Relicensing of Nonfederal Hydroelectric Projects: Background and Procedural Reform Issues

Congressional research reportApr 25, 2007

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Order Code RL31903

Relicensing of Nonfederal Hydroelectric Projects:

Background and Procedural Reform Issues

Updated April 25, 2007

Nic Lane

Analyst in Environment and Resources Management

Resources, Science, and Industry Division

Relicensing of Nonfederal Hydroelectric Projects:

Background and Procedural Reform Issues

Summary

Hydroelectric facilities produce approximately 7% of all electricity generated

in the United States and are an important and flexible source of power. About half

of the hydroelectric power generated in the United States comes from privately

owned facilities that operate under licenses issued by the Federal Energy Regulatory

Commission (FERC). Federal hydropower dams do not require FERC licenses and

are not covered by this report. New licenses for private facilities establish allowed

generation capacity, operating parameters, and environmental protection

requirements for the next 30 to 50 years. Given the multi-purpose nature of

hydropower facilities and changes in river-management priorities since the 1950s and

1960s, it now can take more than six years and millions of dollars to relicense a

hydroelectric project.

Since the mid-1980s, FERC has been working to improve the relicensing

process. In 1985, FERC established a deadline-driven process known as the

Traditional Licensing Process (TLP). In 1997, FERC developed a second, more

flexible process called the Alternative Licensing Process (ALP). The focus of recent

FERC efforts, and of this report, is on the development of regulations, finalized in

FERC’s July 30, 2003, Rule (Docket No. RM02-16-000, Order No. 2002), to further

modify the licensing process by establishing a third process. This process, called the

Integrated Licensing Process (ILP), incorporates elements of the TLP (e.g., deadlines

for multiple steps) and the ALP (e.g., focus on early stakeholder involvement). In

addition, the ILP includes a new process for resolving study disputes and requires

FERC to participate earlier in the licensing process. FERC indicates that these

changes are intended to make the process shorter and more efficient without altering

agencies’ authorities under the Federal Power Act (16 U.S.C. §791 et al.) or the

Clean Water Act (33 U.S.C. §1341) to develop license conditions that protect fish,

federal reservations (e.g., national forests, Indian reservations), or rivers’ statedesignated uses. Effective July 23, 2005, the ILP is the default process, but applicants

may petition to use either the ALP or the TLP based on anticipated costs, level of

complexity and controversy related to the relicensing, and other factors. Approval to

use a process other than the ILP is not automatic.

After FERC completed its rule establishing the ILP, the 109th Congress passed

legislation that affects the rule. P.L. 109-58, signed in August 2005, includes

provisions for applicants to propose alternatives to license conditions and requires

agencies to accept those alternatives as long as they meet certain environmental and

economic requirements. Some have expressed concern that this legislation could

reduce the effectiveness of the ILP by eroding federal resource agencies’ conditioning

authority.

This report summarizes the current processes, describes FERC’s recent

development of a third licensing process, and explains changes to relicensing enacted

by P.L. 109-58. This report will be updated as events warrant.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Historic Licensing Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Traditional Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Alternative Licensing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Major Differences Between the TLP and the ALP . . . . . . . . . . . . . . . . . . . . 5

Time and Cost of Relicensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Administrative Licensing Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Integrated Licensing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Initiating the Study Dispute Resolution Process . . . . . . . . . . . . . . . . . . 8

Study Advisory Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Carrying Out the Study Development Plan . . . . . . . . . . . . . . . . . . . . . 10

Final Application and Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Major Differences and Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Legislative Licensing Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Recent Relicensing Changes: P.L. 109-58 . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Relicensing of Nonfederal

Hydroelectric Projects: Background and

Procedural Reform Issues

Introduction1

Hydroelectric facilities generate nearly 7% of all electricity produced in the

United States and between 15% and 44% of the electricity in seven states.2

Hydropower is generated by releasing water through a set of turbines; thus the

process does not produce air pollutants and can be turned on or off in a matter of

minutes. This flexibility makes hydroelectric facilities an important source of

peaking power.3 However, the construction and management of these facilities are

often contentious because they affect many other resources, activities, and values.

For example, decisions about when and how to release water from a hydro facility,

and how much water to release, can affect fisheries, flood control, irrigation,

municipal water supplies, recreation, stream ecology, and transportation.4

To protect navigable waters and encourage multiple-use hydro projects,

Congress created the Federal Power Commission5 in 1920 and gave it exclusive

authority to license nonfederal hydropower facilities. With this authority, the Federal

Power Commission, renamed the Federal Energy Regulatory Commission (FERC)

in 1977, licensed facilities in 45 states.6 These licenses, which are valid for 30 to 50

years, establish operating parameters for nonfederal facilities.

This report was originally written by former CRS analyst Kyna Powers.

The following states get more than 15% of their electricity from hydropower: Washington

(44%), Oregon (43%), Vermont (37%), Montana (34%), South Dakota (30%), Idaho (27%),

and Maine (15%). U.S. Dept. of Energy, State Energy Data Report 1999, Report DOE/EIA0214, Table 3: Energy Consumption Estimates by Source, at [http://www.eia.doe.gov/emeu/

sedr/contents.html].

Peaking power is electricity generated during periods of high demand, called on-peak

periods or heavy load hours.

For an overview of the interaction between hydropower and other resource uses, see CRS

Report RL31536, Licensing of Non-Federal Hydroelectric Projects: Background and

Current Issues, by Nicole Carter and Amy Abel.

The Federal Power Commission was established under the 1920 Federal Power Act (16

U.S.C. §797, et seq.).

FERC has licensed hydropower facilities in all states except Delaware, Mississippi, North

Dakota, South Dakota, and Hawaii. FERC-licensed facilities account for about half of all

U.S. hydropower production.

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Congress also created a major role in the licensing process for federal resource

agencies, state agencies, and agencies representing Indian tribes.7 Specifically,

Congress gave certain agencies mandatory conditioning authority (i.e., Congress

requires FERC to include in its license certain agency-established operating

conditions). Section 18 of the 1920 Federal Power Act (FPA),8 for example,

stipulates that the Secretary of the Interior or the Secretary of Commerce may require

an applicant to facilitate the passage of fish safely around barriers created by the

facility. When a project is located on a federal reservation (e.g., Indian reservations

and national forests), §4(e)9 also grants the authority to establish such license

conditions to the Secretary of the department under whose supervision such

reservation falls. Specifically, the Secretary may stipulate license provisions to

maintain the reservation for the purposes for which it was designated. Congress

extended this conditioning authority to state resource agencies under the 1972 Clean

Water Act (CWA). Under the CWA, a FERC-issued license must include any

conditions that the state deems necessary to maintain state-developed water quality

standards.10 Given their mandatory conditioning authority, these federal and state

agencies, called conditioning agencies, are actively involved in the relicensing

process.

Pending hydropower relicensing activities will involve a significant percentage

of federally regulated hydropower. During the next decade (2007-2016), 115

projects, which account for about 30% of all nonfederal U.S. hydroelectric capacity,

will face relicensing.11 Given the multi-purpose nature of hydropower facilities,

changes in river-management priorities, and changes in environmental knowledge

and policies since the 1950s and 1960s, this relicensing process can be fairly lengthy.

Since the 1980s, Congress and FERC have worked to reduce the time and cost of

relicensing. Specifically, Congress has pushed FERC to continue evaluating its

relicensing process. Since 1985, FERC has developed three hydropower licensing

processes: the Traditional Licensing Process (TLP) in 1985; the Alternative Licensing

Process (ALP) in 1997; and the Integrated Licensing Process (ILP) in July 2003. The

ILP integrates components of the TLP (e.g., deadlines for process phases) and the

ALP (e.g., focus on early stakeholder involvement). Effective July 23, 2005, the ILP

is the default process, but applicants may petition to use either the ALP or TLP based

on anticipated costs, level of complexity and controversy related to the relicensing,

Federal agencies that may be involved include the Dept. of the Interior’s Fish and Wildlife

Service, Bureau of Land Management, National Park Service, Bureau of Indian Affairs, and

Bureau of Reclamation; the Dept. of Commerce’s National Oceanographic and Atmospheric

Administration and National Marine Fisheries Service; the Dept. of Agriculture’s Forest

Service; the Dept. of Defense’s Army Corps of Engineers; and the Environmental Protection

Agency.

16 U.S.C. §811.

16 U.S.C. §797.

States set these conditions as part of their Water Quality Certification under §401 of the

CWA (33 U.S.C. §401, et seq.)

The 115 projects represent about 16.9 gigawatts (GW) of all nonfederal capacity (55.2

GW) and about 11% of all 1,034 nonfederal projects. (Data from FERC at

[http://www.ferc.gov/industries/hydropower/gen-info/licensing/licenses.xls].

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and other factors. Approval to use a process other than the ILP is not automatic.12

After FERC completed its rule establishing the ILP, the 109th Congress passed

legislation that could affect that rule. P.L. 109-58, signed in August 2005, includes

provisions for applicants to propose alternatives to license conditions and requires

agencies to accept those alternatives as long as they meet certain environmental and

economic requirements. Some have expressed concern that this legislation will

reduce the effectiveness of the ILP by eroding federal resource agencies’ conditioning

authority.

Historic Licensing Processes

Since the passage of the 1920 Federal Power Act, the Federal Power

Commission, now FERC, has been the dominant hydropower licensing authority.13

As such, FERC developed the procedures through which relicensing may occur.

Until recently, FERC supported two relicensing processes: the Traditional Licensing

Process (TLP) and the Alternative Licensing Process (ALP). This section describes

these licensing processes to provide context for discussing the new Integrated

Licensing Process (ILP) and related legislative issues and concerns.

The Traditional Process

In 1985, FERC established what is now referred to as the Traditional Licensing

Process.14 The TLP consists of two phases: a pre-application consultation phase15 led

by the applicant, and a post-application analysis phase led by FERC. During the preapplication phase, the applicant notifies FERC of its intent to seek a new license.

The applicant also provides state and federal resource agencies, and agencies

representing tribal governments, information describing the proposed project. These

agencies help to identify studies the applicant must undertake to determine the

project’s effects on fish and wildlife, cultural resources, recreation, water, and other

resources. After completing these studies, the applicant prepares a draft application,

and obtains comments from resource agencies. The applicant may then attempt to

resolve any disagreements with the agencies through an informal dispute resolution

process.16

After the formal application is filed, the post-application process begins. During

the post-application process, participating stakeholders may request additional studies

and provide other comments and recommendations. Federal resource agencies may

also submit their mandatory license conditions, and state environmental agencies

At [http://www.ferc.gov/industries/hydropower/gen-info/licensing/licen-pro.asp].

Federal Power Act, 16 U.S.C. §790 et seq.

Order No. 413 (1985), 50 Fed. Reg. 23947 (June 7, 1985), FERC Stats. & Regs.

Preambles 1982-1985 paragraph 30,632; Order No. 413-A (1991), 56 Fed. Reg. 31327 (July

10, 1991), FERC Stats. & Regs. Preambles 1991-1996 paragraph 30, 92.2.

This process begins about 5 to 5.5 years before the FERC license expires.

This includes disagreements on further studies and on the steps the licensee must take to

minimize project damages.

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must submit their water quality certification requirements.17 At this point, FERC

begins its environmental analysis, under the National Environmental Policy Act

(NEPA),18 by scoping the issue and identifying project alternatives. Then FERC

prepares an environmental document that incorporates the study results and agencies’

license conditions.19 After examining the environmental and other project analyses,

FERC staff recommends the project, along with a set of conditions, to FERC’s

commissioners, and the commissioners decide either to grant or to deny the license.

The median time and expense of this process, as calculated by FERC, is 79 months

and $246 per kW.20

The Alternative Licensing Process

In October 1997, FERC responded to concerns that the TLP was too lengthy and

costly by establishing a second process called the Alternative Licensing Process

(ALP).21 The ALP was designed to shorten the licensing process by encouraging

early collaboration among stakeholders. Since the ALP requires collaboration,

applicants must gain stakeholder support to use this process. Once the stakeholders

agree to use the ALP, the stakeholders work together during the pre-application phase

to develop the application and a preliminary draft NEPA document. FERC oversees

the ALP and encourages participants to use the voluntary Dispute Resolution Service

(DRS) when there are disagreements. The DRS is a mediation service offered by

FERC that facilitates negotiations but does not offer recommendations. Instead, the

DRS can bring in FERC experts to help clarify issues. Through this process, the preapplication phase can result in a settlement agreement between the applicant and

participating stakeholders. This settlement agreement describes how the project will

be managed and often includes the conditions required by state and federal resource

agencies to protect and enhance the environment.

When a project is located in a federal reservation (i.e., national park, monument, forest,

etc.), the federal agency with jurisdiction may place requirements in a FERC license (16

U.S.C. §811). Applicants must also have their project certified by the applicable state under

§401 of the CWA. Through the certification process, states can place requirements on the

licensees. These requirements are incorporated into the FERC license. For more applicable

laws, see CRS Report RL31536.

42 U.S.C. 4321-4347.

Under NEPA, FERC must conduct an environmental assessment (EA), which determines

whether a more extensive formal environmental impact statement (EIS) will be required to

evaluate the project’s environmental effects.

Federal Energy Regulatory Commission, Report to Congress on Hydroelectric Licensing

Policies, Procedures, and Regulations — Comprehensive Review and Recommendations

Pursuant to Section 603 of the Energy Act of 2000, available at [http://www.ferc.gov/legal/

maj-ord-reg/land-docs/ortc_final.pdf]. (Hereafter referred to as the FERC Section 603

Report.) This report was criticized by the General Accounting Office (GAO, now

Government Accountability Office) in a May 2, 2001, report entitled Licensing Hydropower

Projects: Better Time and Cost Data Needed to Reach Informed Decisions About Process

Reforms (GAO-01-499), available at [http://www.gao.gov].

The ALP was codified in October 1997 at 18 C.F.R. §4.34(i).

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After this intensive collaborative process is complete, the applicant files a

formal relicensing application. The formal application includes the draft NEPA

document and reflects any agreements reached by participating stakeholders. After

receiving the application, FERC completes its NEPA documentation and rules on the

application. The median time and expense of this process, as calculated by FERC,

is 56 months and $58 per kW.22

Major Differences Between the TLP and the ALP

Multiple differences distinguish the ALP from the TLP. First, activities

conducted pursuant to NEPA begin early under the ALP. Under the TLP, preparation

of NEPA documents does not begin until after the application has been accepted by

FERC and all studies have been completed. When the project being evaluated is

controversial, beginning the NEPA process may help to clarify the issues. Second,

an application prepared under the ALP contains a preliminary draft NEPA document

that is largely the product of stakeholder collaboration, rather than a document

containing the results of environmental studies prepared solely by the applicant. This

collaborative development of the draft NEPA document under the ALP may increase

the amount of information stakeholders have available when seeking a settlement

agreement. Third, FERC staff are involved in advising the collaborative team

throughout the ALP’s pre-application activities. In contrast, FERC staff are rarely

involved in pre-application consultation under the TLP. Earlier FERC participation,

under the ALP, can familiarize FERC staff with the project and its issues before the

post-application process begins.

Time and Cost of Relicensing

According to FERC’s Section 603 Report, another major difference between the

TLP and the ALP is time.23 Specifically, FERC estimated that the median licensing

time, from the time the applicant submits its Initial Consultation Document to the

time FERC issues the license, was 79 months under the TLP and 56 months under

the ALP (see Figure 1).24

FERC, Section 603 Report. In its report (GAO-01-499), GAO criticize these data.

FERC, Section 603 Report. For more information, see CRS Report RL31536.

FERC, Section 603 Report. A GAO report (GAO-01-499) criticizes the FERC Section

603 Report because the time data are limited almost entirely to the post-application phase

and the report does not include time data for the administrative and judicial reviews of its

license decisions.

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Figure 1. License Duration

TLP

ALP

79 mo.

56 mo.

100

Months

Pre-Filing Time

Processing Time

Data Source: FERC, Section 603 Report (2001)

According to FERC’s Section 603 Report, the ALP is also less costly than the

TLP. Not including the resources expended by FERC, federal and state agencies,

Indian tribes, and non-governmental organizations, FERC determined that the median

cost of preparing the relicensing application was $109 per kW under the TLP, and

$39 per kW under ALP.25 Once the process is complete, it can also be expensive to

comply with the provisions contained in the new license. FERC determined that the

median cost of the license’s protection, mitigation, and enhancement measures was

$246 per kW under the TLP and $58 per kW under the ALP. However, the cost

differences between the TLP and ALP could increase or decrease depending on the

type of project being relicensed.

However, these figures may not clearly illustrate changes in relicensing time

because they can vary significantly depending on the project size and the water

resources affected. The ALP figures are based on projects for which the ALP was the

selected process. The figures for the TLP include projects relicensed before the ALP

was developed in 1997. Depending on a project’s characteristics, the TLP or the

ALP could be more expedient.

Administrative Licensing Reform

While FERC’s Section 603 Report indicated that the ALP could reduce the time

and cost of relicensing for some projects, FERC continued to examine its licensing

processes. In 1998, FERC joined with other agencies involved in the licensing

process to form the Interagency Task Force to Improve Hydroelectric Licensing

Preparing the application, including study preparation, costs around $2.2 million per

project under the TLP and around $3.6 million per project under the ALP (Section 603

Report, page 47). GAO has also criticized the cost data FERC used in its Section 603

Report. Specifically, cost data were based on information from 80 non-random projects.

(See CRS Report RL31536.)

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Processes (ITF). When the task force concluded its work in 2000, ITF published

seven guidance documents to help agencies and other stakeholders through the TLP

and ALP.26 FERC also held regional workshops with states on how to integrate their

Clean Water Act responsibilities with the licensing processes.

In addition to clarifying the current license processes, FERC also began

developing a new licensing process. In July 2001, senior staff from FERC and other

federal agencies formed the Interagency Hydropower Committee (IHC). This

committee built on the comments developed by the ITF, and developed additional

procedural modifications to further reduce the time and cost of licensing.27

Concurrently, the National Review Group (NRG), an industry and nongovernmental

stakeholder forum, worked to develop a proposal for an Integrated Licensing Process.

In September 2002, FERC used the IHC and NRG proposals as the basis for further

discussions. Specifically, FERC published a notice requesting comments on the two

proposals.28 This notice also established public forums and a schedule for providing

comments and recommendations regarding the adoption of a new hydropower

licensing process.

The Integrated Licensing Process

After receiving oral and written comments in December 2002, FERC began

developing an additional licensing process through meetings and drafting sessions.

On February 20, 2003, FERC issued its Notice of Proposed Rulemaking (NOPR).29

The NOPR set out FERC’s proposal for a new default licensing process called the

Integrated Licensing Process (ILP). In July 2003, FERC issued its final rule

establishing the ILP.30 The ILP, which will not replace either existing process,

incorporates components of the TLP and the ALP and will be both structured and

collaborative. Effective July 23, 2005, the ILP is the default process, but applicants

may petition to use either the ALP or TLP based on anticipated costs, level of

complexity and controversy related to the relicensing, and other factors. Approval to

use a process other than the ILP is not automatic.31

The ITF documents are available at [http://www.ferc.gov/industries/hydropower/indusact/itf/itf-reports.asp].

FERC document RM02-16-000 (September 12, 2002), “Hydroelectric License

Regulations under the Federal Power Act: Notice Requesting Comments and Establishing

Public Forums and Procedures and Schedule.”

Federal Energy Regulatory Commission, “Notice Requesting Comments and Establishing

Public Forums and Procedures and Schedule Pursuant to 18 C.F.R. Parts 4 and 16,” Docket

No. RM02-16-000.

68 Fed. Reg. 13898 (March 21, 2003).

FERC document RM02-16-000, Order No. 2002 (July 23, 2003), Federal Energy

Regulatory Commission, Hydroelectric Licensing under the Federal Power Act. Final Rule.

Available online at [http://www.ferc.gov/whats-new/comm-meet/072303/H-1.pdf]. 68 Fed.

Reg. 51070, August 25, 2003. (Hereafter referred to as FERC Final Rule.)

At [http://www.ferc.gov/industries/hydropower/gen-info/licensing/licen-pro.asp].

CRS-8

Early stages of licensing under the ILP will begin much as they have under the

ALP. The applicant will consult with agencies, tribes, and the public to decide which

studies the applicant needs to complete. In addition, the ILP adopted a

recommendation, proposed by the hydropower industry and resource agencies, that

FERC conduct NEPA scoping during the pre-application phase.32 FERC anticipates

that moving NEPA scoping from the post-application phase, where it occurs in the

ALP, to the pre-application phase could reduce the number of studies FERC requests

late in the application process.

After pre-application consultations and NEPA scoping are complete, the

applicant files a draft study plan that includes a schedule for all major relicensing

steps. Such a schedule could help keep stakeholders on task by providing check

points prior to the deadline for submitting the formal license application. However,

strict deadlines could prove to be unworkable in certain situations (e.g., weather

disruptions or particularly complex studies). Once the applicant files the draft study

plan, the stakeholders meet to discuss the draft and to try and resolve any remaining

study disagreements. FERC would then approve the study plan with any needed

modifications. At this stage, the ILP establishes a new dispute resolution process to

help resolve study disagreements between the applicant and conditioning agencies.

This process is described in more detail below.

Initiating the Study Dispute Resolution Process. A major goal of the

ILP is to encourage stakeholders to identify study needs early in the licensing process

and to give applicants some certainty regarding study requirements. However, in

developing the ILP, FERC recognized that conditioning agencies may require

applicants to provide information sufficient to establish their license conditions.

Since the applicant may need a study to obtain this information, the ILP establishes

a special study dispute resolution process for conditioning agencies. Under the ILP,

FERC only grants additional study requests under exceptional circumstances.

The ILP’s formal dispute resolution process differs from the TLP and the ALP.

Under the TLP, there is no formal mechanism for resolving study disputes before the

applicant files the license application. Under the ALP, conditioning agencies and the

applicant try to resolve their disagreements using the voluntary Dispute Resolution

Service. As will be described below, a major difference between the DRS and the

dispute resolution panel created under the ILP is that the panel is required to

complete its work in a set time period and provide recommendations.

Since the formal dispute resolution process may only be initiated by agencies

with mandatory conditioning authority, other stakeholders have to petition their study

requests to FERC’s Director of Energy Products and face tougher study-approval

standards. Entities without conditioning authority argue that they, too, should be able

to initiate the dispute resolution panel. For example, state agencies with relicensing

responsibilities but without licensing conditioning authority under the Federal Power

Act and Clean Water Act argue that the dispute resolution panel, as described below,

helps them to obtain information that is critical to their analyses. However, FERC

See list of entities recommending early FERC scoping on page 25 of FERC’s February

20, 2003, NOPR (Docket Number RM02-16-000).

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decided that most study disputes should be resolved during the pre-application

consultation phase through voluntary mechanisms, and that the study dispute

resolution panel is only to be used in situations when a conditioning agency is

dissatisfied with the study development plan. Furthermore, FERC notes that

conditioning agencies must require substantial evidence for their conditions to

withstand judicial review.

Study Advisory Panel. When a conditioning agency files a notice of dispute,

FERC convenes a three-member advisory panel. The panel consists of a person

nominated by FERC staff, a person nominated by the agency referring the dispute,

and a subject-area expert selected by the other two panel members. The applicant is

not a panel member, but may provide the panel with information.

Various stakeholders have voiced concerns regarding the composition of the

study dispute resolution panel. The hydropower industry, for example, argues that

applicants should have a greater role in this process. Members of the hydropower

industry are also concerned that the person selected by the agency would face

pressure to rule in favor of the study request. However, FERC and conditioning

agencies point out that the person appointed by the agency will not be working on the

project in question and would not necessarily be an agency employee. Industry and

non-industry stakeholders are also concerned that it may be difficult to find a third,

uncompensated panel member who is not involved with the project but who has the

necessary expertise. However, FERC contends that the panel will be used

infrequently and that it has successfully used similar procedures in the past.

Study Criteria. To make its recommendation, the panel would review study

requests that contain the following information:33

(1) a description of the goals and objectives of the study and the information to

be obtained;

(2) an explanation of the relevant resource management goals of the agencies

or tribes with jurisdiction over the resource to be studied;

(3) an explanation of any relevant public interest consideration in the proposed

study (if the requester is not a resource agency);

(4) a description of existing information concerning the subject of the study

proposal, and the need for additional information;

(5) an explanation of the nexus between project operations and effects on the

resources to be studied, and how the study results would inform the

development of the license requirements;

(6) an explanation of how a proposed study methodology is consistent with

generally accepted practice in the scientific community, or, as appropriate,

considers relevant tribal values and knowledge; and

FERC Final Rule, p. 34.

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(7) a description of the level of effort and cost, as applicable, and why any

proposed alternative studies would not be sufficient to meet the stated

information needs.

After considering all of the information submitted by the applicant, agencies,

and other stakeholders, the panel would make a recommendation to FERC’s Director

of Energy Products on whether to grant the study request. The Director will either

agree with or overrule the panel, and the decision will constitute an amendment to the

approved study plan. After all initial disputes are resolved, the Director will issue an

order directing the applicant to carry out the study plan as amended. Once this final

study plan is complete, any additional requests to alter the plan will be submitted to

the Director, rather than to the panel, and will only be granted under exceptional

circumstances.

Carrying Out the Study Development Plan. Under the new rule, after

FERC approves the study-development plan, the applicant begins the studies. In

contrast, under the TLP or the ALP, an applicant begins studies without a FERCapproved plan. During the ILP’s study phase, the applicant submits status reports and

discusses the study development plan with other stakeholders. The applicant uses its

updated status report, completed after the second phase of studies,34 to file a draft

application. To the extent possible, this draft application will include the same

information as the final application, including information sufficient for tribes and

agencies to file their mandatory terms and conditions, fishway requirements, or State

Water Quality Certification. However, the ILP does not establish a procedural

mechanism forcing applicants to include all such information in its draft application.

Some resource agencies are concerned that the ILP does not include a

mechanism for ensuring that the draft or final license application includes sufficient

information for agencies to exercise their conditioning authority or make other

recommendations to FERC. Some agencies claim that lack of information is often

the primary reason that their conditions or recommendations are delayed. FERC

argues that early resolution of study disputes will reduce the likelihood of incomplete

applications and that conditioning agencies’ authority to amend or prevent the license

is a sufficient incentive for applicants to submit all necessary information.

Conditioning agencies respond that these incentives exist under the TLP and ALP,

and that in some cases they are insufficient.

Final Application and Licensing. Following a comment period, the

applicant files the final application. Then, agencies submit their recommendations

and conditions, and FERC considers the recommendations and incorporates the

requirements into its final NEPA document. FERC then rules to grant or deny the

license.35 FERC rarely denies applications that are based on an uncontested

settlement agreement.

The phase depends on the type of studies. For example, the first phase could be a year

or a season.

The license will include state and federal license conditions and any other conditions

FERC deems necessary to balance multiple water uses, as is the case now under existing

procedures.

CRS-11

Major Differences and Other Issues. As described above, the ILP differs

from the TLP and the ALP. In general, the ILP is more collaborative than the TLP

and more structured than the ALP. The ILP also moves FERC’s NEPA scoping

process from the post-application phase to the pre-application phase in an effort to

resolve study disputes early in the licensing process. Under the ILP, which includes

a FERC-approved study plan, FERC is likely to approve new studies as the licensing

process progresses. This could encourage stakeholders to request studies early in the

process and could provide applicants with some degree of certainty regarding the

study plan. The ILP also develops a new study dispute resolution panel to help

resolve disputes between conditioning agencies and the license applicant.

Although resource agencies, environmental organizations, Indian tribes, and

applicants are optimistic that the rulemaking will improve the licensing process, they

disagree regarding FERC’s decision to make the ILP the default process, but to allow

applicants to petition to use the TLP or the ALP. Specifically, resource agencies,

Indian tribes, and volunteer organizations argue that the ILP should replace the other

two processes after a trial period. They state that retaining multiple processes could

confuse the public, nonprofit organizations, and agencies involved in multiple

relicensing processes. However, the hydropower industry opposes a single process

and argues that there are certain projects for which the TLP or the ALP may be more

appropriate than the ILP. Conversely, proponents of a single process argue that the

ILP should be flexible enough to accommodate all types of projects. These issues,

and other stakeholder concerns, were discussed at regional workshops and at a

stakeholder drafting session before FERC issued its final rule in July 2003.

Legislative Licensing Proposals

The issue before Congress was whether legislation was needed to make the

licensing process shorter and less costly, minimize environmental impacts,36 and

maximize electricity generation, or whether FERC’s actions sufficiently addressed

concerns about relicensing. Congress held hearings and took other action to assess

the necessity of legislative relicensing reform or other action. In 2000, Congress

directed FERC to conduct a comprehensive review of the policies, procedures, and

regulations guiding the licensing process.37 FERC responded, in May 2001, with

recommendations on how to reduce the length and expense of obtaining a new

license.38 In addition to administrative reforms, some of which are in FERC’s 2003

Final Rule, FERC recommended that Congress make FERC the “one-stop shop” for

hydropower licenses by giving it the authority to reject or modify resource agency

conditions and by eliminating other federal authorizations.39 The hydropower industry

generally supported this type of legislative reform. However, these suggestions for

legislative changes were not supported by officials within some resource agencies or

For more information, see CRS Report RL31536.

Section 603 of the Energy Act of 2000 (P.L. 106-469).

FERC, Section 603 Report.

For example, special use authorizations for projects on Forest Service lands and similar

existing authorizations would be eliminated.

CRS-12

environmental organizations, which generally opposed reducing agencies’ mandatory

conditioning authority. In their view, resource agencies’ mandatory conditioning

authority is necessary to protect non-hydropower resources. Officials within some

resource agencies and environmental organizations also argued that administrative

reforms, like the ILP, are adequate to improve the relicensing process.40

Following the issuance of FERC’s Section 603 Report, legislation was proposed

to change components of the licensing process. For example, the comprehensive

energy bill (H.R. 4, 107th Congress), would have allowed applicants to propose

alternatives to agencies’ mandatory conditions under the Federal Power Act, required

conditioning agencies to consider alternatives to their license conditions, and required

them to select the alternative if it met certain environmental and cost criteria. No

resolution came out of the 107th Congress. There was further debate over these issues

in the 108th Congress, but no legislation was enacted until the 109th Congress with the

passage of the Energy Policy Act of 2005 (P.L. 109-58).

Recent Relicensing Changes: P.L. 109-58

Provisions allowing applicants to propose alternatives to agencies’ mandatory

conditions became law in the Energy Policy Act of 2005 (P.L. 109-58, §241). An

applicant for a FERC license, or any other party to the proceedings, has the

opportunity to formally dispute issues that arise in the relicensing process.

Specifically, applicants or other parties involved have the right to request a hearing

to resolve disputes regarding fishways and issues of material fact relating to adequate

resource protection on federal lands. These hearings are conducted by the agency

responsible for the resource in question.

Additionally, whenever the relevant management agencies indicate specific

conditions that are required for resource protection, license applicants or other parties

involved may propose alternatives that cost less to implement or improve

hydropower production. So long as proposed alternatives provide adequate resource

protection, the management agencies must accept them. These same provisions for

alternative proposals — and the same criteria of adequate resource protection — also

apply to fishways that may be prescribed as a license condition.

This procedure was tested in 2006 with the first hearing prompted by §241 of

P.L. 109-58. The Departments of Commerce and the Interior both filed mandatory

terms and conditions related to the relicensing of PacifiCorp’s Klamath River Project

(FERC license number 2082). An administrative law judge ruled that the

government’s preliminary prescriptions would benefit species in the basin.41 The

Departments of Commerce and the Interior have since issued final mandatory

conditions requiring fishways at the Klamath dams.42

For a list of FERC recommendations and more discussion, see CRS Report RL31536.

Decision of administrative law judge in the matter of Klamath Hydroelectric Project,

Docket Number 2006-NMFS-0001 (September 27, 2006). See [http://www.fws.gov/yreka/

P2082/20060927/2Klamath_DNO_Final.pdf].

FWS and NMFS, Section C: Modified Fishway Prescriptions of the Fish and Wildlife

(continued...)

CRS-13

Conclusion

Re-evaluating a project’s historic operating conditions to develop a license that

balances a project’s electricity interests alongside habitat, recreation, water supply,

irrigation, and flood control objectives is necessarily a lengthy process. The length,

however, can be exacerbated by a number of factors. For example, beginning new

studies late in the pre-application phase can lengthen the licensing process. In

formulating the ILP, FERC and other stakeholders attempted to reduce the likelihood

that the applicant will need to produce more information late in the study phase.

Specifically, the ILP requires FERC to identify NEPA issues during the preapplication process and creates a study dispute mechanism for conditioning agencies.

By identifying the information needs of FERC and conditioning agencies early in the

process, the ILP could reduce the need for additional studies near the end of the

licensing process. Furthermore, stakeholders with limited personnel resources hope

that the timelines developed under the ILP will help them to schedule their resources

more efficiently.

In the end, it is not the process but the results (i.e., the contents of and

conditions on the license) that matter most. When results are unsatisfactory from the

perspective of any stakeholder, relicensing may be accompanied by long and costly

legal battles. Bringing all the stakeholders to the table and negotiating a relicensing

agreement, as is done in the ALP, is one method that may reduce post-licensing

litigation. Like the ALP, the ILP could encourage stakeholder collaboration. Unlike

the ALP, however, the ILP establishes strict deadlines for each phase of the licensing

process. Under the ALP, negotiations sometimes drag on until parties are faced with

the deadline for submitting the application. Therefore, the deadlines established

under the ILP could prompt parties to reach agreement sooner. On the other hand,

some stakeholders are concerned that the ILP’s deadlines may not provide sufficient

time to negotiate a settlement. The success of the ILP in achieving settlement

agreements may depend on the quality of the information gathered through the study

process, and on the focused and cooperative efforts of conditioning agencies, license

applicants, FERC, and other stakeholders.

The question of whether legislative efforts could improve relicensing is

difficult, because the ILP has not yet been tested. On one hand, individuals within

some resource agencies and environmental organizations are concerned that reducing

the leverage of conditioning agencies, through legislation such as P.L. 109-58,

removes an important incentive for applicants to work toward a settlement

agreement. On the other hand, FERC and the hydroelectric industry argue that this

legislation complements administrative reforms by encouraging license conditions

that are equally effective and less costly.

(...continued)

Service and National Marine Fisheries Service pursuant to Section 18 of the Federal Power

Act, (January 26, 2007). See [http://www.fws.gov/yreka/P2082/20070126/070126DOIMOD

_Sectionc.pdf].

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.