Resources: Laws & Regulations: Hydropower Licensing

Hydropower Licensing Dam Safety and Security Endangered Species Act Clean Water Act Energy Policy Act

Hydropower Licenisng

History

The Federal Power Act of 1920 gives the Federal Energy Regulatory Commission the exclusive authority to issue licenses to nonfederal hydroelectric power projects on navigable waterways and federal lands. Specifically, FERC may issue licenses to corporations, States or municipalities for the purpose of "constructing, operating, and maintaining dams, water conduits, reservoirs, powerhouses, transmission lines, or other project works necessary or convenient for the development and improvement of navigation and for the development, transmission, and utilization of power...".  The FPA specifies that such licenses shall only be issued upon any part of the public lands and reservations of the United States if it will not interfere or be inconsistent with the purpose of the reservation. 

In accordance with the FPA, FERC issues hydropower licenses for a period between 30 and 50 years.  Click here to see a list of FERC-license hydropower projects in Washington, Oregon, California, Idaho and Montana. When a license expires, the applicant may apply to FERC for a new long-term operating license.  Because many public laws and regulations (particularly with regard to the environment) were enacted after the original licenses for these projects, the relicensing process can be very complex and involve a significant number of stakeholders.  When deciding whether to issue a new license, FERC considers the power and development purposes of the project but must give equal consideration to the purposes of energy conservation, the protection, mitigation of damage to, and enhancement of fish and wildlife (including related spawning grounds and habitat), the protection of recreational opportunities, and the preservation of other aspects of environmental quality.

The hydropower relicensing process is a lengthy and resource-intense commitment for electric utilities.  The expense and complexity of relicensing (in addition to the potential contentiousness and the possibility of legal disputes delaying license) has prompted FERC to reform the relicensing process several times.  In 1997, FERC approved the alternative licensing process that was designed to encourage settlement agreements.  In 2003, FERC approved the current "default" licensing process - the integrated licensing process - that is intended to make the process more predictable, efficient, and streamlined by encouraging early identifications of issues and better integrating other agency permitting processes. 

Relicensing Process

There are three types of relicensing processes, though since 2005 the Integrated Licensing Process has been the default process.  The Alternative Licensing Process and the Traditional Licensing Process may only be utilized after specific approval by FERC.

Traditional Licensing Process (TLP)

The traditional relicensing process consists of a three-stage pre-filing consultation process that involves consultation with stakeholders and resource studies.  It culminates in the filing of a license application to FERC, which then conducts a 2-to-7 year environmental review process.  As part of the FERC's review phase, it produces a draft Environmental Assessment. If the assessment determines that the proposed Project will cause significant impacts to the environment, an Environmental Impact Statement (EIS) is required. 

Alternative Licensing Process (ALP)

On October 29, 1997 FERC issued regulations allowing the consultation and environmental review phases of relicensing to be combined into a single process.  The ALP allowed applicants to prepare a preliminary draft Environmental Assessment to submit to FERC along with the license application.  The ALP was designed to encourage the applicant and stakeholders to cooperatively develop mitigation and enhancement proposals early in the relicensing process with the goal of reaching  settlement.

Integrated Licensing Process (ILP)

The Integrated Licensing Process (ILP) became the default relicensing process on July 23, 2005 after three years of development by FERC and coordination with industry and non-governmental entities. The ILP is intended to encourage concurrent NEPA scoping and application preparation, increased public participation, and early FERC staff participation in relicensing processes.

Relicensing Laws and Regulations

Some of the most significant laws affecting hydropower relicensing processes are:

• Federal Power Act
  • Section 4(e) authority. Federal land-administering agencies have authority under Section 4(e) of the Federal Power Act (FPA) to require “mandatory conditions” for projects located on federal reservations under their jurisdiction.  FERC cannot reject such “mandatory conditions” regardless of cost or the impact on other beneficial uses of the waterway.  The term "reservation" lands is defined to include national forests, Indian lands, and any other lands "acquired and held for public purposes" (like wilderness areas), but not including national monuments or national parks.
  • FPA Section 18 authority. Under FPA Section 18, the Secretaries of the Departments of the Interior and Commerce can require “fishways” or specific conditions related to fish passage facilities at hydropower projects.  FERC cannot reject these fishway prescriptions.
  • FPA Section 10(a) authority.  Under FPA Section 10(a), FERC must give equal consideration to power and non-power values to provide the “best public use of the waterway.” FERC must consider recommendations from federal and state agencies and Indian tribes, state fish and wildlife and water quality agencies
  • FPA Section 10(j) recommendations. Under Section 10(j) of the FPA, licenses must include conditions based on recommendations by federal and state fish and wildlife agencies for the protection, mitigation, or enhancement of fish and wildlife resources affected by the project unless FERC can find that they are inconsistent with the purpose of the project.  Before rejecting any of these recommendations, FERC must show that it gave due weight to the recommendations and tried to resolve any inconsistencies. 

• Electric Consumers Protection Act (ECPA) of 1986. EPCA amended the Federal Power Act by requiring that FERC give equal consideration to non-power values such as recreation, fish, and wildlife, when making hydroelectric project licensing decisions.

• Energy Policy Act of 2005.  EPAct 2005 allows a license applicant, or any other party to a licensing process, to propose an alternative FPA Section 4(e) and Section 18 to mandatory conditions placed on hydropower licenses by federal resource agencies (Departments of Interior, Commerce and Agriculture). If the Secretary of an agency determines that the alternative meets the statutory environmental and resource protection standards, and the alternative provides significant cost or power savings, the Secretary accepts the alternative. EPAct 2005 also allows any party to a licensing proceeding to call for a single, expedited trial-type agency hearing on disputed issues of material fact concerning mandatory conditions.

• CWA Section 401 water quality certification  State water quality agencies also must issue a water quality certification stating that the project complies with water quality laws before FERC can relicense a dam.  State water quality agencies essentially have mandatory conditioning authority through the section 401 water quality certification process.

• National Environmental Policy Act.  Hydropower relicensing is considered a significant federal action that must undergo environmental review as part of the National Environmental Policy Act with FERC issuing an environmental assessment or environmental impact statement before issuing a hydropower license.  NEPA requires analysis of alternatives but as a procedural statute it does not require FERC to choose a particular alternative.

• Section 7 ESA consultation.  Section 7(a)(2) of the ESA requires that FERC ensure that issuance of a license will not jeopardize the continued existence of endangered or threatened species or destroy or adversely modify  to critical habitat.  When an ESA species or critical habitat may be affected by licensing, relicensing or other related actions related to the project, FERC has to consult with the federal resource agency with relevant authority (i.e. the National Marine Fisheries Service or the U.S. Fish and Wildlife Service).  This usually occurs between issuance of a draft environmental impact statement and a final environmental impact Statement.

• NHPA protections. The National Historic Preservation Act requires FERC to consider the effect of a new project license on cultural resources eligible for inclusion in the National Register of Historic Places.  FERC must execute a Programmatic Agreement among relevant tribes and state agencies to protect historic properties at hydropower projects.

• Recreation regulations.  §2.7 of Part 18 of the federal Code of Regulations provides for recreational development at FERC licensed hydropower facilities.  Licenses must provide “public access” to public waters. The regulations are vague, requiring only that the licensee make “reasonable expenditures” as part of an approved recreational development plan that provides public access to project waters.

Recent Developments

Integrated Licensing Process

On September 12, 2002, FERC announced that the FERC would undertake a rulemaking to develop a new hydropower relicensing process.  With a unanimous 3-0 vote, the FERC approved the Integrated Licensing Process (ILP) rule on July 23, 2003.  In October 2003, the rule became effective, and on July 23, 2005, the ILP became the default process (with Commission approval required for the TLP and ALP).

The ILP is intended to encourage concurrent NEPA scoping and application preparation, increased public participation, and early FERC staff participation. Other emphases are development of a preliminary application document five years before the current license expires; early study plan development with informal and formal dispute resolution; and enhanced tribal consultation.  A flowchart detailing the steps in the ILP process is available. FERC has developed a document to help parties understand the study criteria in the ILP.

FERC staff has been conducting training and outreach on ILP implementation. FERC released an effectiveness study of the new regulations, to analyze if the rule is accomplishing what it set out to do - develop better licenses in a shorter time period.  The guidance document that was released in February, 2006 is entitled "Ideas for Implementing and Participating in the Integrated Licensing Process (ILP): Tools for Industry, Agencies, Tribes, Non-Governmental Organizations, Citizens, and FERC Staff." The study will be the basis for a report on the rule in 5-6 years. 

Energy Policy Act of 2005 Sec. 241: Alternative conditions and trial-type hearings

EPAct 2005 allows a license applicant, or any other party to a licensing process, to propose an alternative to mandatory conditions placed on hydropower licenses by federal resource agencies (Departments of Interior, Commerce and Agriculture). If the Secretary of an agency determines that the alternative meets the statutory environmental and resource protection standards, and the alternative provides significant cost or power savings, the Secretary accepts the alternative. EPAct 2005 also allows any party to a licensing proceeding to call for a single, expedited trial-type agency hearing on disputed issues of material fact concerning mandatory conditions. See EPAct 2005: Sec. 241 Alternative Conditions and Fishways.  It required the Secretaries of the Interior, Commerce, and Agriculture to jointly establish, by rule, the procedures for such expedited trial-type hearing, including the opportunity to undertake discovery and cross-examine witnesses, in consultation with FERC. The rulemaking was issued on November 17, 2005. See Interim rule on Sec. 241. The rule applies to all relicensings where a license has not been issued.  It also applies to future reopeners. 

On December 16, 2005 American Rivers (and others) filed for declaratory and injunctive relief against the Departments of Agriculture, Commerce, and Interior.  They sought to "enjoin and set aside" the hydropower license regulations.  The challenge was filed in the Western District of Washington.  See American Rivers’ complaint. On October 3, 2006, the judge dismissed American Rivers’ case against the agency rule implementing the EPAct 2005 provisions on trial type hearings.  The judge ruled that the federal resources agencies did not violate the notice and comment requirements of the APA when they adopted rules authorized under EPAct 2005.  The judge said that the rules adopted by the agencies qualify for the APA's exemption from notice and comment requirements because they are "procedural and interpretative" in nature, not "substantive."  

While the interim rule has been upheld, there is a possibility that the agencies will conduct a final rulemaking, which may provide an avenue for public comment.  In addition, Senator Larry Craig (R-ID) has asked that FERC report back to the Senate Energy Committee to provide an update on how the law is working.  Such a hearing has not yet been scheduled.

FERC settlement policy

See the FERC 's Policy Statement on Hydropower Licensing Settlements.

On September 21, 2006, the FERC Commission issued a policy statement in the form of a guidance document for participants in hydroelectric relicensing settlement agreements.  The guidance is designed to help parties determine which conditions are appropriate for inclusion in settlement agreements.  Over the past couple of years, FERC staff had been reviewing settlement agreements with increased scrutiny and rejecting measures that were not project-related, ambiguous or contingent on future action, or were unenforceable by FERC.  The settlement guidance memorializes this approach in an attempt to reduce the number of conditions in settlement agreements that do not "meet the requirements of the Federal Power Act."

Specifically, FERC recommended that:

1) Measures be based on substantial evidence in the record of the licensing proceeding. 

2) Measures be consistent with the law, enforceable, and within FERC's jurisdiction.

3) A relationship must be established between a proposed measure and project effects/purposes.

4) Measures should be drafted as narrowly as possible, with specific measures preferred over general.

5) Actions required should occur physically or geographically as close to the project as possible.

6) Measures must reserve FERC's compliance authority, as well as its authority to review and modify as necessary proposed resource or activity plans.

Practically, the policy calls into question how FERC will treat off-project mitigation/enhancement and recreation, funds, and adaptive management.

A 45 day comment period ended on November 10, 2006.   

[Top of Page]