Policy Statement on Establishing License Terms for Hydroelectric Projects

161 FERC ¶ 61,078

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

(Docket No. PL17-3-000)

Policy Statement on Establishing License Terms for Hydroelectric Projects

(Issued October 19, 2017)

AGENCY: Federal Energy Regulatory Commission.

ACTION: Policy Statement.

SUMMARY: The Federal Energy Regulatory Commission (Commission) is giving

notice of a new policy on establishing license terms for hydroelectric projects. In this

Policy Statement, the Commission adopts a 40-year default license term for original and

new licenses for hydropower projects located at non-federal dams. The Policy Statement

also sets forth when the Commission will consider issuing those projects a license with a

term for less or more than 40 years.

EFFECTIVE DATE: This policy statement will become effective [date of publication in

the Federal Register].

FOR FURTHER INFORMATION CONTACT:

Nicholas Jayjack

(Technical Information)

Office of Energy Projects

Federal Energy Regulatory Commission

888 First Street, NE

Washington, DC 20426

(202) 502-6073

Docket No. PL17-3-000

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Carolyn Clarkin

(Legal Information)

Office of the General Counsel – Energy Projects

Federal Energy Regulatory Commission

888 First Street, NE

Washington, DC 20426

(202) 502-8563

SUPPLEMENTARY INFORMATION:

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Neil Chatterjee, Chairman;

Cheryl A. LaFleur, and Robert F. Powelson.

Policy Statement on Establishing License Terms for Docket No

RMATION:

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Neil Chatterjee, Chairman;

Cheryl A. LaFleur, and Robert F. Powelson.

Policy Statement on Establishing License Terms for Docket No. PL17-3-000

Hydroelectric Projects

POLICY STATEMENT ON ESTABLISHING LICENSE TERMS FOR

HYDROELECTRIC PROJECTS

(Issued October 19, 2017)

In this Policy Statement, the Commission sets forth a new policy on establishing

license terms for original and new licenses for hydropower projects located at non-federal

dams. The goal of this action is to provide more certainty for stakeholders regarding the

Commission’s regulatory process, reduce regulatory burden, increase administrative

efficiency for all stakeholders, and further encourage licensees to negotiate settlement

agreements and promptly seek authorization to implement voluntary environmental,

recreational, and developmental enhancements.

I.

Background

A.

Current License Term Policy

Section 6 of the Federal Power Act (FPA)1 provides that hydropower licenses

shall be issued for a term not to exceed 50 years. There is no minimum license term for

1 16 U.S.C. 799 (2012).

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original licenses. FPA section 15(e)2 provides that any “new license”3 shall be for a term

that the Commission determines to be in the public interest, but not less than 30 years or

more than 50 years

s

shall be issued for a term not to exceed 50 years. There is no minimum license term for

1 16 U.S.C. 799 (2012).

Docket No. PL17-3-000

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original licenses. FPA section 15(e)2 provides that any “new license”3 shall be for a term

that the Commission determines to be in the public interest, but not less than 30 years or

more than 50 years.

It is current Commission policy to set a 50-year term for licenses issued for

projects located at federal dams.4 For projects located at non-federal dams, the

Commission sets a 30-year term where there is little or no authorized redevelopment, new

construction, or environmental mitigation and enhancement; a 40-year term for a license

involving a moderate amount of these activities; and a 50-year term where there is an

extensive amount of such activity.5 The Commission previously established this policy

to ease the economic impact of new costs, promote balanced and comprehensive

development of renewable power generating resources, and encourage licensees to be

good environmental stewards.6

2 16 U.S.C. 808(e) (2012).

3 “New license” is the term used in the FPA to refer to a license issued to replace a

project’s expiring license.

4 City of Danville, Virginia, 58 FERC ¶ 61,318, at 62,020 (1992) (citing Little

Falls Hydroelectric Associates, 27 FERC ¶ 61,376 (1984)).

5 Id. (addressing original licenses); Consumers Power Co., 68 FERC ¶ 61,077, at

61,384 (1994) (addressing new licenses). Projects that entail construction of a new dam

have generally received 50-year licenses. City of Danville, Virginia, 58 FERC ¶ 61,318

at 62,020 (citing Little Falls Hydroelectric Associates, 27 FERC ¶ 61,376).

6 Consumers Power Co., 68 FERC ¶ 61,077 at 61,384.

6 (1984)).

5 Id. (addressing original licenses); Consumers Power Co., 68 FERC ¶ 61,077, at

61,384 (1994) (addressing new licenses). Projects that entail construction of a new dam

have generally received 50-year licenses. City of Danville, Virginia, 58 FERC ¶ 61,318

at 62,020 (citing Little Falls Hydroelectric Associates, 27 FERC ¶ 61,376).

6 Consumers Power Co., 68 FERC ¶ 61,077 at 61,384.

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Determining whether the measures required under a license are minimal,

moderate, or extensive is highly case-specific and largely based on a qualitative analysis

of the record before the Commission. In establishing the appropriate license term, staff

initially examines the nature and extent of the required measures in the context of the

project at issue,7 and then uses the cost of measures as a check on a qualitative conclusion

that the measures required under the license are minimal, moderate, or extensive. The

Commission’s current policy takes a forward-looking approach, such that any measures

adopted under a prior license term are not considered.8 It has also been the

Commission’s policy to coordinate, to the extent feasible, license terms for projects in the

same river basin to maximize consideration of cumulative impacts when the projects are

due to be relicensed.9

The length of an original license has not been contested on rehearing for some

time; however, licensees and other parties have recently contested the length of a new

license in several relicensing proceedings. The arguments raised in these cases include

7 For example, one type of fishway may be more expensive than another, and a

fishway type that might be considered extensive for a small project could be seen as

minimal for a larger one

, licensees and other parties have recently contested the length of a new

license in several relicensing proceedings. The arguments raised in these cases include

7 For example, one type of fishway may be more expensive than another, and a

fishway type that might be considered extensive for a small project could be seen as

minimal for a larger one.

8 See, e.g., Duke Energy Carolinas, LLC, 156 FERC ¶ 61,010, at P 19 (2016)

(Duke Energy) (stating Commission’s long-standing policy is to only consider measures

required in the new license) (citing Alabama Power Co., 155 FERC ¶ 61,080, at P 72

(2016); Georgia Power Co., 111 FERC ¶ 61,183, at P 12 (2005); Ford Motor Co.,

110 FERC ¶ 61,236, at PP 6-8 (2005)).

9 18 CFR 2.23 (2017); see also Public Utility of District No. 1 of Chelan County,

Washington, 127 FERC ¶ 61,152, at P 18 (2009) (Chelan PUD).

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that the Commission, when establishing the license term, should have considered, or

given more weight to: previously-authorized capacity-related investments or

environmental enhancements made by the licensee before issuance of the new license;10

total cost of the relicensing process;11 losses in generation value related to environmental

measures;12 the license terms of projects that the license applicant states are similarly

situated to its project;13 and the license term provided for in settlement agreements.14

In each circumstance, the Commission declined to extend the length of the license.

B.

Notice of Inquiry on Establishing License Terms for Hydroelectric

Projects

On November 17, 2016, the Commission issued a notice of inquiry (NOI) to seek

comments on whether, and if so how, the Commission should revise its current license

term policy. The NOI invited comments on five potential license term policy options:

e, the Commission declined to extend the length of the license.

B.

Notice of Inquiry on Establishing License Terms for Hydroelectric

Projects

On November 17, 2016, the Commission issued a notice of inquiry (NOI) to seek

comments on whether, and if so how, the Commission should revise its current license

term policy. The NOI invited comments on five potential license term policy options:

(1) retain the current policy; (2) modify the current policy to consider voluntary

10 See, e.g., Duke Energy, 156 FERC ¶ 61,010 at P 12; Alabama Power Co.,

155 FERC ¶ 61,080 at P 71; Public Utility District No. 1 of Douglas County, Washington,

143 FERC ¶ 61,130, at PP 12-13 (2013) (Douglas PUD); Chelan PUD, 127 FERC

¶ 61,152 at PP 12-13; Georgia Power Co., 111 FERC ¶ 61,183 at P 10; Ford Motor Co.,

110 FERC ¶ 61,236 at P 6.

11 See, e.g., Duke Energy, 156 FERC ¶ 61,010 at P 12.

12 See, e.g., id.

13 See, e.g., id. P 20; Alabama Power Co., 155 FERC ¶ 61,080 at P 71; Duke

Energy Progress, Inc., 153 FERC ¶ 61,056, at P 39 (2015); Douglas PUD, 143 FERC

¶ 61,130 at P 15.

14 See, e.g., Duke Energy Progress, Inc., 153 FERC ¶ 61,056 at P 40; Douglas

PUD, 143 FERC ¶ 61,130 at P 18; Chelan PUD, 127 FERC ¶ 61,152 at P 16.

Docket No. PL17-3-000

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authorized actions implemented under the prior license (“previously-authorized voluntary

actions”); (3) replace the current license term policy with a policy for a 50-year default

license term unless a lesser license term would be in the public interest (for example, to

better coordinate the license terms of projects in the same river basin); (4) add a more

quantitative cost-based analysis to the current policy; and (5) alter the current policy to

accept license terms agreed upon in settlement agreements, when appropriate. Comments

on alternative policy options were also encouraged. The NOI established January 24,

2017, as the deadline for comments, which staff extended to March 24, 2017

erms of projects in the same river basin); (4) add a more

quantitative cost-based analysis to the current policy; and (5) alter the current policy to

accept license terms agreed upon in settlement agreements, when appropriate. Comments

on alternative policy options were also encouraged. The NOI established January 24,

2017, as the deadline for comments, which staff extended to March 24, 2017.

Industry members, federal and state resource agencies, environmental and

recreation groups, and individuals filed comments. Most commenters support revising

the current policy. Several commenters state that under the current policy stakeholders

lack certainty, and, consequently, license applicants lack guidance on what measures will

yield longer license terms and are deterred from proposing additional protection,

mitigation, and enhancement measures. Further, many commenters state that because the

policy is forward-looking, licensees delay seeking authorizations for capacity upgrades

and environmental and recreational enhancements until they apply for a new license.

Some industry commenters state that under the current policy, license applicants and

settlement parties cannot use the license term as a bargaining chip because the

Commission might reject that term in the license order. To address these concerns, many

commenters recommend that the Commission consider previously-authorized voluntary

actions and defer to the license term that was negotiated as part of a settlement

agreement.

under the current policy, license applicants and

settlement parties cannot use the license term as a bargaining chip because the

Commission might reject that term in the license order. To address these concerns, many

commenters recommend that the Commission consider previously-authorized voluntary

actions and defer to the license term that was negotiated as part of a settlement

agreement.

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Commenters disagree on the 50-year default license term policy option. Industry

commenters generally support the 50-year default license term because they state it

would provide a clear, predictable standard. Industry commenters add that such policy

would eliminate the current “penalty” for efficient, well-maintained, and relatively low-

impact projects that do not require substantial environmental or developmental measures

and therefore only receive a 30-year license.

In contrast, environmental groups, individuals, and most resource agencies oppose

the 50-year default license term option. Several resource agencies argue that this option

would provide little incentive for a license applicant to voluntarily propose or agree to

mitigation measures because such measures would no longer factor into the

Commission’s license term decision. The resource agencies also contend that such policy

would result in applicants focusing their license application study efforts on disproving

project effects rather than on identifying potential mitigation measures.

Most commenters recommend against the policy option to adopt a more

quantitative cost-based analysis. Many commenters state that it would be difficult to

develop a quantitative cost-based analysis that takes into account the diverse hydropower

fleet and environmental and recreational values

dy efforts on disproving

project effects rather than on identifying potential mitigation measures.

Most commenters recommend against the policy option to adopt a more

quantitative cost-based analysis. Many commenters state that it would be difficult to

develop a quantitative cost-based analysis that takes into account the diverse hydropower

fleet and environmental and recreational values.

As an alternative to the five policy options, several industry commenters

recommend that the Commission adopt a 40-year default license term with credit (up to

an additional 10 years) for previously-authorized actions and deference to settlement

agreements. They state that under this alternative, licenses should be issued for less than

40 years only when a license applicant has agreed to a settlement agreement with a

Docket No. PL17-3-000

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negotiated license term of less than 40 years, or voluntarily coordinates its license term

with other projects in a river basin.

II.

Discussion

The extensive comments received have given the Commission a deeper

understanding of the effects that the current license term policy has on stakeholders in

hydropower licensing proceedings. The Commission recognizes the importance of

providing license applicants and other stakeholders as much certainty as possible.

License applicants expend significant financial resources on preparing their license

applications and complying with their licenses thereafter. Further, stakeholders need

certainty to determine the protection, mitigation, and enhancement measures that they

will negotiate and license applicants will propose.

The current policy also affects the Commission’s staff and resources needed to

review and process license applications. Staff anticipate that over 300 projects will enter

the relicensing process through 2025. Under the current policy, staff would establish the

license term for each of those projects case by case

ment measures that they

will negotiate and license applicants will propose.

The current policy also affects the Commission’s staff and resources needed to

review and process license applications. Staff anticipate that over 300 projects will enter

the relicensing process through 2025. Under the current policy, staff would establish the

license term for each of those projects case by case.

After considering this matter and the comments on the NOI, the Commission has

decided it is in the public interest to change its license term policy. With this Policy

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Statement, the Commission establishes a 40-year default license term policy for original

and new licenses for hydropower projects located at non-federal dams.15

There are three circumstances where the Commission will consider issuing a

license for less or more than 40 years. First, the Commission will establish a shorter or

longer term if necessary to coordinate license terms for projects located in the same river

basin. Second, the Commission will defer to a shorter or longer term explicitly agreed

upon in a generally-supported comprehensive settlement agreement, provided that such

term does not conflict with coordination. Settlement agreements that state the settlement

signatories would not oppose a certain term or would support a term within a range of

years will not be considered to include an explicitly agreed upon license term.16

Third, the Commission will consider a longer license term – provided that doing

so is consistent with coordinating license terms within a basin – when a license applicant

specifically requests a longer license term based on significant measures expected to be

required under the new license or significant measures implemented during the prior

15 This policy does not apply to pilot hydrokinetic projects, which have terms of

up to five years

ith coordinating license terms within a basin – when a license applicant

specifically requests a longer license term based on significant measures expected to be

required under the new license or significant measures implemented during the prior

15 This policy does not apply to pilot hydrokinetic projects, which have terms of

up to five years. See FERC, Licensing Hydrokinetic Pilot Projects,

www.ferc.gov/industries/hydropower/gen-

info/licensing/hydrokinetics/pdf/white_paper.pdf.

16 See, e.g., Chelan PUD, 127 FERC ¶ 61,152 at n.27 (settlement states that the

signatories do not oppose the licensee’s efforts to seek a 50-year term); Duke Energy,

156 FERC ¶ 61,010 at P 24 (settlement states the signatories agree to support a license

term that is not less than 40 years nor more than 50 years).

Docket No. PL17-3-000

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license term that were not required by that license or other legal authority17 and for which

the Commission has not already given credit through an extension of the prior license

term. The Commission will consider, on a case-by-case basis, measures and actions that

enhance non-developmental project purposes (i.e., environmental, project recreation,

water supply), and those that enhance power and developmental purposes, together with

the cost of those measures and actions to determine whether they are significant and

warrant the granting of a longer license term. Maintenance measures and measures taken

to support the licensing process will not be considered. As guidance, we note that the

Commission has found that measures including the construction of pumped storage

facilities, fish passage facilities, fish hatcheries, substantial recreation facilities, dams,

and powerhouses warranted longer license terms

arrant the granting of a longer license term. Maintenance measures and measures taken

to support the licensing process will not be considered. As guidance, we note that the

Commission has found that measures including the construction of pumped storage

facilities, fish passage facilities, fish hatcheries, substantial recreation facilities, dams,

and powerhouses warranted longer license terms.

There are a number of reasons for establishing a 40-year default license term with

exceptions for coordination, deference to generally-supported comprehensive settlement

agreements, and consideration of previously-authorized voluntary actions. This policy

will provide significant certainty to licensees, resource agencies, and other stakeholders.

A 40-year default license term will provide a simpler method for Commission staff to

establish license terms, and, thus, increase administrative efficiencies. A case-specific

assessment will only be required for those license applications that request a longer

license term, and are not explicitly supported by a generally-supported comprehensive

17 See, e.g., Chelan PUD, 127 FERC ¶ 61,152, at P 14 (stating that the licensee

acted in order to comply with the Endangered Species Act, not to simply voluntarily

resolve relicensing issues early).

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settlement agreement. Because many projects would be relicensed less frequently, the

policy would also lower administrative costs for all stakeholders, provide licensees longer

license terms to recoup costs, and reduce regulatory burden. Further, the policy will

place efficient, low-impact projects that require minimal measures – and thus, would

receive a 30-year term under the current policy – on more equal footing with projects that

require more measures.

The policy may also encourage licensees to voluntarily make capacity upgrades

and enhance recreational and environmental resources during the prior license term

urden. Further, the policy will

place efficient, low-impact projects that require minimal measures – and thus, would

receive a 30-year term under the current policy – on more equal footing with projects that

require more measures.

The policy may also encourage licensees to voluntarily make capacity upgrades

and enhance recreational and environmental resources during the prior license term.

Affected resources will benefit from licensees undertaking preventative or remedial

measures sooner rather than later. In addition, the policy may further encourage license

applicants to engage with stakeholders to negotiate a license settlement agreement.

Because a generally-supported comprehensive settlement agreements represent

stakeholder values, terms negotiated as part of those agreements are in the public interest,

provided they do not conflict with coordination.

A 40-year default license term will not adversely affect environmental and

recreation resources. All of our licenses contain extensive environmental and recreation

measures. While under our new policy some projects may be relicensed less frequently

and unanticipated project effects on environmental resources may go unmitigated for

longer durations of time than before, there are many tools available to address these

unanticipated effects in a timely manner. The Commission may address serious,

Docket No. PL17-3-000

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unanticipated environmental effects using its standard reopener article,18 and licensees

often file applications for license amendments to address significant, unanticipated

environmental issues. Further, resource agencies frequently reserve authority to address

those effects under FPA section 4(e) (federal reservation)19 and section 18 (fishway

prescription),20 and in water quality certifications issued under section 401 of the Clean

Water Act

reopener article,18 and licensees

often file applications for license amendments to address significant, unanticipated

environmental issues. Further, resource agencies frequently reserve authority to address

those effects under FPA section 4(e) (federal reservation)19 and section 18 (fishway

prescription),20 and in water quality certifications issued under section 401 of the Clean

Water Act. Stakeholders have also negotiated with or encouraged licensees to propose

measures that include adaptive management approaches to allow for appropriate

modifications as additional information is gathered, new technologies develop, and

societal and environmental needs change.

This Policy Statement will apply to all licenses issued following its publication in

the Federal Register with no retroactive application. License applicants with pending

license applications may file a comprehensive settlement agreement, or addendum to an

existing agreement, that includes an explicitly agreed upon license term or may make a

filing demonstrating why the Commission should award them a longer license term than

18 Each license incorporates a Commission L-Form that includes standard reopener

clauses to enhance fish and wildlife resources. See Standardized Conditions for Inclusion

in Preliminary Permits and Licenses Issued Under Part I of the Federal Power Act,

54 F.P.C. 1792 (1975).

19 16 U.S.C. 797(e) (2012) (licenses for projects located on federal reservations are

subject to and contain conditions as the Secretary of the department under whose

supervision such reservation falls shall deem necessary).

20 16 U.S.C. 811 (2012) (Secretaries of the Interior and Commerce may prescribe

fishway prescriptions).

r Part I of the Federal Power Act,

54 F.P.C. 1792 (1975).

19 16 U.S.C. 797(e) (2012) (licenses for projects located on federal reservations are

subject to and contain conditions as the Secretary of the department under whose

supervision such reservation falls shall deem necessary).

20 16 U.S.C. 811 (2012) (Secretaries of the Interior and Commerce may prescribe

fishway prescriptions).

Docket No. PL17-3-000

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40 years. The Commission, however, will not entertain applications to amend existing

licenses to extend their license terms simply on the basis of this new license term policy.

Pursuant to current policy, licensees that seek to extend existing licenses with terms of

less than 50 years, must justify such requests, for example by proposing development,

environmental, and recreation enhancements in a license amendment application

accompanied by a request that the Commission extend their license term.21

III.

Document Availability

In addition to publishing the full text of this document in the Federal Register,

the Commission provides all interested persons an opportunity to view and/or print the

contents of this document via the Internet through FERC’s Home Page

(http://www.ferc.gov) and in FERC’s Public Reference Room during normal business

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A,

Washington DC 20426.

From FERC’s Home Page on the Internet, this information is available on

eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft

Word format for viewing, printing, and/or downloading

(http://www.ferc.gov) and in FERC’s Public Reference Room during normal business

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A,

Washington DC 20426.

From FERC’s Home Page on the Internet, this information is available on

eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft

Word format for viewing, printing, and/or downloading. To access this document in

eLibrary, type the docket number excluding the last three digits of this document in the

21 See, e.g., Idaho Power Co., 132 FERC ¶ 62,001 (2010) (10-year extension

of the license term due to the costs of replacing the project’s existing powerhouse and

increasing generating capacity); PPL Holtwood, LLC, 129 FERC ¶ 62,092 (2009)

(16-year extension of license term due to costs associated with the constructing a new

powerhouse, installing two turbine generating units at the existing powerhouse, and

various environmental measures).

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docket number field. User assistance is available for eLibrary and the Commission’s

website during normal business hours from FERC Online Support at 202-502-6652 (toll

free at 1-866-208-3676) or email at ferconlinesupport@ferc.gov, or the Public Reference

Room at (202) 502-8371, TTY (202)502-8659. E-mail the Public Reference Room at

public.referenceroom@ferc.gov.

By the Commission.

( S E A L )

Nathaniel J. Davis, Sr.,

Deputy Secretary.