Power & Pipes

FERC, CFTC, and State Energy Law Developments

In a per curiam decision on October 3, 2023, the US Court of Appeals for the Sixth Circuit affirmed that the Federal Power Act prevents tort suits against the United States relating to damage caused by dams that are licensed by the Federal Energy Regulatory Commission (FERC). That is, liability for any injuries or damages caused by any dam licensed by FERC is solely the responsibility of the licensee, and liability cannot flow to the United States, even after dam failures. 


In May 2020, the Edenville Dam in Michigan partially collapsed, flooding many downstream residents. After the dam’s operator went bankrupt in the wake of the flooding, several affected residents sued FERC under the Federal Tort Claims Act arguing that FERC, which licenses hydroelectric facility owners, negligently entrusted the dam to its now-bankrupt owner.

Under the Federal Power Act, FERC has jurisdiction to license and regulate most nonfederal hydropower projects. FERC’s regulatory scope extends beyond the generating plant itself and to all of the various appurtenant facilities, such as canals, flumes, transmission facilities, and dams, used to impound or divert the water used to turn the turbines. A major portion of FERC’s licensing review and ongoing regulation of hydroelectric licensees is the safety of the project and its operations. 

Built in 1924, the Edenville Dam operated without a license until FERC issued one in 1998. FERC ordered the licensee to make some improvements, but the licensee became insolvent and sold the license to a new owner, who both failed to make the ordered improvements and committed further license violations.

FERC then revoked the license in 2018, after which jurisdiction passed to the state of Michigan. Michigan permitted the former FERC licensee to continue operating the Edenville Dam, which continued until its bankruptcy following the partial collapse and flooding.

Sovereign Immunity

The United States cannot be sued absent its consent. Under the Federal Tort Claims Act, the United States has generally consented to liability for injuries or damages caused by any negligent or wrongful act of government employees who act within the scope of their office if a private party would have been liable in similar circumstances (28 USC § 1346(b)).

The Federal Power Act, however, specifically asserts sovereign immunity regarding dam licensing. It provides that the licensee “shall be liable for all damages occasioned to the property of others by the construction, maintenance, or operation of the project works or of the works appurtenant or accessory thereto, constructed under the license and in no event shall the United States be liable therefor” (16 USC § 803(c)). 

Longstanding judicial precedent holds that where statutes governing the same issues appear to conflict, specific terms prevail over general terms. Here, whether a conflict existed turned on whether the phrase “constructed under the license” refers to the entire dam or merely “works appurtenant or accessory” to a dam.

If the former, sovereign immunity would not attach to the Edenville Dam because it was built prior to being licensed, and the residents could proceed under the Federal Tort Claims Act. If the latter, then sovereign immunity would apply to all dams licensed by FERC regardless of whether the dam was built under a FERC-issued license.

Licensees Are Exclusively Liable

The court concluded that sovereign immunity barred the resident’s suit against FERC, holding that “constructed under the license” referred only to “work appurtenant or accessory thereto.”

Accordingly, the licensee is liable for, and the government is immune from, damages caused by a dam regardless of whether the dam was initially constructed under a FERC-issued license. Because sovereign immunity deprived federal courts of jurisdiction, neither the trial court nor appellate court addressed whether FERC acted negligently by issuing the license.

The salient point for dam licensees and those downstream of dam licensees is the scope of liability. The Sixth Circuit joins the Ninth Circuit in holding that the Federal Power Act channels all liability for FERC-licensed projects to the licensee. FERC cannot be held liable for any harm that may flow from its decision to issue a license or its regulation of licensed projects. 

Morgan Lewis advises on all matters related to the energy sector, including compliance with federal regulations and licensing of hydropower projects subject to FERC’s jurisdiction.