Hydroelectric Licensing Under the Federal Power Act

Federal RegisterMar 21, 2003

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 4, 5, 16, and 385

[Docket No. RM02-16-000]

Hydroelectric Licensing Under the Federal Power Act

February 20, 2003.

AGENCY:

Federal Energy Regulatory Commission, DOE.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Federal Energy Regulatory Commission is proposing to revise its regulations pertaining to hydroelectric licensing under the Federal Power Act. The proposed revisions would create a new licensing process in which a potential license applicant's pre-filing consultation and the Commission's scoping pursuant to the National Environmental Policy Act (NEPA) would be conducted concurrently, rather than sequentially. The proposed rules also provide for increased public participation in pre-filing consultation; development by the potential applicant of a Commission-approved study plan; better coordination between the Commission's processes, including NEPA document preparation, and those of Federal and state agencies with authority to require conditions for Commission-issued licenses; encouragement to informal resolution of any study disagreements, followed by mandatory, binding study dispute resolution; and schedules and deadlines.

DATES:

Comments are due April 21, 2003.

ADDRESSES:

File written comments with the Office of the Secretary, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. Comments should reference Docket No. RM02-16-000. Comments may be filed electronically or by paper (an original and 14 copies, with an accompanying computer diskette in the prescribed format requested).

FOR FURTHER INFORMATION CONTACT:

John Clements, Office of the General Counsel, Room 101-57, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 202-502-8070.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction

II. Background

A. Current Licensing Procedures

B. Reform Efforts

C. The Instant Proceeding

III. Discussion

A. Need for a New Integrated Process

B. Traditional Process and ALP to be Retained

D. Key Issues and Goals for an Integrated Licensing Process

1. Early Identification of Issues and Study Needs

a. Advance Notification of License Expiration

b. Integrating Pre-Filing Consultation with NEPA Scoping

c. Study Plan Development

d. Study Dispute Resolution Process

e. Other Recommended Uses for Dispute Resolution

2. Consultation and Coordination with States

a. Timing of Water Quality Certification Application

3. Consultation with Indian Tribes

4. Environmental Document Preparation

a. Cooperating Agencies Policy

b. NRG Cooperating Agency Proposal

c. Non-Decisional NEPA Documents

d. Draft License Articles

e. Endangered Species Act Consultation

f. Fish and Wildlife Agency Recommendations

g. National Historic Preservation Act Consultation

5. Public Participation

6. Processing Schedules and Deadlines

7. Settlement Agreements

a. Flexibility in Processing Schedules

b. Timing and Conduct of Settlement Negotiations

c. Guidance on the Content of Settlement Agreements

E. Description of Integrated Licensing Process

1. Applicability

a. New and Original Licenses

b. Competition for New Licenses

2. Process Steps

a. NOI, Process Schedule, and Study Plan Development

b. Conduct of Studies

c. Draft Application to License Order

F. Improvements to Traditional Process and ALP

1. Increased Public Participation

2. Mandatory, Binding Study Dispute Resolution

3. Recommendations not Adopted

a. Waiver of Pre-Filing Consultation

b. Applicant-Prepared NEPA Documents

c. Process Steps in the ALP

G. Ancillary Matters

1. Intervention by Federal and State Agencies

2. Information Technology

3. Project Boundaries and Maps

4. Miscellaneous Filing Requirements

H. Transition Provisions

IV. Environmental Analysis

V. Regulatory Flexibility Act

VI. Information Collection Statement

VII. Public Comment Procedures

VIII. Document Availability

Appendix A

Appendix B

Appendix C

I. Introduction

1. The Federal Energy Regulatory Commission (Commission) proposes to amend its regulations governing the process for licensing of hydroelectric power projects by establishing a new licensing process. The proposed amendments are the culmination of many actions by the Commission, other Federal and state agencies, Indian tribes, licensees, and members of the public to develop a more efficient and timely licensing process, while ensuring that licenses provide appropriate resource protections required by the Federal Power Act (FPA) and other applicable laws.

2. The proposed new licensing process is designed to create efficiencies by integrating a potential license applicant's pre-filing consultation with the Commission's scoping pursuant to the National Environmental Policy Act (NEPA).

Highlights of this “integrated” process include:

42 U.S.C. 4321,

et seq.

• Increased assistance by Commission staff to the potential applicant and stakeholders during the development of a license application;

• Increased public participation in pre-filing consultation;

• Development by the potential applicant of a Commission-approved study plan;

• Better coordination between the Commission's processes, including NEPA document preparation, and those of Federal and state agencies and Indian tribes with authority to require conditions for Commission-issued licenses;

• Encouragement of informal resolution of study disagreements, followed by mandatory, binding study dispute resolution;

• Elimination of the need for post-application study requests; and

• Issuance of public schedules and enforcement of deadlines.

3. We believe that the proposed changes will significantly improve the licensing process. During the development of this proposed rule, many commenters have raised issues beyond the scope of this rulemaking and, in fact, beyond the scope of this Commission's jurisdiction, such as concerns about the content of license conditions imposed by various federal land and resource management agencies with authority to require conditions for Commission-issued licenses. We acknowledge that the changes proposed in this rulemaking are largely procedural in nature and would amend only the regulations of this Commission,

not the regulations of any of the Federal or state agencies involved in hydropower licensing. Nevertheless, we believe that these proposed procedural changes will promote better-informed decision-making by everyone involved in the licensing process.

4. Moreover, we will continue to support the resource management agencies outside the context of this rulemaking as they explore ways of improving their own licensing-related processes. We appreciate the collegial spirit in which the Departments of Agriculture, Commerce, and the Interior, in particular, have worked with us during the development of this proposed rule. We applaud the announcement of Interior's Assistant Secretary-Policy, Management, and Budget, at our joint hearing on November 7, 2002 in this proceeding, that Interior is developing an administrative appeals process for its mandatory conditions. Agriculture has had such a process for several years, and we support that Department in examining ways of streamlining its existing process. The Commission is ready to assist these other agencies in this regard.

II. Background

5. Sections 4, 10, 14, 15, and 18 of the FPA,

as amended by the Electric Consumers Protection Act of 1986 (ECPA),

provide the regulatory framework for the licensing of non-Federal hydroelectric projects.

16 U.S.C. 797, 803, 807, 808, and 811. Sections 4 and 10 apply to all licenses. Sections 14 and 15 are specific to the issuance of a new license following the expiration of an initial license.

Pub. L. 99-495, 100 Stat. 1243.

6. Section 10(a)(1)

provides that hydropower licenses issued must be best adapted to a comprehensive plan for the affected waterways for all beneficial public uses, and must include provisions for the protection of fish and wildlife and other beneficial public uses, and that the Commission must give environmental values, including fish and wildlife and recreation, equal consideration with hydropower development. Under section 4(e),

licenses for projects located within Federal reservations must also include any timely conditions mandated by the department that manages the reservation, which in most cases is the Department of Agriculture or the Interior. Under section 18, licenses must also include fishways if they are timely prescribed by the Departments of Commerce or Interior.

16 U.S.C. 803(a)(1).

16 U.S.C. 797e.

7. In addition, section 401(a)(1) of the Clean Water Act

requires a license applicant to obtain from the state in which any project discharge into navigable waters originates, certification that such discharge will comply with applicable water quality standards, or waiver of such certification. Section 401(d) requires state water quality certification conditions to be included in hydroelectric licenses.

33 U.S.C. 1341(a)(1).

8. Other Federal statutes may also apply to a license application. These include, among others, the Endangered Species Act (ESA),

Coastal Zone Management Act (CZMA),

and National Historic Preservation Act (NHPA).

16 U.S.C. 1531-1543.

16 U.S.C. 1451-1465.

16 U.S.C. 470-470w-6.

A. Current Licensing Procedures

9. The Commission staff processes license applications in hearings conducted by notice and comment procedures. Licensing procedures have evolved over time in response to changes in the statutory framework, increased public awareness of the need for increased environmental protection, and as a result of Commission efforts to make the process more efficient and effective.

10. Under the existing “traditional” process, prior to filing an application, applicants must consult with Federal and state resource agencies, affected land managing agencies, Indian tribes, state water quality agencies and, to some extent, the public, and must provide the consulted entities with information describing the proposed project. The applicant must also conduct studies necessary for the Commission staff to make an informed decision on the application. Under the Commission's detailed regulations concerning prefiling consultation and processing of filed applications,

the formal proceeding before the Commission does not begin until the license application is filed. Accordingly, the Commission staff do not generally participate in pre-filing consultation.

See

18 CFR Parts 4 and 16.

11. After an application is filed, the Federal agencies with responsibilities under the FPA and other statutes, the states, Indian tribes, and other participants have opportunities to request additional studies and provide comments and recommendations. Federal agencies with mandatory conditioning authority also provide their conditions. The Commission staff may ask for additional information that it needs for its environmental analysis. All of this information is incorporated into the Commission staff's environmental review under the NEPA.

12. The Commission's regulations also provide for an alternative licensing process (ALP), which combines the pre-filing consultation process under the FPA with the environmental review process under NEPA.

Under this process, the parties work collaboratively prior to the filing of the application to develop the application and, in most cases, a preliminary draft NEPA document, and generally anticipate efforts to conclude a settlement agreement. Also, the Commission staff participate to a greater extent than under the traditional process.

18 CFR 4.34(i).

B. Reform Efforts

13. There is widespread agreement that additional improvements are needed to further the goal of achieving a more efficient and timely licensing process without sacrificing environmental protection. The President's National Energy Policy report included recommendations in this regard,

and the Commission, the Federal agencies, and many hydropower program stakeholders are engaged in a variety of activities toward the same end.

Report of the National Energy Policy Group,

May 2001.

14. The Commission staff's ongoing efforts include an Outreach Program in which interested persons meet with members of the licensing staff to learn about the licensing process and related laws and Commission regulations; various interagency training activities; encouragement of settlements through the use of Alternative Dispute Resolution (ADR); and issuance of guidance documents.

In May 2001, the Commission staff prepared a comprehensive report on hydropower licensing, including recommendations designed to make the licensing process more efficient and timely.

The Commission held in December 2001 and November 2002 Hydroelectric Licensing Status Workshops to identify and focus attention on long-pending license applications and find ways to bring

these cases to completion.

The Commission staff also held regional workshops with states on how better to integrate Commission licensing processes with the states' Clean Water Act responsibilities.

Staff guidance documents include the Licensing Handbook, Environmental Analysis Preparation, and ALP guidelines. All of these are posted on the Commission's Web site (

http://www.ferc.gov/hydro

Report to Congress on Hydroelectric Licensing Policies, Procedures, and Regulations—Comprehensive Review and Recommendations Pursuant to Section 603 of the Energy Act of 2000,

Federal Energy Regulatory Commission, May 2001 (Section 603 Report). The report can be viewed at

http://www.ferc.gov/hydro/docs/section603.htm.

The Commission staff established Docket No. AD02-05 for the workshop proceeding. A number of entities have made filings in that proceeding with recommendations for improvements to the licensing process.

Summaries of these workshops are on the Commission's Web site at

http://www.ferc.gov/hydro/docs/licensing_workshop_sched.htm.

15. Federal agencies have also worked cooperatively on several efforts to improve the licensing process. For example, the staff of the Commission, the Departments of the Interior, Commerce, Agriculture, and Energy, the Council on Environmental Quality, and the Environmental Protection Agency formed an Interagency Task Force to Improve Hydroelectric Licensing Processes (ITF). The ITF's efforts resulted in a series of commitments and administrative actions intended to make the licensing process more efficient and timely.

Reports issued by the ITF have been made public and are posted on the hydroelectric page of the Commission's Web site.

See http://www.ferc.gov/hydro/docs/interagency.htm.

16. More recently, in July of 2001, senior managers from the Commission staff and other Federal agencies formed the Interagency Hydropower Committee (IHC) to build on the commitments developed by the ITF and to develop additional procedural modifications that would further improve the efficiency and timing of licensing while maintaining environmental protections. The IHC developed a proposal for an integrated licensing process. Another integrated licensing process proposal was developed and circulated for comment by the National Review Group (NRG), a multi-stakeholder forum consisting of representatives from industry and non-governmental organizations (NGOs).

17. One reform concept that shows particular promise is a licensing process that integrates an applicant's prefiling consultation with resource agencies, Indian tribes, and the public with the Commission staff's NEPA scoping (integrated process). Such an approach could differ from the ALP in several respects, such as ensuring the Commission staff involvement at all stages, establishing deadlines for all participants, providing a more effective vehicle for study dispute resolution than currently exists, and better integrating the Commission staff actions with the actions of other Federal agencies with statutory roles under the FPA.

C. The Instant Proceeding

18. On September 12, 2002, the Commission and the Federal agencies with mandatory conditioning authority under FPA sections 4(e) and 18 commenced this proceeding by issuing a notice requesting comments in response to a series of questions concerning the need for a new licensing process, how an integrated process might best be implemented, and establishing a series of regional public and tribal forums to discuss issues and proposals associated with establishing a new licensing process.

67 FR 58,739 (September 19, 2002). Public and Tribal forums were held in Milwaukee, Wisconsin; Atlanta, Georgia; the Commission's headquarters in Washington, DC; Bedford, New Hampshire; Sacramento, California; and Tacoma, Washington. Entities that made oral comments at the public and tribal forums or filed written comments in response to the September 12, 2002 notice are listed on Appendix A.

19. Following the regional forums and submission of written comments in early December 2002, the Commission conducted public drafting sessions on December 10-12, 2002, in which discussion of the results of the regional forums and comments was followed by a broadly-based collaborative effort to develop consensus recommendations on an integrated licensing process and, where possible, develop preliminary draft regulatory text.

20. Following the December drafting sessions, the Commission staff and staff from the Federal agencies with mandatory conditioning authority held additional discussion and drafting sessions.

21. The Commission appreciates the active participation and deliberate and thoughtful comments provided by the industry representatives, Federal and state resource agencies, Indian tribes, and members of the public in this proceeding. The provisions of the proposed rule, discussed below, attempt to fully take into consideration the interests of all of the stakeholders and to propose an integrated licensing process that will serve the public interest.

For the convenience of commenters on the proposed rule, a redline/strikeout version of the affected regulatory text is being posted on the hydroelectric page of the Commission's Web site.

22. Following the issuance of this notice, and prior to the due date for comments, the Commission will conduct additional regional stakeholder workshops to seek consensus on final rule language. The schedule for these workshops may be viewed on the hydroelectric page of the Commission's website.

III. Discussion

A. Need for a New Integrated Process

23. The fundamental issue in this proceeding is whether the Commission, by adopting a new licensing process, can make significant progress toward the goal of more efficient and timely licensing procedures, while ensuring environmental protection.

Many commenters from across the spectrum of interests think a new process can achieve these goals.

Many also support the adoption of an integrated process, subject to various recommendations.

Commenters raised many issues that exceed the Commission's jurisdiction or are beyond the scope of this rulemaking, including dispersed decisional authority in the statutory scheme, minimum terms for licenses, our policy on decommissioning of hydroelectric projects, annual charges for the use of Federal lands, and the Mandatory Conditions Review Policy of the Departments of the Interior and Commerce. These matters should be addressed elsewhere.

E.g.,

Ameren/UE, RAW, HRC; NHA; NRG, AmRivers, Oregon, Washington, APT, Oregon, Kleinschmidt, Michigan DNR, C-WRC, CDWR, Menominee, WYGF, NHDES, Wisconsin DNR, California, Interior, NCWRC, WPPD, NYSDEC, Long View, Southern, Maryland DNR, NMFS, CRITFC, ADF&G, PG&E.

E.g.,

NHA, HRC, NRG, Kleinschmidt, Michigan DNR, C-WRC, Menominee, WYGF, NHDES, KT, OWRB, Wisconsin DNR, Interior, EEI, PG&E, HETF, PCWA, NCWRC, WPPD NYSDEC, Southern, Caddo, Xcel, NMFS, CRITFC, California, NMFS, ADF&G, Oregon, CDWR, PG&E. The NHA version of an integrated process actually encompasses two differrent tracks, one of which features pre-application study development and NEPA scoping, and the other of which features post-application additional information and NEPA scoping. Only the first track would be considered an integrated process as we have defined it.

24. Others assert that there is no need for an integrated licensing process distinct from the traditional process if the Commission takes the most beneficial aspects of such a process and incorporates them into the traditional process, or believe that a new untested process is unlikely to result in greater efficiency.

California, SCE, Idaho Power, EEI. California and SCE both proposed modified traditional process models, which they characterize as integrated processes. The California process does not fully integrate NEPA scoping with study plan development, but does feature pre-filing NEPA scoping. Wisconsin DNR and Oregon endorse California's version of the traditional process model.

25. Many factors can cause delays in licensing. These include multiple applications for projects in the same watershed; Failure to resolve during pre-filing consultation disagreements over requests for the applicant to gather information or conduct studies; requests for extensions of time, including extensions of time for Federal agencies to provide mandatory conditions pursuant to FPA section 4(e) and

fishway prescriptions pursuant to section 18, or required consultation with the U.S. Fish and Wildlife Service or National Marine Fisheries Service (NMFS) and attendant studies under the ESA; and delayed receipt of state water quality certification.

Other actions that have increased the time required for licensing include a policy established in 1993 of issuing draft environmental analyses for comment in all license proceedings and increasing reluctance by states to grant waiver of water quality certification.

See

603 Report, p. 32.

26. Some or all of these factors may be present in any license proceeding. However, the principal causes of delay are the need for additional information or studies after the application is filed, untimely receipt of biological opinions under the ESA, and state water quality certification.

The longer the delay in a licensing proceeding, the more likely the cause is to be lack of water quality certification.

Id.,

pp. 37-39.

Id.,

p. 43.

27. The potential benefit of an integrated licensing process can be judged by the extent to which it addresses these causes of delay in licensing. The process we are proposing addresses these causes by: merging pre-filing consultation with the Commission's NEPA scoping; enhancing consultation with Indian tribes; improving coordination of processes with Federal and state agencies, especially those with mandatory conditioning authority; increasing public participation during pre-filing consultation; and developing a study plan and schedule, including mandatory, binding study dispute resolution. With these features, the proposed process should make it much more likely that the Commission, Federal agencies with mandatory conditioning authority, and state agencies or Indian tribes with water quality certification authority obtain all the information they need to carry out their respective statutory responsibilities by the time the application is filed. This process should also encourage early settlement discussions by fostering early development of information necessary to inform settlement negotiations.

Some of these broadly-stated features and more specific features discussed below are consistent with, or were developed in the context of, the drafting groups. These include early Commission contact with Indian tribes, development of a pre-application document, inclusion of tribal and public interest considerations in information development and study plan criteria. One drafting group also discussed concepts related to the filing of a draft license application that are the subject of specific requests for comment.

28. Some commenters made process proposals that they characterize as modifications to the traditional process but which incorporate some, but not all, of the elements of the proposed integrated process. NHA, for instance, would allow the license applicant to unilaterally determine whether to use an integrated process or to defer NEPA scoping until after the license application is filed, and would not provide for binding pre-filing study dispute resolution. California would include expanded pre-filing public participation and dispute resolution, but would defer NEPA scoping until late in the pre-filing process. For these and other reasons, these proposals fall short of the goal. These proposals do however also contain other elements which, as discussed below, have been included in the proposed process.

B. Traditional Process and ALP To Be Retained

29. Our proposal to establish an integrated process raises the issue of whether there is a need to retain the traditional process or ALP. Industry commenters generally favor retaining both processes.

They argue that a single process is not suitable for every case, and that they need flexibility to choose a process that best suits the circumstances of each project.

NHA suggests that licensee process choice is needed to prevent participants from withholding agreement to an appropriate process as leverage to extract substantive or other procedural advantages. NHA also states that the traditional process remains suitable for projects that have few complications or issues. EEI adds that the traditional process may be most suitable for cases where the stakeholders are extremely polarized and unlikely to work cooperatively, and is less costly for licensees than the ALP. EEI and some licensees also state that the ALP, which tends to be labor-intensive for all concerned, is best suited to large projects with the revenues to support an intensive collaborative effort, but makes little sense for the operator of a small project.

Idaho Power adds that it can be difficult to get full participation in pre-filing consultation by agencies, tribes, and NGOs with large agendas and limited resources. Xcel states that both the traditional and ALP processes have been used successfully, and that the study criteria and timelines of the IHC and NRG proposals are rigid and less likely to foster settlements. At least one Native American commenter suggests that the limited resources of many Indian tribes favor a choice of processes, although it does not endorse leaving the choice to applicants.

Some commenters also suggest that the traditional process needs to be retained as a fallback in the event that an integrated process or ALP breaks down.

NHA, Idaho Power, AEP, EEI, DM&GLH, APT, SCL, SCE, WPPD, Xcel, NEU, Troutman, Southern, NYSDEC. On this point, the industry majority appears to enjoy some support from NYSDEC and WDOE. Michigan DNR and WDOE state that they are less concerned with the number of processes than with funding, coordination, mutually agreeable time frames, and other matters. PG&E however suggests that an integrated process would eliminate the need for the traditional and alternative process.

NHA, Idaho Power, AEP, EEI, DM&GLH, APT, SCL, SCE, WPPD Xcel, ORWB; NEU; Troutman; Southern; NEU.

SCE, CHI, EEI, Idaho Power.

GLIFWC.

EEI, Troutman, Menominee.

30. EEI and NHA also urge us to allow license applicants to tailor the licensing process to individual projects; that is, regardless of the process used, allow waiver of procedural requirements and the incorporation into ongoing processes of features from an integrated process.

EEI, for instance, states that the National Energy Policy Act of 1992

and the Council on Environmental Quality regulations

permit license applicants to prepare draft environmental assessments and to have a third party (

i.e.

, a contractor funded by the applicant, but working under the Commission's direction) prepare a draft environmental impact statement (EIS). It requests that the Commission modify its regulations to permit this in any process at the applicant's option, rather than only where an ALP is used. These arguments are considered below.

EEI.

Pub. L. 102-486, 106 Stat. 2776-3133 (Oct. 24, 1992).

40 CFR part 1500,

et seq.

See

Section III.F.3.b.

31. Environmental groups, some Federal and state agencies, and tribes argue that the Commission should have one process that is sufficiently flexible to accommodate the circumstances of any specific proceeding. Broadly stated, they suggest that this flexibility would be achieved by allowing for the applicant and stakeholders to agree to modify process steps and schedules, subject to Commission assent, in order to ensure that all parties understand and agree to the process applicable to each proceeding, and by providing guidance on acceptable terms of settlement agreements. These commenters maintain that multiple processes will make it very difficult for participants with limited resources, and that it is already difficult for environmental groups that rely heavily on volunteers to

educate their members on the existing licensing processes.

HRC, AmRivers, NYRU, NE FLOLW, AMC, BRB-LST, Menominee, VANR, KT, RAW, GLIFWC, Oregon, CRITFC, AMC, BRB-LST, Interior.

32. If there is to be more than one proceeding, some of these entities recommend that the ALP be the only alternative to the integrated process, and some suggest that it be modified to better encourage settlement agreements.

HRC requests that if the traditional process is retained, it be modified to incorporate important elements of an integrated process. NHDES and OWRB recommend that the ALP and traditional processes be retained until it is demonstrated that the integrated process works, at which point those process options would be eliminated.

RAW, Oregon, C-WRC, Menominee, VANR, Wisconsin DNR, DM&GLH, Domtar, FPL, AMC, AW, California.

33. We conclude that it is appropriate to retain the traditional process and ALP, but that the integrated process should be the default process. Commission approval would be required to use the traditional process, as is now required for the ALP.

We are persuaded that the concerns of the industry and others that the integrated process may not be appropriate for some proceedings are well-founded. The integrated process brings together in a compressed time frame consultation, studies, dispute resolution, NEPA scoping and document preparation, and water quality certification activities that are now conducted over a much longer time frame. This could pose undue difficulty for some licensees, particularly those operating small projects, and for the other participants, who may agree that the traditional process will work best. Other considerations in requesting the traditional process might include the degree of stakeholder support for that process, level of controversy concerning project impacts, and the degree to which relevant information already exists.

See

18 CFR 4.34(i).

34. We are also not inclined to abandon the alternative process. It has a demonstrated track record of reducing license application processing times,

as well as fostering settlement agreements, which are commonly filed with the application itself.

See

603 Report, pp. 29-54.

35. We are mindful of concerns that the availability of three process alternatives could be a source of confusion for some participants. We conclude however that the benefit of having different processes that can be applied to differing circumstances outweighs this concern. In this regard, we also note that the integrated process regulations have been crafted to show the steps clearly in sequence from beginning to end, and to be as self-contained (

i.e.

, with a minimum of cross-referencing to parts 4 and 16) as is practicable, given the complexity of the statutory scheme. We are also proposing to require any applicant seeking permission to use the traditional process or ALP to do so when the notification of intent to seek a license (NOI) is filed,

so that all concerned will have a voice in the process selection and will know which process will apply to the proceeding from the very beginning.

See

proposed 18 CFR 5.3 (Notification of intent).

See

proposed 18 CFR 5.1 (Applicability). As discussed below, we also propose to require a potential applicant for an original license to file an NOI.

36. We have also concluded that certain elements of the integrated process can be included in the existing traditional licensing process. These include full public participation in pre-filing consultation, mandatory, binding study dispute resolution, and elimination of post-application additional information requests for license applications. These are discussed below.

See

Section III.F. We are also making certain other modifications applicable to all processes, such as including draft license articles with draft NEPA documents.

See

Section III.D.4.

D. Key Issues and Goals for an Integrated Licensing Process

37. The September 12, 2002, notice requested comments on, among other things, what key issues in the licensing process need to be addressed and how a new process might be structured to resolve those key issues. The responses confirm that the notice correctly identified the key issues.

1. Early Identification of Issues and Study Needs

38. Nearly all commenters state that one key to reducing the length of the licensing process is for all concerned entities, including the Commission staff, to participate as early as possible, so that issues can be fully identified, study needs resolved, and necessary studies timely conducted.

Many also advise that a well-designed integrated process would improve the timing and development of mandatory terms and conditions by fostering the early involvement of Federal and state agencies with such authorities so that needed information-gathering and studies are timely commenced and completed.

E.g.,

EEI, PG&E, NRG, SCE, NHA, Michigan DNR, HRC, NYSDEC, Idaho Power, NF Rancheria, Caddo, ADK, AmRivers, AMC, APT, SCL, C-WRC, CDWR, Interior, PG&E, HETF, PCWA, APT, DM&GLH, Skancke, NYRU, Oregon, Wausau, Salish-Kootenai, HLRTC, PREPA, Kleinschmidt, Xcel, California, WPPD, RAW, GLIFWC, Virginia, CRITFC, NMFS, NHDES, VANR, Wisconsin DNR.

SCE, Oregon, Michigan DNR, HRC, NHDES, Wisconsin DNR, Interior, EEI, PG&E, PCWA, NCWRC, WPPD Xcel, NMFS, PacifiCorp, Kleinschmidt, Idaho Power, NYSDEC, Maryland DNR, ADF&R, CRITFC, California.

a. Advance Notification of License Expiration

39. The IHC proposed that three years prior to the deadline for an existing licensee to file notification of intent (NOI) to seek a new license the Commission staff would notify the licensee of the deadline and provide it with a list of basic information needs and resource agency and tribal contacts (advance notification of license expiration, or advance notification). Under the IHC proposal, the licensee would be encouraged to contact resource agencies, Indian tribes, and the public to begin identifying issues and collecting data. This early issue identification and data collection would help to ensure that the licensee files with its NOI a complete “Pre-Application Document,”

more fully described below, which would help to make effective integrated pre-filing consultation and early NEPA scoping.

See

proposed 18 CFR 5.4 (Pre-application document).

40. The advance notification concept received much favorable comment.

All of the process proposals include some form of voluntary or required pre-NOI consultation.

Some proposals contemplate an advance notification followed by a pre-NOI meeting among the licensee, Commission staff and stakeholders.

NHA would also have the Commission staff directly contact Indian tribes to discuss licensing process options and initiate government-to-government consultation. Under the NHA and SCE proposals the license applicant would, following the public meeting, choose a licensing process.

NHA, APT, Oregon, Idaho Power, VANR, NHDES, HRC, SCE, Kleinschmidt, Menominee, EEI, BRB-LST, Southern.

Voluntary pre-NOI consultation is contemplated in the NRG and PG&E proposals. Required consultation, at least to the extent of an initial informational meeting conducted by the Commission staff and existing licensee, is provided for in the NHA proposal.

NHA, HRC, SCE.

NHA and SCE apparently would not have the applicant's process choice subject to Commission approval.

41. Long View recommends that the Commission modify its regulations to allow existing licensees to file their NOI

any time prior to the statutory limit of five years prior to license expiration, rather than only during a five to five and one-half year window. California recommends moving the deadline date for the NOI forward one year (

i.e.,

6.5 years before license expiration) based on its belief that more time is needed between the NOI and license application to accommodate information-gathering and studies.

We disagree with California that the 3 to 3.5-year time frame from NOI to application contemplated by the FPA is insufficient to develop the necessary information and still provide about two years in which to conduct field studies. As discussed above, the principal barrier to success in the early conduct of studies has been the lack of active Commission staff participation early on and lack of effective pre-filing dispute resolution. The proposed integrated process should go a long way toward curing this problem.

42. We conclude that the advance notification concept has merit, and that the notification should be issued regardless of which licensing process may be selected. It would however be inconsistent with our goal of developing a more timely process to compel existing licensees to commence the licensing process in advance of the NOI, and we will not do so. The Commission believes that in the great majority of cases, a license applicant should be able complete consultation, information-gathering and studies, and application development in the three to three and one-half year period provided for in our regulations.

43. We propose to issue an advance notification sufficiently in advance of the deadline date for filing of an NOI with respect to each project to ensure that the existing licensee is alerted to the requirements of the NOI, Pre-Application Document, and any potential request to use the traditional process or ALP.

Because the advance notification will be an administrative measure taken by the Commission which requires no action on the part of any other entity, and which would be undertaken regardless of the process selected, we do not propose to include it in the regulations.

Entities other than the licensee will be able to determine which licenses expire, and when, on the hydroelectric page of the Commission's website. They will likewise have access to the Commission's regulations and Pre-Application Document guidance. These resources should together enable interested members of the public to inform themselves of potential future relicense proceedings.

44. Also, as recommended by one of the December 2002 drafting groups, the Commission staff will contact Indian tribes whose resources may be affected by a future relicense proceeding to inform them about the licensing process and how they can participate in it, and to become aware of concerns the tribes have with respect to potential relicense proceedings. In this regard, we also intend to create a Tribal Liaison position to ensure that tribes have a clearly identified point of access to the Commission staff.

b. Integrating Pre-Filing Consultation With NEPA Scoping

See

Section III.D.3.

45. Under the traditional process, pre-filing consultation focuses on development of information and studies by the potential applicant, agencies, and Indian tribes. Public participation is limited.

The Commission staff also has not participated in pre-filing consultation, because under the traditional process there is no proceeding until an application is filed, and, particularly with regard to potential original license applications, the Commission has not been willing to commit its limited resources to a process that may not result in a license application.

Unless the potential applicant voluntarily does more, public participation is limited to attendance at a single, publicly noticed meeting.

See

18 CFR 4.38(g).

46. Nearly all commenters agree that the earlier the Commission's NEPA scoping begins, the earlier issues and information needs will be identified, and the earlier information-gathering and studies will be commenced and completed.

We agree. Accordingly, the proposed integrated process provides for the Commission staff to begin NEPA scoping immediately after the NOI is filed.

E.g.,

NHA, CDWR, NYSDEC, RAW, Caddo, Menominee, CRITFC, DM&GLH, Domtar, APT, Oregon, SCL, HRC, CRITFC, Oregon, Kleinschmidt, C-WRC, Interior, NMFS, Washington, California, SCE, Salish-Kootenai, HLRTF, PG&E, PCWA, Idaho Power, PacifiCorp, SCDWQ, APT, Michigan DNR, HRC, Wisconsin DNR, EEI, Maryland DNR, NMFS.

See

Section III.E.2.a.

47. NEPA scoping will be greatly assisted by the availability to the participants of as much relevant existing information as possible when scoping begins. The current regulations require an existing licensee, at the time it files its NOI, to make available to the public existing information with respect to the project, its operation, and project impacts on various resources.

They also require all potential operating license applicants to provide an initial consultation package to consulted entities during first stage consultation.

We propose to supplant these requirements for all processes by requiring a potential applicant for an operating license to file with its NOI the above-mentioned Pre-Application Document.

18 CFR 16.7(d).

18 CFR 4.38(b)(1), 16.8(b)(1).

Exemption and non-power license applicants would continue to use the traditional process and to distribute the initial consultation package now required by 18 CFR 4.38(b)(1) and 16.8(b)(1).

48. The proposed Pre-Application Document is intended to compile and provide to the Commission, Federal and state agencies, Indian tribes, and members of the public engineering, economic, and environmental information available at the time the notification of intent is filed. It would also provide the basis for identifying issues and information needs, developing study requests and study plans, and the Commission's environmental scoping documents under NEPA. Because of its form and content requirements, the Pre-Application Document would be a precursor to Exhibit E, the environmental exhibit, in the license application. For license applicants using the integrated process, the Pre-Application Document would evolve directly into a new Exhibit E. The integrated process Exhibit E would have the form and content requirements of an applicant-prepared draft NEPA document.

Applicants using the traditional process would continue to use the existing Exhibit E, and applicants using the ALP could use the existing Exhibit E or file with their application in lieu thereof an applicant-prepared environmental analysis. The Commission requests comments on the content of the Pre-Application Document.

See

proposed 18 CFR 5.16(b).

The Commission is interested in any comments parties may have on any aspect the proposed rule; however, there are several aspects on which we are particularly requesting comments. Appendix B is a list of all matters on which the Commission is specifically requesting comments, cross-referenced to the appropriate paragraph in the preamble. Commenters are requested to identify the paragraphs to which their comments respond.

49. Some industry commenters contend that integrating pre-filing consultation with NEPA scoping should be optional for the applicant.

That is, of course, fundamentally inconsistent with the concept of an integrated licensing process. Deferral of NEPA scoping until after the license application is filed should occur where the circumstances are such that use of the traditional process is permitted.

We also think that requiring all potential operating license applicants to

file the Pre-Application Document will enhance the combined pre-filing consultation and NEPA scoping that now occurs in the ALP, and pre-filing consultation under the traditional process as well.

Xcel, NHA, HLRTF. Under NHA's proposal, an existing licensee would elect to have a pre- or post-application NEPA process when it files its NOI.

The ALP generally encompasses pre-filing environmental scoping because it contemplates filing by the applicant of a draft environmental document.

c. Study Plan Development

50. Involving all interested parties and Commission staff from the outset of consultation will not alone bring about timely development of information and studies. There is general agreement that a Commission-approved study plan is needed as well,

but divergent views on the appropriate development and content of study plans.

E.g.,

NHA, SCE, HRC. PG&E's dispute resolution proposal calls for neutral, objective criteria. In most cases, these would be voluntarily applied by the parties to resolve disputes among themselves. Disputes brought to the Commission would not actually be resolved, because the Commission would issue only “opinions” based on the neutral, objective criteria.

51. Industry commenters contend that agencies and NGOs often request studies not based on any demonstrable nexus between project operations and resource impacts, unreasonably oppose the use of existing data from the project in question or other projects, and are insensitive to the cost of the study to the applicant. They recommend that the Commission establish clear criteria for acceptable study and information-gathering requests, and some believe that clearly articulated criteria would significantly reduce the number of study disputes.

The “nexus” criterion is the one they most often identify as necessary.

Some request that we make explicit that site-specific studies are not always needed, since in many cases extrapolation of data from studies at similarly situated projects is appropriate.

Some industry commenters, while supporting the concept of study criteria, oppose a prescriptive approach to defining the scope of studies, suggesting that the matter is best resolved in the context of specific cases or in alternative licensing proceedings.

SCE, Kleinschmidt, NHA, WPPD, Menominee, Oregon, Long View.

NHA, EEI, Wausau, Ameren/UE, Spaulding, Xcel, APT, Duke, SCE.

Xcel, NHA, Southern, NHA.

NHA. EEI states that the scope of required studies is already too broad and that the Commission should require only studies based on demonstrated nexus between project operations and resource impacts.

52. Agency, tribal, and NGO commenters generally agree that established study criteria are desirable, but disagree with the industry concerning the development and application of criteria. For instance, HRC and others state that criteria for acceptable studies should include potential cumulative impacts of projects throughout the relevant river basin, because project impacts may extend far beyond project boundaries.

HRC adds that studies should be directed not merely at identifying project impacts, but also at determining the causes of those impacts and the sustainability of affected resources in a basin-wide cumulative impacts context. These commenters also tend to view the “nexus” issue differently, stating that a “common sense” test should apply to the establishment of a nexus between project operations and resource impacts.

In addition, several commenters indicate that deference should be shown to state agency study requests.

HRC, NYSDEC, PFMC, Salish-Kootenai.

GLIFWC, VANR.

Michigan DNR, Wisconsin DNR, California, RAW.

53. Licensees note that, notwithstanding the Commission's well-established and judicially-approved policy that the baseline for environmental analysis is existing conditions,

participants continue to request studies intended to establish a pre-project baseline that would serve as a standard for purposes of establishing environmental mitigation requirements. They recommend that the Commission incorporate its policy into regulations establishing study criteria.

Some state agencies respond that state laws or policies require water quality standards to be established with reference to pre-project conditions, and that the record necessary to support certification is not complete until such studies are complete.

ADK states that the continuing dispute is unproductive and requests only that we resolve the matter once and for all.

See

American Rivers v. FERC, 201 F.3d 1186 (9th Cir. 1999); Conservation Law Foundation v. FERC, 216 F.3d 41 (DC Cir. 2000).

Wausau, WE Energies, Duke, DM&GLH, Domtar, Skancke, FPL, APT, SCE, NHA. In a related vein, Ameren/UE suggests that applicants who choose the ALP are under continuous pressure to agree to unneeded studies as the price for continued cooperation of special interest groups, and that the Commission should relieve these applicants of this pressure by itself deciding on all study requests. That would however be inconsistent with the collaborative thrust of the ALP.

Wisconsin DNR, NYSDEC.

54. We conclude that a Commission-approved study plan is an essential component of any integrated licensing process, and that such a plan will be most effective in reducing study disputes and allowing agreed-upon studies to go forward expeditiously if reasonably objective criteria by which to judge study requests are established.

55. The IHC developed six study dispute resolution criteria. These criteria are:

(a) Whether the request describes available, project-specific information, and provides a nexus between project operations and effects on the resources to be studied.

(b) Whether the request includes an explanation of the relevant resource management goals of the agencies with jurisdiction over the resource to be studied.

(c) Whether the study objectives are adequately explained in terms of new information to be yielded by the study and its significance relative to the performance of agency roles and responsibilities in connection with the licensing proceeding.

(d) If a study methodology is recommended, whether the methodology (including any preferred data collection and analysis techniques) is consistent with generally accepted practice in the scientific community.

(e) Whether the requester has considered cost and practicality, and recommended a study or study design that would avoid unnecessary costs while still fully achieving the stated study objectives.

(f) If the license applicant has provided a lower cost alternative, whether the requester has considered this alternative and, if not adopted, explained why the lower cost alternative would not be sufficient to achieve the stated study objectives.

September 12, 2002 Notice, Attachment A, p. 11.

56. Several commenters endorse the IHC study criteria, and some, as discussed below, also suggest additions or modifications.

Menominee, Duke, WPPD, Wisconsin DNR, Michigan DNR, Ameren/UE, NHA, HRC.

57. A few commenters found fault with the IHC criteria. The principal criticism is that the criteria are focused on the needs of agencies with mandatory conditioning authority, notwithstanding that the Commission's public interest analysis must include issues raised by tribes or NGOs which may have resource goals and management plans of their own, or for which no formal goals or management plans may exist.

These commenters also take the position that a dispute resolution process should be open to any party, not just to Federal or state agencies or tribes to the extent that

exercise of their mandatory conditioning authority is implicated. EEI opposes the IHC criteria, because it opposes the IHC dispute resolution proposal in which they would be applied.

PG&E, HRC. For instance, an NGO might support the establishment of certain instream flows in a bypass reach for aesthetic, biological health, or recreation purposes, but have no formal planning process of the kind that resource agencies typically employ.

58. With regard to IHC criterion (a), the Menominee Tribe states that a study may be needed in some cases to determine if there is a nexus between project operations and resource impacts, and that this criterion should be applied liberally to accommodate that need. For instance, it may be reasonable to assume that unscreened turbines at a project cause entrainment mortality, but no data exist indicating the extent of such mortality or its biological impacts at the project site. GLIFWC similarly states a requester should not have to demonstrate a nexus when common sense dictates that there is one. VANR appears to assert that a requester should only have to articulate a relationship between the study request and a regulatory requirement.

59. We believe the nexus requirement is important to ensure that the licensing process is the vehicle for making informed decisions pursuant to the FPA and other applicable laws, rather than for development of information at the applicant's expense that may be useful to the requester in some other context. The same rule of reason must apply to the application of this criterion as to the application of any other criteria.

60. Some tribes state that the reference to agency jurisdiction over resources in criterion (b) should be removed, because it could be construed to exclude tribal participation in dispute resolution.

Similarly, one of the drafting groups recommended that this criterion be modified to take into account tribal and public participation in study plan development. As discussed below, we are proposing a study dispute resolution process for the integrated process which encompasses the participation of tribes in the development of the applicant's Commission-approved study plan, and in formal dispute resolution to the extent their mandatory conditioning authority under the Clean Water Act is implicated.

Menominee, BRB-LST, GLIFWC, Shoshone.

Consistent with the recommendation of one of the drafting groups, we have also modified the study criteria to require parties requesting information development or studies to address any known resource management goals of Indian tribes or non-governmental organizations.

61. Wausau indicates that agency management goals may not be an appropriate determinant of what studies are necessary, citing the possibility that a resource agency could establish the removal of dams in general as a management goal, which could lead to lengthy and expensive dam removal studies where there is no realistic prospect that a dam will be removed. SCE similarly states that the requester should have to demonstrate that agency management goals are appropriate, then show that the study is designed to directly address the nexus between impacts and management goals.

62. Our intention is that the criteria will be applied as a whole, so that the mere fact that a study request can be related to an agency management goal will not ensure that the study is required to be conducted. This necessarily implies that judgment calls will be made, and it is our intention that those calls be made in light of the principle that the integrated licensing process should to the extent reasonably possible serve to establish an evidentiary record upon which the Commission and all agencies or tribes with mandatory conditioning can carry out their responsibilities. We do not intend to second guess the appropriateness of agency or Tribal resource management goals, but must consider study requests based on those management goals in light of all applicable criteria, such as the “nexus” criteria, as well as the potential for conflict with important Commission policies, practices, or rules.

63. Regarding IHC criteria (e) and (f), some tribes believe that where tribal trust resources are concerned, study cost is irrelevant once the reasonableness of the need for the data has been established.

We cannot agree. Our responsibility to balance all aspects of the public interest with respect to any project proposal necessarily encompasses the exercise of independent judgement concerning the relative cost and value of obtaining information.

Menominee, St. Regis Mohawks, GLIFWC.

64. We conclude that the IHC study criteria are sound and reasonably objective, and propose to require participants in the integrated process to support their information-gathering or study requests with reference to those criteria, with minor modifications, such as the inclusion of tribal management plans and public interest considerations mentioned above. Our proposed criteria require an entity making an information-gathering or study request to, as applicable:

(1) Describe the goals and objectives of the study and the information to be obtained;

(2) If applicable, explain the relevant resource management goals of the agencies or tribes with jurisdiction over the resource to be studied;

(3) If the requester is not a resource agency, explain any relevant public interest considerations in regard to the proposed study;

(4) Describe existing information concerning the subject of the study proposal, and the need for additional information;

(5) Explain any nexus between project operations and effects (direct, indirect, and/or cumulative) on the resource to be studied;

(6) Explain how any proposed study methodology (including any preferred data collection and analysis techniques, or objectively quantified information, and a schedule including appropriate filed season(s) and the duration) is consistent with generally accepted practice in the scientific community or, as appropriate, considers relevant tribal values and knowledge;

(7) Describe considerations of cost and practicality, and why any proposed alternatives would not be sufficient to meet the stated information needs.

See

proposed 18 CFR 5.10.

65. NHA and SCE would add the following three criteria:

1. If a study request has previously been the subject of dispute resolution, or if the Study Plan was undisputed, requests for that study would be rejected except in extraordinary circumstances.

NHA and EEI frame this also in terms of “rebuttable presumption” that no additional studies would be required under these circumstances.

2. Study requests intended to establish a “pre-project conditions” baseline would be rejected.

3. The cost of the study must be justified relative to the value of the incremental information provided.

In a similar vein, PG&E suggests that criteria should include whether a real problem has been identified, how the information will be used, and the cost of the information relative to its value.

66. NHA's first additional criterion has merit, particularly in light of the fundamental purpose of the proposed rule. It is not, however, really a study criterion, but a statement concerning treatment of additional information requests and will therefore be considered elsewhere.

With regard to the baseline issue, we note that all of the criteria will be applied in light of important Commission policies. Thus, we will not include this as a criterion, but will continue to adhere to our environmental analysis baseline policy.

NHA's third criterion is similar

to proposed criterion (7). Both our proposed criterion (7) and NHA's recommended criterion (3) involve a significant degree of subjectivity, to which a rule of reason must be applied. The Commission requests comments on whether our proposed criterion (6) or NHA's recommended criterion (3) more appropriately deals with the issue of study costs.

See

this section, infra, Section III.E.2, and proposed 18 CFR 5.13 and 5.14.

As stated above, existing environmental conditions, not pre-project conditions in the case of

existing projects, is the baseline for analysis in our NEPA documents. We have also stated however that, while it does not change the focus our analysis, reliable information on pre-project conditions may help to inform our decisions about what environmental enhancement measures may be appropriate for a new license.

See

City of Tacoma, 67 FERC ¶ 61,152 (1994),

reh'g denied,

71 FERC ¶ 61,381 at pp. 62,491-92 (1995).

67. SCE also proposes that we add a criterion that “study results will aid the decision-making process in a substantive way.”

We are not entirely certain what SCE means, but the proposed criteria implicitly require that study requests not be frivolous and add some appreciable evidentiary value to the record.

SCE, p. 19.

68. Duke and the Michigan and Wisconsin DNRs state that the study criteria might include standard study plan formats, including standardized formats for reporting results. Michigan and Wisconsin DNR state that this would better enable states and tribes to meet their own responsibilities with respect to water quality and coastal zone management plan certification, as well as fishery and energy management goals. AMC recommends that a scientific peer review process be employed to develop a list of approved study methodologies.

69. We do not find that the guidance proposed by Duke and the Michigan and Wisconsin DNRs is appropriate for a rulemaking, because study plan development tends to be project-specific. We note however that Appendix D of the Commission's Hydroelectric Project Licensing Handbook, which may be viewed on the Commission's website, includes guidelines for preparing Exhibit E, the environmental exhibit. This appendix provides, in some detail, the information that should be considered for inclusion in a license application. Study plans can be developed from the information needs there described, and can be adapted to site-specific needs for information and in light of anticipated impacts.

70. Several commenters indicate that an effective study plan must include one or more opportunities for additional study requests to account for circumstances where studies result in data very different from the data expected or otherwise demonstrate that additional information is required to make a fully informed decision.

Licensee commenters generally acknowledge that such circumstances may occur, but stress their need for certainty with respect to costs and timeliness. They request that any new rule establish a presumption that an applicant which completes the approved study plan has obtained all of the information necessary for the Commission and agencies with mandatory conditioning authority to carry out their responsibilities, and that any request thereafter for additional information would be granted only upon a showing of extraordinary circumstances.

Wisconsin DNR, Washington, VANR, NMFS.

NHA, Idaho Power, Van Ness, Kleinschmidt, PG&E, Southern, SCE.

71. We recognize the tension between licensees' desire for certainty and the need for finality in compiling the decisional record, and, on the other hand, the likelihood that circumstances will occur during the course of studies and data gathering which require additional information or a course correction in order to develop the necessary information. We are proposing therefore that each Commission-approved study plan under the integrated licensing process include specified points at which the status of information development and other relevant factors are reviewed and an opportunity for amendments provided. As the information-gathering and studies proceed however, the standard for new requests will increase.

Also, because the integrated process would include stakeholder participation in study plan development, periodic review of results and opportunities for amendments, and study dispute resolution, the integrated process does not contemplate any additional opportunity for participants to request information and studies after the license application is filed.

See

Section III.E.2 and proposed 18 CFR 5.14 and 5.15.

72. Finally, AMC contends that where studies are conducted by consultants who are paid by and answer to license applicants, the consultants are under explicit or implicit pressure from the applicant to find minimal or no impact on resources from project operations. It recommends that study plans require applicant-funded consultants to report directly to, and work under the direction of, a stakeholder group. We decline to adopt this proposal. Allegations of institutional bias might be directed at technical experts in the employ of any party to a license proceeding. AMC notes that applicants have agreed to such arrangements in at least one instance, and that it worked well for the participants, but we decline to establish a process that compels applicants to fund consultants who answer to other participants.

d. Study Dispute Resolution Process

73. Early resolution of study disputes was identified by many commenters as critical to improving timeliness.

See

Section III.D.1,

supra.

Also, NRG, DM&GLH, Skancke, New York Rivers, Oregon, NMFS.

74. The pre-filing study dispute resolution process provided in the Commission's existing regulations

is seldom used. Commenters cite various reasons for this. Some say it is because the decision of the Director of the Office of Energy Projects (OEP) is not binding.

Others suggest that the absence of specific study criteria in the regulations creates uncertainty that leads parties to continue attempts to negotiate study requirements until after the application is filed.

Some Federal and state agencies indicate that they do not use the process because the Commission only considers the need for information to support its own decisions, which may be different from the information these agencies require for a complete record to support the exercise of their own authorities.

HRC notes that the current rules do not provide for resolution of disputes between the applicant and NGOs. A few other commenters, mostly from the industry, state that the existing process, or the existing process with minor modifications, works well enough.

See

18 CFR 4.38(b)(5) and (c)(2); 16.8(b)(5) and (c)(2).

NHA, PG&E, NYSDEC, Van Ness, AMC, WPPD, SCE, Kleinschmidt.

California, Oregon, Long View

Interior, NYSDEC, NCWRC.

SCE, Idaho Power, EEI, NAH, ADK.

75. Commenters generally support the establishment of a more clear and effective dispute resolution process.

There are, however, substantial differences concerning the details of what that process should be. It is helpful to use the IHC dispute resolution proposal as a frame of reference to discuss these differences.

NHA, PRT, APT, CRITFC, NYSDEC, CTUIR, Menominee, AMC, Oregon, SCE, Kleinschmidt, WPPD, KCCNY, HRC, AmRivers, HRC, Menominee, Wisconsin DNR, EEI, Idaho Power, DM&GLH, APT, Duke, PG&E, NCWRC, Long View, Xcel, CSPPA. Some industry commenters recommend that any new dispute resolution process be incorporated into any and all licensing process options. Duke, EEI, Van Ness. This is discussed in Section III.H.

76. In brief, the IHC proposal provides for the Commission staff to approve with any necessary modifications a proposed information-gathering and study plan developed by the applicant in consultation with interested parties. Parties other than Federal or state agencies with mandatory conditioning authority under FPA Sections 4(e) and 18, or state or Tribal water quality certification agencies, as well as the applicant, would be bound by the decision. Agencies and tribes with conditioning authority would be able to dispute the decision with respect to studies pertaining to the exercise of their authorities.

77. The dispute would be submitted to a panel consisting of a person nominated by the Commission staff, a person nominated by the agency or tribe referring the dispute, and a third person with the appropriate technical qualifications selected by the other two panel members from a list of such persons maintained by the Commission. The panel would review the request with reference to the study criteria discussed above. There would be an opportunity for other participants to submit information. If the panel concluded that the study request satisfied the criteria, it would recommend to the Director that the applicant be required to conduct the study. The Director would review the recommendation pursuant to the study criteria and, unless he disagreed with the panel's conclusions, would direct the applicant to do the study. This process would be available when the applicant's study plan is first considered and if disputes arise during periodic status reviews. Several commenters indicated that the IHC proposed dispute resolution process appears to be reasonable, subject to various suggested modifications.

One frequent comment was that whatever dispute resolution mechanism is adopted, basic fairness requires that it be available to every participant that has a dispute with an applicant.

NYSDEC, Van Ness, Duke, CRITFC, NYRU, GLIFWC, BRB-LST, WPPD, Michigan DNR, California.

SCE, Kleinschmidt, WPPD, SCE, Skancke, AMC, EEI, PG&E, NYRU, Van Ness, Oregon, VANR, Southern, Idaho Power, ADK. NHA's proposal is that only applicants, agencies, and tribes be able to initiate dispute resolution, but that any party could participate.

78. Various commenters oppose the panel approach, or aspects of it, for different reasons. Some state that it would be costly, unwieldy, or take too long, and that the Commission has sufficient in-house expertise to resolve study disputes.

PG&E is concerned that the panelists would not be directly involved in the proceeding and thus lack familiarity with the complexities of individual cases. Some object to the absence of the applicant from the panel, because it has expertise and will bear the cost of whatever studies are required.

100

EEI and others suggest that a panel would diminish the Commission's authority by placing too much decisional input into the hands of an entity in which the Commission has a minority role.

101

GLIFWC is concerned that a panel format might result in inconsistent resolution of disputes concerning the same or similar issues, and suggests that consistency could be ensured by having one neutral third party serve on multiple panels concerned with the same or similar issues. CDWR recommends that any panel have the applicant and resource agency or Tribe as the disputants, with the Commission staff acting as the third party.

SCE, Kleinschmidt, Southern, Idaho Power, EEI, NHA. SCE adds that if the Commission lacks internal expertise with respect to a particular issue, it can obtain it by contract.

100

Duke, Xcel, Kleinschmidt, Wausau, Georgia Power, WE Energies, Skancke, CDWR, Idaho Power.

101

Wausau, FPL.

79. Licensees further assert that if the licensee must be excluded from the panel, then it should in any event be afforded a role in the process. Suggestions in this regard include provisions for informal dispute resolution before a panel is convened,

102

the panel convening a technical conference,

103

and an opportunity for review and comment on the recommendation of any advisory panel before the Director resolves the issue.

104

102

NYSDEC.

103

Duke, AEP, Van Ness.

104

Duke.

80. A few commenters object to the Commission resolving study disputes. Some states and HRC aver that deference to the expertise of state agencies requesting studies is appropriate, and that disputes over studies requested by agencies with mandatory conditioning authority should be resolved by those agencies.

105

States also emphasize that they are not bound by Commission decisions with respect to information needs in support of water quality certification, and if the result of a dispute resolution process at the Commission was not favorable, they would use their own processes to deny the certification or otherwise ensure that they receive the requested data.

106

The Menominee Tribe states that the Commission staff lacks impartiality and, recommends with GLIFWC that the panel's recommendation be binding on the Commission staff as well as other parties. Wisconsin DNR recommends development of a dispute resolution mechanism in which the Commission staff acts as a facilitator.

105

California, Oregon, Michigan DNR, Washington, HRC.

106

California, Oregon, Michigan DNR, Washington, NYSDEC.

81. There is also no consensus on whether dispute resolution should be mandatory, and whether the result should be binding. Some licensee commenters would require stakeholders to refer an issue in dispute during prefiling consultation, and if they failed to do so, would not be able to make the study recommendation or raise the dispute after the application is filed.

107

Other commenters appear to support continuation of dispute referral as optional.

108

107

This concept is frequently expressed in terms of there being a ban on post-application information requests, or a rebuttable presumption against them, or that they be allowable only under extraordinary circumstances. EEI, Idaho Power, NHA, Xcel.

108

PG&E. NHA's dispute resolution proposal would appear to be voluntary but, if it was invoked, would in effect be binding on requesters because they could not later revisit the issue except in extraordinary circumstances. It would not appear to be binding on the applicant.

82. Some commenters would make the result of the process binding.

109

NHA and NRG would make participation mandatory, which NHA explains would provide a needed incentive for parties to become involved during pre-filing consultation, but would make the result advisory.

110

Under HRC's collaborative process proposal, the participants would negotiate their own case-specific dispute resolution procedures with respect to study requests and various other aspects of the process, such as a plan and schedule for processing the application, as well as the contents of a draft license application, NEPA document, and mitigation and enhancement measures. HRC would have study disputes ultimately resolved by a panel which closely resembles the panel we are proposing.

109

SCE, EEI, PG&E, Van Ness, Snohomish.

110

NHA, NRG. Only a few commenters focused on the NRG dispute resolution process. In general, they approved that the process would be open to all participants, but expressed concern that criteria for dispute resolution were not defined, and that its advisory nature would result in no clear resolution. EEI, PG&E, Van Ness, Snohomish.

83. We conclude that in order to be effective, a dispute resolution process should be timely, impartial, transparently based on a thorough consideration of the applicable facts and

decision criteria, and binding. We believe a modified version of the IHC proposal may satisfy these requirements.

84. Timeliness can be ensured by building into the dispute resolution process deadlines for action by all parties. The advisory panel approach offers the best assurance of impartiality and acceptance by including a panel member with appropriate technical expertise agreeable to the other panelists, and who has no conflicts of interest. Transparency can be assured by requiring a disputing party, the advisory panel, and the Director to explain how they applied the facts in light of the study criteria.

85. We propose to establish what is essentially a two-step dispute resolution process. In Step 1, the applicant files a draft study plan for comment; the participants (including Commission staff) meet to discuss the draft plan and attempt to informally resolve differences. The Commission then approves a study plan with any needed modifications after considering the applicant's proposed plan and the participants' comments (preliminary determination). Step 2 would be a formal dispute resolution process, including the panel described above, in which resource agencies with mandatory conditioning authority under FPA sections 4(e) and 18, and states or tribes with water quality certification authority under Clean Water Act section 401, would be able to dispute the preliminary determination to the extent their dispute concerns requests that directly implicate their exercise of that conditioning authority.

111

If more than one agency or tribe filed a notice of dispute with respect to the preliminary determination's decision on a study request, the disputing agencies or tribes would select one representative to the panel, to ensure that balance is maintained.

111

See

proposed 18 CFR 5.12.

86. This proposed process distinguishes between agencies and tribes with conditioning authority, to extent they are exercising that authority, and participants whose role is to make recommendations pursuant to FPA sections 10(a) and 10(j), NHPA section 106, or other applicable statutes. Agencies or tribes exercising mandatory conditioning authority have a duty to make reasoned decisions based on substantial evidence, and their decisions are subject to judicial review. Agencies, tribes, or members of the public that make recommendations to the Commission bear no such responsibility. The proposed integrated process ensures information and study requests of the latter entities receive appropriate consideration, in the context of early NEPA scoping and a process for developing the study plan provides all parties with opportunities to participate in study plan development meetings and file comments.

87. We recognize that the applicant, by virtue of the fact that it must conduct any studies required by the Commission and implement the license, has a special interest in the outcome of any dispute resolution process involving the Commission and agencies or Tribes with mandatory conditioning authority. For that reason, the dispute resolution process we are proposing provides an opportunity for the applicant to submit to the panel information and arguments with respect to a dispute.

88. The advisory panel procedure does not delegate any of the Commission's decisional authority, because the panel is advisory only. Nor do we think it is necessarily too costly or unwieldy if properly managed. All costs of panel members representing the Commission staff and the agency or tribe which served the notice of dispute would be borne by the Commission, agency, or tribe, respectively. The third panel member will serve without compensation, except for certain allowable travel expenses to be borne by the Commission.

112

The allowable travel expenses are defined at 31 CFR part 301. In brief, travel allowances are the same as those of a salaried employee traveling on behalf of the Commission. The Commission has procedures and guidance in place for such situations.

89. We agree with GLIFWC that consistency of analysis is desirable in a dispute resolution process, but anticipate that project-specific facts will play a large role in the recommendations of the panels. We are not moreover able to provide any assurance that third party panelists, who volunteer their services, would be willing to appear on multiple panels during any given period of time. Finally, the recommendations of each panel and the Director's decision will be matters of public record, and may inform the thinking of future panels applying the same criteria to issues concerning the same resource.

90. NYSDEC and AMC state that to ensure the neutrality of the third panel member, that person should be from academia and not tied to any licensee's financial interests, or should be some other wholly independent party. We believe that neutrality will be sufficiently ensured by the fact that the third panelist must be agreed upon by the panelists representing the Commission staff and the disputing agency or tribe. The Commission requests comments on the proposed study dispute resolution process, and in particular on the efficacy of the advisory panel.

91. California and others

113

recommend that disputes be resolved by persons local to the project region, on the ground that local officials have a better understanding of the issues and states cannot afford to send staff to Washington, DC This is a matter best decided in the context of each proceeding.

113

Oregon, CRITFC.

e. Other Recommended Uses for Dispute Resolution

92. Menominee recommends that the study dispute resolution concept be extended to other elements of the licensing process, such as disagreements on draft license articles (which we propose to include with draft NEPA documents),

114

and whether the Commission is in compliance with NEPA. Dispute resolution with the Commission staff is not appropriate for such matters, which are solely within the Commission's authority, and to which rehearing and the opportunity for judicial review apply. Dispute resolution procedures may however be appropriate in the context of settlement negotiations among parties where a settlement agreement could include recommendations to the Commission concerning the content of license articles.

93. Some industry commenters suggest that disputes over material issues of fact related to issuance of mandatory conditions should be the subject of “mini-hearings” upon the applicant's request. They contend this would improve the overall record of the proceeding for judicial review, and that the prospect of a fact-finding hearing would make agencies with conditioning authority more likely to settle cases and less likely to impose unreasonable conditions.

115

We do not propose to change our general practice of resolving most hydroelectric licensing matters by means of notice and comment procedures. We agree, however, that there may be merit in using evidentiary hearings before administrative law judges in licensing proceedings, and will give due consideration to any requests for such hearings.

116

114

See

Section III.D.4.d.

115

EEI, NHA, Idaho Power, DM&GLH, APT, Duke.

116

Proposed 18 CFR 5.27(e) explicitly provides for this.

2. Consultation and Coordination With States

94. The current regulations require prospective license applicants to include state fish and wildlife agencies and water quality certification agencies in pre-filing consultation,

117

and for license applicants to include with their application proof that they have received, applied for, or received waiver of water quality certification.

118

Notwithstanding, the Section 603 Report identified lack of timely state water quality certification as one of the principal causes of delay in licensing.

119

95. The causes for this appear to vary from state to state. States, including those which participated in the December 2001 regional workshops, indicate that they have very limited resources to devote to such applications; that disputes over the scope of studies required for a complete certification application are not resolved before the license application is filed; or that their water quality certification process is designed to use the Commission's final NEPA document to the extent possible as the basis for acting on the water quality certification application.

120

117

18 CFR 4.38(a)(1) and (a)(2);and 16.8(a)(1) and (a)(2).

118

18 CFR 4.38(f)(7); 16.8(f)(7).

119

See

Section 603 Report, pp. 38-43.

120

WDOE, Oregon, SCDWQ, Michigan DNR, California, Wisconsin DNR. EPA states that the limited resources of some states relative to their Clean Water Act responsibilities could make it difficult for the state agency to stay involved over the term of a multi-year license proceeding.

96. Not surprisingly, then, there was broad agreement in the regional workshops with states and among the commenters that early collaboration or coordination by all parties with state agencies that issue water quality and CZMA consistency certification is essential to any effort to improve the timeliness of licensing.

121

Many commenters recommend that these state agency processes be fully integrated with the Commission's processes from the beginning of pre-filing consultation through license issuance. This could include joint Federal/state environmental issues scoping and preparation of environmental documents as cooperating agencies.

122

CRITFC states coordination of Federal and state regulatory agency action would also be enhanced by river basin-wide analyses that take into account all relevant state and tribal water quality standards and tribal water rights.

121

Washington, California, SCE, Salish-Kootenai, NHA, HLRTF, Oregon, Interior, PG&E, PCWA, Idaho Power, PacifiCorp, SCDWQ, APT, Michigan DNR, HRC, Wisconsin DNR, EEI, NYSDEC, Maryland DNR, NMFS.

122

NRG, Washington, Idaho Power, PacifiCorp, SCE, Oregon, Michigan DNR, HRC, KCCNY, CDWR, HRC, Idaho Power, PacifiCorp, NHDES, PG&E.

97. The proposed integrated licensing process is designed to maximize coordination with state processes under the CWA and CZMA, and to aid the ability of state agencies to timely provide recommendations pursuant to FPA sections 10(a)(1) and 10(j). State agencies would be consulted with respect to development of the applicant's Commission-approved study plan; invited to participate in an initial public meeting for the purpose, among others, of coordinating all regulatory processes to the extent possible; and could participate in the Commission's NEPA scoping activities. They would also be eligible for dispute resolution with respect to information and study requests pertaining to the exercise of their water quality conditioning authority.

98. There are limits to what the Commission can do to coordinate its activities with state processes. Some states for instance indicate that the problem of incomplete water quality certification applications when the license application is filed would be eliminated if the Commission would treat states as “full partners” in the licensing process, which appears to entail, among other things, complete deference to state agency study requests.

123

The Commission may in fact require an applicant to complete all of the information-gathering or studies requested by a state agency, but must exercise its independent judgement with respect to each study request in light of the comprehensive development standard of FPA section 10(a)(1), the Commission's policies, and any other applicable law. Several states moreover commented that they cannot be bound by the result of any Commission decisions on information and study needs insofar as their independent water quality certification authority is concerned, and if they are not satisfied with the information resulting from the Commission-approved study plan or dispute resolution process, they will deny water quality certification or use their other authorities to require the information they believe is needed.

124

Finally, some states oppose participation as cooperating agencies for NEPA document preparation, on the ground that would conflict with their own policies or procedures.

125

123

California, NYSDEC, VANR, Wisconsin DNR.

124

California, Oregon, Michigan DNR, Wisconsin DNR, WDOE.

125

See

Section III.D.4.b.

99. EEI, NHA, and Idaho Power recommend that the Commission consider developing state-specific agreements comparable to programmatic agreements with State Historic Preservation Officers (SHPO), which might address such matters as coordination of schedules and key information needs of the states.

126

As previously noted,

127

the Commission has already begun consultations with the states to determine whether such memoranda or other actions to enhance coordination, apart from the proposed rule, may be useful. Our staff is also engaged in more focused discussions with some states where numerous relicense applications are expected to be filed over the next decade.

126

EEI, NHA, Idaho Power. EEI states that any drafts of any such agreements should be submitted to licensees for comment.

127

See

Section II.B., supra.

100. Some states

128

indicate that their ability to timely issue water quality and coastal zone management plan consistency certifications would be greatly enhanced if the Commission directly funded their participation in the licensing process or used its authorities to require license applicants to fund their participation. The Commission does not have authority to directly fund state agencies. Licensee funding of Federal and State agencies is governed by FPA section 10(e)(1), which requires the Commission to collect in annual charges from licensees the Commission's administrative costs and * * * any reasonable and necessary costs incurred by Federal and State fish and wildlife agencies and other natural and cultural resource agencies in connection with studies or other reviews carried out by such agencies for purposes of administering their responsibilities under this part * * *.

128

Washington, Oregon, Michigan DNR. California recommends that the Commission reimburse intervenors for attorneys' fees and travel expenses.

101. This clause was added by section 1701(a) of the National Energy Policy Act of 1992 (EPAct).

129

Section 1701(a)(2) of EPAct also added the following proviso:

129

Pub. L. 102-486, 106 Stat. 2776-3133 (Oct. 24, 1992).

Provided, That, subject to annual appropriations Acts, the portion of such annual charges imposed by the Commission under this subsection to cover the reasonable and necessary costs of such agencies shall be available to such agencies (in addition to other funds appropriated for such purposes) solely for carrying out such reviews and shall remain available until expended;

102. The Commission has construed this provision to require an annual appropriation for this purpose by

Congress in the budgets of the applicable agencies or the Commission.

130

Congress has not made such appropriations for the states.

131

a. Timing of Water Quality Certification Application

130

See

Testimony of Commission Chair Elizabeth Moler before the Subcommittee on Energy and Water Development of the House Committee on Appropriations (April 21, 1993); Letter from Chair Elizabeth Moler to Hon. John Dingell of August 2, 1994.

Certain Federal agencies have for a number of years submitted “reasonable and necessary costs” to the Commission for inclusion in annual charges. Some licensees have challenged the eligibility of these costs for recovery in annual charges and the Commission's policies concerning the evidentiary showing necessary for the costs to be recovered. These matters are currently in litigation.

City of Tacoma,

et al.

FERC,

DC Cir. 01-1375 (filed August 28, 2001).

131

Although the Commission's existing authority in this regard is constrained, we are well aware of the funding challenges faced by many states and are interested in pursuing with them in other contexts how the Commission might be able to assist them in meeting this challenge.

103. Some commenters suggest that the timing of the water quality certification application should be governed by events other than the filing of the license application. Although the specific time frames that they recommend for filing are divergent, the common theme appears to be that the water quality certification application should be filed when the record with respect to water quality issues is complete.

132

California recommends that the certification application be filed after the Commission's draft NEPA document is issued. New York Rivers and Oregon suggest that regardless of when the certification application is filed, the Commission should not begin counting the one-year period for state action until the state deems the application to be complete.

133

132

NHA, Idaho Power, NYSDEC, SCE (when the REA notice is issued); CDWR (one year prior to scheduled license issuance); HRC, NCWRC (following issuance of a draft or final NEPA document).

133

NYRU, Oregon.

104. The current rule requiring a license applicant to apply for water quality certification by the time the license application is filed rests on the assumption that water quality data issues will have been resolved during pre-filing consultation. The integrated licensing process we are proposing provides greater opportunity for that to occur. The applicant and water quality certification agencies will know well before the application is filed what related data the Commission will require to be filed with it. Thus, states should be in a position to inform license applicants if additional information will be required by the state for water quality certification purposes before the application is filed, and applicants should be prepared to begin obtaining any such information and assembling a water quality certification application before the license application is filed.

105. For those applications developed using the traditional process, we propose to modify the rules to require the applicant to show that it has applied for, received, or received waiver of water quality certification no later than the date for responses to the Commission's REA notice. The later date may be appropriate for the traditional process because there is no Commission-approved pre-filing study plan, and therefore less reason to assume that water quality information and study issues will have been resolved when the application is filed. Similar considerations may apply to the ALP, where the parties have much flexibility with respect to the timing of the development of the record. On the other hand, and as discussed below, we are proposing to incorporate full public participation and mandatory, binding dispute resolution into the traditional process, which should result in pre-filing resolution of water quality data issues far more often than is currently the case. The Commission therefore requests comments on whether the deadline date for filing the water quality certification application should remain when the license application is filed for both the traditional process and ALP.

3. Consultation With Indian Tribes

106. The September 12, 2002 Notice asked how a new licensing process can better accommodate the authorities, roles, and concerns of Indian tribes. The principal concerns expressed by tribes are that tribal sovereignty and authorities need to be recognized in the process, that the Commission have government-to-government relations with the tribes, and that the tribes be consulted and their issues identified very early in the process.

134

Menominee, GLIFWC, CRITFC, Salish-Kootenai, St. Regis Mohawks, PRT, HETF; CTUIR; St. Regis Mohawks, NF Rancheria, Catawba, APT, KT, Nez Perce.

107. A few tribes suggest that the existence of a government-to-government relationship means that only the Commission should consult with the tribes, and that the tribes should not have to deal directly with license applicants.

135

Most tribes, however, recognize the crucial role of the license applicant in consultation and development of studies and the license application, and accordingly offer recommendations intended to improve coordination and development of information with the applicant as well as the Commission. A few licensees suggest that if consultations between the tribes and license applicants become unproductive, or at the tribe's request, all consultation with the tribe should be through the Commission.

136

135

Choctaw, PRT, Shoshone.

136

PacifiCorp, NHA.

108. Several tribes state that there is a lack of understanding by the Commission of its roles and responsibilities as a trustee for tribes, and of individual tribal concerns, and a lack of understanding by tribes of the Commission's processes. They also state that our regulations are not clear with respect to the rights, roles, and responsibilities of Indian tribes.

137

Several suggest that the Commission establish either an office of tribal affairs or otherwise dedicate a specific person or persons as a tribal liaison.

138

137

E.g.

, Nez Perce.

138

CRITFC, Salish-Kootenai, NF Rancheria, Menominee, KT, GLIFWC, BRB-LST, Quinault, CTUIR, Shoshone.

109. The relationship between the United States and Indian tribes is defined by treaties, statutes, and judicial decisions. Indian tribes have various sovereign authorities, including the power to make and enforce laws, administer justice, and manage and control their lands and resources. Through several Executive Orders and a Presidential Memorandum,

139

departments and agencies of the Executive Branch have been directed to consult with Federally recognized Indian tribes in a manner that recognizes the government-to-government relationship between these agencies and tribes. In essence, this means that consultation should involve direct contact between agencies and tribes, in a manner that recognizes the status of the tribes as governmental sovereigns.

139

Executive Order 13175, Consultation and Coordination with Indian Tribal Governments (issued November 6, 2000); Executive Order 13084, Consultation and Coordination with Indian Tribal Governments (issued May 14, 1998); Presidential Memorandum, Government-to-Government Relations with Native American Tribal Governments (issued April 29, 1994), reprinted at 59 Fed. Reg. 22,951; Executive Order 12875, Enhancing the Intergovernmental Partnership (issued October 26, 1993).

110. As an independent regulatory agency, the Commission functions as a neutral, quasi-judicial body, rendering decisions on license applications filed with it, and resolving issues among parties appearing before it, including Indian tribes. Therefore, the Commission's rules and the nature of its licensing process place some limitations on the nature and type of consultation

that the Commission may engage in with any party in a contested case.

111. The Commission believes that the licensing process will benefit by more direct and substantial consultation between the Commission staff and Indian tribes. Because of the unique status of Indian tribes in relation to the Federal government, it may be beneficial to increase direct communications with tribal representatives in appropriate cases. The type and manner of consultation with Indian tribes should fit the circumstances. Different issues and stages of a proceeding may call for different approaches, and there are some limitations that must be observed. However, there are a number of steps that the Commission staff can take to improve consultation with Indian tribes on matters affecting their interests in hydroelectric licensing.

112. For example, it may be mutually beneficial for the staff and Indian tribes to engage in some high-level meetings to discuss general matters of importance, rather than issues involved in specific licensing proceedings. These could be arranged for particular tribes, regions, or river basins, if appropriate.

113. There are also opportunities for greater involvement with Indian tribes before a licensing proceeding has begun. Indian tribes may be reluctant to consult with the applicant, preferring to meet directly with the Commission staff. In these cases, the staff should consider some means of direct communication with the tribe, at an appropriate level, to explain the consultation process and the importance of tribal participation, and to learn more about the tribe's culture. Because it would occur before the proceeding commences, the Commission's rules regarding off-the-record communications would not apply. Our proposal to establish a tribal liaison, discussed below, responds to this concern.

114. Once the licensing proceeding has begun, the Commission's rules prohibiting off-the-record communications must be observed. These rules apply in any case in which an intervenor disputes a material issue, and they generally prohibit off-the-record communications relevant to the merits of a proceeding between Commission employees involved in the decisional process and interested persons outside the agency. Thus, they would prevent Commissioners or Commission staff from consulting privately in a contested proceeding with representatives of any party to the proceeding, whether on a government-to-government basis or in any other capacity, to discuss matters relevant to the merits of the proceeding.

115. However, under special exemptions provided in the rules, communications concerning the staff's preparation of environmental documents are permitted, as are communications with tribal and other governmental representatives if the tribe or government agency is not a party to the proceeding. In each instance, the staff must promptly disclose the substance of the communication and place it in the record for the proceeding. Using these guidelines, Commission staff can work to ensure that consultation with Indian tribes is both meaningful and appropriate to the circumstances of particular cases. For example, staff might consider holding a high-level “kick-off” meeting or invitation to participate, or a separate scoping meeting with tribal representatives.

116. As part of the licensing process, the Commission must also comply with section 106 of the NHPA. Section 106 requires the Commission to take into account the effect of its actions on historic properties, and to afford the Advisory Council on Historic Preservation (ACHP) a reasonable opportunity to comment. The NHPA expressly provides that traditional cultural properties that are of religious or cultural significance to Indian tribes can be considered historic properties. It also requires the Commission to consult with representatives of Federally recognized Indian tribes that attach religious or cultural significance to those properties, if they may be affected by the licensing action. The Council's regulations provide that this consultation “should be conducted in a sensitive manner respectful of tribal sovereignty,” and “must recognize the government-to-government relationship between the Federal government and Indian tribes.”

140

If direct communication between Commission and tribal representatives occurs as part of the Section 106 process, it must be conducted in compliance with the Commission's rules regarding off-the-record communications.

140

36 CFR 800.2(c)(2)(ii)(B) and (C).

117. A few tribes recommend that consultation be limited to Federally recognized tribes.

141

The Commission is sensitive to the fact that Federal recognition establishes certain rights that are not enjoyed by non-recognized tribes, and that there may be competing interests at stake. For instance, some Federally recognized tribes have authority to issue water quality certification under section 401 of the Clean Water Act with respect to actions that require a Federal license and are located on reservation lands. Consultation under section 106 of the NHPA differs, depending on the tribe's status.

142

The Council's regulations concerning government-to-government consultation apply only to Federally recognized tribes. However, they also provide for consultation with non-Federally recognized tribes as consulting parties that have an interest in the proposed licensing action.

143

If a Federally recognized tribe has an approved Tribal Historic Preservation Officer (THPO), the Commission is required to consult with the THPO instead of the SHPO for undertakings that affect historic properties on tribal lands. We intend for the licensing process to be conducted in a manner consistent with the proper exercise of such rights, and that tribes be consulted at the earliest practicable opportunity. We believe, however, that members of unrecognized tribes can have Native American cultural resources that should also be respected by the Commission. We will therefore direct our staff to consult with non-recognized tribes that choose to participate in license proceedings.

141

Choctaw, Catwaba.

142

As used in the NHPA and the Council's regulations, the term, “Indian tribe” refers to Federally recognized tribes; thus, only a Federally recognized tribe has the right to participate in Section 106 consultation. See

http://www.achp.gov/regs_tribes.htm.

143

36 CFR 800.2(C)(5) and 800.3(f).

118. The tribes and other commenters made many suggestions intended to enhance early consultation. These include: Commission contact with tribes before the due date for an existing licensee's NOI to better understand tribal issues and to ensure that the tribes are fully aware of the licensing process;

144

Commission and tribe-only meetings to ensure confidential treatment of cultural resources and for NEPA scoping;

145

development with each tribe of a plan for consultation with that tribe;

146

more timely notice of deadlines and flexible deadlines;

147

facilitation services for consultation between tribes and the Commission or tribes and license applicants;

148

and that comprehensive information on future license expirations and the state of any existing consultations be posted

on the Commission's website or made available on CD ROM.

149

144

PacifiCorp, PRT.

145

NF Rancheria. Several tribes broadly stated their concern that the licensing process protect the confidentiality of cultural resources;

e.g.

, Choctaw, PRT, Shoshone, NF Rancheria.

146

SCE, Idaho Power, EEI, NHA, NEU, Nez Perce.

147

CRITFC, St. Regis Mohawks.

148

Idaho Power, PRT, Nez Perce.

149

NF Rancheria, PRT.

119. Our proposed rule and related administrative actions should substantially address these concerns. First, we are establishing the position of Tribal Liaison. The Tribal Liaison will provide a single, dedicated point of contact and a resource to which Native Americans can go regardless of the proceeding or issue. Also, as discussed above, the Commission will be contacting Indian tribes likely to be interested in a relicense proceeding in a time frame consistent with the advance notification to initiate discussions concerning consultation procedures.

120. Under section 304 of the NHPA, the Commission is required to withhold from public disclosure information about the location, character, or ownership of a historic property when disclosure may cause a significant invasion of privacy, risk harm to the property, or impede the use of a traditional religious site by practitioners. The Council's regulations reflect this requirement.

150

The Commission also has regulations and practices in place that address the tribes' confidentiality concerns. For instance, all applicants must delete from any information made available to the public specific site or property locations if their disclosure would create a risk of harm, theft, or destruction of archeological or Native American cultural resources.

151

In addition, the regulations provide specific procedures to follow when requesting privileged treatment of documents that are either filed with the Commission or submitted to the Commission staff.

152

150

See

36 CFR 800.6(a)(5) and 800.11(c).

151

18 CFR 4.32(b)(3)(ii) and 16.7(d)(5)(ii).

152

18 CFR 388.112.

121. The Commission agrees that Commission-sponsored facilitation services, which some non-tribal commenters also recommend, may be useful in certain proceedings, as discussed in the preceding section. The most appropriate facilitation or dispute resolution techniques are a matter best considered in the context of specific proceedings.

122. Some tribes suggest that, because original construction of dams caused impacts to tribal resources for which there was no compensation under an original license or other pre-license construction authorization, the licensing process should provide a means to identify and mitigate for those past impacts.

153

The Commission has no authority under the FPA to require restitution or to assess damages. Moreover, the FPA does not mandate that all past environmental damage caused by a project be “mitigated” in a relicensing proceeding. Our responsibility at relicensing is to determine whether, and under what conditions, to issue a new license for a hydroelectric project. As previously stated, we use existing environmental conditions as a baseline for our analysis, and do not attempt to re-create a hypothetical pre-project environment. However, past environmental effects are relevant in assessing cumulative effects and in determining what measures are appropriate to protect, mitigate, and enhance natural resources for the new license term. This approach is reasonable, and complies with both NEPA and the FPA.

154

153

Shoshone, NW Indians.

154

See

Section III.D.1.c

123. Some tribes state that the geographic scope of the Commission's public interest analysis with respect to tribal cultural and other resources should not be limited to resources located within the project boundary, but should extend to project impacts wherever they may occur.

155

The Commission agrees that there may be instances where project impacts occur outside of an existing or proposed project boundary, and that appropriate mitigation for these impacts, as well as possible changes to the project boundary, should be considered in the licensing process. For historic properties, this is taken into account in defining the project's “area of potential effect” during the consultation process under section 106 of the NHPA. Such matters are best dealt with in the context of specific proceedings.

155

CTUIR, Menominee, Shoshone.

124. Some commenters indicate that project-related social and economic issues raised by tribes should be addressed in the licensing process and should be given the same weight as developmental values.

156

We agree that social and economic impacts of proposed projects on tribal resources, positive and negative, need to be addressed through consultation pursuant to our trust responsibility, the NHPA section 106 process, and in the Commission's NEPA and decisional documents. The enhanced consultation measures provided by the proposed integrated process generally, and for Indian tribes in particular, should ensure that such issues are fully considered.

156

Shoshone, CTUIR.

125. A few tribes suggest that tribal water rights should be specifically addressed in the licensing process.

157

Issues concerning tribal water rights have rarely been raised in licensing proceedings, mainly because the Commission does not adjudicate water rights. The Commission's practice, when such water rights are in dispute, is that if it issues the license, it makes the license subject to a reservation of authority to reopen the license to make any changes that may be required once the water rights issues are resolved.

158

This safeguard has worked in the past and should continue to adequately protect tribal water rights.

159

157

CTUIR, CRITFC.

158

See, e.g.

, Idaho Water Resources Board, 84 FERC ¶ 61,146 (1998) (reserving authority to modify the license to reflect the outcome of pending state water right proceeding in which an Indian Tribe claimed an implied Federal reserved water right). Similarly OWRB states that license conditions should be developed consistent with interstate water compacts enacted as Federal law. It is not the Commission's intention to interfere in any way with such compacts, and we are not aware of any instance where there has been an inconsistency.

159

See Covelo Indian Community

FERC

, 895 F.2d 581, 586 (9th Cir. 1990).

126. Some commenters state that the Commission's guidelines for the development of Historic Properties Management Plans (HPMPs) are confusing with regard to how Section 106 is fulfilled and the degree of applicant responsibility. They request clarification of the distinction between government-to-government relations and consultation.

160

The Commission and the Council issued these guidelines jointly in May 2002.

161

They are intended to assist license applicants in preparing their HPMPs, which the Commission includes as a license condition, and provide for the licensee's management of historic properties during the license term. These plans, while related to historic preservation, are not necessarily part of the Section 106 process. Rather, a programmatic agreement or memorandum of agreement entered into as part of the Section 106 process will usually include provisions requiring the applicant to prepare and implement an HPMP. The HPMP is often prepared in consultation with the SHPO, THPO, or Indian tribe, and may include provisions for consultation with the tribes during the term of the license. The Commission's role is to review and approve the HPMP. Thus, any consultation with tribes that may occur during the preparation or implementation of the HPMP ordinarily

would be with the applicant or licensee, rather than with the Commission. In some cases, consultation pursuant to Section 106 may be combined with consultation concerning the preparation of an HPMP. As discussed above, the Commission will attempt to be responsive to tribes' requests for direct communication, if this can be accomplished in a manner consistent with the Commission's rules governing off-the-record communications.

160

SCE, NHA. SCE states that Section 106 consultation should begin when the applicant files a draft HPMP.

161

Guidelines for the Development of Historic Resources Management Plans for FERC Hydroelectric Projects (May 2002),

http://www.ferc.gov/hydro/docs/hpmp/pdf.

127. Some tribes state that they should be consulted on the identity of, or have the right to approve, all persons performing tribal cultural resources analyses pursuant to section 106 of the NHPA. Tribes may also have professional expertise in this area, and some indicate that qualified tribal members should be hired for such studies whenever possible.

162

We agree that it is appropriate for license applicants to consult with tribes concerning the identity and qualifications of persons conducting studies with respect to a tribe's cultural resources. However, license applicants need to have flexibility in the hiring of consultants. We do not believe that applicants should be required to obtain a tribe's approval before engaging a consultant, or to engage a consultant based on tribal membership. It would however appear to be in a license applicant's best interests to consult affected tribes concerning these matters. We note that, in many proceedings, licensees have reached agreements with affected tribes in which the tribes have a voice in the selection of consultants.

163

162

Shoshone, Kalispel.

163

Examples include relicense proceedings for the Condit Project No. 2342, Box Canyon Project No. 2040, Lake Chelan Project No. 637, Rocky Reach Project No. 2145, Klamath River Project No. 2082, and Baker River Project No. 2150.

4. Environmental Document Preparation

a. Cooperating Agencies Policy

128. The Commission's policy has for a number of years been that an agency that has served as a cooperating agency in a proceeding may not thereafter intervene in that proceeding. The reason for this policy is that staff of a cooperating agency is treated in some respects as though it were Commission staff, including having conversations and exchanging information that may not be put in the record, just as Commission staff shares predecisional analyses and information internally. To allow a cooperating agency to intervene in a proceeding would make it a party privy to decisional information not available to other parties, in violation of our rule prohibiting

ex parte

communications.

164

See

Rainsong Company, 79 FERC ¶ 61,338, at p. 62,457, n.18 (1997); Order No. 596, Regulations for the Licensing of Hydroelectric Projects, FERC Statutes and Regulations ¶ 31,057 at p. 30,644 (1997). When the Commission modified its

ex parte

communication rules in 1999, it noted, but made no change to, this policy.

See

Order No. 607-A, FERC Statutes and Regulations ¶ 31,112 n. 50 and p. 31,931 n. 41.

See also

Arizona Public Service Co., 94 FERC ¶ 61,076 (2001) (denying request for late intervention by the Forest Service and rejecting arguments that the new

ex parte

rule does permit a cooperating agency to also be an intervenor).

129. Other Federal agencies, environmental groups, and some states urge us to revisit this policy.

165

They contend that the policy is inefficient because it discourages other agencies from becoming cooperating agencies, which forces the preparation of multiple NEPA documents. Interior suggests that if the Commission were to issue non-decisional NEPA documents, that is, documents which are purely analytical and make no substantive recommendations, there should be no concern about off-the-record communications regarding the merits of the proceeding.

166

165

HRC, SCE, NYSDEC, WDOE, DOI. NRG also supports this proposal, but would put limits on the bases upon which a cooperating agency that subsequently became an intervenor could seek rehearing or judicial review, and would include disclosure requirements with respect to discussions concerning license articles or terms and conditions, and “any communication necessary for the completeness of the record.”

See

Attachment B to September 12, 2002 Notice, p. 10.

166

This suggestion is inconsistent with our

ex parte

regulations, which define “relevant to the merits” as “capable of affecting the outcome of a proceeding, or of influencing a decision, or providing an opportunity to influence a decision, on any issue in the proceeding,” subject to certain narrowly drawn exceptions not applicable here.

See

18 CFR 385.2201(b)(c)(5).

130. EEI and Idaho Power assert however that reversing the policy would violate the Administrative Procedure Act (APA).

167

They state that APA section 557(d)(1) prohibits in an adjudicatory proceeding any “interested person” from outside the agency from making any “

ex parte

communication relevant to the merits of the proceeding” to a decisional employee.

168

This is correct, but the APA defines a “person” as “a public or private organization

other than an agency.

”

169

(emphasis added), and defines an agency, with certain exceptions not relevant here, as “each authority of the Government of the United States.”

170

Thus, the APA does not prohibit

ex parte

communications between Federal agencies.

167

5 U.S.C. 551-559.

168

5 U.S.C. 557(d)(1).

169

5 U.S.C. 551(2).

170

5 U.S.C. 551(1).

131. Our policies concerning

ex parte

communications exceed the requirements of the APA in this regard, because the Commission is concerned that its procedures be fundamentally fair in both appearance and reality. On this score, EEI and Idaho Power cite Order No. 607, where the policy against cooperating agency intervenors articulated above was codified, and

Arizona Public Service

, where it was affirmed. They assert that nothing has changed in this regard, and add that reversing the policy would afford a dissatisfied cooperating agency a “second bite at the apple” by permitting it to seek rehearing and judicial review of Commission orders.

171

EEI intimates that permitting cooperating agency relationships would enable other Federal agencies to prevent or hinder the issuance of economically vital gas pipeline certificates and unduly influence the Commission's public interest balancing under FPA section 10(a)(1).

172

Finally, they argue that NRG's proposal would be impractical because it would require all communications to and from a cooperating agency to be placed on the record, which would be administratively unworkable and inimical to the free exchange of ideas essential to the cooperating agency relationship.

171

EEI, Idaho Power.

172

See

EEI, pp. 45-46.

132. We conclude that reversal of our policy (and the concomitant revision of our

ex parte

rules) as it applies to Federal agencies would increase the likelihood that Federal agencies with mandatory conditioning authority would be willing to act as cooperating agencies, which would better enable these agencies and the Commission to coordinate the exercise of their separate responsibilities. This should also better enable cooperating Federal agencies with conditioning authority to develop a complete record, reduce duplication of effort among cooperating agencies, and may help to focus discussion of scientific and policy issues. To be weighed against these benefits is the potential for prejudice to other parties that would not have access to some information and decisional communications between the Commission and the cooperating agency.

133. On balance, we are persuaded that the potential benefits are significant and the likelihood of prejudice to other parties is minimal if an appropriate disclosure requirement is established. The Commission and other Federal agencies with mandatory conditioning

authority must support their conditions with reasoned decisions based on facts in the public record. A cooperating agency that supplies the Commission with study results or other information presumably does so because it believes the material adds value to the decisional record and deliberations. No cooperating agency should therefore object to a requirement that all study results and other information provided to the Commission also be served on parties to the proceeding. Deliberative communications however involve the interpretation and application of study results and other information. It is appropriate for such communications among cooperating agencies to remain off-the-record in order to foster the free and timely exchange of ideas. As long as the analyses upon which the Commission and a cooperating agency ultimately rely are set forth in their respective NEPA or decisional documents, they will be subject to challenge in comments on draft NEPA documents, on rehearing of decisional orders, and on judicial review. Under these circumstances, no other party should be prejudiced.

134. We therefore propose to modify our policy by permitting Federal cooperating agencies to intervene, subject to a requirement that all studies and other information provided by a cooperating agency to the Commission be promptly submitted to the Secretary and placed in the decisional record. Decisional communications such as working drafts of NEPA documents and associated communications would continue to be exempt from disclosure. Accordingly, we also propose to modify the text of the ex parte regulations to this effect.

173

The exception to the APA's prohibition on ex parte communications for Federal agency communications does not extend to states or Indian tribes. Our policy will therefore remain in place with respect to these entities.

173

Proposed new 18 CFR 385.2201(g)(2).

b. NRG Cooperating Agency Proposal

135. NRG proposes that the Commission and Federal or state resource agencies that regularly participate in the Commission's licensing processes develop a general Memorandum of Understanding (MOU) that would establish a procedural framework in which the resource agencies would be cooperating agencies in the preparation of a non-decisional NEPA document; that is, one which would analyze resource impacts of the applicant's proposal and reasonable alternatives, but would not include any recommendations on license articles or terms and conditions. The MOU would cover procedures for cooperation, dispute resolution, and decision-making. Each MOU would be supplemented by a project-specific Memorandum of Agreement.

174

See

NRG proposal summary, September 12, 2002 Notice, Attachment B, p. 9. NHA supports the NRG proposal in this regard. CRITFC and Nez Perce support joint-agency NEPA documents in concept, but are concerned that the NRG's proposal might exclude the tribes, or somehow impose inappropriate limitations on appeal rights.

136. The Commission supports in general the use of cooperating agency NEPA documents as a means of increasing efficiency. We are not however prepared to structure the integrated licensing process proposal based on the assumption that there will be a cooperating agency relationship in all or most cases. Many considerations go into an agency's decision to seek or not to seek such status. These include staff availability, the nature and extent of the agency's responsibilities with respect to licensing, and the policies and practices of the potential cooperating agencies.

175

Moreover, where the Commission and resource agencies have found it to their mutual benefit to be cooperating agencies, project-specific agreements have generally been timely concluded so that the processing milestones were not prejudiced. Nevertheless, the Commission acknowledges that there may be benefits to having general MOUs with resource agencies to address coordination issues that cut across projects, and we will continue to explore that approach outside the context of this rulemaking.

175

Michigan DNR and WDOE object to the inclusion of state agencies as cooperating agencies, on the ground that would subject the state agency to schedules established by the Commission, which they aver would conflict with other Federal or state laws and regulations.

c. Non-Decisional NEPA Documents

137. Under NRG's proposal for non-decisional NEPA documents, the Commission and cooperating agencies would separately publish records of decision explaining the basis for their respective decisions, based on the record in the joint NEPA document and other relevant materials in their public record. NRG believes there would be little controversy with regard to the scientific analyses, which would eliminate the need for the Commission and cooperating agencies to conduct separate NEPA reviews. It suggests that this might reduce the average time of license proceedings.

138. NRG's proposal enjoys some support from across the spectrum of interests.

176

HRC states that having a non-decisional NEPA document will help to ensure transparent decision-making, and that non-decisional documents are needed to ensure that license articles and terms and conditions are not negotiated between agencies without public input. It is not however universally embraced. EPA, citing the regulations of the Council on Environmental Quality,

177

and NMFS support a decisional NEPA document with a Commission-preferred alternative. ADK suggests that using two documents for what is now encompassed in one document might lead to inefficient sequential processing.

176

HRC, AmRivers, SCE, CRITFC.

177

See

40 CFR 1500,

et seq.

139. The Commission does not propose to adopt a practice of issuing non-decisional NEPA documents as proposed by NRG. Although we propose to change our existing policy with respect to intervenor status for cooperating agencies, there is no assurance that cooperating agency agreements will become the norm, as discussed above. We are moreover less optimistic than NRG concerning the likelihood of conflicts over scientific analyses. The ubiquity of study disputes and conflicts over interpretation of study results, quite apart from decisions over how they might translate into PM&E measures, leads us to believe that the resource impact analysis sections of NEPA documents will continue to be controversial.

140. The Commission does however propose to modify the structure of its NEPA documents to better separate resource impact analysis from decisional analysis. In the future, all of our NEPA documents will confine decisional analyses pursuant to FPA sections 10(a) and 10(j) to clearly delineated sections at the close of the document. In this way, any other Federal or state agency or Tribe with mandatory conditioning authority will, whether or not it is a cooperating agency, be able to use those parts of the resource impact analysis not in dispute in whatever documents it prepares pursuant to its legislative mandates.

d. Draft License Articles

141. Federal agencies and some commenters recommend that the Commission issue draft license articles for comment in connection with draft NEPA documents. They believe this will result in better license orders and license articles, and that issuance of draft articles would help to foster settlement agreements.

178

HRC, Menominee, BRB-LST.

142. The Commission has previously issued draft license articles only in the extraordinary circumstance of a lengthy proceeding in which the Commission's jurisdiction was at issue and where it was concluded that issuance of draft license articles might provide assurance to the operator of existing, previously unlicensed facilities that a Commission license would not undermine its ability to operate the project in a manner consistent with certain state laws affecting project operations.

179

See

Hudson River-Black River Regulating District, Project No. 2318, letter dated February 8, 2002.

143. We propose to attach to the draft NEPA document for comment the preliminary terms and conditions of any Federal or state agency with mandatory conditioning authority, plus additional draft articles proposed by the Commission to be required pursuant to FPA section 10(a)(1).

180

This will provide the parties with more specific information concerning the staff's licensing recommendations. Where no draft NEPA document is issued, we would include draft license articles and preliminary terms and conditions with the environmental assessment. Parties would have an opportunity to file comments before the Commission issued an order acting on the license application. We also propose to begin this practice for applications developed under the traditional process and ALP.

181

180

This would encompass conditions based on 10(j) recommendations. We do not propose to attach the standard L-Form license articles (

See

54 FPC 1799-1928 (1975)) to draft or final NEPA documents, as we have consistently rejected requests to modify these articles, which are intentionally broad, in the context of specific license proceedings.

181

NYSDEC states that project operational effects cannot be fully understood before a new project is built, so license articles should be included to determine what a new project's actual impacts are, and to reserve authority to modify the project as needed to meet resource goals. Licenses very often include monitoring requirements and every license includes a standard form article reserving our authority to modify the license to respond to fish and wildlife concerns. Specific post-licensing articles are, of course, a matter best determined in the context of project-specific proceedings.

e. Endangered Species Act Consultation

144. Currently, neither Interior and Commerce rules nor Commission rules specifically address how the ESA section 7 consultation process is to be integrated into the Commission's licensing process.

182

NHA and others state that ESA consultation is often deferred until the end of the licensing process, causing delay and disruption. The ITF prepared a report on this subject

183

containing recommendations for integrating consultation in the context of the traditional process, but which also includes an outline of a process beginning at the time the NOI is filed.

184

These commenters state that the ITF recommendations have met with little success, and suggest that it is because the ITF recommendations are unenforceable. WPPD recommends that the Commission, Interior, and Commerce cooperate in developing joint rules to integrate ESA Section 7 consultation with the licensing process. Interior and NMFS recommend that the integrated process regulations identify the key steps and requirements for completing ESA consultation.

182

The joint Interior and Commerce regulations implementing the ESA are found at 50 CFR part 402.

183

Interagency Task Force Report on Improving Coordination of ESA Secton 7 with the FERC Licensing Process. http://www.ferc.gov/hydro/docs/interagency.htm.

184

ITF ESA Report, Figure 1.

145. The proposed integrated licensing process encourages early ESA consultation, and is consistent with the ITF Report on section 7 consultation. First, it encourages an applicant to request designation as the Commission's non-Federal representative at the time it files its NOI and distributes its Pre-Application Document.

185

The proposed process also provides a vehicle for all parties to make their issues and information needs known from the beginning. This, in conjunction early development of a process plan for coordinating regulatory processes, a Commission-approved study plan, binding dispute resolution process, periodic status reports, a high standard for requesting additional data and studies following an initial status report on studies and information gathering, a recommendation to include a draft Biological Assessment (BA) in the draft license application, and requirement for applicants that are designated non-Federal representatives to include a draft BA in their license application, should help to ensure that ESA consultation proceeds on the same track as the rest of the process. We acknowledge however that timely completion of ESA consultation has been an ongoing issue, particularly concerning projects in the Pacific Northwest, and we are open to working with the Departments of Interior and Commerce to develop additional means of effecting improvements in this area.

185

Proposed 18 CFR 5.1.

f. Fish and Wildlife Agency Recommendations

146. The proposed integrated process rules incorporate the Commission's existing practices with respect to consideration of fish and wildlife agency recommendations made pursuant to the Fish and Wildlife Coordination Act and FPA section 10(j), with minor modifications to the timing of any meetings that may occur in order to ensure that the 10(j) process is fully compatible with the proposed application processing milestones.

186

The Commission also proposes to make non-substantive modifications to the existing 10(j) process rule at 18 CFR 4.34(e), so that the language of that section will better track the statutory provisions.

g. National Historic Preservation Act Consultation

147. Consultation pursuant to section 106 of the National Historic Preservation Act has not been a significant source of delay in licensing. The few parties who addressed section 106 recommend that such consultation begin early.

187

We agree. The proposed integrated process includes SHPOs among the entities to be consulted and encourages applicants to request to initiate section 106 consultation when the NOI is filed.

188

187

ACHP, Menominee.

188

Proposed 18 CFR 5.1.

5. Public Participation

148. The traditional process regulations concerning prefiling consultation focus on the applicant's interactions with agencies and Indian tribes. Potential license applicants are required to conduct only one public meeting prior to filing the license application,

189

and the draft license application is required to be served only on agencies and tribes.

190

Thus, unless an applicant voluntarily consults with the public, the traditional process often causes identification of issues and study requests from the public to be delayed until after the license application is filed. Commenters from across the spectrum of interests agree that identifying NGO issues and study requests as early as possible is important to alleviating this source of delay.

191

189

18 CFR 4.38(b)(3); 16.8(b)(3).

190

18 CFR 4.38(c)(4); 16.8(c)(4).

191

EEI, PG&E, NRG, SCE, NHA, Michigan DNR, HRC, NYSDEC, Idaho Power, NF Rancheria, Caddo, ADK, AmRivers, AMC, SCL, C-WRC, CDWR, Interior, PG&E, HETF, PCWA, APT, DM&GLH, Skancke, NYRU, Oregon, Wausau, Salish-Kootenai, HLRTC, PREPA, Kleinschmidt, Xcel, California, Michigan DNR, WPPD, RAW, GLIFWC, Virginia, NE FLOW, Wehnes, RAW, AmRivers, CRWC, WDOE.

149. We agree that improving public participation in pre-filing consultation is essential to the success of an integrated licensing process, and believe that the traditional process regulations should also be revised in this regard. The specific provisions for enhancing

public participation are discussed below.

192

See

Section III.F.1.

6. Processing Schedules and Deadlines

150. Many commenters express the view that timeliness would be improved if the Commission established schedules and deadlines, including for itself, and ensured that the deadlines are firm to the extent possible.

193

Beyond that general principle, there is little agreement.

193

Ameren/UE, NHA, HLRTC, Ameren/UE, APT, SCE, AmRivers, HRC, NMFS, RAW, NRG, California, Wisconsin DNR, Interior, PG&E, NCWRC, Southern, Duke, C-WRC, WPPD, Wyoming.

151. Licensees fault resource agencies for most delays and favor strict application of deadlines to the actions required of agencies, tribes, and the public, particularly the filing of recommendations and Federal agency mandatory conditions, on the basis that strict deadlines provide an incentive to timely participation.

194

Resource agency, Tribal, and NGO commenters identify tardy or incomplete filings (particularly studies) by licensees as the principal reason firm schedules and deadlines are needed.

195

194

NHA, HLRTC, Ameren/UE, APT, SCE, Southern, Xcel. SCE states that the Commission should decline to accept late-filed study requests and establish an “extraordinary conditions” test for any study requests following the first field season of studies as incentives to timely agency action.

195

California, Oregon, Michigan DNR, HRC, NMFS, NYSDEC, CRITFC.

152. Commenters from all camps favor the establishment of schedules and deadlines, with strict compliance required by others, but also agree that “default” or “generic” time frames need to be flexible to accommodate case-specific complicating factors and settlement agreements. There is also general agreement that the time frames in the IHC and NRG proposals, including the time period from NOI to filing of the license application, are too short, except for very simple cases.

196

EEI, PG&E, HETF, HRC, NHA, EEI, SCE, Snohomish, Xcel, WPPD, California, Oregon, Michigan DNR, NYSDEC, CRITFC, WGFD, Catawba, Choctaw, GLIFWC, BRB-LST, Menominee, KT, Interior. PG&E states that when parties work together to identify issues and study plans, three years is sometimes not enough to go from early issue identification to a filed license application, and that a five year process is realistic only for a simple proceeding.

153. There is broad agreement that improving outcomes is equal in importance to reducing licensing process time and expense, particularly where 30-50 year license terms are involved, and that strict adherence to schedules may compromise the development of study plans and the conduct of studies, hamper public or Tribal participation, and be inconsistent with state water quality certification processes.

197

Various commenters similarly state that it is inappropriate to make assumptions concerning the number of field seasons required to compile data on current conditions or to complete other studies, because the time needed to obtain representative data may be affected by drought, ESA consultation, insufficient years of existing data where anadromous fish with multi-year return cycles are involved, and many other factors.

198

Others suggest that the time frames should be adjusted as necessary to accommodate instances where multi-project or basin-wide environmental analyses are necessary.

199

197

E.g.,

Oregon, HRC, California, NW Indians, Menominee, NHA, Idaho Power.

198

HRC, Wisconsin DNR, AmRivers, AMC, NMFS, NHDES, Menominee, GLIFWC, NMFS, Washington, Xcel.

199

GLIFWC, Interior, NCWRC.

154. Commenters' perceptions of the nature of, and procedures for, study plan development and the conduct of studies also influence their perceptions of timeliness. HRC and RAW, for instance, appear to view these matters as a collaborative endeavor in which consensus is required. A number of agency, tribal, and public commenters similarly advocate that schedules in individual cases should be negotiated by the Commission staff with the stakeholders,

200

or via agreements between the applicant and the parties.

201

200

Ameren/UE, AmRivers, HRC, NMFS, RAW, DM&GLH, SCL, Washington, ADK, Michigan DNR. Some commenters recommend that the rules provide for a “default” time frame that would apply to simple, non-controversial applications that can be adjusted to accommodate water quality certifying agency data requirements or the complications posed by individual cases. HRC, Michigan DNR, Wisconsin DNR, PG&E, Washington.

201

HRC.

155. In this connection, HRC states that NGOs with minimal staff are often trying to keep up with many projects in a region, so predictability of schedules and deadlines is an important tool for them to effectively allocate resources. It adds that the traditional process provides no advance warning of notices calling for comments, recommendations, responses to draft NEPA documents, and the like, which makes their task difficult. Some Indian tribes similarly state that they have very limited resources, and that tribal decisional hierarchies and communications channels may require longer to obtain a decision than in other organizations.

202

Catawba, Choctaw, Menominee.

156. The Commission agrees with the commenters that firm schedules and deadlines are important to keep the licensing process moving, and also that there will be instances where a schedule or deadline will need to be revised. As of July 2002, the Commission's practice has been to publish a licensing schedule with each application tendering notice, and these schedules are updated periodically as required. The integrated process we are proposing also includes time frames for all critical process steps, from filing of the NOI to issuance of a license application, that will form the basis for development of case-specific detailed schedules.

203

Some commenters recommend that time be built into schedules to accommodate intra-agency appeals of Federal or state mandatory terms and conditions. APT, NHA, EEI. Our long-standing practice is to include final conditions in licenses and to reserve authority to modify the license depending if the licensee successfully appeals the conditions.

See e.g.,

Southern California Edison Co., 77 FERC ¶ 61,313 (1996). That policy, which permits the licensee to seek extensions of time to comply with such conditions if the burden of interim compliance would be unduly onerous, recognizes the authority of the conditioning agency while protecting the interests of the licensee during the pendency of the appeal.

157. The elements of the proposed integrated process should make it easier to establish and maintain a timely schedule. Early issue identification and voluntary commencement of information-gathering are fostered by the advance notification of license expiration; Commission contact with potentially affected tribes; existing information, and process options; and the more complete informational requirements of the Pre-Application Document. Pre-filing consultation following the Applicant's NOI will be improved by full Commission staff and public participation; a Commission-approved study plan binding on the applicant which provides for interim review of study results; and a study dispute resolution process for agencies with mandatory conditioning authority. There would moreover be no opportunity after the application is filed for parties to request additional information or studies. Under these conditions, every interested entity has powerful incentives to timely participate.

158. We encourage all parties to consult in a collegial manner on the development of information and study plans (indeed, on all aspects of licensing). We are not however disposed to adopt a process, such as HRC appears to advocate, that relies almost entirely on consensus as the basis for approving a study plan and schedule. That approach would be incompatible with the three to three and one-half year time frame from the NOI to filing of the application, and would be certain to

ensure the filing of many applications requiring significant additional information. An applicant-proposed study plan and schedule, subject to review and comment, and appropriate dispute resolution provisions, is much more likely to ensure timeliness without sacrificing the quality of the record.

7. Settlement Agreements

159. Commenters offered very broad support for the inclusion in our regulations of specific provisions to accommodate settlement agreements, regardless of which licensing process is employed.

204

EEI, SCE, Oregon, Kleinschmidt, NHA, Idaho Power, HRC, Wisconsin DNR, Interior, PG&E, AmRivers, NCWRC, Xcel, NYSDEC, NMFS, CRITFC, ADF&G.

a. Flexibility in Processing Schedules

160. One view shared by nearly all commenters is that the Commission should allow more flexibility in schedules to accommodate settlement discussions. They state that settlement agreements generally best represent the public interest because they are consensus-based, may avoid Federal/state conflicts, can reduce delays and litigation, and result in limited resources being devoted to providing environmental benefits rather than transaction costs. They indicate that the Commission's recent practice of denying requests for temporary suspension of the licensing process pending settlement negotiations is hindering settlement agreements.

205

NHA and Oregon recommend that the licensing process provide for a 12-18 month “time-out” for settlement negotiations, based on the joint request of the parties. California urges that flexibility in this regard is necessary in order to recognize the responsibilities of Federal and state agencies with mandatory conditioning authority.

205

EEI, CRITFC, SCE, Oregon, Kleinschmidt, NHA, Idaho Power, HRC, Wisconsin DNR, Interior, PG&E, AmRivers, NCWRC, Xcel, NMFS, NYRU, NYSDEC, SCL, Idaho Power, CDWR, VANR, Troutman, Menominee, CTUIR, Xcel, Michigan DNR, NCWRC, WPPD, DM&GLH, Domtar, FPL, AMC, AW, California.

161. The Commission strongly favors settlement agreements, which provide the opportunity to eliminate the need for more lengthy proceedings if the parties reach an agreement on the issues that is compatible with the public interest and within our authority to adopt. The integrated licensing process should provide substantial encouragement to settlement agreements by helping to ensure early identification of issues and production of information useful to parties considering whether to engage in settlement negotiations. We do not however see a need for specific provisions in our regulations to provide a “time out” or other flexibility in scheduling to accommodate settlement negotiations. General assertions to the contrary notwithstanding, we see no evidence that suspending Commission actions in the licensing process is more likely to result in a settlement agreement. Rather, our experience indicates that the prospect of near-term Commission action in the form of a draft or final NEPA document, or a license order, is more likely to spur the parties to resolve their differences. We are also concerned that suspending the licensing process to accommodate settlement negotiations may cause parties to view settlement negotiations as a means to obtain an open-ended suspension of the licensing process. We will, however, continue to consider requests for brief suspension of the Commission's processes on a case-by-case basis.

b. Timing and Conduct of Settlement Negotiations

162. HRC recommends that the Commission require the parties to a proceeding to meet at certain critical times in the process to explore interest in and opportunities for settlement. Others oppose this recommendation on the grounds that settlement negotiations require substantial commitments of time and can be costly, and that any such requirement is unnecessary because the parties will know whether and when the effort makes sense in the context of each proceeding.

206

RAW states that settlement discussions should begin before the licensing proceeding begins. NHA suggests that appropriate junctures for such discussions are during formation of the study plan and preparation of a draft license application. NMFS recommends that settlement discussions be barred until all information requests have been satisfied.

206

NHA, PG&E, CDWR, NMFS.

163. We are not inclined to require parties to meet for this purpose, or to predetermine any particular point in the process where settlement should be considered. Settlement agreements have been conducted, and agreements filed, at every step in the licensing process, from the pre-filing consultation stage to after issuance of a license order. The parties themselves are in the best position to determine whether and when it makes sense to consider settlement negotiations. It may however be beneficial to encourage the applicant at the time the draft license application is filed to include with that filing a non-binding statement of whether or not it intends to make an offer to engage in settlement negotiations.

207

Such a provision might encourage all parties to consider whether the proceeding is in a favorable posture with regard to potential settlement negotiations. The Commission requests comments on this matter.

207

Alternatively, an applicant might make such a statement when all major information-gathering and studies are completed.

164. NMFS recommends that we require parties to establish ground rules and a communications protocol before settlement discussions begin. C-WRC similarly suggests that the rules should provide for stakeholder charters to accompany settlement discussions. The Commission agrees in general that settlement discussions should proceed based on mutual understandings concerning the scope of, and procedures for, negotiation. These commenters however offer no reason, and we see none, to limit the flexibility of parties to an individual proceeding with regard to the drafting of agreements, written or oral, in this connection.

165. NHA suggests that the ADR procedures established in Order No. 578

208

may be unduly formal and that the Commission's Dispute Resolution Service (DRS) staff could serve as facilitators rather than mediators.

209

Some commenters state that the Commission could assist settlement negotiations by providing training to stakeholders in interest-based negotiation processes

210

or by providing neutral facilitators or mediators to parties involved in negotiations.

211

The Commission's dispute resolution program encompasses all of these recommendations where circumstances are appropriate. The DRS is designed to encourage the use of ADR, train the Commission staff and other parties in its use, and, where appropriate, provide staff to serve as neutral facilitators of settlement negotiations. Under this program the Commission's administrative law judges have received

training in service as third-party neutrals, and judges have served in that capacity in a number of hydroelectric proceedings. In addition, the Commission has provided various training programs in facilitation, mediation, and dispute resolution to its staff. In just the past few years, over 100 members of the Commission staff have completed training courses in various forms of ADR, and many staff members have put their skills to work in assisting collaborative licensing processes and settlement negotiations as mediators or facilitators.

208

Order No. 578 (1995), 60 FR 19494 (April 19, 1995), FERC Stats. & Regs., Regulations Preambles January 1991-June 1996 ¶ 31,018 (April 12, 1995).

209

In general, a facilitator is a person who works with the group members by providing procedural directions concerning how the group can move efficiently through the problem solving steps of the meeting and arrive at a jointly agreed-upon goal. More concisely stated, a facilitator's efforts are focused on process. A mediator also brings process skills to the group, but focuses in addition on helping the group member reach a mutually acceptable substantive resolution of the issues. This may involve working with the whole group or subsets of the group to explore interests and develop options that address the interests with the aim of reaching settlement.

210

PacifiCorp.

211

SCE, NHA, PG&E, NCWRC, Kleinschmidt, Michigan DNR.

166. Finally, NMFS states that the Commission should establish schedules for acting on settlement agreements. As noted above, we are already providing schedules for license application proceedings.

c. Guidance on the Content of Settlement Agreements

167. Several commenters stated that the Commission's rules should provide guidance concerning the Commission's policies on what kinds of settlement provisions are or are not acceptable,

212

or that the Commission should have a policy of deferring to settlement agreements in the absence of illegality.

213

Specific subjects on which commenters seek guidance include support for adaptive management programs for licenses,

214

mitigation measures in lieu of additional studies,

215

mitigation measures that occur outside of existing project boundaries or are beyond the Commission's authority to require,

216

and confidentiality agreements.

217

212

APT, HRC, Interior, AMC, PG&E, Wisconsin DNR.

213

Washington, Interior, NYSDEC, NMFS. DM&GLH states that when a settlement agreement is accompanied by an applicant-prepared EA (APEA), the Commission should adopt the APEA, rather than prepare a separate NEPA document. While an APEA prepared in connection with a settlement agreement is certain to be helpful to the Commission's analysis, the Commission cannot delegate its NEPA responsibilities to applicants or settling parties.

214

RAW, NYSDEC, Oregon, Michigan DNR.

215

Xcel, Southern, NHA.

216

Oregon, Michigan DNR.

217

SCE, NHA.

168. The Commission strongly supports the efforts of parties appearing before it to settle their differences and propose to the Commission agreements to resolve pending proceedings in the public interest.

218

We make every effort to fully accept uncontested settlement agreements that are consistent with the public interest. Where settlements are contested, the Commission has an additional duty to protect the interests of non-settling parties and must ensure that agreements are fair and reasonable. Our conclusions concerning the compatibility of a settlement agreement with the public interest are informed by the comprehensive development standard of FPA section 10(a)(1) and the policies and practices we have adopted pursuant to that standard. This is not the same as the absence of illegality, and our responsibility to review the merits of each settlement agreement in this context is statutory and cannot be delegated to the settling parties.

218

18 CFR 385.602 (g)(3).