara must pay for its water rights without being reimbursed by
the United States, that is the price Niagara must pay for its
federal license.
See United States v. Appalachian Electric
Power Co., 311 U. S. 377;
cf. Regents v. Carroll, 338 U. S. 586. The
Federal Power Act should not be construed as requiring the United
States to pay for something it already owns. [
Footnote 2/3] But that is precisely what the Court does
today.
[
Footnote 2/1]
The same is true in case the United States moves to acquire the
properties under § 26 by judicial sale.
[
Footnote 2/2]
See also United States v. Chicago, M., St. P. & P. R.
Co., 312 U. S. 592;
United States v. Commodore Park, Inc., 324 U.
S. 386;
United States v. Willow River Power
Co., 324 U. S. 499.
[
Footnote 2/3]
The command of § 14 is otherwise. It excludes from the "net
investment," which must be paid if the federal government decides
to recapture the project, "the value of any lands, rights-of-way,
or other property of the United States licensed by the Commission
under this Act."