Shafer & Freeman Lakes Environmental Conservation Corporation v. Federal Energy Regulatory Commission

The Northern Indiana Public Service Company (NIPSCO) owned two hydroelectric dams on Indiana’s Tippecanoe River. The dams created two reservoirs, Lake Shafer and Lake Freeman, which were economic and recreational hubs for the region. In 2007, the Federal Energy Regulatory Commission (FERC) issued NIPSCO a license to operate the dams. The license required NIPSCO to ensure that the lakes’ water levels never deviated more than three inches from a target water level except during periods of abnormally high river flow. In 2012, extreme drought conditions began drying up the river. Downstream of the dams, mussels began dying, including many mussels that were endangered species under the Endangered Species Act (ESA). The United States Fish and Wildlife Service (the service) determined that low water flow out of the dams was contributing to the dead-mussel situation and told NIPSCO that it could avoid liability under the ESA by releasing enough water from the dams to mimic the river’s natural flow if the dams were not present. Because implementing the service’s plan would violate the license requirement to maintain the lakes’ water levels, NIPSCO sought to amend the license to allow water levels to fall more than three inches below the target during droughts. Entities including the Shafer & Freeman Lakes Environmental Conservation Corporation (collectively, the coalition) (plaintiffs) objected, asserting that complying with the service’s water-flow requirements would cause environmental and aesthetic harms and make Lake Freeman unusable recreationally. FERC proposed a compromise that would require NIPSCO to stop diverting water for electricity-generation purposes during droughts, while still maintaining Lake Freeman’s water level within three inches of the target. The service prepared a biological opinion that found that FERC’s compromise was not likely to jeopardize the continued existence of the endangered mussels. However, in order to minimize incidental mussel losses (i.e., incidental take), the service proposed a purported reasonable and prudent measure of requiring NIPSCO to follow the service’s original water-flow-management recommendation. FERC subsequently granted the license amendment, concluding that the ESA required FERC to adopt the service’s approach. The coalition petitioned for review of the service’s biological opinion and FERC’s licensing decision. The coalition argued that the service’s river-flow calculations were improperly based on a linear-scaling theory. The service countered, that linear-scaling modeling was appropriate given the natural increase in a river’s flow from its headwaters to its mouth and because the model mimicked both the quantity and timing of water releases from the dam. The coalition also asserted that although a reasonable and prudent measure to reduce incidental take could not impose more than a minor change in a proposed agency action, the service’s proposed measure (i.e., requiring NIPSCO to follow the service’s water-flow requirements) was a major change to FERC’s proposed compromise.