Albany Eng'g Corp. v Hudson River - Black River
2012 NY Slip Op 30814(U)
April 3, 2012
Supreme Court, Albany County
Docket Number: 5289-11
Judge: Joseph C. Teresi
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STATE OF NEW YORK
ALBANY ENGINEERING CORPORATION,
COUNTY OF ALBANY
DECISION and ORDER
INDEX NO. 5289-11
RJI NO. 01-12-105799
HUDSON RIVER - BLACK RIVER
Supreme Court of Albany County All Purpose Term, March 15, 2012
Assigned to Justice Joseph C. Teresi
Matthew C. Hug, Esq.
Attorney for Plaintiff
105 Jordon Road
Troy, New York 12180
Eric T. Schneiderman, Esq.
Attorney General of the State of New York
Attorneys for Defendant
(c. Harris Dague, Esq., AAG)
Albany, New York 12224
Plaintiff moves for summary judgment pursuant to CPLR 3212 and seeks an assessment of
damages against the defendant in the amount of$516,655.62
with interest from January 1,2003 with
costs, disbursements and attorney fees. The defendant opposes the motion and cross-moves for
summary judgment and maintains the plaintiff has not exhausted its administrative remedies and the
motion is premature based upon the doctrine of ripeness. The plaintiff opposes the cross-motion.
The plaintiff is an engineering firm that owns and operates hydroelectric power plants. The
plaintiff possesses a Federal Energy Regulatory Commission ("FERC") license for the Mechanicville
Hydroelectric Project which is located downstream from the Conklingville Dam, the Sacandaga River,
Sacandaga Lake and Indian Lake which are located in the Adirondack State Park. The defendant has
been regulating the flow of the upper Hudson River since 1922 and has jurisdiction over the Hudson
Regulating District ("District") which includes twelve municipal counties in Eastern New York State.
The Great Sacandaga Lake is a man made lake and was created in 1930 with the construction of the
Conklingville Dam on the Sacandaga River. The purpose of the project was to reduce floods and
stabilize the water flow of the Sacandaga and Hudson rivers for hydroelectric power generation. The
District is charged with providing flood protection for the welfare and benefit of the public.
The defendant manages the flow of the rivers and lakes and it produces what is called
"headwater benefits" which provides downstream hydroelectric power generation plants with water
flow from upstream owners. Federal and state statutes allow upstream users to charge downstream users
for the benefits created by the "headwater benefits".
For many decades the defendant charged
downstream users an assessment which included all of their capital expenses, operating expenses and
maintenance costs. In 1992, the FERC demanded that the defendant obtain a FERC license. The
defendant obtained a FERC license in 2002 and was then subject to the control and regulation of the
FERC. As a FERC licensee, the defendant was not allowed to levy an assessment for headwater benefits
without the approval of FERC. In addition, the defendant's assessment could only be used to recoup
interest, maintenance and deprecation. The plaintiff claims the defendant did not seek the approval of
the FERC for its assessments. The plaintiff maintains that for the years 2003 to 2007, the defendant
assessed it $516,655.62 for headwater benefits and it had no choice but to pay the assessments. The
plaintiff maintains for the years 2003 to 2007 the defendants obtained more than $15 million dollars
from all of the downstream owners.
On July 25,2006, the plaintiff filed a complaint with the FERC and alleged the defendant's
assessments for headwater benefits since 2003 was improper and excessive. The plaintiff alleged the
defendanat lacked the authority to collect assessments and the assessment scheme violated the Federal
Power Act. The defendant joined the litigation as an intervening party.
In an Order issued December 22,2006, the Federal Energy Regulatory Commission held, inter
alia, that the defendant had been imposing assessments to downstream users without the pre-approval
of the FERC. The Order found the defendant could not charge the downstream owners for interest,
maintenance and deprecation as they were preempted by federal law. The Order stated the defendant
was not prohibited from levying assessments for operating and capital expenditures and the FERC had
no authority to order the defendant to issue refunds for assessments improperly collected from the
plaintiff. Plaintiff sought a rehearing with the Federal Energy Regulation Commission which reviewed
the prior proceeding but denied the request on May 17, 2007. Thereafter, the plaintiff appealed the
decision ofthe FERC to the United States Court of Appeals for the District of Columbia. The defendant
joined the case as an intervening party.
On November 28,2008, the United States Court of Appeals reversed the decision of the FERC
and found Federal Power Law § 10(t) precluded the defendant from charging the plaintiff any
assessments. (Albany Engineering Corporation v. Federal Energy Regulatory Commission, 548 F. 3d
1071 [D.C. Circ. 2008]. The Court determined the defendant never had the authority to '"exact any
compensation from the [plaintiff] for headwater benefits." The plaintiff claims as a result of this
decision, the defendant had improperly collected $516,655.62 from it in the form of assessments. The
Court of Appeals remanded the matter to the FERC to attain an appropriate remedy.
On May 21, 2001 the FERC issued an Order of Remand which instituted proceedings before
a settlement judge to "assist the parties and other owners of projects in the affected river basin in
reaching a headwater benefits settlement." (see, Exhibit L at ~ 3). If a settlement could not be attained,
the FERC would conduct an investigation to ascertain the appropriate headwater benefit assessments
for all future projects. Settlement negotiations failed and an investigation was commenced. The FERC
offered to credit any future amounts due by the plaintiff as an offset against all funds previously paid.
The plaintiff maintains the headwater benefits investigation is ongoing. The plaintiff maintains the
FERC refused to exercise its authority and enforce its regulations by ordering the defendant to refund
plaintiff assessments previously paid. The FERC concluded that if the plaintiff was dissatisfied with
their proposal to offset future payements from the amounts previously paid, it should seek refunds in
state court. The plaintiff sought a re-hearing on the refusal ofFERC to order refunds which was denied
in an Order of Rehearing on November 19,2009. (see, Exhibit M).
The plaintiff claims the alleged ongoing investigation of the FERC has nothing to do with the
issue of refunds as directed by the United States Court of Appeals. The plaintiff alleges the purpose of
the ongoing investigation is to address how the defendant will financially survive and how it may
lawfully charge downstream owners future assessments for future benefits.
The defendant maintains the plaintiff has not its burden of proof entitling it to summary
judgment. The defendant alleges its cross-motion for summary judgment should be granted as plaintiff's
claims for refunds are premature, unripe and plaintiff has not exhausted the available administrative
remedies under FERC. The defendant maintains the FERC has jurisdiction over the issues remanded
by the Court of Appeals and the authority to conduct an administrative process to determine the amount
of headwater benefits received by sixteen downstream hydro power corporations. Defendant claims the
investigation would determine the amount of refunds due and improperly assessed by the District. The
Order of Rehearing authorized the retention of the Oakridge National Laboratory to conduct a
Headwater Benefits study ("HWB study"). On January 19,2012, after an 18 month investigation, the
FERC issued an initial draft of the HWB study. The defendant claims the preliminary assessment is on
going as federal regulations contemplates an appeal and rehearing procedure. Neither the defendant or
the FERC have indicated that any appeals have been filed.
On a motion for summary judgment, the movant must establish be admissible proof the
rightto judgment as a matter oflaw.
(Alvarez v Prospect Hospital, 68 NY2d 320 ). The burden
shifts to the opponent of the motion to establish by admissible proof, the existence of genuine issues
offact. (Zuckerman v City of New York, 49 NY2d 557 ). It is well established that on a motion
for summary judgment, the court's function is issue finding, not issue determination. (Barr v. County
of Albany, 49 NY2d 557 , and all evidence must be viewed in the light most favorable to the
opponent to the motion. (Davis v. Klein, 88 NY2d 1008 ).
In opposing a motion for summary judgment, one must produce evidentiary proof in
admissible form ... mere conclusions, expressions of hope or unsubstantiated allegations or assertions
are insufficient. (Zuckerman v City of New York, 49 NY2d at 562). It is incumbent upon the nonmoving party to lay bare her proof in order to defeat summary judgment. (0'Hara v Tonner, 288 AD2d
513 [3rd Dept. 2001 D. Mere conclusionary assertions, devoid of evidentiary fact, are insufficient to raise
a genuine triable issue of fact on a motion for summary judgment as is reliance upon surmise,
conjecture or speculation. (Banco Popular North America v. Victory Taxi Management, Inc., 1 NY3d
The United States Court of Appeals held in Albany Engineering Corporation v. Federal Energy
Regulatory Commission, 548 F. 3d at 1079:
Our holding that [Federal Power Law] § 1O(i) preempts all state
headwater benefits assessments materially changes the context
for FERC's consideration of both of these issues. Whereas FERC
and the District formerly believed that the District was free to assess
charges of certain costs under the authority of state law, our holding
makes clear that the District never had such authority to exact any
compensation from [plaintiff] for headwater benefits .
... In light of these changed circumstance, we find it appropriate
to remand to FERC to consider the scope of its authority to craft
As a result of this decision, the District did not have the authority to collect assessment fees from the
plaintiff for the years 2003-2007. In addition, the Court of Appeals found the FERC had the power to
order refunds as the District is a licensee of the FERC subject to FERC's jurisdiction. [d. at 1080. The
Court also stated the FERC is not compelled to order refunds of rates collected under the authority of
state law that is pre-empted by a federal statute. [d. At 1081. The defendant levied assessments against
the downstream users pursuant to federal statutes after it became a licensee of the FERC in 2002.
In order to comply with the directives of the Court of Appeals, the FERC has attempted to
fashion an appropriate remedy since 2008. A judicial settlement program was unsuccessful. A
Headwater Benefits study was recently completed after an 18 month process. The FERC has declined
to address the issue of refunds. The record reveals the FERC claims "we do not have authority to order
refunds of charges collected by the District without authority" and if the plaintiff seeks an immediate
refund, it must be "pursued in state court." (see, Exhibit L at ~ 19; Exhibit M at ~ 7, 11 and 32). The
FERC clearly stated that the plaintiff retains the right to seek refunds in the state courts if it chooses
"regardless of whether a headwater benefits investigation later determines that it was liable for past
headwater benefits, since the District's collection of all previous payments was unauthorized." (see,
Exhibit L at ~ 24). The FERC stated in its May 19,2009 Order on Remand:
if [plaintiff] insists on obtaining a refund of the payments, rather
than a remedy that we can provide, it should do so through a court
action. Our determination that we cannot order refunds does not
leave [plaintiff] without a remedy. In seeking a refund through the
court system, [plaintiff] can rely on the court or appeals' determination
that the assessments were unauthorized because they were made under
preempted authority. (see, Exhibit L at ~ 41).
It appears the focus of the FERC remedial investigation concentrates on the future of assessment
levies by the District and to identify legitimate sources of income for the District. The purpose of the
HWB study is not to consider refunds pursuant to the findings of the Court of Appeals, but rather, to
ascertain financial resources for the District. In addition, the HWB study would identify sources that
"the District would be unable to collect future payments from hydropower projects as a source of
funding." (see, Exhibit L at ~ 23).
The FERC clearly states it does not have the authority to order refunds for unauthorized
assessment levies pursuant to the decision of the Court of Appeals. Since the FERC cannot and will not
consider that refunds would or would not he an appropriate remedy of those issues remanded by the
Court of Appeals, the plaintiff has no recourse other than to turn to the state court. Since the FERC
maintains it has no authority to grant a refund, the ripeness doctrine and the exhaustion doctrine are not
applicable in this instance. (Ward v, Bennett, 79 NY2d 394 ).
Plaintiff s motion for summary judgment
is granted. The plaintiff has demonstrated
entitlement to summary judgment as a matter of law. The Court of Appeals clearly stated that the
assessment levied by the District for the years 2003-2007 was in violation of federal law. Since the
levies were unlawful, the plaintiff was entitled to refunds for those assessments previously paid. The
plaintiff is entitled to a judgment in the amount of$516,655.62 together with interest from January 1,
Accordingly, the plaintiffs motion for summary judgment pursuant to CPLR 3212 is granted.
The cross-motion of the defendant is denied.
This Decision and Order is returned to the attorney for the plaintiff. A copy of this Decision
and Order and all other original papers submitted on this motion are being delivered to the Albany
County Clerk for filing. The signing of this Decision and Order shall not constitute entry or filing under
CPLR 2220. Counsel is not relieved from the applicable provision ofthat section relating to filing, entry
and notice of entry.
Dated: Albany, New York
Notice of Motion dated January 4,2012;
Affidavit of Matthew C. Hug, Esq. dated January 4,2012 with Exhibits A-N;
Plaintiff's Memorandum of Law dated January 4,2012;
Notice of Cross-motion dated February 23,2012;
Affidavit of Richard J. Ferrara dated February 23,2012 with Exhibits 1-7;
Defendant's Memorandum of Law dated February 23,2012;
Affirmation of Matthew C. Hug, Esq. dated March 7,2012;
Affidavit of Richard J. Ferrara dated March 15,2012.