    [House Hearing, 106 Congress]
    [From the U.S. Government Publishing Office]

                           HYDROELECTRIC LEGISLATION

    =======================================================================

                                    HEARING

                                   before the

                        SUBCOMMITTEE ON ENERGY AND POWER

                                     of the

                             COMMITTEE ON COMMERCE
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED SIXTH CONGRESS

                                 SECOND SESSION

                                       on

                        H.R. 2335, H.R. 1262, H.R. 3852,
                      S. 334, S. 422, S. 1236, and S. 1937

                                   __________

                                 MARCH 30, 2000

                                   __________

                               Serial No. 106-106

                                   __________

                Printed for the use of the Committee on Commerce

                         U.S. GOVERNMENT PRINTING OFFICE
    64-033CC                     WASHINGTON : 2000

                             COMMITTEE ON COMMERCE

                         TOM BLILEY, Virginia, Chairman

    W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
    MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
    MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
    JOE BARTON, Texas                    RALPH M. HALL, Texas
    FRED UPTON, Michigan                 RICK BOUCHER, Virginia
    CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
    PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
      Vice Chairman                      SHERROD BROWN, Ohio
    JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
    CHRISTOPHER COX, California          PETER DEUTSCH, Florida
    NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
    STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
    RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
    BRIAN P. BILBRAY, California         BART STUPAK, Michigan
    ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
    GREG GANSKE, Iowa                    TOM SAWYER, Ohio
    CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
    TOM A. COBURN, Oklahoma              GENE GREEN, Texas
    RICK LAZIO, New York                 KAREN McCARTHY, Missouri
    BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
    JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
    JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
                                         BILL LUTHER, Minnesota
                                         LOIS CAPPS, California

                       James E. Derderian, Chief of Staff

                       James D. Barnette, General Counsel

          Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                     ______

                        Subcommittee on Energy and Power

                          JOE BARTON, Texas, Chairman

    MICHAEL BILIRAKIS, Florida           RICK BOUCHER, Virginia
    CLIFF STEARNS, Florida               KAREN McCARTHY, Missouri
      Vice Chairman                      TOM SAWYER, Ohio
    STEVE LARGENT, Oklahoma              EDWARD J. MARKEY, Massachusetts
    RICHARD BURR, North Carolina         RALPH M. HALL, Texas
    ED WHITFIELD, Kentucky               FRANK PALLONE, Jr., New Jersey
    CHARLIE NORWOOD, Georgia             SHERROD BROWN, Ohio
    TOM A. COBURN, Oklahoma              BART GORDON, Tennessee
    JAMES E. ROGAN, California           BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ALBERT R. WYNN, Maryland
    HEATHER WILSON, New Mexico           TED STRICKLAND, Ohio
    JOHN B. SHADEGG, Arizona             PETER DEUTSCH, Florida
    CHARLES W. ``CHIP'' PICKERING,       RON KLINK, Pennsylvania
    Mississippi                          JOHN D. DINGELL, Michigan,
    VITO FOSSELLA, New York                (Ex Officio)
    ED BRYANT, Tennessee
    ROBERT L. EHRLICH, Jr., Maryland
    TOM BLILEY, Virginia,
      (Ex Officio)

                                      (ii)

                                C O N T E N T S

                                   __________
                                                                       Page

    Testimony of:
        Brouha, Paul, Associate Deputy Chief, Forest Service, U.S.
          Department of Agriculture..................................   100
        Burns, Allen, Vice President of Requirements Marketing,
          Bonneville Power Administration, U.S. Department of Energy.    34
        DeFazio, Hon. Peter A., a Representative in Congress from the
          State of Oregon............................................    12
        Fahlund, Andrew, Policy Director for Hydropower Programs,
          American Rivers............................................    76
        Grimm, Robert S., President, Alaska Power & Telephone Company    86
        Hoecker, Hon. James J., Chairman, accompanied by Curt Hebert,
          Jr. and William L. Massey, Commissioners, Federal Energy
          Regulatory Commission......................................    17
        Kennedy, Lynne, Oregon Department of Environmental Quality...    96
        Leshy, John D., Solicitor, U.S. Department of the Interior...    29
        Lynch, Kevin A., Director of Government Affairs, Pacificorp..    74
        Murkowski, Hon. Frank, a United States Senator from the State
          of Alaska..................................................     5
        Murphy, Michael A., President, National Hydropower
          Association................................................    60
        Piper, Dave E., Chief Executive Officer, Pacific Northwest
          Generating Cooperative.....................................    89
        Radanovich, Hon. George P., a Representative in Congress from
          the State of California....................................     9
        Rosenberg, Andrew A., Deputy Assistant Administrator for
          Fisheries, National Oceanic and Atmospheric Administration,
          U.S. Department of Commerce................................    36
        Waddington, Steve, Northwest Power Manager, Reynolds Metals
          Company....................................................    93
    Material submitted for the record by:
        American Public Power Association, prepared statement of.....   114
        Brouha, Paul, Associate Deputy Chief, Forest Service, U.S.
          Department of Agriculture, responses for the record........   251
        Center for Energy Efficiency, Environmental Defense, Natural
          Resources Defense Council, and Sierra Club, letter dated
          March 30, 2000, to Hon. Joe Barton.........................   121
        Dingell, Hon. John D., a Representative in Congress from the
          State of Michigan:
            Letter dated January 19, 2000, to Hon. Bill Richardson,
              enclosing questions for the record, and responses to
              same...................................................   129
            Letter dated March 27, 2000, to Hon. Bill Richardson.....   133
            Letter dated February 8, 2000, to Greg Booth, enclosing
              questions for the record, and responses to same........   146
            Letter dated January 20, 2000, to Frank L. Cassidy,
              enclosing questions for the record, and responses to
              same...................................................   155
            Letter dated February 8, 2000, to Mark Gendron, enclosing
              questions for the record, and responses to same........   161
            Letter dated February 23, 2000, to Robert G. Hayes,
              enclosing questions for the record, and responses to
              same...................................................   169
            Letter dated February 8, 2000, to Tom Kuhn, enclosing
              questions for the record, and responses to same........   174
            Letter dated February 8, 2000, to David Piper, enclosing
              questions for the record, and responses to same........   178

                                     (iii)

                                      (IV)

        Fahlund, Andrew, Policy Director for Hydropower Programs,
          American Rivers, letter dated May 8, 2000, to Hon. Joe
          Barton, enclosing response for the record..................   254
        Hart, City of, prepared statement of.........................   113
        Hebert, Curt, Jr. Commissioner, Federal Energy Regulatory
          Commission, letter dated May 8, 2000, to Hon. Joe Barton,
          enclosing response for the record..........................   200
        Hoecker, Hon. James J., Chairman, Federal Energy Regulatory
          Commission, letter dated May 8, 2000, to Hon. Joe Barton,
          enclosing response for the record..........................   192
        Hoekstra, Hon. Peter, a Representative in Congress from the
          State of Michigan, letter dated March 29, 2000, to Hon. Joe
          Barton.....................................................   113
        Idaho Energy Authority, prepared statement of................   119
        Kennedy, Lynne, Oregon Department of Environmental Quality,
          letter dated May 8, 2000, to Hon. Joe Barton, enclosing
          response for the record....................................   261
        Knowles, Hon. Tony, Governor, State of Alaska, letter dated
          March 29, 2000, to Hon. Joe Barton.........................   112
        Leshy, John D., Solicitor, U.S. Department of the Interior,
          letter dated May 16, 2000, to Hon. Thomas J. Bliley, Jr....   236
        Lyder, Jane M., Legislative Counsel, Office of Congressional
          and Legislative Affairs, Department of the Interior, letter
          dated May 30, 2000, to Hon. Joe Barton.....................   220
        Markey, Hon. Edward J., a Representative in Congress from the
          State of Massachusetts, letter dated April 10, 2000, to
          Hon. Joe Barton, enclosing material for the record.........   189
        Massey, William L., Commissioner, Federal Energy Regulatory
          Commission, letter dated May 8, 2000, to Hon. Joe Barton...   219
        Michigan United Conservation Clubs, prepared statement of....   115
        Oregon Utility Resource Coordination Association, prepared
          statement of...............................................   117
        Rosenberg, Andrew A., Deputy Assistant Administrator for
          Fisheries, National Oceanic and Atmospheric Administration,
          U.S. Department of Commerce, responses for the record......   246
        Souby, James M., Executive Director, Western Governors'
          Association, letter dated May 15, 2000, to Hon. Joe Barton
          and Hon. Rick Boucher......................................   269
        Taylor, Gary J., Legislative Director, International
          Association of Fish and Wildlife Agencies, letter dated
          March 28, 2000, to Hon. Joe Barton.........................   122

                           HYDROELECTRIC LEGISLATION

                                  ----------

                            THURSDAY, MARCH 30, 2000

                 U.S. House of Representatives,
                                 Committee on Commerce,
                              Subcommittee on Energy and Power,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10:07 a.m., in
    room 2322, Rayburn Building, Hon. Joe Barton (chairman)
    presiding.
        Members present: Representatives Barton, Shimkus, Wilson,
    Shadegg, Bryant, Sawyer, Markey, and Dingell (ex officio).
        Also present: Representative Towns.
        Staff present: Joe Kelliher, majority counsel; Kevin Cook,
    science advisor; Elizabeth Brennan, legislative clerk; and Rick
    Kessler, minority professional staff.
        Mr. Barton. The purpose of the hearing today is to consider
    various hydroelectric bills pending before the subcommittee.
        Four of the 7 bills that are the subject of this hearing
    have passed the Senate, and I am pleased we are able to hold a
    hearing with sufficient time left in the year to act on these
    bills if it turns out they enjoy support among subcommittee
    members.
        The most important bill before the subcommittee today is
    H.R. 2335, the Hydroelectric Licensing Process Improvement Act
    of 1999, which was introduced by our colleague, Representative
    Towns, and is co-sponored by four subcommittee members--Mr.
    Burr, Mr. Hall, Mr. Wynn, and Mr. Shadegg.
        This hearing comes at an important time. Much of the
    country's hydroelectric capacity will be relicensed in the next
    15 years. We need to understand how well or badly the licensing
    process is working. If the process is working badly, we need to
    know whether administrative reforms can improve the process or
    whether Congress must act in this area. If Congress must act,
    we need to know what a bill should look like.
        As I mentioned earlier, 4 of the 7 bills that are the
    subject of our hearing today have passed the Senate. Some of
    these bills have repeatedly passed the Senate only to die as
    the House took no action. I believe as a general rule, the
    subcommittee should hold hearings on bills that have passed the
    Senate. That does not mean we'll necessarily pass a bill just
    because it passed the Senate. The subcommittee will show the
    Senate the courtesy of considering their bills. If the Senate
    bills referred to the subcommittee die, they will die as a
    result of conscious decisions, not out of neglect.
        I understand that there is some controversy associated with
    the Senate bills we consider today. Federal resource agencies
    and environmental groups oppose the Alaska and Hawaii exemption
    bills and the Michigan exemption bill. Some Bonneville customer
    groups oppose S. 1937, which apparently is also known as the
    JOE bill. I'm suspicious that Senator Craig gave the bill that
    name in order to maximize its chance of House action----
        I'm wondering whether it was called the Dan bill in the
    last Congress.
        Finally, I understand that the license extension bills are
    not controversial.
        We look forward to hearing the testimony of the witnesses
    before us.
        The Chair would now recognize the distinguished ranking
    member from the State of Michigan, Congressman Dingell, for an
    opening statement.
        Mr. Dingell. Mr. Chairman, thank you. I'd like to welcome
    our friend, the Senator from Alaska. Glad to see you here. And
    also Mr. DeFazio and the other witnesses. Thank you also for
    being here, Mr. Radanovich. Senator, I think with your
    legislation, there will be some small problems to work out. We
    will try and work with you.
        Mr. Barton. Mr. Chairman, you need to speak up a little bit
    so we can----
        Mr. Dingell. Mr. Chairman, I also have an opening statement
    which I ask be inserted into the record at this time.
        [The prepared statement of Hon. John D. Dingell follows:]
        Prepared Statement of Hon. John D. Dingell, a Representative in
                      Congress from the State of Michigan
        Mr. Chairman, I want to welcome our guests, Mr. DeFazio, Mr.
    Radanovich, and, of course my good friend the Senator from Alaska.
        Today's hearing covers a good deal of ground, most of it relating
    to the relicensing of hydroelectric facilities. Some of the bills are
    simple extensions of construction licenses. Because of the limitations
    set in the Federal Power Act, the Committee has had a long, bipartisan
    tradition of moving non-controversial license extensions, so long as
    the Commission raises no objections. I will say that it is very
    unusual--though not unheard of--for Congress to extend the license for
    more than six years beyond the four year period granted by FERC. One of
    the bills we are considering today, authored by my friend Senator
    Craig, would require us to deviate from those standards and I think we
    need to carefully consider the legislation to decide if it is
    appropriate to move forward.
        Two of the bills before us would have us exempt small hydroelectric
    projects in the states of Hawaii and Alaska, respectively, from the
    possibility of FERC regulation under Section 4(e) and Section 23(b) of
    the Federal Power Act. This would leave these projects solely under the
    jurisdiction of these states. I am curious as to why these two states
    should be treated differently from the other 48 states. I am, however,
    certainly open to the arguments of my friend from Alaska and want to
    extend him every courtesy and consideration.
        Another bill, H.R. 1262, authored by my colleague from the Michigan
    delegation, Mr. Hoekstra, would exempt from FERC relicensing and
    regulation for all time the Hart Lake project on the Pentwater River in
    Michigan. I would truly like to be helpful to my colleague, but the
    legislation has drawn strong objections from FERC, the resource
    agencies, and environmental groups. In particular, the Michigan United
    Conservation Clubs--which counts 100,000 members in my state--has
    submitted testimony in opposition to H.R. 1262 and other legislation
    before us today, and I ask that the testimony be made part of the
    record. Finally, the State of Michigan has informed the Majority staff,
    Mr. Hoekstra, and my staff that it opposes the bill. I regret that this
    leaves me with very little room to be of assistance.
        The other hydroelectric bill on which we will hear testimony today
    is legislation offered by the Ranking Member of the Finance
    Subcommittee, Mr. Towns. As many of you know, I have long taken a
    strong interest in hydropower issues and the hydroelectric relicensing
    process. In the mid-1980s, I worked closely with several other
    committee members on enactment of the Electric Consumers Protection Act
    (ECPA), which attempted to balance environmental values and the
    economic benefits of hydropower. This statute amended the Federal Power
    Act to direct FERC to give equal consideration to fish and wildlife,
    recreation, and other environmental benefits.
        There are a number of factors that led to this change in 1986. For
    the 65 years prior to enactment of ECPA, the law more or less promoted
    the development of hydroelectric power, with little weight given to
    other uses of a waterway and its ecosystem. Now, the waters of the
    United States are public resources owned by all the people. The
    production of electric power is but one of many potential uses of a
    waterway, and FERC only the regulator of that particular use. The
    resource agencies and the states are mainly responsible for the
    management of these bodies of water and often the surrounding land, so
    they have been given an appropriate level of input into any FERC
    decision that would affect the disposition of that water and land.
    Another important factor to keep in mind is that these licenses can be
    issued for up to 50 years. That's a pretty long time. To put it in
    perspective, the last time some of these dams went through re-
    licensing, I wasn't in Congress and Strom Thurmond was a Democrat. So,
    I think a rigorous licensing process is not an undue burden.
        Having said all this, if there is truly a problem that can't be
    handled by the regulatory process or readily resolved by the courts and
    that is causing real uncertainty or harm, then we should consider
    whether legislative action might be helpful on balance. That was the
    case in 1986 when we passed ECPA. But there should be a large body of
    evidence and a large, diverse group of stakeholders supporting
    legislative action. As of now, I do not think either of those
    conditions have been met, but I remain open to being convinced.
        Finally, we have a bill before us that would amend the Pacific
    Northwest Electric Power Planning and Conservation Act to allow the
    Bonneville Power Administration (BPA) to sell electricity to joint
    operating entities (JOEs).
        Our former colleague Ron Wyden first contacted me about this when
    the Senate was considering this legislation late last year. I know he,
    Mr. DeFazio, Rep. Hastings, and Rep. Walden are very interested in
    seeing this legislation move quickly through the legislative process.
    In an effort to assist them and expedite Congress' consideration of
    this matter, in mid-January I sent questions to seven stakeholders
    about the legislation and its impact.
        I am happy to say that six of those stakeholders took this matter
    seriously and responded fully and quite promptly to my request. They
    had responses to me over a month ago. I believe their responses will
    help us as we continue to consider the legislation and I ask that my
    letters and their responses be made a part of the record.
        Unfortunately, the one ``stakeholder'' that has yet to respond is
    the one that is responsible for administering the law: the Department
    of Energy. My friends from the Northwest should know that it is due to
    the Department's inability or unwillingness to respond in a timely
    fashion, that we lack the information necessary to fully consider their
    proposal. I am also disturbed by the lack of a response from DOE,
    because the information I requested from the Department is of a basic
    nature, on a proposal that had been considered previously by the
    Senate, and therefore I find it difficult to believe that my request
    was extraordinary. Yet, judging by the written testimony of Mr. Allen
    Burns, DOE still cannot answer these questions.
        Mr. Chairman, I would like to submit for the record the two letters
    and questions I sent to the Department. I would also ask that you keep
    the record of this hearing open for a substantial amount of time
    because that may be our only hope for ever getting the Department to
    contribute something useful to this hearing.
        With that Mr. Chairman, I thank you for your indulgence and will
    look forward to hearing from our witnesses.

        Mr. Barton. Without objection, so ordered. Does the
    gentleman from Arizona, Mr. Shadegg, wish to make an opening
    statement?
        Mr. Shadegg. I'll make a brief one, Mr. Chairman. I simply
    want to thank you for holding this hearing. I think it is
    extremely important. I am particularly interested in the issue
    of relicensing the pilot hydropower plants. With the current
    energy crisis we are suffering, the spike in the price of
    gasoline and crude oil, and with the recognition that many of
    our strategies to control air pollution and to avoid further
    damage to our air quality, I think it is incumbent upon this
    Congress to ensure that the process of relicensing dams is
    accomplished in an appropriate fashion and that that----
        Mr. Barton. You say relicensing dams or relicensing Dems?
        Mr. Shadegg. Dams.
        Mr. Barton. Just want to get it on the record.
        Mr. Shadegg. Relicensing hydroelectrical projects if you
    prefer, Mr. Chairman.
        Mr. Barton. That's more appropriate.
        Mr. Shadegg. And they affectionately labeled me ``Mr.
    Hydro'' last year.
        Mr. Barton. No. They actually labeled you ``Hydro Man.''
        Mr. Shadegg. I commend my colleague, Mr. Towns, for his
    legislation, and I'm anxious to hear the testimony here this
    morning.
        Mr. Barton. Thank you. The distinguished gentleman from New
    York, a member of the full committee, not of the subcommittee,
    but who is a distinguished guest today. Would you like to make
    an opening statement?
        Mr. Towns. Thank you very much, Mr. Chairman, and I also
    thank you for holding this hearing. First I'd like to thank you
    again for holding this hearing on my bill, H.R. 2335, the
    Hydroelectric Licensing Process Improvement Act of 1999. This
    is an important issue, and it deserves the attention that we
    are giving it today.
        I would also like to thank the witnesses. I have reviewed
    your testimony. I look forward to the opportunity to discuss
    these issues with you during the question and answer period.
        Over half of all nonFederal hydroelectric capacity is
    scheduled to be relicensed in the next 15 years. If current
    trends continue, our country could lose a number of hydropower
    projects and with them enormous clean energy and other
    benefits. Congress must act, and it must act now, to improve
    the relicensing process.
        I think that all of the witnesses today, regardless of
    whether they support my legislation, will acknowledge that
    there are serious problems with the current hydroelectric
    licensing process. The present process broken and should be
    fixed. While I commend FERC and the other agencies involved in
    the several well-known efforts to rationalize the licensing
    process, I do not believe that they are sufficient to bring the
    necessary level of accountability and responsibility to the
    process. Statutory changes are needed to require agencies to
    consider all important factors when setting mandatory
    conditions and to give applicants some procedural protections
    to ensure that the agencies abide by those requirements.
        Without going into the description of H.R. 2335, I do want
    to emphasize, this legislation does not--and I emphasize that--
    does not propose to repeal mandatory conditioning. Neither does
    it modify or repeal the environmental laws of the resource
    agencies involved in the licensing process. Rather, the bill
    calls for the reasonable implementation of these laws to
    achieve a balance that will protect the environment while
    ensuring a viable hydroelectric industry.
        Finally, Mr. Chairman, I would like to note also that since
    this bill was introduced, other problems facing companies
    trying to relicense hydro projects have come to my attention.
    For example, I recently learned about a problem of a utility
    company with respect to their efforts to relicense a project.
    Unfortunately, the State has used the authority delegated to
    them under section 401 of the Clean Water Act to impose license
    conditions without regard to the costs and benefits of the
    license conditions they would impose.
        I believe this is an important issue that warrants
    additional consideration by this subcommittee. Once again, I
    would like to thank you for extending to me the courtesy to
    come and to make an opening statement and to indicate that I
    look forward to working with you to be able to bring about some
    changes.
        Any time you have a situation where you try to relicense,
    you don't know how many lawyers you need, you don't know how
    much money you need or do you have any idea what year it will
    ever happen. So thank you very much, Mr. Chairman.
        Mr. Barton. Thank you, Congressman. All of the members not
    present have the requisite number of days to put their opening
    statement in the record at the appropriate point.
        [Additional statement submitted for the record follows:]
     Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
        Mr. Chairman, this hearing is indeed timely. It has been many years
    since the Subcommittee on Energy and Power reviewed legislative
    proposals to reform the Federal hydroelectric relicensing process.
        This is not an issue that has gotten much attention. My first
    priority is to enact comprehensive electric restructuring legislation.
    I intend to push very hard for that to happen. Of course, 10 percent of
    U.S. electric generation comes from hydroelectric projects.
    Hydroelectric relicensing is an important issue in many States, and I
    applaud my good friend Mr. Towns' work.
        Many believe the current relicensing process is hopelessly broken
    and there is a need to amend the Federal laws that govern this process.
    Others are concerned that legislation might undermine the level of
    protection for the environment and fish in the relicensing process.
        In my view, a relicensing process that takes a decade or two has
    room for improvement. The process is a very complicated one, and
    involves Federal, State, and local officials. The history of the
    licensing process has been marked by State-Federal conflicts, and
    frictions between FERC and the Federal resource agencies.
        I want to offer a special welcome to one of the witnesses today,
    Mr. Waddington of Reynolds Metals Company. I will give his comments on
    S. 1937 my close attention.
        I look forward to hearing the testimony today.

        Mr. Barton. We're going to start with our first panel of
    legislators. We're going to start with Senator Murkowski. And
    we understand, Senator, that you are chairing a hearing in
    absentia at this moment. So after you give your statement you
    can leave, and we'll submit questions to you in writing. Or if
    you wish to stay and take oral questions, that'll be your
    prerogative.
        We're going to recognize you for 7 minutes. Your written
    statement is in the record. Then we'll just go to Mr.
    Radanovich and then Congressman DeFazio.

      STATEMENTS OF HON. FRANK MURKOWSKI, A UNITED STATES SENATOR
        FROM THE STATE OF ALASKA; HON. GEORGE P. RADANOVICH, A
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA; AND
     HON. PETER A. DeFAZIO, A REPRESENTATIVE IN CONGRESS FROM THE
                            STATE OF OREGON

        Senator Murkowski. Thank you very much, Mr. Chairman. Let
    me thank you for calling this hearing, and I think the topics
    that are before your committee are most appropriate, and as you
    indicated, they passed the Senate. Hydro relicensing, of
    course, is very meritorious and something we have to address
    and resolve.
        First of all, let me thank Congressman Dingell for his
    remarks, and I certainly look forward to working with he and
    his staff as well as all the members of the committee to try
    and address our little bill, which suggests, if you will, that
    Alaska's a little different, that a five megawatt exemption is
    justified, and I would hope that in my brief remarks I can
    convince the environmental community that it is a big plus for
    the environment.
        Let me give you an example of why perhaps Alaska is
    different. You know, our pipeline has been in existence for 23
    years. It's up for renewal. It needs to be relicensed. And the
    mandate of the Department of Interior was that it receive a
    full EIS. We were kind of surprised, because there's never been
    a pipeline that's been relicensed in this country, the hundreds
    of pipelines, that required anything more than environmental
    assessment. The explanation was, ``Alaska is different.''
        That being the case, what we've got in the five megawatt or
    less bill that's before this committee is really needed for two
    reasons. It will help reduce the price of electricity to
    consumers, and it will help the environment in our State.
        As you know, and those of you who have traveled in Alaska,
    we have a small--a potential for a small number of
    hydroelectric projects of five megawatts or less. These are for
    areas where there are no anadromous fish in the streams or the
    runoff, and they can meet the needs of our small communities of
    2,500 to 3,000 people.
        Now, FERC's licensing process is significant in case you're
    wondering. And as a consequence, it costs millions of dollars,
    and the burden of a FERC license is so great that the small
    projects simply can't afford the cost.
        We have in my home town 18 feet of rainfall a year. That's
    over 220 inches. This is in southeastern Alaska. These are
    mountainous little streams that come down with a Pelton wheel
    plugged in. We can get power generation to these communities
    that are dependent currently on diesel power. And as a
    consequence, with that kind of rainfall, we're looking at
    projects like a black bear project on Prince of Wales at 4.5
    megawatt, took 7 years to get it through FERC. In comparison,
    the construction only took a year.
        The FERC licensing costs of $1.2 million comparison with,
    you know, $10 million to build the project, who pays that $1.2
    million? It's the consumer through the licensing. And as a
    consequence, you know, it just isn't applicable in our small
    area. We only have 700,000 people in an area one-fifth the size
    of the United States that goes from Canada to Mexico, Florida
    to California, with the Aleutian Islands.
        So what we want to make sure is that we're not bypassing
    any of the environmental oversight that is necessary. But we
    have high costs because much of our electric generation is by
    diesel. You know, the price, residential price of electricity
    in Alaska is 11.5 cents per kilowatt hour in our major cities
    as compared to 8.3 cents--that's 39 percent higher. In some of
    the villages it's up to 44 cents per kilowatt. And, you know,
    it's because we have to bring in the diesel fuel by barge
    during the summer season, or if we're short in the winter, we
    have to fly it in.
        Now the consumers will benefit, the air quality will
    benefit. And finally, we do have the safeguards to ensure that
    in this legislation there is the necessary protection for the
    environment. It does not exempt Alaska's small hydro projects
    from regulation. Instead it allows the State to regulate in
    lieu of FERC. And obviously the State's interested in its
    environmental consequences and responsibilities, more so than a
    distant FERC who, you know, sits here in Washington and looks
    at something 3,000 miles away a little different than the folks
    that are there looking at it.
        In addition, because licensing and regulation for these
    small projects will be handled by the State instead of FERC,
    the processing time and the cost will be reduced.
        Finally, this legislation allows Alaska to regulate the
    small projects only after FERC certifies that the State has in
    place a regulatory program which protects the public interest
    and the environment to the same extent provided by licensing
    and regulation.
        Finally, the legislation specifically provides that full
    application of all Federal environmental natural resources or
    culture resource protection laws apply. Thus the environment in
    the legislation will provide full protection of the environment
    and the public interest while at the same time reducing the
    cost and time required to license a small hydro project in
    Alaska.
        In summary, if enacted, this legislation would benefit
    Alaska, the environment and the economy, and I would encourage
    my environmental friends to join with me, and if they have
    differences, I'd be happy to discuss it with them. But this is
    a win-win-win, and it'll do a great benefit for Alaskans. And
    when you see 18--that's the year I learned to swim, when we had
    18 feet of rain in 1947. Thank you, Mr. Chairman.
        [The prepared statement of Hon. Frank Murkowski follows:]
     Prepared Statement of Hon. Frank H. Murkowski, Chairman, Committee on
               Energy and Natural Resources, United States Senate
         Chairman Barton and the Members of the Subcommittee, I appreciate
    the opportunity to testify before your Subcommittee on S. 422, a bill
    to provide for Alaska state jurisdiction over small hydroelectric
    projects of 5 megawatts or less. This bill passed the Senate
    unanimously.
         This legislation is needed for two reasons. First, it will help
    reduce the price of electricity to consumers in Alaska. Second, it will
    help the environment in Alaska. Let me explain.
        Alaska has great potential for a number of small hydroelectric
    projects of five megawatts or less. These projects are generally run-
    of-the-river, meaning that no dam will be built, and they are generally
    located on non-anadromous rivers. A 5 megawatt generator can meet the
    needs of an Alaskan community of two to three thousand people.
        But under existing law, in order for a hydroelectric project to be
    built--no matter how small or remote--it must obtain a license from the
    Federal Energy Regulatory Commission. And FERC's licensing process
    itself is a major impediment for these small projects, often killing
    otherwise beneficial ones.
        For a large hydroelectric project costing tens or hundreds of
    millions of dollars, the burden of obtaining a FERC license is large,
    but relatively small as compared to the total cost. But that is not the
    case for a small project. Let me give some real world examples.
        Take the Black Bear project on the Prince of Wales Island, a 4.5
    megawatt generator. It took seven years to get through the FERC
    process; in comparison, construction of the project took only one year.
    The FERC licensing process cost $1.2 million; in comparison, it cost
    $10 million to build the project. And who pays that $1.2 million FERC
    licensing cost? You guessed it, consumers through higher electricity
    rates.
        The Goat Lake project is another example. This 4 megawatt project
    took five years to get through the FERC process, which cost just over
    $1 million. Compare that to a construction cost of $10 million.
        These are not exceptions to the rule--they represent the normal
    cost and time to obtain a license from the FERC. Thus, as you can see
    for a small project located in a remote region of Alaska, FERC's
    licensing process is a major expense. And for too many small projects,
    this alone dooms an otherwise economically viable and environmentally
    beneficial project.
        These small hydro projects are critically important to consumers
    and for the economic development of Alaska. Alaskans have the most
    expensive electricity in the United States, and anything we can do to
    reduce that would be very helpful. According to Department of Energy
    data, the average residential price of electricity in Alaska is 11.5
    cents per kilowatt hour as compared to a U.S. residential average of
    8.3 cents per kilowatt hour--39 percent higher. And in some parts of
    Alaska the residential price reaches a stunning 44 cents per kilowatt
    hour--5 times the U.S. average. A key reason for this high cost of
    electricity is that a large share of Alaska's electrical supply--
    particularly in rural and remote regions--is provided by diesel-fired
    internal combustion engines. If high-priced diesel-fired electric
    generators could be replaced with low-cost hydroelectric power,
    consumers would enjoy significant reductions in the electrical bills.
    That would be particularly beneficial to Alaskans on fixed incomes.
        Not only would Alaska's consumers benefit from low-cost
    hydroelectric power, Alaska's environment would also benefit. Diesel-
    fired generators produce significant amounts of unhealthy air
    emissions--hydroelectric power produces none.
        Let me turn now to the legislation itself. Its most important
    aspect is that it provides for the full protection of the environment.
    The legislation does not exempt Alaska's small hydro projects from
    regulation. Instead, it allows the State of Alaska to regulate in lieu
    of FERC. I ask: Who is more interested in the environment of Alaska--
    Alaskans or a distant FERC? In addition, because licensing and
    regulation of these small projects will be handled by the State of
    Alaska, instead of FERC, processing time and costs will be reduced
    significantly.
        Moreover, the legislation allows Alaska to regulate these small
    projects only after FERC certifies that the State of Alaska has in
    place a regulatory program which ``protects the public interest . . .
    and the environment to the same extent provided by licensing and
    regulation . . . [by the FERC].'' Finally, the legislation specifically
    provides for the full application of all ``Federal environmental,
    natural resources, or cultural resources protection laws . . .'' Thus,
    enactment of this legislation will provide for full protection of the
    environment and the public interest, while at the same time reducing
    the cost and time required to license a small hydro project in Alaska.
        In summary, if enacted this legislation will benefit both Alaska's
    environment and its economy.

        Mr. Barton. Thank you, Senator. I just want to----
        Senator Murkowski. And thank you, gentlemen.
        Mr. Barton. Thank you.
        Senator Murkowski. Thank you, John.
        Mr. Barton. I just--we have a new timing system, and we
    went from the old timing system to an egg timer to this high
    tech system, and it's supposed to give a certain amount of time
    into the statement, usually at the end where you sum up and the
    little yellow light goes on. As soon as Senator Murkowski
    started speaking, the yellow light went on to sum up.
        Senator Murkowski. Well, that's because I'm from the
    Senate.
        I was winding up.
        Mr. Barton. All right.
        Senator Murkowski. Would you excuse me?
        Mr. Barton. Yes. We'll submit any questions to you in
    writing for the record.
        Senator Murkowski. I'm conducting a hearing on climate
    change.
        Mr. Barton. If you learn anything, send us a copy.
        Senator Murkowski. It's pretty cold in Barrow this winter.
        Mr. Barton. Thank you, Senator.
        Senator Murkowski. Thank you very much.
        Mr. Barton. We'd now like to hear from our distinguished
    colleague from California, Mr. Radanovich. You will be
    recognized for 7 minutes also, and then your statement's in the
    record in its entirety.

                 STATEMENT OF HON. GEORGE P. RADANOVICH

        Mr. Radanovich. Thank you so much, Mr. Chairman. And I
    appreciate the opportunity to testify before your subcommittee.
        I want to voice my support, my strong support for
    Congressman Towns' bill, 2335, The Licensing Process
    Improvement Act of 1999.
        I appear before you today in two capacities, first as a
    representative who is concerned about our national energy
    policy, but also here as chairman of the Western Caucus, a
    bipartisan group of 56 Members of Congress concerned about
    improving the quality of life for Western and rural Americans.
        The environmental vision of the Western Caucus is grounded
    in the belief that sound scientific evidence, not politics,
    should be the determining factor in environmental
    decisionmaking, and that environmental protection should be
    achieved in a cooperative manner rather than through conflict
    and wasteful litigation.
        That is precisely the philosophy behind H.R. 2335, and
    that's why I support the bill, and I urge others to support it
    as well.
        Our Nation is at a precarious crossroads with energy--with
    regard to its energy policy. On need look no further than the
    local gas station, where gas prices are reaching levels close
    to $2 a gallon in some areas of the Nation, to recognize the
    serious repercussions of our ongoing dependency on foreign
    sources of energy. This dependence is even more perplexing when
    one considers that domestic generation of hydropower, our
    Nation's largest emissions-free renewable energy resource, is
    diminishing as a result of FERC licensing process that most, if
    not all, parties agree is in need of repair.
        Since the late 1800's when the first hydroelectric plant in
    the American West--the Folsom Powerhouse--opened in California,
    hydropower has played a vital role in California's energy mix.
    According to the Energy Information Administration, California
    hydroelectric facilities generated about 88.5 billion kilowatt
    hours of hydropower in the 2-year period of 1997 to 1998,
    representing approximately 40 percent of the net electric
    utility generation in the State.
        The benefits of hydropower to my State and to the Nation go
    well beyond clean, efficient, renewable energy--renewable
    electric power. Our Nation's hydro projects provide drinking
    water, flood control, fish and wildlife habitat, irrigation and
    environmental enhancement funding, and recreation to benefit
    all Americans.
        In my district in California, Hunting Lake and Shaver Lake
    re reservoirs that were created by and exist solely because of
    the Big Creek hydro project. In total, my district comprises
    over 20 major hydro projects, generating about 3,000 megawatts
    of hydropower. Due to its unique load following capability,
    peak capacity and voltage stability attributes, hydropower
    plays a critical role in maintaining reliable electric service
    in the region that I represent as well as throughout the
    Nation.
        In spite of the benefits our country derives from
    hydropower, an enormous problem exists. The problem is that
    overly burdensome, costly and litigation-prone FERC licensing
    process is threatening our Nation's nearly 60,000 megawatts of
    nonFederal hydro capacity.
        A typical hydro license application can take from 8 to 10
    years to weave its way through the complex licensing process.
    Some have taken more than 20 years. Certain Federal agencies
    are allowed to set mandatory conditions on FERC licenses
    without regard to their effects on project economics, energy
    benefits and values protected by other statues or regulations,
    or FERC-imposed license conditions.
        There is no referee other than the Federal courts, which
    can resolve conflicts between these agencies and reconcile
    their inconsistent demands. Often the result is license
    conditions that have nothing to do with project impacts.
    Hydropower licensees, and even the FERC, have no opportunity to
    effectively appeal or even question the basis of mandatory
    conditions set by the agencies except through litigation.
        The unfortunate result is higher costs, loss of operational
    flexibility and lost generation due to new constrains imposed
    on other operations.
        Earlier this year in its Energy Outlook 200 report, the
    Energy Information Administration, the independent statistical
    branch of the U.S. Department of Energy, for the first time
    forecast decreased hydroelectric capacity as regulatory actions
    limit capacity at existing projects.
        My colleagues, this is troubling--and it's a very troubling
    and urgent state of affairs. Troubling because this is a clean,
    wholly domestic source of energy we are talking about. Urgent
    because over the next 15 years, over half of all nonFederal
    hydro capacity--nearly 29,000 megawatts of hydropower--must go
    through this FERC relicensing process. That, my friends, are
    why we are here today and why this bill is so important.
        By enacting H.R. 2335, Congress can do its part to ensure
    that this important renewable resource continues to operate in
    a cost-effective and environmentally compatible manner. If
    current trends continue, my State our country will lose a
    number of hydropower projects, and with them, enormous clean
    energy benefits. Moreover, consumers could faced increased
    energy replacement costs.
        Let me talk briefly about what this bill is and what it
    isn't. This is a moderate bill that enjoys bipartisan support
    in the House of Representatives. It will not change or modify
    any existing environmental laws nor remove regulatory authority
    from Federal resource agencies. Rather, it will give these
    agencies the responsibility to consider and to be accountable
    for the full effects of their actions before imposing mandatory
    conditions on a hydro license. This bill also requires that
    resource agency conditions reflect sound scientific evidence.
        In closing, I want to reiterate that H.R. 2335 is a
    balanced bill. It emphasizes sound scientific evidence as the
    determining factor in environmental decisionmaking. the measure
    also achieves environmental protection in a cooperative manner,
    without costly lawsuits. By providing reasonable relicensing of
    hydroelectricity projects, H.R. 2335 is a benefit to the future
    of this clean, renewable energy resource. For these reasons, I
    encourage you to support this bill.
        I commend Congressman Towns for his leadership in
    introducing this important bill and urge that the subcommittee
    and all of my colleagues in the House work toward the enactment
    of this bill in this session.
        Thank you, Mr. Chairman.
        [The prepared statement of Hon. George P. Radanovich
    follows:]
       Prepared Statement of Hon. George Radanovich, a Representative in
                     Congress from the State of California
        Chairman Barton, members of the Subcommittee, thank you very much
    for giving me the opportunity to appear before you today to voice my
    strong support for Congressman Towns' bill, H.R. 2335, ``The Licensing
    Process Improvement Act of 1999''.
        I appear before you today in two capacities. First, as a
    representative who is concerned about our national energy policy; but I
    am also here as the Chairman of the Western Caucus, a bipartisan group
    of 56 Members of Congress concerned about improving the quality of life
    for Western and rural Americans. The environmental vision of the
    Western Caucus is grounded in a belief that ``sound scientific
    evidence, not politics, should be the determining factor in
    environmental decision-making,'' and that environmental protection
    should be achieved ``in a cooperative manner, rather than through
    conflict and wasteful litigation.'' That is precisely the philosophy
    behind H.R. 2335. That is why I support this bill. And that is why I
    urge you to support it as well.
        Our nation is at a precarious crossroads with regard to its energy
    policy. One need look no further than the local gas station--where gas
    prices are reaching levels close to $2.00/gallon in some areas of the
    nation--to recognize the serious repercussions of our ongoing
    dependency on foreign sources of energy. This dependency is even more
    perplexing when one considers that domestic generation of hydropower--
    our nation's largest, emissions-free, renewable energy resource--is
    waning as a result of a FERC licensing process that most, if not all,
    parties agree is in need of repair.
        Since the late 1800s, when the first hydroelectric plant in the
    American West--the Folsom Powerhouse--opened in California, hydropower
    has played a vital role in California's energy mix. According to the
    Energy Information Administration, California hydroelectric facilities
    generated about 88.5 billion kilowatt hours of hydropower in the two
    year period 1997-98, representing approximately 40 percent of net
    electric utility generation in the state.
        The benefits of hydropower to my state and to the nation go well
    beyond clean, efficient, renewable electric power. Our nation's hydro
    projects provide drinking water, flood control, fish and wildlife
    habitat, irrigation. environmental enhancement funding, and recreation
    benefits to all Americans. In my district in California, Huntington
    Lake and Shaver Lake are reservoirs that were created by and exist
    solely because of the Big Creek hydro project. Also, due to its unique
    load-following capability, peaking capacity and voltage stability
    attributes, hydropower plays a critical role in maintaining reliable
    electric service throughout the nation.
        It seems like hydropower is a good deal for the country and its
    citizens. So, what is the problem?The problem is that an overly
    burdensome, costly and litigation-prone FERC licensing process is
    threatening our nation's nearly 60,000 megawatts of non-federal hydro
    capacity.
        A typical hydro license application can take from eight to 10 years
    to weave its way through the complex licensing process-some have taken
    more than 10 years. Certain federal agencies are allowed to set
    ``mandatory'' conditions on FERC licenses without regard to their
    effects on project economics, energy benefits and values protected by
    other statutes or regulations, or FERC imposed license conditions.
    There is no ``referee'' other than the federal courts, which can
    resolve conflicts between these agencies or reconcile their
    inconsistent demands. Often, the result is license conditions that have
    nothing to do with project impacts. Hydropower licensees, and even the
    FERC, have no opportunity to effectively appeal, or even question, the
    basis of mandatory conditions set by the agencies, except through
    litigation.
        The unfortunate result is higher costs, loss of operational
    flexibility, and lost generation due to these constraints imposed on
    operations. Earlier this year, in its Energy Outlook 2000 report. the
    Energy Information Administration--the independent, statistical branch
    of the U.S. Department of Energy--for the first time forecasts
    decreased hydroelectric capacity as ``regulatory actions limit capacity
    at existing projects . . .''
        My colleagues, this is a troubling and urgent state of affairs.
    Troubling because this is a clean, wholly domestic source of energy we
    are talking about. Urgent because over the next 15 years, over half of
    all non-federal hydro capacity--nearly 29,000 megawatts of hydropower--
    must go through this FERC relicensing process.
        That, my friends, is why we are here today, and why this bill is so
    important.
        By enacting H.R. 2335, Congress can do its part to ensure that this
    important renewable resource continues to operate in a cost-effective
    and environmentally compatible manner. If current trends continue, my
    state and our country could lose a number of hydropower projects and,
    with them, enormous clean energy benefits. Moreover, consumers could
    face increased energy replacement costs.
        Let me talk briefly about what this bill is and what it isn't. This
    is moderate bill that enjoys bipartisan support in the House of
    Representatives. It will not change or modify any existing
    environmental laws, nor remove regulatory authority from federal
    resource agencies. Rather, it will give these agencies the
    responsibility to consider, and be accountable for, the full effects of
    their actions before imposing mandatory conditions on a hydro license.
    The bill also requires that resource agency conditions reflect sound,
    scientific evidence.
        In closing, I want to reiterate that H.R. 2335 is a balanced bill.
    It emphasizes sound scientific evidence as the determining factor in
    environmental decision-making. The measure also achieves environmental
    protection in a cooperative manner, without costly lawsuits. By
    providing reasonable relicensing of hydroelectricity projects, H.R.
    2335 is a benefit to the future of this clean, renewable energy source.
    For these reasons, I encourage you to support the bill.
        I commend Congressman Towns for his leadership in introducing this
    important bill and urge the subcommittee and all of my colleagues in
    the House to work towards enacting this bill this session.
        Thank you.

        Mr. Barton. Thank you, Congressman.
        Mr. Radanovich. I, too, do have a hearing in the Resources
    Committee that is of specific interest to my constituents, so
    if I may excuse myself.
        Mr. Barton. Yes, sir.
        Mr. Radanovich. Thank you very much.
        Mr. Barton. Thank you. We'd now like to hear from
    Congressman DeFazio. We'll put your statement in the record and
    recognize you for 7 minutes.

                   STATEMENT OF HON. PETER A. DeFAZIO

        Mr. DeFazio. Thank you, Mr. Chairman. I'm here today to
    talk about the JOE bill.
        Mr. Barton. Oh, no.
        Mr. DeFazio. Sometimes known as Senate bill 1937. I commend
    the committee on bringing the bill to the attention of the
    subcommittee and am hopeful that you'll act favorably upon it
    in the near future.
        There is a time sensitivity to this legislation. The bill
    is quite simple, actually. It would establish a JOE, or Joint
    Operating Entity, in the Pacific Northwest, which will allow
    the smaller, consumer-owned utilities to aggregate their demand
    and purchase their power from the Bonneville Power
    Administration and achieve some efficiency in their operations
    that could be passed on as cost savings to consumers, both
    residential and business consumers of those utilities.
        The legislation is very, very narrow in scope. It does--you
    know, although it amends the Northwest Electric Power Planning
    Conservation Act, it does not go to the issue of preference. It
    does not entitle the utilities who would enter into the Joint
    Operating Entities to purchase more power than they could
    individually from the Bonneville Power Administration. It does
    not change their rights in terms of resale of the preference
    power. It just allows them to aggregate--these are very, for
    the most part, very small utilities that do not have a
    tremendous amount of technical expertise.
        They're dealing with a very large Federal agency, the
    Bonneville Power Administration, which is proposing rather
    complex new contractual arrangements, including some things
    called slice which nobody quite understands, and other things.
    And it just would be of great utility to these small entities
    to be able to aggregate their purchasing power and to also pool
    their funds to higher the technical expertise they need to
    better negotiate with the Bonneville Power Administration.
        In my opinion, it will not disadvantage any other customers
    or potential customers of the Bonneville Power Administration
    since all these utilities are entitled to full preference and
    generally are all full requirements customers getting all of
    their power from the Bonneville Power Administration. Yet you
    will hear from the aluminum industry, who are raising some
    procedural concerns, as I understand, not particularly
    substantive concerns, and asking that consideration be delayed
    til such a time as it could be part of a greater overhaul or
    discussion of the Bonneville Power Administration's operating
    statutes.
        The problem is that the Bonneville Power Administration is
    on a short timeline for these contracts. The current contracts
    are expiring. In order to meet their obligations both to
    bondholders and to the Federal treasury and to the region, the
    Bonneville Power Administration is going to have to complete
    the contracts in the not-too-distant future. And therefore, if
    this legislation is not quickly adopted, it will just
    disadvantage one small group of ratepayers in the contractual
    discussions.
        So I would urge the subcommittee's favorable preference--or
    favorable action. It does not, again, alter the status between
    and among Bonneville's other customers.
        [The prepared statement of Hon. Peter A. DeFazio follows:]
    Prepared Statement of Hon. Peter DeFazio, a Representative in Congress
                            from the State of Oregon
        As co-chair of the Northwest Energy Caucus, I would first like to
    thank the members of the Commerce Committee for their thorough and
    efficient work on Senate Bill 1937. It has been a pleasure to work with
    this committee on Federal Power Marketing Agency issues, in particular
    trying to establish joint Operating Entities. I am particularly
    appreciative of Mr. Barton's involvement with the Northwest Energy
    Caucus as the House struggles with energy restructuring. I am grateful
    to Mr. Dingell for bringing this issue before the Commerce Committee so
    that everyone might better understand the merits of establishing joint
    Operating Entity in the Pacific Northwest and its importance to many
    rural Oregonians.
        The energy market in the Pacific Northwest is unique compared with
    other regions of the country. Over 45% of the power used by residential
    and industrial customers is generated and marketed by Bonneville Power
    Administration (BPA). Many rural areas in my district are serviced by
    rural electric cooperatives and other consumer-owned utilities that
    rely almost exclusively from on power provided by BPA.
        Establishing a Joint Operating Entity in the Pacific Northwest,
    will allow smaller, consumer-owned utilities to more effectively
    purchase their power from BPA and achieve more efficiency in their
    operations which should be passed on as cost savings to consumers.
        While S. 1937 amends the Pacific Northwest Electric Power Planning
    and Conservation Act, the legislation does not amend statutes governing
    preference. The Joint Operating Entity will not have the ability to
    purchase more power than individual utilities already receive from BPA.
    In addition, S. 1937 does not expand the rights of BPA's consumer-owned
    utilities to purchase and resell BPA power. It simply allows a joint
    Operating Entity to manage power purchases from BPA.
        BPA and its customers have been working for two years to negotiate
    contacts and establish rates for the future sale of power. This spring
    and summer, BPA will complete its subscription and rate negotiations.
    Oregon consumer-owned utility customers will greatly benefit from the
    establishment of joint Operating Entities before contracts and rates
    are finalized.
        I understand that the Direct Service Industries do not support
    moving the legislation although they have no substantive objections. I
    find this and other recent actions of the Direct Service Industries at
    odds with many of the consumer-owned and investor-owned utilities in
    the Pacific Northwest. I urge this committee to support S. 1937 and
    quickly move this legislation before the entire House.
        Again, I appreciate the attention this Committee has given to this
    important issue.

        Mr. Barton. Thank you, Congressman. The Chair will now
    recognize members for questions for Congressman DeFazio. I
    don't have any. Congressman Towns?
        Mr. Towns. Do not have any.
        Mr. Barton. Congressman Shadegg?
        Mr. Shadegg. I don't have any.
        Mr. Barton. Congressman Markey?
        Mr. Markey. Good job. Excellent job.
        Mr. Barton. Congressman Bryant?
        Mr. Bryant. I don't have any. We could call it the ED,
    though, bill, JOE-ED bill, you know, if you'd like.
        Mr. DeFazio. If that'll help, anything. We're flexible on
    the name, Mr. Chairman.
        Mr. Barton. I understand.
        Mr. DeFazio. As long as JOE is part of it.
        Mr. Barton. That's--you know, success has many fathers, and
    failure none, so we'll see.
        Mr. DeFazio. All right.
        Mr. Barton. Thank you for your testimony.
        Mr. DeFazio. Thank you, Mr. Chairman.
        Mr. Barton. Good job. We now want to hear from our second
    panel, but before I bring them forward, I want to make a
    statement. We have been in a continuing battle with members of
    the executive branch about getting their testimony in on time.
    Our primary problems have been with the Department of Energy.
    It got so bad with the Department of Energy that I called the
    Secretary and said, ``If your testimony's not on time this
    time, don't bother coming.'' And it got here on time.
        Today, of our administration witnesses, all but one had
    their testimony in on time. The Department of Agriculture
    testimony came in at 8:30 this morning. So we're going to ask
    Mr. Paul Brouha, who's the associate deputy chief, to wait
    until the third panel to give staffs on both sides the
    opportunity to read the testimony.
        My briefing book was given to me last night at 10:30.
    Didn't have it in it. So hopefully by the time the first--the
    second panel gets their--goes through their testimony and
    answers questions, we will have had a chance to digest the
    Department of Agriculture's testimony. Mr. Brouha can be on the
    third panel. If he has other things he needs to do, he can go
    back to the Department of Agriculture.
        So, will Mr. Hoecker of the Federal Energy Regulatory
    Commission and Mr. Leshy from the Department of Interior come
    forward. Mr. Hoecker is accompanied by Commissioners Hebert and
    Massey. Mr. Burns, who is with the Bonneville Power
    Administration, the Department of Energy, and Ms. Penelope
    Dalton, who is with the National Marine Fisheries Service, if
    you gentlemen and ladies will come forward.
        Do you want to make an opening statement?
        Mr. Markey. Delighted to.
        Mr. Barton. While they're coming forward, we will let
    Congressman Markey make a brief statement.
        Mr. Markey. Thank you, Mr. Chairman. I appreciate it. Over
    200 years ago, Sir Isaac Newton told us, every body continues
    in its state of uniform motion unless it is compelled to change
    that state by forces impressed upon it. Little did Mr. Newton
    know how relevant that finding would be to today's hearing.
        Salmon swimming upstream know how relevant it is. They abut
    Mr. Newton's first law head on, literally, as they try to pass
    rivers and streams blocked by hydroelectric facilities. The
    hydropower industry knows what it means, too. They know that
    FERC's relicensing procedures may force them to consider the
    environmental and the resource values of their hydroelectric
    plants. The process provides the public with an opportunity to
    assess the critical environmental, recreational, navigational,
    flood control, irrigation, and other values that are also in
    contention with the process of producing electricity.
        So they're trying to rewrite Sir Isaac Newton's first law
    of motion by diminishing the resource agency's involvement in
    the relicensing of these hydropower facilities by letting the
    hydropower industry continue with less resistance and Federal
    oversight.
        Now while I understand that the industry finds the
    complexity of the relicensing process frustrating, I must note
    that licensees held their licenses for up to 50 years. In 1985,
    in 1986 when I was chairman of this subcommittee----
        Mr. Barton. Oh, the golden years.
        Mr. Markey. The good old days. I spent considerable time
    and effort in forging the consensus that became the Electric
    Consumers' Protection Act of 1986, or ECPA. That legislation
    included provisions that required that the FERC base its
    recommendations for mitigating the adverse effects of a license
    on the recommendations of Federal and State resource agencies
    and mandated that FERC negotiate with those agencies in the
    event of disagreements.
        ECPA also required FERC to give equal consideration to the
    environment, to fish, wildlife and other nonelectricity values
    as it gives to the development objectives in making licensing
    decisions.
        Congress enacted these reforms.
        Mr. Barton. Can the gentleman speed it up a little bit? I
    see you've got about four more pages of this brief statement.
        Mr. Markey. I'll be glad to do it. I'll be glad to do it.
    That became the law of the land, and it became the new
    constitution for constructing this balance between the
    environment----
        Mrs. Wilson. Would the gentleman yield for just a question?
        Mr. Markey. Sure. I'd be glad to.
        Mrs. Wilson. Does this Newtonian theory mean that the
    gentleman is still living in the world before Einstein and the
    discovery that energy and mass are interchangeable and perhaps
    we might be able to move at the speed of light to----
        Mr. Barton. See, no good deed goes unpunished.
        Mr. Markey. No. It only means that as an English major, it
    was the best metaphor available on short notice.
        And again, you know, congressional expert is an oxymoron.
    We're only experts compared to each other, not the real experts
    out here.
        Mr. Barton. That's true.
        Mr. Markey. So I just do my best to illuminate, you know,
    as best I can the contentions on both sides.
        Mr. Barton. Well, we'll put the gentleman's complete formal
    statement in the record.
        Mr. Markey. So I'm not--all right. So I'll conclude by
    saying I am not saying torpedo all the dams. All I'm saying is
    we shouldn't be saying damn the environment, full speed ahead,
    that we have to construct a balance. I think the 1985-'86 act
    was a good balance, and I think that we should be very careful
    if we try to alter that balance. And I thank you, Mr. Chairman.
        [The prepared statement of Hon. Edward J. Markey follows:]
       Prepared Statement of Hon. Edward J. Markey, a Representative in
                    Congress from the State of Massachusetts
        Thank you, Mr. Chairman. Over 200 years ago Sir Isaac Newton told
    us
            ``Every body continues in its state . . . of uniform motion . .
            . unless it is compelled to change that state by forces
            impressed upon it.''
    Little did Mr. Newton know how relevant that finding would be for
    today's hearing.
        Salmon swimming upstream know how relevant it is. They abut Mr.
    Newton's first law head-on--literally--as they try to pass rivers and
    streams blocked by hyrdopower facilities.
        The hydropower industry knows what it means too. They know that
    FERC's relicensing procedures may force them to consider the
    environmental and resource values of their hydroelectric plants. The
    process provides the public with an opportunity to assure that critical
    environmental, recreational, navigational, flood control, irrigation,
    other values are being properly served. So they're trying to rewrite
    Sir Isaac Newton's first law of motion by diminishing the resource
    agencies' involvement in the relicensing of these hydropower
    facilities--by letting the hydropower industry continue with less
    resistance and federal oversight.
        While I understand that the industry finds the complexity of the
    relicensing process frustrating, I must note that licensees hold their
    licenses for up to 50 years. From 1985 to 1986, I spent considerable
    time and effort, as the Chairman of the Energy Conservation and Power
    Subcommittee, in forging the consensus that became the Electric
    Consumers Protection Act of 1986, or ECPA.
        That legislation included provisions that required that FERC base
    its recommendations for mitigating the adverse effects of a license on
    the recommendations of Federal and State resources agencies and
    mandated that FERC negotiate with those agencies in the event of
    disagreements. ECPA also required FERC to give equal consideration to
    the environment, fish and wildlife, and other nonpower values as it
    gives to power and development objectives in making licensing
    decisions. Congress enacted these reforms then because it was concerned
    that FERC was not according sufficient weight to environmental and
    nonpower concerns as it reviewed requests for relicensing of
    hydroelectric facilities.
        I would note that when we passed EPCA, we did so with unanimous
    bipartisan support of Members of the Committee and of the House and
    with the endorsement of both the environmental community and the
    support of the electric utility industry, including the Edison Electric
    Institute and other industry trade associations. Indeed, the
    legislative history of the bill shows that it had the support of such
    wild-eyed liberals as Frank Murkowski, Mike Oxley, and Ted Stevens.
    There were no calls at the time for repeal or weakening of the resource
    agencies mandatory conditioning authority back then, even though this
    authority had been exercised by the agencies for decades.
        So what has changed? Little that I can see, other than the fact
    that FERC, at the direction of Congress, must now give greater weight
    to the adverse environmental effects of a dam when it considers
    relicensing. Since many of the dams that are coming up for relicensing
    were first licensed before Congress enacted many of the environmental
    laws now on the books, it is inevitable that the industry will in some
    cases be required to take actions to rectify harm to fish and wildlife,
    natural habitat, recreational or other values. In my view, industry has
    a very high burden of proof to meet if it is to seek alterations in the
    process that might sacrifice these critical nonpower values.
        Let me be clear: I'm not saying we should ``torpedo all the dams''.
    But I'm also not saying ``damn the environment--full speed ahead'' with
    relicensing. What I am saying is that we have a relicensing process
    administered by FERC that holds water and should continue.
        I look forward to the testimony of the witnesses this morning on
    this matter, and to assuring that the integrity of the hydroelectric
    relicensing process remains intact.

        Mr. Barton. Well, we actually do value your expertise as
    past chairman of this subcommittee. And as we move to mark-up,
    we will call on that expertise.
        Mr. Markey. Thank you, Mr. Chairman.
        Mr. Barton. This will be a bipartisan basis--process, and
    I'm sure your institutional memory will be of considerable
    value, actually.
        All right. Let's start with the honorable chairman of the
    Federal Energy Regulatory Commission. Did Mr. Massey and
    Commissioner Hebert, are you all going to give statements also
    or are you just here to help the distinguished chairman? Okay.
    So we'll go with Mr. Hoecker, then Mr. Leshy and Mr. Burns,
    then Dr. Rosenberg. Okay.
        Chairman Hoecker, we'll recognize you for 5 minutes, put
    your statement in the record, and ask you to summarize it.
    Welcome to the subcommittee again.

     STATEMENTS OF HON. JAMES J. HOECKER, CHAIRMAN, FEDERAL ENERGY
      REGULATORY COMMISSION, ACCOMPANIED BY CURT HEBERT, JR. AND
      WILLIAM L. MASSEY, COMMISSIONERS; JOHN D. LESHY, SOLICITOR,
    U.S. DEPARTMENT OF THE INTERIOR; ALLEN BURNS, VICE PRESIDENT OF
     REQUIREMENTS MARKETING, BONNEVILLE POWER ADMINISTRATION, U.S.
      DEPARTMENT OF ENERGY; ANDREW A. ROSENBERG, DEPUTY ASSISTANT
     ADMINISTRATOR FOR FISHERIES, NATIONAL OCEANIC AND ATMOSPHERIC
              ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE

        Mr. Hoecker. Thank you, Chairman Barton and members of the
    subcommittee. It's a pleasure to be here. Thank you for the
    opportunity to discuss the proposed legislation and how it
    might affect the commission's hydropower program.
        I am pleased, of course, to be joined by my colleagues,
    Commissioners Massey and Hebert, who will be available to
    answer questions. And I convey the regrets of Commissioner
    Breathitt, who could not be here today.
        The commission's hydropower program faces significant
    challenges today, particularly in relicensing the major
    projects whose licenses expire in the next 10 years. Although
    the commission is ostensibly responsible for balancing all
    competing interests when it authorizes hydropower project
    operations, it effectively shares that responsibility with
    other agencies which have critical environmental conditioning
    authority.
        The commission often lacks the ability to control the
    timetable for license issuance and often has only very limited
    discretion to exercise its own judgment in determining the
    appropriate balance of economic efficiencies, environmental
    protection, and all the other public purposes the Federal Power
    Act identifies.
        So hydropower licensing proceedings can be contentious,
    prolonged and costly. While I am persuaded that such problems
    necessarily accompany any administrative proceeding that
    attracts such diverse, multiple interests, I believe that it is
    incumbent upon us in government to continue working to make
    licensing decisions more timely and to develop better support
    for them.
        I am proud of what the commission has accomplished in that
    regard and what we propose to achieve through further
    collaboration with other resource agencies.
        The commission takes very seriously its responsibilities to
    fully analyze developmental and environmental impacts, to give
    equal consideration to these impacts, and to exercise its
    balancing responsibilities in a manner that protects the
    environment.
        It encourages the use of its alternative licensing
    procedures in individual cases as tools for reaching
    settlements to satisfy both public and private interests in a
    timely manner.
        My written testimony today cites examples of our success.
    And because we respect the challenges and responsibilities
    faced by the resource agencies, which are assigned by the
    Congress to be stewards of the environment, the commission has
    dedicated much of its limited much of its limited resources to
    the pursuit of interagency agreements that will help us all
    serve the public better.
        The commission is a key sponsor and participant with six
    executive branch departments in the Interagency Task Force on
    Improving Hydroelectric Licensing Processes. The ITF now also
    has a chartered advisory committee that is gathering advice
    from States, licensees, Indian tribes, counties, and
    nongovernmental organizations on how to improve the process,
    and I expect great things from this effort.
        The principal legislation before you today, H.R. 2335, is
    designed to increase the efficiency of the licensing process
    and to promote outcomes that are in the public interest. I
    certainly support that intent, although some parts of the bill
    are more likely than others to achieve these outcomes, I
    believe. For instance, having the resource agencies consider a
    range of public interest factors in developing mandatory
    conditions would lead to a better informed decisionmaking,
    unquestionably. The commission is required to take into account
    a similar set of factors for matters within its discretion.
        The requirement for resource agencies to document their
    decisonmakings is essential for due process in my view.
    Subjecting resource agencies to deadlines for submitting
    conditions, as the commission's regulations now provide, also
    could help improve licensing processes. These sensible
    requirements could make licensing more timely and efficient
    while developing the record that supports well-reasoned
    licensing decisions.
        I am concerned that other provisions unnecessarily add
    burdensome, time-consuming steps to the process, however, and
    thereby add to the burden and cost placed on licensees and
    other participants without a compensating benefit.
        I've also been asked today to testify on six other bills.
    And in that regard, I rely on my written testimony and have
    nothing further to add about them at this time.
        I want to thank the chairman and the subcommittee for its
    interest in hydropower licensing at the Commission, and I will
    be very pleased to answer whatever questions you may have.
        [The prepared statement of Hon. James J. Hoecker follows:]
       Prepared Statement of James J. Hoecker, Chairman, Federal Energy
                             Regulatory Commission
        Mr. Chairman and Members of the Subcommittee: I appreciate the
    opportunity to appear before you to discuss proposed legislation, and
    how it might affect the Commission's hydropower program.
        The Commission's hydropower program faces significant challenges
    today, particularly in relicensing the important projects whose
    licenses expire in the next 10 years. Although the Commission is
    ostensibly responsible for balancing all competing interests when it
    authorizes hydropower project operations, its authority is statutorily
    circumscribed. Other agencies have critical environmental conditioning
    authority, and the multiple interests involved in relicensing cases
    require extensive due process. As we have seen, hydropower licensing
    cases can lead to contentious debates among the interested parties and,
    at times, among different elements of the Federal government with
    statutory roles in the process. Concerns have been voiced about whether
    licensing decisions can be more timely, and whether support for
    decisions can be better developed.
        In response, the Commission has advanced approaches that favor
    collaboration and balance. First, the Commission takes seriously its
    own responsibilities, for decisions within its discretion, to fully
    analyze developmental and environmental impacts, to give equal
    consideration to these impacts, and to exercise its balancing
    responsibilities in a manner that protects the environment. Second, the
    Commission encourages the use of its alternative licensing procedures
    in individual cases. This innovative approach is a tool for reaching
    settlements that satisfy public and private interests in a timely
    manner. Third, the Commission is working hard to enhance its procedures
    for working with the resource agencies, so the licensing process under
    the Federal Power Act (FPA) is as smooth and productive as possible.
    Legislation that will help us achieve these objectives and meet the
    FPA's objective of balancing all public interest considerations is
    helpful.
        My prepared testimony today will survey the Commission's statutory
    responsibilities and the overlap of regulatory authorities which are
    involved in the licensing process. My objective is to share with the
    Subcommittee an assessment about how that process has worked in
    practice, and what we are doing to improve our productivity and our
    responsiveness to the needs of various participants in future cases. I
    will then turn to the specific bills before you.
                     i. the commission's licensing program
        Hydropower is the oldest area of Commission jurisdiction. The
    Commission's predecessor began Federal regulation of private
    hydroelectric generation in 1920. The Commission currently regulates
    over 1,600 hydropower projects at over 2,000 dams pursuant to Part I of
    the FPA. Those projects represent more than half of the Nation's
    approximately 100 gigawatts (GW) of hydroelectric capacity and over 5
    percent of all electric power generated in the United States.
    Hydropower is an essential part of the Nation's energy mix and offers
    the benefits of an emission-free, renewable energy source.
        I am proud of the Commission's ability to meet the challenges in
    this area. The Commission's hydropower work generally falls into three
    categories of activities. First, the Commission licenses and relicenses
    projects. Relicensing is of particular significance because it involves
    projects that originally were licensed from 30 to 50 years ago. In the
    intervening years, enactment of numerous environmental, land use, and
    other laws has begun to significantly affect the Commission's ability
    to control the timing of licensing and the conditions of a license. The
    Commission's second role is to manage hydropower projects during their
    license term. This post-licensing workload has grown in significance as
    new licenses are issued and as environmental standards become more
    demanding. Finally, the Commission oversees the safety of licensed
    hydropower dams. This program is widely recognized for its leadership
    in dam safety.
        Non-federal hydropower projects have been required by the Congress
    to obtain Commission authorization if they are on lands or waters
    subject to Congress' authority. Original licenses are issued for terms
    of 30-50 years. Under the standards of the FPA, projects can be
    authorized if, in the Commission's judgment, they are ``best adapted to
    a comprehensive plan'' for improving or developing a waterway for
    beneficial public purposes, including power generation, irrigation,
    flood control, navigation, fish and wildlife, municipal water supply,
    and recreation. The Congress last spoke to the Commission's role in
    balancing these purposes in the Electric Consumers Protection Act of
    1986 (ECPA), which amended the FPA to require the Commission to give
    ``equal consideration'' to developmental and non-developmental values.
        The number of applications for original licenses has steadily
    declined to a handful per year for a number of reasons, including the
    diminished availability of attractive sites and current economic
    conditions. The Commission does not expect this situation to change.
    Most licensing activity currently before the Commission therefore
    involves the relicensing of existing projects.
        As I stated earlier, while the Commission's overarching
    responsibility under the FPA is to strike an appropriate balance among
    the many competing power and non-power interests, as required by the
    public interest standards of Sec. Sec. 4(e) and 10(a) of the FPA,
    various statutory requirements give other agencies a powerful role in
    licensing cases. Those requirements include:

     Section 4(e) of the FPA, which authorizes the Departments of
            Agriculture and the Interior to impose mandatory conditions on
            projects located on Federal reservations they supervise.
     Section 18 of the FPA, which authorizes the Departments of
            Commerce and the Interior to impose mandatory fishway
            prescriptions.
     Section 10(j) of the FPA, which authorizes federal and state
            resource agencies to propose conditions to protect fish and
            wildlife.
     Section 401 of the Clean Water Act, which authorizes States to
            impose mandatory conditions as part of the State water quality
            certification process.
     The Coastal Zone Management Act, which authorizes States to
            impose conditions on projects affecting their coastal
            resources.
     The Endangered Species Act, which directs the Departments of
            the Interior and Commerce to propose measures to protect
            threatened and endangered species.
     The National Historic Preservation Act, which requires
            Commission consultation with Federal and State authorities to
            protect historic sites.
        Thus, licenses typically contain requirements that are developed by
    a variety of agencies other than the Commission, and that often are
    imposed through those agencies' mandatory conditioning authority.
        I recognize and respect the importance of the mandates of our
    sister Federal agencies, and appreciate the constraints under which
    they operate. However, the current regulatory structure suggests at
    least two things to me. First, the Commission often lacks the ability
    to control the timetable for license issuance. Second, the Commission
    often has only very limited discretion to exercise its own judgment in
    determining the appropriate balance of economic efficiencies,
    environmental protection, and all the other public purposes the FPA
    identifies. These concerns have been heightened by a series of court
    decisions that have held that the Commission has essentially no
    authority to reject or modify mandatory conditions, even where, in the
    Commission's view, they are not consistent with the public interest.
    See Escondido Mut. Water Co. v. LaJolla Band of Mission Indians, 466
    U.S. 765 (1984) (Commission cannot reject Section 4(e) conditions); PUD
    No. 1 of Jefferson County v. Washington Dept. of Ecology, 511 U.S. 700
    (1994) (States may include in Clean Water Act certifications conditions
    to protect all designated uses contained in water quality standards);
    American Rivers v. FERC, 129 F.3d 99 (2d Cir. 1997) (Commission cannot
    modify or reject State conditions under the Clean Water Act); American
    Rivers v. FERC, 187 F.3d 1007 (9th Cir. 1999) (Commission cannot
    determine if Section 18 conditions fall within the scope of that
    provision). The Commission's only discretion with respect to mandatory
    conditions it might conclude are not in the public interest is simply
    to deny the license application. I am sure you understand what a
    difficult position that puts the agency in.
                           ii. meeting new challenges
        In determining whether and how to relicense a project upon
    expiration of its original license, the Commission must strike a
    balance among many legitimate but sometimes competing interests.
    Development and utilization of hydropower must now adjust to an
    increasingly competitive electric marketplace and heightened
    environmental scrutiny, as well as to a decisionmaking process
    characterized by shared authorities. Projects coming up for relicense
    in the next several decades were originally licensed before the
    enactment of ECPA, the National Environmental Policy Act (NEPA), the
    Endangered Species Act, the Federal Water Pollution Control Amendments
    of 1972 (the Clean Water Act), and the Coastal Zone Management Act. I
    think it is fair to say that consideration of non-power values has come
    to dominate most relicensing proceedings in the modern era.
        The Commission has responded to this modern era of relicensing with
    orders crafted to fully sustain environmental resources. For licenses
    issued since the passage of ECPA in 1986, the Commission has included
    approximately 95 percent of all fish and wildlife agency
    recommendations. Increased flows to provide for the needs of fish have
    been provided in thousands of miles of streams, boat launches and
    camping areas have been created for public recreation, and thousands of
    acres of wildlife habitat have been set aside and protected as a result
    of the licensing process. All of these environmental improvements have
    been implemented while maintaining the viability of the hydropower
    industry. No license issued since the Commission began relicensing the
    large group of projects in the so-called ``class of '93'' has been
    surrendered. Thus, licensing can achieve the balance between
    developmental and non-developmental values mandated by Congress.
        In order to achieve optimum outcomes in hydropower licensing
    proceedings, the Commission has placed increased emphasis on promoting
    settlements and the more collaborative, alternative licensing process.
    The alternative process allows license applicants and other parties to
    collaborate on the preparation of environmental documentation and other
    matters early on--before an application is filed--with the goal of
    developing consensus on the terms and conditions of the license.
    Several licenses have been completed under the alternative process, and
    many more are currently underway. Figure 1, attached to my testimony,
    shows the growth in the use of the alternative licensing process, while
    Figure 2 shows a similar increase in the number of licenses based on
    settlement agreements.
        The most recent example of successful use of a collaborative
    process is Avista Corporation's 700-MW Clark Fork Project located in
    Idaho and Montana. In July 1997, Avista decided to use a collaborative
    process for relicensing this project and formed a relicensing team
    consisting of Federal, State, and non-governmental organizations. The
    members of the relicensing team met regularly, with Commission staff
    providing guidance and support, to address resource concerns and
    ultimately develop a comprehensive settlement agreement that resulted
    in the protection and enhancement of the natural and human environment.
    A license incorporating Avista's settlement agreement was issued by the
    Commission in February 2000, only one year after the license
    application was filed.
        Additional examples of successful collaborative processes include
    Georgia Power Company's 5.4-MW Flint River Project No. P-1218 located
    on the Flint River in Georgia, and International Paper Company's 23-MW
    Riley-Jay-Livermore Project No. P-2375 and Otis Hydroelectric Company's
    10-MW Otis Hydroelectric Project No. P-8277, both located on the
    Androscoggin River in Maine. Licenses for each of these projects also
    were issued less than one year from the date the applications were
    filed.
        I have attached to my testimony a map, Figure 3, which shows the
    220 project licenses that will expire in the years 2000 through 2010.
    The Commission began receiving these relicense applications in 1998.
    They will comprise a significant ``class'' of projects and another
    spike in the Commission's workload. This group of projects has a
    combined capacity of approximately 22 GW, or 20 percent of the Nation's
    installed hydroelectric capacity.
        In addition to supporting collaboration in individual cases, the
    Commission is also working hard to improve coordination among the
    disparate authorities involved in hydropower licensing. By way of
    example, for the past two years, the Commission, the Department of the
    Interior, the Department of Commerce, the Department of Agriculture,
    the Department of Energy, the Council on Environmental Quality, and the
    Environmental Protection Agency have convened an Interagency Task Force
    on Improving Hydroelectric Licensing Processes to address problems in
    licensing. The Interagency Task Force's agenda includes matters such as
    the manner in which the Commission issues notice of license
    applications, how to determine which environmental studies should be
    performed, environmental review under the NEPA, coordination of
    Endangered Species Act review, guidelines for participants in the
    Commission's collaborative process, the crafting of clear and
    enforceable license conditions by state agencies and other
    participants, a review of the economic techniques used by various
    federal agencies as they participate in the licensing process, and
    input to the reform of the Commission's ex parte rule. At the Task
    Force's request, Secretary Babbitt and I chartered an advisory
    committee, pursuant to the Federal Advisory Committee Act, to obtain
    input from states, licensees, Indian Tribes, counties, and non-
    governmental organizations.
        I expect that the Task Force will continue to generate important
    work products and, perhaps just as important, foster a spirit of
    collaboration among the agencies involved, with the goal of making the
    licensing process as efficient as possible within the existing
    statutory framework.
        From the Commission's vantage point, the Task Force has led to some
    encouraging developments. For instance, the resource agencies have
    indicated that they are exploring concrete reforms to enhance their
    participation in the licensing process, including establishing
    procedures for obtaining public input, such as notice and comment on
    draft mandatory conditions, and committing to participate in cases
    where the collaborative process is used, subject to resource
    constraints. I support these reforms, and have every reason to believe
    they will be implemented.
                      iii. comments on pending legislation
        My comments above relate to the Commission's diligent efforts to
    make the current statutory framework, as interpreted by the courts,
    work as effectively as possible. Now let me turn to comments on
    proposals to change Federal statutes. I will discuss each of the
    several bills under consideration in turn.
    A. H.R. 2335: Improving the Hydroelectric Licensing Process
        H.R. 2335 would amend the FPA with the respect to mandatory license
    conditions submitted by the Secretaries of the Interior and Commerce
    under Sections 4(e) and 18 of that Act, and by federal agencies
    supervising lands on which project works are located. The bill would
    require them to take into consideration various factors, including the
    impacts of proposed conditions on economic and power values, electric
    generation capacity and system reliability, air quality, drinking
    water, flood control, irrigation, navigation, or recreation water
    supply, compatibility with other license conditions, and means to
    insure that conditions address only direct project environmental
    impacts at the lowest project cost. The Departments would be required
    to provide written documentation for their conditions, submit them to
    scientific review, and provide administrative review of proposed
    conditions.
        H.R. 2335 would provide for the Commission to establish a deadline
    for the submittal of mandatory conditions in each case, to be no later
    than one year after the Commission issues notice that a license
    application is ready for environmental review. If an agency fails to
    submit a final condition by the deadline, the agency loses the
    authority to recommend or establish license conditions. The Commission
    must conduct an economic analysis of conditions proposed by consulting
    agencies, and, upon request of license applicants, must make a written
    determination whether such conditions are in the public interest, were
    subjected to scientific review, relate to direct project impacts, are
    reasonable and supported by substantial evidence, and are consistent
    with the FPA and other license conditions.
        In addition, the bill provides that the Commission shall be the
    lead agency for environmental review under the NEPA, and that other
    Federal agencies will not perform additional environmental review.
        Finally, the bill provides that the Commission shall submit to
    Congress a study of the feasibility of establishing a separate
    licensing procedure for ``small hydroelectric projects,'' which term
    the Commission may define by regulation, but which must at a minimum
    include projects with generating capacities of five megawatts or less.
    I comment on this study requirement in my discussion of S. 422.
        I support the underlying purpose of the bill, which is to promote
    sensible and timely decisions by all agencies involved in licensing
    matters. Reasoned decision-making with respect to mandatory conditions
    must be the responsibility of the resource agencies, given the
    Commission's very limited discretion with respect to such conditions.
    As Congress considers any legislation, however, it should be careful to
    ensure that any procedures that could add time or expense to the
    process are justified by improved outcomes.
        Several portions of H.R. 2335 could improve the process. For
    instance, having the resource agencies consider a range of public
    interest factors in developing mandatory conditions would lead to
    better-informed decisionmaking. The Commission is required to take into
    account a similar set of factors for matters within its discretion. The
    requirement for resource agencies to document their decision making is
    essential for due process. See Bangor Hydroelectric Co. v. FERC, 78
    F.3d 659 (D.C. Cir. 1996). Subjecting resource agencies to deadlines
    for submitting conditions (as the Commission's regulations now provide)
    also could help improve the licensing process. These sensible
    requirements could make licensing more timely and efficient, while
    developing the record that supports well-reasoned licensing decisions.
        I am less sanguine about some other procedures that would be
    established by the bill, such as those requiring scientific peer review
    of conditions, mandating detailed administrative review procedures, and
    requiring the Commission to review the economic impact of proposed
    conditions and whether the resource agencies have complied with the
    bill's requirements. I am concerned that adding burdensome, time-
    consuming steps to the licensing process could lengthen and increase
    the expense of the process, and thereby add to the burden placed on
    licensees and other participants, without a compensating benefit. I am
    also concerned about the portion of the bill that would permit only the
    Commission to conduct NEPA environmental analyses. This might prevent
    individual agencies from performing the review that they need to
    support their portion of the licensing process in a timely fashion.
    Further, the Commission would be required to do NEPA analysis on the
    agencies' behalf, which would not only increase the Commission's
    workload, but could lead to disputes as to whether the Commission's
    efforts are sufficient for the agencies' purposes.
        If all parties in a hydropower licensing case do not work
    harmoniously, resolution of substantive and procedural issues will tend
    to become more time-consuming and more expensive. I believe that,
    within the general framework of the FPA, the Commission and its expert
    staff are well-suited to bring proceedings to closure even if there is
    a sustained level of disagreement and to render timely judgments that
    will meet the public interest. To the extent that H.R. 2335 will help
    the resource agencies to be effective partners in this difficult
    licensing process, it could improve that process.
    B. S. 422: Small Hydroelectric Projects in Alaska
        S. 422 provides (with certain exceptions discussed below) that, at
    such time as the Commission determines that the State of Alaska has in
    place a process for regulating hydropower project works having a power
    production capacity of 5,000 kilowatts (5 megawatts or MW) or less,
    according to specified public interest standards, Alaska shall have
    exclusive authority to authorize all such project works that are not
    under Commission license or exempted from licensing, and are not within
    an application for preliminary permit or license that has been accepted
    for filing as of the date of the provision's enactment. If such project
    works are under a Commission license as of the date of enactment, then
    the licensee may elect to transfer the project to state regulation.
        The bill provides that project works are not removed or removable
    from Commission jurisdiction if they are located in whole or in part on
    any Indian reservation, unit of the National Park System or other
    federal designated system, or component of the Wild and Scenic Rivers
    System, or segment of a river designated for study for potential
    addition to such system. State authorizations for project works located
    in whole or in part on other Federal lands shall be subject to the
    approval of, and terms and conditions imposed by, the Secretary having
    jurisdiction with respect to such Federal lands. Finally, the transfer
    to the State of the above-described authority does not preempt the
    application of Federal environmental, natural, or cultural resources
    protection laws according to their terms.
        There are currently 22 licensed projects in Alaska. Of these, 17
    projects occupy National Forest lands administered by the U.S. Forest
    Service, and 5 projects occupy federal lands administered by the U.S.
    Bureau of Land Management (BLM). Of the total of 22 licensed projects,
    10 projects are 5 MW or less, and 12 projects are larger than 5 MW.
    There are 3 exempted projects in Alaska, all under 5 MW. One project
    occupies National Forest lands, and two occupy non-federal lands. There
    are currently pending before the Commission five Alaska license
    applications, three of which have been accepted for filing. One
    application, for a 0.5 MW project will be located on lands managed by
    the U.S. Fish and Wildlife Service. The other four--a 2.2-MW project, a
    3.0-MW project, a 4.2-MW project, and a 6.0-MW project, will be located
    on National Forest lands.
        Finally, there are a number of potential Alaska projects at the
    pre-development application stage. Eight project proposals are
    currently being studied under issued preliminary permits. Of these, two
    would be projects over 5 MW, of which one would occupy National Forest
    lands, and one would occupy Bureau of Land Management lands. Six would
    be projects of 5 MW or less, of which three would occupy National
    Forest lands, and three would occupy non-federal lands.
        As a general matter, I do not support legislation removing non-
    federal hydropower projects from the Commission's jurisdiction based on
    the size of the project. A project with a small capacity can have a
    significant impact both at the project site and beyond its immediate
    environs. Pursuant to the mandates of the Federal Power Act, the
    Commission evaluates that impact, and, in rendering a licensing
    decision, gives equal consideration to development interests and
    environmental resources in determining whether, and with what
    requirements, to authorize hydropower development.
        The underlying premise of the legislation is that Alaska presents
    the Congress with a special case that favors local control over
    projects that would otherwise be subject to the Commission's
    jurisdiction. Inasmuch as Alaska is not interconnected with the
    interstate electric grid in the lower 48 states, that environmental
    impacts of projects located in Alaska are relatively unlikely to affect
    the lower 48 states, and that the bill requires a state program that
    will adequately evaluate project impacts, I do not object to this
    legislation. However, I would oppose a generic 5-MW exemption for
    projects located in the lower 48 states. Because some 70 percent of the
    projects the Commission regulates are 5 MW or smaller, such an
    exemption would have a deleterious effect on the Commission's ability
    to address the cumulative environmental effects of all non-federal
    hydropower projects in a river basin or watershed.
        S. 422 also raises one technical issue. The bill provides for the
    transfer to the State of Alaska of the Commission's jurisdiction over
    the hydroelectric ``project works'' of certain categories of projects.
    Section 3(12) of the Federal Power Act defines ``project works'' as
    ``the physical structures of a project,'' and Section 3(11) of the Act
    defines ``project'' as a ``complete unit of improvement of
    development'' consisting of project works . However, the bill provides
    no standard for defining ``project works having a power production
    capability of 5,000 kilowatts (5 megawatts) or less.'' Absent statutory
    criteria to the contrary, there is the potential for abuse in
    ``packaging'' proposed project works in a manner that artificially
    segregates into 5-megawatt groupings the power production components of
    what is in fact a single unit of development, in order to evade
    Commission jurisdiction. Creating these incentives would not in my view
    foster public interest objectives. I therefore recommend that the bill
    specify that the power production capacity of a project be determined
    in accord with the Federal Power Act's definition of a project.
    C. S. 334: Voluntary Licensing of Hydroelectric Projects in the State
            of Hawaii
        S. 334 would amend Section 4(e) of the Federal Power Act by
    inserting the following parenthetical limitation: ``(except fresh
    waters in the State of Hawaii, unless a license would be required by
    section 23 of the Act)''. These words would modify the reference to
    ``several States,'' so as to partially limit the authority of the
    Commission to issue licenses under Section 4(e) with respect to
    proposed hydropower projects in Hawaii.
        Section 4(e) of the Act contains the Commission's authority to
    issue licenses for hydropower projects. Section 23(b)(1) sets forth the
    circumstances under which a project cannot be constructed, operated, or
    maintained without a license. In certain circumstances, the Commission
    has authority to issue a license for a hydropower project in response
    to a voluntary application under Section 4(e), even though licensing is
    not required under Section 23(b)(1). See Cooley v. Federal Energy
    Regulatory Commission, 843 F.2d 1464, 1469 (D.C. Cir. 1988).
        Under S. 334, the Commission would continue to have jurisdiction to
    issue licenses to construct, operate, and maintain hydropower projects
    in Hawaii whenever Section 23(b)(1) would require a license for such
    activities. However, the Commission would be precluded from issuing a
    license for a project in Hawaii if Section 23(b)(1) did not require a
    license for such activities. In the absence of this legislation, an
    applicant might seek an FPA license if it wanted protection from
    competitors for a site, or if it concluded that federal regulation was
    preferable to state regulation.
        Pursuant to Section 2408 of the Energy Policy Act of 1992, the
    Commission on April 13, 1994, submitted to the Senate and House
    Committees a study of regulation of hydropower projects in Hawaii. The
    study noted that the Commission has never licensed a hydropower project
    in Hawaii, and is thus not currently regulating any project in Hawaii.
    That is still the case. Therefore, S. 334 would not likely have any
    impact on the Commission's current operations, and I would not oppose
    its enactment.
    D. S. 1236: Extending Deadline to Commence Project Construction
        Section 13 of the Federal Power Act requires that construction of a
    licensed project be commenced within two years of issuance of the
    license. Section 13 authorizes the Commission to extend this deadline
    once, for a maximum additional two years. If project construction has
    not commenced by this deadline, Section 13 requires the Commission to
    terminate the license.
        The project in question is the Arrowhead Project No. 4656, to be
    located at the Bureau of Reclamation's Arrowrock Dam, on the South Fork
    of the Boise River, in Idaho. The Commission issued a license for this
    project on March, 27, 1989, and granted a two-year extension of the
    commencement-of-construction deadline in 1991. In 1993, pursuant to
    section 1704(c) of the Energy Policy Act of 1992, the Commission
    extended the deadline until March 26, 1999. S. 1236 would authorize the
    Commission to extend the deadline an additional six years, until March
    26, 2005.
        As a general principle I do not support the enactment of bills
    authorizing or requiring construction extensions for individual
    projects. More particularly, where Congress has considered statutory
    extensions, the Commission has, as a matter of policy, objected to
    granting a licensee a total of more than 10 years from the issuance
    date of the license to commence construction. In my view, 10 years is a
    more than reasonable period for a licensee to determine definitively
    whether a project is economically viable and to sign a power purchase
    agreement. Moreover, the Commission has a policy against ``site-
    banking,'' that is, allowing a licensee who is not developing a site to
    prevent other potential applicants from doing so, and I am also
    concerned that a license issued more than 10 years ago may not reflect
    current circumstances. I note that, even if a license is terminated,
    the applicant is free to file a new application, based on current
    information. Since the bill in question would extend the deadline until
    16 years after the license was issued, I think it is inadvisable on
    policy grounds.
    E. H.R. 3852: Extending Deadline to Commence Project Construction
        H.R. 3852 would require the Commission, upon the request of the
    licensee and in accordance with the good faith, due diligence, and
    public interest requirements of Section 13 of the Federal Power Act, to
    extend the deadline for commencement of construction of Project No.
    7115 for up to six additional years after September 21, 2000, the
    current deadline.
        As I noted with respect to S. 1236, as a matter of general
    principle, I do not support the enactment of bills authorizing or
    requiring construction extensions for individual projects. However, if
    such extensions are authorized by the Congress, I would object to
    granting a licensee more than 10 years from the issuance date of the
    license to commence construction. In my view, 10 years is a more than
    reasonable period for a licensee to determine definitively whether a
    project is economically viable and to sign a power purchase agreement.
    If a licensee cannot meet such a deadline, I believe the license should
    be terminated pursuant to Section 13, so that the site is once again
    available for whatever uses current circumstances may warrant.
        Where the Commission has stayed the construction deadlines, or the
    entire license, for example pending judicial appeal of the license or
    the completion of pre-construction proceedings, the period of the stay
    is not counted in applying the 10-year policy.
        Because H.R. 3852 would not extend the construction commencement
    date beyond 10 non-stayed years from the issuance of the Project No.
    7115 license, I have no specific objection to its enactment.
    F. H.R 1262: Exempting from Licensing Facilities on the Pentwater River
        H.R. 1262 would exempt from Sections 23(b) and 4(e) of the FPA
    certain existing facilities located on the Pentwater River in Michigan,
    so that no license would be required under Part I of the FPA to operate
    and maintain those facilities.
        I oppose this legislation. Congress' purpose in enacting the FPA
    was to provide ``a complete scheme of national regulation'' to
    ``promote the comprehensive development of the water resources of the
    Nation'' and to avoid the piecemeal federal and state regulation that
    had previously blocked that comprehensive scheme. See First Iowa Hydro-
    Electric Coop. v. FPC, 328 U.S. 152, 10 (1946). Exempting particular
    projects from regulation under the FPA would undercut the Commission's
    ability to ensure the optimum development of waterways, and would deny
    to the public the consideration of public interest factors that is the
    basis for all Commission licensing decisions. While the states of
    Alaska and Hawaii present special cases, in that they are
    geographically distinct from the rest of the Nation and are not
    connected to the interstate power grid, the same cannot be said for the
    lower 48 states. Thus, the features that distinguish S. 422 and S. 334
    are not present for H.R. 1262.
    G. S. 1937: Sales of Bonneville Power Authority Energy to Joint
            Operating Entities
        This bill would amend the Pacific Northwest Electric Power Planning
    and Conservation Act to provide for sales of energy by the Bonneville
    Power Administration to joint operating entities composed of public
    bodies or cooperatives. The Commission has no jurisdiction over the
    matters that the bill addresses, and I have no comment on the bill.
                                   conclusion
        In conclusion, I want to thank you for this opportunity to speak to
    you today about the hydropower program. The Commission stands ready to
    work with Congress and with all interested parties to make the
    hydroelectric licensing process as efficient as possible, while
    ensuring that we continue to balance all of the interests that surround
    this important national resource.
        I will be happy to answer any questions you may have.
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        [GRAPHIC] [TIFF OMITTED] T6325.003

        Mr. Barton. Thank you, Chairman. We'd now like to hear from
    Mr.--is it Leshy or Leshy?
        Mr. Leshy. It's Leshy, Mr. Chairman.
        Mr. Barton. Leshy. We'd like to hear from you, sir. Your
    statement's in the record, and we will recognize you for 5
    minutes summarizing.

                       STATEMENT OF JOHN D. LESHY

        Mr. Leshy. Thank you, Mr. Chairman. I'm very pleased to be
    here. I'm the Solicitor of the Department of the Interior,
    pinch-hitting today for Deputy Secretary David Hayes, who's on
    vacation this week.
        I'm very pleased to be here and have the opportunity to
    comment and address the bills before the committee today,
    especially the principal bill, H.R. 2335.
        The Department of the Interior, particularly under
    Secretary Babbitt, has made the Federal Power Act hydro
    relicensing process a very high priority over the last several
    years. Ever since 1920, our department has had an important
    role and responsibilities under that act to provide input into
    the hydro licensing and relicensing process. Our mission, as
    defined by Congress in 1920, is to ensure that certain
    resources are protected when the public resource of navigable
    waterways is dedicated to provide hydropower generation for a
    period of 30 to 50 years.
        We recognize that this licensing and now relicensing
    process can be complex, time consuming, and can be resource
    intensive, but we also believe--and we are taking I think great
    strides to make sure--that the process can be improved to avoid
    inefficiencies and delays.
        I certainly associate myself with the remarks of Chairman
    Hoecker and especially in his written testimony where he
    outlined at some length the work that our department and the
    other Federal agencies that work with FERC are doing with FERC
    to improve the process in a number of respects--the Interagency
    Task Force, the FACA committee that's been chartered under that
    task force. We are also working with the NHA and the Electric
    Power Research Institute to focus our attention on ways we can
    improve the process within the existing architectural structure
    of the Federal Power Act. And we think those collaborative
    efforts that we have undertaken in the last several years and
    the energy and time we're putting into this is really beginning
    to bear fruit. We have opened some really important lines of
    communication with FERC and with the National Hydropower
    Association and the environmentalists, and we think there are a
    number of ideas being batted around which will soon produce
    some really pretty dramatic improvements in the way the process
    of relicensing works, particularly as respects our mandatory
    conditioning authority, which has been talked about so much
    here today.
        With that preface, let me make some comments on the
    principal bill in front of the committee, because we think that
    this bill would make some very fundamental changes in the
    structure of the act vis-a-vis the mandatory conditioning
    authority, and we are very troubled by those changes because we
    think effectively they would not streamline the existing
    process but would rather add a number of layers of new process
    and cumbersome procedures that would in effect and ironically
    delay licensing still further.
        It would go beyond, for example, the current well
    understood standard that we have to have substantial evidence
    for any conditions that we impose on projects and require a
    separate scientific peer review. There would be a mandated
    internal 6-month appeals process before some independent body
    before our conditions could be made final. Then when the
    conditions went over to the commission itself, the commission
    would have to do an economic analysis of each condition and
    would have to undertake an additional review process.
        So there are a number of additional layers and steps that
    would be involved that we think would effectively be
    unworkable.
        The basic structure of the act and our mandatory
    conditioning authority has existed, as I said, since 1920, for
    80 years. We think it has stood the test of time. Of course
    today and in the modern era, more attention is being paid to
    environmental factors in the relicensing process. That's true,
    of course, of just about every decision made in the public and
    private sector throughout society.
        Our job under the Federal Power Act for the last 80 years
    has been to set a mandatory floor of conditions for certain
    specified areas: The fishway protection of section 18 and
    mandatory conditioning to protect Federal reservations when
    there are Indians--Indian reservations or national parks or
    other Federal reservations of land involved. We do that to set
    the floor for how these projects can be operated. We do that in
    a cost conscious manner, and we do that as required by law only
    when we have substantial evidence to support the conditions
    that we impose.
        We think the public today is demanding more, not less,
    environmental sensitivity in resource management, and we
    unfortunately regard the H.R. 2335 as a serious step backwards
    in that regard. I would be happy to answer any questions. Thank
    you very much for the opportunity to testify.
        [The prepared statement of John D. Leshy follows:]
    Prepared Statement of John D. Leshy, Solicitor, U.S. Department of the
                                    Interior
        Good morning Mr. Chairman, Members of the Subcommittee. I
    appreciate the opportunity to discuss the Federal Power Act hydropower
    licensing process, HR 2335, and several related bills before the
    Subcommittee today.
        The Department of the Interior has made the Federal Power Act
    licensing process a high priority over the last several years. The
    Department has an important role and responsibilities under the Federal
    Power Act to provide input to the Federal Energy Regulatory Commission
    as it decides whether and how to license hydropower projects. Our
    mission is not to interfere with licensing, but to ensure that certain
    resources are protected when a public resource--a navigable waterway--
    is dedicated to private hydropower generation for thirty to fifty years
    under a Federal Power Act license.
        The Department recognizes that the FERC licensing process can be
    complex, time-consuming and resource-intensive for all parties, but we
    also believe that the process can be improved to avoid inefficiencies
    and delays. In undertaking to improve the process, we have become
    convinced that the existing statutory framework is sound, and whatever
    inefficiencies or shortcomings may exist can and should be addressed
    administratively. Therefore, we would oppose each of the bills the
    Subcommittee is considering today that would revise the licensing
    process or exempt particular hydropower projects from all or part of
    the Federal Power Act requirements.
    Administrative Efforts on Hydropower Licensing
        For the last two years, the Department has worked in several
    different forums to improve the hydropower licensing process for all
    participants. I would like to point out several specific efforts in
    that regard.
        First, the Department is actively engaged in the Interagency Task
    Force on Hydropower Licensing (ITF)--a cooperative effort initiated by
    Interior, Commerce, Agriculture, EPA, Energy, CEQ, and FERC to find
    administrative solutions for inefficiencies in the licensing process
    that can sometimes result from unclear procedures, poor communication,
    and the interaction of other federal statutes (e.g. NEPA, ESA) with the
    Federal Power Act process. The ITF has developed a variety of
    administrative solutions:

     facilitating and streamlining noticing procedures,
     standardizing the NEPA review process,
     implementing necessary studies of resource impacts from
            licensing,
     preparing trackable and enforceable license conditions
            pursuant to the Coastal Zone Management Act and Section 401 of
            the Clean Water Act.
        The ITF also has produced a draft set of guidelines that should
    make the Commission's alternative licensing procedures (a.k.a., the
    ``collaborative process'') work better for all federal and non-federal
    stakeholders. Currently, the ITF is working on additional solution
    documents for Endangered Species Act consultation, various provisions
    of the Federal Power Act, and issues related to the post-licensing
    phase of hydropower operations.
        Second, the Department has sought input from others affected by
    hydropower licensing (e.g., licensees, NGOs, tribes, states and
    counties) to better understand and address their concerns with the
    licensing process. As a member of the ITF, the Department was
    instrumental in establishing a federal advisory committee that enables
    these interests to advise the ITF. The advisory committee has met three
    times in the last seven months and will continue to make
    recommendations to the ITF through the end of this year, when the work
    of the ITF should be complete. As the advisory committee provides its
    input, the ITF sets about institutionalizing the agreed-upon reforms in
    each of our respective agencies.
        One positive outcome of the ITF effort is that our relationship
    with many stakeholders in the licensing process has improved. For
    instance, the staffs of the Commission and the resource agencies have
    come to better understand each other's views and respective obligations
    under the Federal Power Act and other relevant statutes, which in turn
    has led to increased trust among our agencies and an enhanced ability
    to work together. In my view, this improved relationship will pay
    dividends in the field as we address the many projects scheduled for
    relicensing over the next ten years.
        Our relationship with the licensees has also greatly benefitted
    from the Department's recent attention to hydropower licensing. The
    National Hydropower Association periodically visits with Department
    staff to discuss concerns they have about various aspects of our
    participation in the licensing process. Moreover, the Department is an
    active participant in the industry-sponsored Electric Power Research
    Institute effort, which brings together the full range of affected
    interests to explore our common goal of improving the hydropower
    licensing process.
        Finally, the Department has taken concrete internal steps to
    further improve the constructive role that its bureaus play in the
    licensing process. These internal changes will facilitate better
    communication and coordination among Interior bureaus. Improving our
    own internal processes will help us avoid unnecessary delays and ensure
    consistent application of Department policies throughout the bureaus'
    regional offices.
    H.R. 2335
        Far from contributing to these efforts to improve hydropower
    licensing, we believe that H.R. 2335 as written would interfere with
    the Department's responsibilities under the Federal Power Act, add
    multiple delays to the licensing process, and make the Department's
    involvement in Federal Power Act licensing proceedings completely
    unworkable. We strongly oppose H.R. 2335, and if it were presented to
    the President in its current form the Secretary of the Interior would
    recommend that he veto it.
        The most troubling feature of H.R. 2335 is that it would undercut
    the purposes of much of the Department's participation in federal
    hydropower licensing. The Department provides input to the Commission
    under several different sections of the Federal Power Act; this bill is
    principally directed at the prescriptions for ``fishways'' issued by
    the Fish and Wildlife Service under section 18, and at the
    responsibility of several bureaus that manage reserved lands to mandate
    conditions under section 4(e) ``necessary for the adequate protection
    and utilization of such reservations.'' The resource agencies'
    authority to protect the uses of reserved lands is an integral part of
    the Federal Power Act licensing scheme, going back 80 years to the
    original enactment of Act in 1920. While the Act allowed licensing of
    private hydro facilities on Federal lands, it also contemplated that
    the resource agencies would possess the necessary expertise to ensure
    that those facilities would not interfere with protection and use of
    the lands. That responsibility of Federal land managers to condition
    projects on the lands they manage remains in the statute to this day.
        Section 4 of the bill (new section 32(b)(1) of the FPA) would
    change these mandates by requiring the Department to take into
    consideration a variety of factors, including air quality, drinking
    [sic], flood control, irrigation and navigation, in determining section
    4(e) conditions and section 18 prescriptions. At the same time, the
    original purposes of sections 4(e) and 18--to protect and utilize
    reserved lands and to ensure that fish can survive passage through
    hydro projects--are not mentioned in the list of proposed new factors.
    Thus, there would be no mandate that the Department take these purposes
    into consideration. In effect, by emphasizing other factors, H.R. 2335
    would potentially force the Department to ignore fishery needs in
    prescribing fishways. It might oblige us to ignore the project impacts
    to Indian tribal lands and resources when determining conditions
    necessary to protect Indian reservations, or the needs of parks,
    wildlife refuges and other conservation areas when setting conditions
    to protect those reserved lands.
        Furthermore, as if to underscore this effort to ignore the original
    purposes of sections 4(e) and 18, H.R. 2335 would then require the
    Commission to make a separate determination based on the same factors.
    Under section 4 (new section 32(h)(1) of the FPA), if requested by the
    license applicant, the Commission would have to make a determination
    whether a 4(e) condition or section 18 prescription was in the public
    interest, based solely on this same list of other factors. Thus, the
    Commission could not take fisheries or land management needs into
    account in making this ``public interest'' determination.
        H.R. 2335 would also undercut the purpose of recommendations made
    by state and federal fish and wildlife agencies for protection,
    mitigation and enhancement of fish and wildlife and their habitats
    under section 10(j) of the Federal Power Act. Section 4 (new section
    32(g) of the FPA) would require the Commission to evaluate these
    section 10(j) recommendations as well against the list of factors set
    out above.
        The combined effect of these various provisions of H.R. 2335 would
    be to subordinate resource needs and trust responsibilities to a wide
    range of other factors. The current structure of the Federal Power Act
    requires that a license be issued only with conditions that ensure
    protection of underlying resources. Once this floor is established to
    protect against unreasonable resource destruction, then the Commission
    balances various factors to determine whether and how to issue a
    license. This bill would turn that scheme on its head, allowing
    protection of underlying resources only if a laundry list of other
    needs were met.
        In addition, rather than streamlining the licensing process under
    the Federal Power Act, the bill would add new and cumbersome procedures
    to the process, delaying license issuance still further. It would go
    beyond the current judicially required standard of ``substantial
    evidence'' for agency conditions and require separate scientific peer
    review (new section 32(c) of the FPA). It would mandate a six-month
    appeals process before ``an administrative law judge or other
    independent reviewing body'' before section 4(e) conditions and section
    18 prescriptions could be made final (new section 32(e) of the FPA). It
    would require the Commission to conduct an economic analysis of each
    section 4(e) condition or section 18 prescription (new section 32(g) of
    the FPA), plus an additional review process if requested by the license
    applicant (new section 32(h) of the FPA).
        Apart from these concerns about delay, the licensing procedure
    prescribed by H.R. 2335 is simply unworkable. Section 5 (new section
    33(b) of the FPA) would prohibit the resource management agencies from
    doing any environmental analysis outside of the Commission's own NEPA
    analysis. This would make it impossible to formulate section 4(e)
    conditions and section 18 prescriptions. Our section 4(e) and 18
    responsibilities can only be carried out through our own analysis of
    impacts to lands, fisheries, and other resources--though this is not a
    separate NEPA process, it is environmental analysis. The Bangor Hydro
    court decision held that we must have ``substantial evidence'' to
    support our 4(e) conditions and section 18 prescriptions--again, that
    substantial evidence is developed through environmental analysis.
    Without such analysis, we cannot do our job at all.
        The Department could not rely on the Commission's NEPA analysis to
    provide the evidence necessary to support our determinations under
    sections 4(e) and 18, because H.R. 2335 would require that the draft
    conditions and prescriptions be formulated before the license
    application is filed (new section 32(e) of the FPA). Not surprisingly,
    the Commission does its NEPA analysis after the license application is
    filed. Obviously, if there is no application available, and
    consequently no Commission NEPA analysis, many of the necessary
    conditions and prescriptions could not be developed at all. Moreover,
    finalization of the conditions depends upon information provided in the
    Commission's NEPA analysis. H.R. 2335 would require that final
    conditions and prescriptions be issued within one year after the
    Commission determines the application is ready for environmental
    analysis (new section 32(f) of the FPA). But a condition could hardly
    be finalized if the Commission has not completed at least a draft NEPA
    analysis, which is often delayed more than one year after the
    application is determined ready for environmental analysis.
        The most impractical aspect of this process described by this bill
    bears repeating: H.R. 2335 would require that the agencies formulate
    license conditions and prescriptions before the license application is
    filed (new section 32(e) of the FPA). Although license applicants
    circulate draft applications before filing, these are often altered
    substantially before they are filed before the Commission. An agency
    simply can't write a mandatory condition for a license application it
    hasn't yet seen.
    S. 422, S. 334, H.R. 1262, H.R. 3852, S. 1236
        The remaining hydro licensing bills before the Subcommittee today
    have one feature in common: each seeks to exclude a project or class of
    projects from some or all of the hydropower licensing requirements of
    the Federal Power Act. We oppose each of these exemptions.
        The Department has commented at some length in the past on S. 422,
    which would place small hydroelectric projects in the State of Alaska
    solely under State jurisdiction. The Secretary's previous letters to
    Chairman Bliley are attached to my testimony. In brief, we strongly
    oppose S. 422 because it would fragment hydropower regulation and
    impair the Federal government's ability to protect federally managed
    lands and resources affected by the projects. Although certain land
    areas are exempted from application of S. 422, the bill's provision
    addressing tribal lands is confusing, since most Native lands in Alaska
    are not ``reservations.'' Furthermore, it does not address the
    applicability of NEPA, the Endangered Species Act, or rights of way
    under the Federal Land Policy and Management Act.
        We also oppose S. 334, which would exempt hydropower projects on
    fresh waters in the State of Hawaii from the Federal Power Act.
    Presumably, such an exemption would leave jurisdiction for licensing to
    the State of Hawaii, although there might be a question of Federal
    preemption. Whether or not the State would exert jurisdiction, this
    bill suffers from many of the same flaws as S. 422, in that it does not
    provide for continued Federal protection of federally managed
    resources, nor for NEPA and Endangered Species Act application in
    hydropower licensing. Hawaiian fresh water streams currently provide
    habitat for six candidate and one listed species. The streams also
    contain fish and shrimp that are harvested for subsistence. In
    addition, the proposed hydropower project on the Wailua River may
    impact the Hanalei National Wildlife Refuge and its fish and wildlife
    resources including endangered water birds, migratory waterfowl and
    shorebirds.
        H.R. 1262, H.R. 3852 and S. 1236 each provide special exemptions
    for particular hydropower projects, and we oppose them. H.R. 3852 and
    S. 1236 provide extensions of time for project construction. The
    Federal Power Act allows a two-year window to begin construction after
    a license is issued, which may be extended another two years. If a
    licensee does not begin construction within that time frame, there is
    no reason to extend the benefit of the license for a longer period--if
    the site is appropriate for hydropower development, it should be
    available for another applicant to obtain a license. License extensions
    simply encourage speculation in hydropower development, as well as
    diminish the applicability of pre-licensing economic and environmental
    reviews, and we oppose them in general.
        H.R. 1262 is an attempt to evade the relicensing policy of the
    Federal Power Act, exempting a single hydropower project owned by the
    City of Hart, Michigan, from the Commission's jurisdiction. Since we
    support the regulatory purposes of the Act, and oppose any attempt to
    avoid periodic review of the operations of hydropower projects, we
    oppose this bill as well.
        Thank you. I would be happy to answer any questions.

        Mr. Barton. Thank you, sir. We appreciate that. We'd now
    like to hear from Mr. Burns. We're sooner or later going to get
    this clock right. We've managed to mess it up on everybody so
    far. Come on up. You're recognized for 5 minutes, and your
    complete statement's in the record in its entirety.

                        STATEMENT OF ALLEN BURNS

        Mr. Burns. Thank you, Mr. Chairman and members of the
    subcommittee. I'm the Vice President of Requirements Marketing
    at Bonneville Power Administration, responsible for power sales
    to our public customers. I appreciate the opportunity to convey
    some brief comments and thoughts on the proposed legislation on
    Bonneville selling to a Joint Operating Entity or a JOE. I have
    five quick points I want to leave with you. There's more in my
    testimony.
        The first point is that BPA does not object to the proposed
    JOE legislation. It does not expand or diminish the rights of
    those members of the JOE to buy power from Bonneville. Also, we
    do not believe that it diminishes the rights of any other
    customers to buy or the cost of the power that they would be
    buying from us. Last, we do believe that the JOE will provide
    some administrative benefits, some efficiencies in O&M
    operation, and other things to membership of the JOE.
        The second point I want to touch on briefly is the
    eligibility for a Joint Operating Entity. The proposed
    legislation applies only to BPA's preference customers. All of
    these customers were currently customers of ours in January
    1999, so as the legislation is proposed, they would be eligible
    to participate in a JOE. Currently we are aware of four such
    entities. I think you're going to hear from one this afternoon,
    PNGC, that as currently formed would qualify as a JOE.
        The third point I want to make is that JOEs currently are
    ineligible to purchase BPA requirements power. We've had over
    60 years of interpreting our current statutes regarding this
    matter and believe this legislation is necessary if we are
    going to sell to a Joint Operating Entity.
        The fourth point I want to make is there will be no change
    to preference customers' current rights. A JOE will have the
    rights to buy power from Bonneville, whether it be requirements
    power or surplus power, will remain the same as for their
    individual members. The JOE will still have those same
    requirements not to resell requirements power, and when it
    comes to surplus power, they'll have the same type of
    restrictions that any other customer would have.
        The fifth point I want to make is in regards to
    comprehensive electricity energy restructuring, it is the
    administration's view that this should be done in a
    comprehensive manner. So the question arises, well, what about
    this legislation? It's our view at BPA and the Department that
    this is really minor legislation. And for all the reasons that
    I've currently mentioned, it has a very minor----
        Mr. Barton. Which is minor? The comprehensive electricity--
    --
        Mr. Burns. No. Excuse me. The JOE language. Excuse me. Let
    me be clear about that. The proposed JOE legislation would be
    minor in scope and nature, and as such would not need to be
    held up or be part of any comprehensive electricity
    restructuring moving forward. That concludes my comments.
        [The prepared statement of Allen Burns follows:]
        Prepared Statement of Allen Burns, Vice President, Requirements
     Marketing, Bonneville Power Administration, U.S. Department of Energy
                                  introduction
        Mr. Chairman, distinguished members of the House Subcommittee, my
    name is Allen--Burns. I am the Vice President for Requirements
    Marketing at the Bonneville Power Administration (BPA), responsible to
    the BPA Administrator for BPA's power sales to its public utility
    customers. We appreciate this opportunity to appear today at this
    hearing on H.R. 3447, the proposed legislation to allow BPA to sell to
    Joint Operating Entities (JOE). We thank you for your continued support
    and attention to issues affecting BPA and its customers.
        Today, I will be brief. BPA does not object to the proposed JOE
    legislation. The legislation will not expand or diminish the rights
    that our public preference utility customers currently have to buy BPA
    power.
        The legislation would create a new type of BPA preference
    customer--a JOE--that could pool power purchases for customers who
    currently enjoy preference status for purchase of BPA power. Under this
    legislation, a JOE's member utilities might realize several benefits.
    They might be able to reduce their administrative overhead, combine
    their operations and maintenance work, or optimize their use of the
    interconnected transmission and distribution system. However, BPA does
    not believe the legislation would result in less BPA power or increased
    costs for BPA's other regional customers.
                             eligibility for a joe
        The proposed JOE legislation would apply only to BPA's preference
    customers. These are public bodies and cooperative utilities, which,
    under current statutes, receive preference and priority in all sales of
    federal power. BPA must first meet requests of preference customers in
    all sales of power.
        All of BPA's current preference customers would be eligible to be a
    member or participant of a JOE under this legislation, since they all
    were formed under state laws prior to January 1, 1999. We are aware of
    only four Northwest organizations that might qualify at this time to be
    a JOE under the requirements of the legislation, although there may be
    more. The four Northwest organizations are Pacific Northwest Generating
    Cooperative (PNGC); Oregon Utility Resource Coordination Association
    (OURCA); the Idaho Energy Authority (IdEA) and Western Montana Electric
    Generating and Transmission Cooperative. To qualify as a JOE, an entity
    must be organized under state law as a public body or cooperative on
    the bill's date of enactment.
       joe's are currently ineligible to purchase bpa requirements power
        Section 5(b)(1) of the Northwest Power Act directs BPA to sell firm
    power to the region's utilities to meet each utility's retail consumer
    load that exceeds--or is net of--the amount of its firm power
    resources. This is referred to as a utility's net firm load
    requirement, or simply, requirements load. BPA's obligation is to
    provide power based on each utility's individual loads and resources,
    independent of the loads and resources of others. Utilities can only
    use that power to meet the load of their retail consumers.
        The Bonneville Project Act limits BPA's authority to sell blocks of
    firm requirements power to an entity representing large groups of
    public bodies or cooperatives. Section--2(b) of the Project Act
    expresses the general purpose of encouraging the widest possible use of
    all electric energy marketed and preventing monopolization of such
    energy by limited groups. Sections 4(c) and (d) say that public bodies
    and cooperatives are to be both sellers and distributors of federal
    power--in other words, retail utilities with distribution systems.
        For the past 60 years, BPA has interpreted the Project Act as
    precluding sales of firm requirements power to an entity which does not
    itself directly serve regional retail consumers, but which simply
    reallocates the power to retail utilities. The proposed JOE legislation
    would create a limited exception to these provisions by permitting a
    combined sale of power to a JOE for its members' requirements
    purchases. BPA does see the need to have an express authorization for
    such sales included in its statutes.
               no change to preference customers' current rights
        In sum, the proposed JOE legislation does not affect our preference
    customers' rights under current law to buy BPA power. It simply allows
    a JOE to act as a purchasing agent for its member utilities.
        When a JOE purchases from BPA on behalf of its members or
    participants, the JOE will have the same preference and priority status
    for those purchases as the member utilities currently have. Like its
    members, a JOE would be precluded under this legislation from reselling
    requirements power for any purpose other than its members' requirements
    loads. Similarly, the same restrictions that apply to customers, which
    purchase BPA's surplus power, would also apply to a JOE.
                      impact on electricity restructuring
        Mr. Chairman, one of the questions that arises is whether this
    issue is one that should be addressed in broader national electricity
    restructuring legislation. It is the Administration's view that
    electricity restructuring would best be handled in a comprehensive
    manner.
        It is our view, however, that JOE legislation is a minor issue. It
    simply creates a different way for existing preference customers to
    choose to purchase power from BPA that is consistent with their
    existing rights. Therefore, we believe the Committee could reasonably
    move this legislation independent of national restructuring legislation
    if it so chooses.
        Mr. Chairman, members of the Subcommittee, thank you for your time
    and attention. I am available now to answer any questions about the JOE
    legislation that you may have.

        Mr. Barton. Thank you, Mr. Burns. We'd now like to hear
    from Dr. Rosenberg. Your statement's in the record in its
    entirety, and we recognize you for 5 minutes.

                    STATEMENT OF ANDREW A. ROSENBERG

        Mr. Rosenberg. Thank you, Mr. Chairman, and good morning to
    you and members of the subcommittee. Thank you for inviting me
    to testify on these seven hydropower bills under consideration.
        I'm Andrew Rosenberg. I'm the Deputy Director of the
    National Marine Fisheries Service in the U.S. Department of
    Commerce.
        NOAA, the National Oceanic and Atmospheric Administration,
    mandates under the Federal Power Act, includes some of our most
    important tools for protecting anadromous fish--that is, fish
    that migrate from rivers to the sea and back again--and
    mitigating damage to fish habitat. And through the Federal
    Energy Regulatory Commission's licensing process, resource
    agencies such as National Marine Fisheries Service prescribe
    fishways to meet a variety of objectives, including the passage
    of healthy existing populations, passage for depleted
    populations as part of a restoration program, and passage as a
    means of providing access to underutilized habitat areas.
        Passage facilities must be constructed where they're
    needed, and deficient fishways must be improved by including--
    and by including effective fishways during relicensing, we can
    provide these fish stocks will long-denied access to
    historically important habitats.
        We have been working to ensure that the Nation's fisheries
    resources receive the necessary protections, including those
    provided by the Federal Power Act, with its key protections for
    anadromous fish. And to effectively implement the Federal Power
    Act, NOAA has developed a nationally recognized biological
    engineering and legal expertise related to fish passage.
        Many of our Nation's stocks of anadromous fish are in
    unhealthy condition, but we have a historic opportunity to
    change that prognosis because so many dams without passage
    facilities are soon to be considered for relicensing. The
    health of these stocks continues to decline, with several
    requiring listing as threatened or endangered under the
    Endangered Species Act. And therefore, now is the time to
    strengthen our protections for anadromous fish, not diminish
    them. And by taking a preventive yet realistic approach, we can
    decease the likelihood of additional listings under the
    Endangered Species Act, which would be of even greater concern.
        The commitment of the administration to the recovery of
    anadromous fish stocks is evident from the very significant
    resources that have been expended by the resource management
    agencies to restore fish habitat. Clearly, efforts to improve
    the health of aquatic ecosystems will be frustrated if fish
    cannot gain access to those improved habitats. And thus by
    improving fish passage, we make possible the ultimate success
    of the many regional and national large-scale planning
    initiatives to enhance fisheries' habitat by the U.S. Forest
    Service, Bureau of Land Management, our agency and others.
        NOAA does oppose the bills being considered by the
    subcommittee today because they undercut the ability of the
    Federal Power Act to provide important protections for fish. We
    strongly oppose H.R. 2335 and its implication for the
    management of NOAA trust resources. We have grave concerns
    about the bill and will make those concerns known within the
    administration in concert with the position stated by the
    Department of Interior.
        We believe that H.R. 2335 would complicate and lengthen the
    fishway prescription process as well as potentially remove any
    Federal obligation to provide fish passage at dams. The bill
    will cause delays in fishway prescription by adding additional
    and duplicative scientific and administrative reviews, and this
    could add many months to an already long process.
        The bill would provide sanctions for late prescriptions in
    the form of changing the nature of the conditions from
    mandatory to advisory for late submission, thereby removing any
    assurance that fish passage will be implemented.
        And most troubling of all, the sanction for late final
    prescription removes any requirement that the commission
    provide any fish passage, and this potentially could harm
    public fisheries resources that may be severely impacted by
    dams. Because licenses are issued for 30 to 50 years, that harm
    will be long-term for those public resources.
        We oppose the other bills because they, with the exception
    of the JOE bill, where we have no position, because they all
    seek exemptions to the licensing requirements of the Federal
    Power Act, and these requirements include important protections
    for NOAA trust resources.
        We do strongly support administrative changes for improving
    the licensing process and have been working intensively in the
    interagency task force mentioned by the other speakers already.
        We will continue to work in that task force, continue to
    work to improve the licensing process with regard to
    communication, coordination and resolving outstanding issues in
    licensing.
        NOAA is very deeply committed to the effort to restructure
    that licensing process, but we believe it can be done
    administratively, not through the legislative prescriptions
    provided here.
        With that, Mr. Chairman, I would be happy to respond to any
    questions. Thank you very much.
        [The prepared statement of Andrew A. Rosenberg follows:]
          Prepared Statement of Andrew A. Rosenberg, Deputy Assistant
         Administrator for Fisheries, National Oceanic and Atmospheric
                  Administration, U.S. Department of Commerce
        Mr. Chairman and members of the Subcommittee, thank you for
    inviting me to testify on the hydropower bills under consideration. I
    am Andrew A. Rosenberg, Deputy Assistant Administrator for Fisheries,
    National Oceanic and Atmospheric Administration (NOAA).
                                  introduction
    Role of NOAA Fisheries in Hydropower Relicensing
        Although hydropower is cleaner than fossil fuel and nuclear power,
    it is not free from adverse environmental effects. Efforts to reduce
    environmental problems associated with hydropower operations, such as
    providing safe fish passage and improved water quality, have received
    considerable attention in the past decade from the Federal Energy
    Regulatory Commission (Commission) and from Congress. The Federal Power
    Act (FPA) provides important safeguards for fish and wildlife resources
    from potentially serious harm that could be caused by hydropower
    projects. The Commission's relicensing process provides NOAA with an
    opportunity to reexamine operations and further the restoration of
    fisheries through the Department of Commerce's mandatory conditioning
    authority for prescribing fish passageways under the FPA. Fishways
    serve a variety of resource objectives including, but not limited to,
    passage for healthy existing populations, passage for depleted
    populations as part of a restoration program, and passage as a means of
    providing access to under-utilized habitat areas.
        NOAA is responsible for conserving and managing anadromous and
    marine fishery resources and their habitats, in accordance with the
    Magnuson-Stevens Fishery Conservation and Management Act, and other
    statutes. Our authority with respect to hydropower licensing is
    provided by the FPA, including sections 10(j) and 18, and the Fish and
    Wildlife Coordination Act. The Commission must give due weight to
    NOAA's recommendations for the protection and mitigation of damages to,
    and enhancement of, fishery resources and their habitats. The
    Commission also must include any fishway prescriptions issued by the
    Secretary of Commerce pursuant to section 18 in their licenses.
    Two Initiatives to Streamline the Licensing Process
        Hundreds of dams were licensed decades ago with inadequate or no
    fish passage facilities. They will have to come into compliance with
    current environmental laws and FPA mandates when those facilities are
    relicensed. Given the large number of license expirations over the next
    decade, we have an unparalleled opportunity to reconfigure inadequate
    fishways, prescribe fishways for projects that have existed without
    them for as long as 50 years, and provide other fish protection
    measures. I will describe two initiatives in which we are already
    working to realize these opportunities.
        First, there is the Interagency Task Force to Improve Hydroelectric
    Licensing Processes (ITF) convened by the Commission, NOAA, the
    Department of the Interior, and other resource agencies to develop
    administrative reforms to the licensing process. The ITF is playing a
    catalytic role between the Commission and the resource agencies,
    significantly improving communication and coordination. The ITF
    workgroups are developing administrative measures that should make the
    licensing process work more smoothly. They are being assisted by an
    advisory committee composed of industry, non-governmental
    organizations, tribes, and local, state, and Federal government
    agencies. Second, NOAA and our Federal partners are participating in an
    industry-led effort, sponsored by the Electric Power Research Institute
    (EPRI), to develop mutually acceptable means for improving the
    licensing process. The ITF and the EPRI initiatives collectively
    provide a means for stakeholders and agencies to identify and discuss
    improvements to the licensing process.
                                hydropower bills
    H.R. 2335--Hydroelectric Licensing Process Improvement Act of 1999
        While we agree with the objective of making the hydropower
    licensing process work smoothly, we disagree with the need for the
    proposed legislative changes and therefore strongly oppose H.R. 2335.
    We have grave concerns with the bill for the reasons outlined below. We
    believe that the ongoing, comprehensive efforts of the ITF and EPRI to
    streamline the licensing process via administrative reforms will
    improve the licensing process while still preserving the necessary
    environmental protections of the FPA. Until this process reaches
    completion, and ITF and EPRI recommendations can be implemented and
    assessed, legislative changes to the FPA should be held in abeyance. I
    will now comment on several issues raised in the bill.
    General Comments
        Many anadromous fish stocks continue to decline, with several
    listed as threatened or endangered under the Endangered Species Act
    (ESA). By taking a preventative yet practical approach, the likelihood
    of additional listings under the ESA is decreased and chances for
    recovery are increased.
        If mandates to provide passage for anadromous fish are diminished,
    our ability to protect fish, ensure sustainable fisheries, and maintain
    healthy river systems will be decreased. For nearly 30 years NOAA has
    been developing scientific capabilities in the area of fish passage
    that should continue to be applied to development of fishway
    prescriptions. It is appropriate that NOAA continue to provide for the
    protection of anadromous fish at hydropower projects because we have
    the statutory authorities and scientific expertise to manage these
    species throughout their range. It would be inefficient for the
    Commission to duplicate this expertise.
    Specific Comments
    Sec. 32(b). Factors to be Considered
        NOAA recommends deleting sections A, B, and C of the bill because
    they are unnecessary and add confusion to the licensing process. The
    FPA requires the Commission to make decisions on licenses in the public
    interest by ``balancing'' varied and competing biological, economic,
    and social interests. H.R. 2335 would either shift the responsibility
    for balancing from the Commission to the resource agencies, or result
    in a duplicative system where the agencies and the Commission are
    separately considering the implications underpinning a licensing
    decision. All of the factors in A are appropriately considered by the
    Commission. NOAA already takes factors B and C into consideration when
    developing fishway prescriptions.
        NOAA works closely with other consulting agencies when fishway
    prescriptions are developed. Additionally, in developing its mandatory
    conditions, NOAA already considers their compatibility with other
    mandatory conditions, relation to project impacts, and costs.
    Sec. 32(b)(2). Documentation
        NOAA considers this section unnecessary. The courts have stated
    that there must be substantial evidence to support mandatory conditions
    in the Commission's record. This standard is one used for review of
    Federal agency actions and it is appropriate for mandatory conditions
    to withstand legal challenge. Substantial evidence should include the
    scientific basis for the agency's conditions, as well as appropriate
    consideration of any other information provided to the consulting
    agency.
    Sec. 32(c). Scientific Review
        NOAA opposes this section because it would cause delays in an
    already lengthy process. Also, it is unnecessary because we already
    consider the results of peer reviews, and base our decisions on the
    best available science.
        The process of developing a fishway prescription directly involves
    the applicant because it is an interactive, multi-phase process during
    which NOAA coordinates with the license applicant, who can provide any
    additional information when needed. We work with the applicant or their
    contractors to ensure that appropriate data are collected according to
    accepted scientific practice. If an applicant submits results of a peer
    review, the review is given due consideration. Adding one more step to
    this process would lengthen it unnecessarily.
        NOAA is the world's largest fishery research and management agency,
    and has a scientific capability with diverse and highly specialized
    skills. As a science-based agency, we believe strongly that management
    and conservation decisions should be based on the best available
    science. Applicants can choose to provide us with their own scientific
    analyses and peer reviews. We will give those reviews appropriate
    consideration in our decisions, but believe we must retain the final
    decision for our prescriptions. The FPA appropriately assigns this
    responsibility to us.
    Sec. 32(e). Administrative Review
        The option of an Administrative Law Judge (ALJ) or other non-
    scientific reviewing body recommending a fish passage condition
    improperly places the responsibility for a technical decision on a
    person or review body without the requisite scientific background. NOAA
    has a number of other concerns as well. First, the time to provide
    conditions for review is unworkable because we typically would not have
    all the information needed to formulate fishway prescriptions at least
    90 days before the applicant files its application. Second, the ALJ or
    other reviewing body would not have information available on energy or
    economic values of a project. Third, downgrading a mandatory condition
    to a recommendation because an ALJ or independent reviewing body takes
    longer than 180 days potentially could significantly harm fishery
    resources and associated users. Fish passage prescriptions are
    mandatory measures needed to assure safe and effective fish passage.
    Fish passage needs do not change because a procedural timing
    requirement is not met. Upon being downgraded to 10(j) recommendations,
    the Commission would be allowed to accept, reject, or modify them. Such
    a practice would frustrate Congress's clear purpose of ensuring that
    fish passage is required as prescribed by Federal fishery experts.
    Sec. 32(f). Submission of Final Condition
        NOAA opposes this section because the deadlines do not take the
    Commission's National Environmental Policy Act (NEPA) analysis into
    consideration and the result of missing a deadline may adversely affect
    fishery resources. The deadline for submission of a final condition of
    no later than one year after the license application is ready for
    environmental review is unrealistic in relation to the Commission's
    NEPA analysis. Currently, when sufficient information is available,
    NOAA will submit preliminary fishway prescriptions in response to the
    Commission's notice that the project is ready for environmental
    analysis. The Commission can then include them in its NEPA analysis of
    the proposed project. NOAA may modify its prescriptions based on
    information developed during the NEPA analysis. As written, this
    section would deny this option.
        Also, the ``default'' option, essentially our sanction for not
    making the deadline, is even more onerous. The consulting agency would
    not be able to recommend conditions for fish passage or alleviating
    impacts to a federal reservation. The result would be that fishery
    resources could lack passage, causing significant declines in their
    numbers. Many anadromous fishery resources are already in a precarious
    state and this would exacerbate the problems.
        Additionally, this section would encourage applicants to delay in
    providing information requested by the resource agencies because it
    would increase the likelihood of the agencies missing a deadline. NOAA
    already makes every effort to meet its deadlines and will continue to
    do so.
    Sec. 32(g). Analysis by the Commission
        NOAA opposes this section because it would require NOAA to conduct
    an analysis that is duplicative with the Commission's NEPA analysis.
    NEPA analysis requires consideration of all impacts to the quality of
    the human environment, not only biological and physical impacts, but
    economic impacts as well. NOAA bases its conditions on the best
    available science, its expertise, and any other factors relevant to
    providing adequate fish passage. We take into account information
    regarding costs of the measures and will choose the least-costly option
    that provides adequate fish protection.
        The FPA is clear in its requirement that the Commission consider
    the economic viability of a project as part of its ``balancing''
    deliberations that precede the decision to issue a license. During
    balancing the Commission considers a multiplicity of issues affecting
    societal interests. NOAA does not have access to the varied types of
    information that the Commission applies to balancing. The Commission's
    decisions indicate that the economic viability of a project is not the
    only factor in their deliberations, as the Commission often issues
    licenses to applicants whose projects have been determined to have
    negative economic benefits.
    Sec. 32(g)(2). Consistency With This Section
        In regards to this section, the concerns stated above regarding
    section (b) and (c) apply equally to FPA section 10(j).
    Sec. 32(h). Commission Determination on Effect of Conditions
        NOAA disagrees with the characterization of the public interest
    being only those factors listed in section (b). There is no mention of
    the value of a resource protected by the condition. As to the rest of
    the factors listed, the Commission already reviews appropriate
    information on rehearing. Therefore, we recommend this section be
    deleted.
    Sec. 33. Coordinated Environmental Review Process
        NEPA and the President's Council on Environmental Quality (CEQ)
    regulations already provide deadlines for comments on NEPA documents.
    The Commission should not set different deadlines for governmental
    agencies to provide their comments, because this runs counter to the
    CEQ regulations.
    Sec. 6. Study of Small Hydroelectric Projects
        The size of a hydropower project is not necessarily related to the
    magnitude of its impacts on fish and habitat. Even small projects are
    major Federal actions and, regardless of the licensing process in use,
    require some level of NEPA review. While we would support consideration
    of processes for expediting the licensing process for small projects,
    we would not support any action that diminishes the role of the
    resource agencies from safeguarding the public's resources under their
    jurisdiction. Currently, the FPA does provide an exemption from the
    licensing process for small hydropower projects, and includes adequate
    protections for fish and wildlife.
    S. 422--Alaska State Jurisdiction Over Small Hydroelectric Projects
        NOAA strongly opposes S. 422. This bill would eliminate certain
    hydropower protections for fish and wildlife by removing small
    hydropower projects in Alaska from the jurisdiction of the Commission.
    Enactment of S. 422 would prevent Federal fishery managers from being
    able to conserve and manage anadromous fish throughout their range.
    NOAA's statutory responsibility to protect anadromous fish is
    especially important in Alaska, which supports many of the remaining
    healthy stocks of anadromous fish in the Nation. Alaska is where most
    new hydropower projects are under development, presenting an
    opportunity to achieve compliance with fish protection measures from
    the outset. Removing the Commission from the licensing process would
    remove NOAA as well, thereby preventing the agency that is responsible
    for management of anadromous fish throughout their range from
    participating in development of fish passage measures. Management of
    issues such as cumulative impact assessment would be greatly
    complicated if responsibility for fish protections was split between
    Federal and state entities within the same watershed, as many
    watersheds cross the boundaries of several states. While this is not
    true for Alaska, the transboundry rivers shared with Canada (Yukon,
    Taku, Stikine) present an analogous and even more complex situation.
    Additionally, Canada has taken the position that failure by the United
    States to protect salmon from hydroelectric development is a principal
    cause for imbalance in salmon production between the two nations.
    Passage of S. 422 may make future negotiations under the U.S. and
    Canada salmon treaty more difficult.
    Consultations with Affected Agencies
        The bill states that the Commission shall consult with the
    Secretaries of Commerce and the Interior before certifying a state
    program. Apparently this is intended to ensure that Alaska's program
    would provide adequate protection for Federal interests. However, there
    is no statutory provision requiring the Secretaries to concur with the
    Commission's decision, merely that the Commission consults. While the
    bill provides for oversight by the Commission it does not give the
    Federal resource agencies a role in this review. This leaves NOAA with
    little recourse if anadromous fish are not receiving adequate
    protection under the state program.
    Exemption Unnecessary
        Small hydropower projects already can be exempted from the
    licensing process pursuant to provisions of the Federal Power Act and
    the Public Utility Regulatory Policies Act (PURPA). (See 16 U.S.C. 823a
    and 2705). Hydropower projects falling within a FPA and PURPA licensing
    exemption already may apply for a FERC license exemption. This
    alternative involves much less time and effort on the part of the
    license applicant than the licensing process. Such projects still
    remain subject to conditions for fish protection issued by Federal
    resource agencies. This is important because projects of 5,000
    kilowatts or less may have significant environmental consequences and
    should, therefore, continue to be subject to the requirements of the
    FPA and protections deemed necessary by the resource managers. Damming
    of an anadromous fish stream has adverse impacts regardless of the
    project's size.
    Project Works on Federal Lands
        Although NOAA is not a land management agency, we have concerns
    regarding the direct and indirect effects of hydropower projects
    located in whole or in part on Federal lands. S. 422 would require that
    the Secretary having jurisdiction with respect to such lands must
    approve the State of Alaska's authorization for the hydropower project.
    However, S. 422 fails to require any consultation with the Federal fish
    and wildlife resource agencies before such approval is provided. Public
    resources under Commerce jurisdiction and management plans may be
    affected.
    S. 334--Removing FERC Jurisdiction to License Projects on Fresh Waters
            in Hawaii
        NOAA opposes S. 334 because it would eliminate important living
    marine resource protections provided by the FPA and could cause
    significant harm to fishery resources. S. 334 would exempt hydropower
    projects on fresh waters in the state of Hawaii from the requirements
    of the FPA, and the Commission would no longer have licensing
    authority. As with Alaska, we oppose complete devolvement of licensing
    authority to the states because of the important role that Federal
    fishery managers play in the licensing process. Although NOAA currently
    has no current involvement in hydropower licensing in Hawaii, we should
    not be precluded from doing so in the future, where resources under
    Commerce jurisdiction are impacted.
    S. 1236 and H.R. 3852--Extensions of Deadline and Reinstatement of
            License
        NOAA opposes S. 1236 and H.R. 3852 ``Extensions of Deadline and
    Reinstatement of License'' because we believe that all projects should
    be constructed on time to ensure that environmental information is
    current. S. 1236 and H.R. 3852 would authorize the Commission to extend
    the time limits for construction of projects after issuance of a
    license in Idaho and Alabama, respectively. When Congress has
    authorized extensions of the construction deadlines for hydropower
    projects, the Commission generally has not objected to extensions of up
    to ten years from the date the project was licensed. Conditions may
    change substantially in that amount of time, thereby requiring
    supplementation of the Commission's environmental analysis. At a
    minimum, the Commission should ensure that their NEPA analysis is still
    valid, or prepare a supplemental NEPA document.
        H.R. 1262--FPA License Not Required for Pentwater River, Michigan
        NOAA opposes passage of H.R. 1262 for the same reasons we oppose S.
    422 and S. 334. Specifically, the erosion of the Commission's
    authority, whether state by state or project by project, circumvents
    the FPA requirements that provide the Federal resource agencies with an
    important role in the licensing process.
        S. 1937--Allowing Bonneville Power Administration to Sell
    Electricity to Joint Operating Entities
        NOAA has no comment on this bill.
                                  conclusions
        NOAA is working to ensure that the Nation's fishery resources
    receive necessary protections, including those provided by the FPA with
    its key protections for anadromous fish. By including effective
    fishways during relicensing, we can provide anadromous fish stocks with
    long denied access to historically important habitats. By combining
    this preventative approach under the FPA with the important curative
    measures under the ESA, we can decrease the decline in other
    populations and decrease the likelihood of additional listings under
    the ESA.
        NOAA mandates under the FPA include some of our most important
    tools for protecting anadromous fish and mitigating damages to fish
    habitat. Our positions on these bills stem from our conviction that
    these mandates should not be diminished or removed.
        The FPA mandates the Commission to make licensing decisions in the
    public interest, balancing the Nation's need for hydropower and the
    need to protect important natural resources. NOAA will continue our
    collaborative efforts with the Commission, industry, non-governmental
    organizations, tribes, and other interested entities to ensure that the
    hydropower licensing process provides a sound basis for the balancing
    of societal priorities, including the need for healthy habitats and
    productive fisheries. We will also continue our efforts to make
    administrative changes that will make the process work more smoothly.
        NOAA views relicensing as an opportunity to increase, rather than
    retreat from, efforts to improve fish passage at dams and protection of
    aquatic ecosystems. H.R. 2335 proposes changes to the FPA that will
    diminish our ability to protect anadromous fish by providing passage at
    dams and meet statutory mandates to ensure the sustainability of
    stocks. Therefore, we strongly oppose H.R. 2335.
        NOAA opposes S. 422 ``Alaska State Jurisdiction Over Small
    Hydroelectric Projects'' because we believe that the fish and wildlife
    protection provisions of the FPA should continue to apply to all
    hydropower projects, regardless of geographical location. Applicants in
    Alaska can already apply for an exemption from the full licensing
    process for small hydropower projects and still enjoy adequate
    protection for Federal resources.
        NOAA opposes S. 334, ``Removing FERC Jurisdiction to License
    Projects on Fresh Waters in Hawaii,'' because we are concerned that
    removing Hawaiian hydropower projects from the licensing requirements
    of the Federal Power Act would eliminate important resource protections
    that may be needed in the future. We believe that the provisions of the
    Federal Power Act should continue to apply to all non-Federal
    hydropower projects.
        Thank you for the opportunity to provide testimony on these
    important issues. I would be happy to respond to any questions.

        Mr. Barton. Thank you, Dr. Rosenberg. We have two pending
    votes on the floor. We've got 10 minutes left in the first vote
    and then there will be a 5-minute second vote. The chair's
    going to try to get one round of at least one member ask some
    questions before we go vote, and then we'll come back.
        Congressman Towns, we'll give you the option, if you wish,
    since you have been so maligned by this distinguished group of
    witnesses.
        They all----
        Mr. Towns. They strongly oppose.
        Mr. Barton. Strongly oppose. And they just--I know your ego
    is taking a beating. If you would like to go first to try to
    correct the record so that your reputation remains intact,
    we'll give you that option. And then when we come back, we'll
    give Mr. Shadegg the opportunity if he wishes.
        Mr. Towns. Thank you very much, Mr. Chairman.
        Mr. Barton. Five minutes.
        Mr. Towns. I really appreciate this, because it's strong
    language. Let me just begin by asking you, Dr. Rosenberg, do
    you support what's happening now?
        Mr. Rosenberg. If you mean do we support----
        Mr. Towns. I want to find out what you're supporting. You
    strongly oppose change.
        Mr. Rosenberg. Yes. And we strongly support----
        Mr. Towns. Do you support what's happening now?
        Mr. Rosenberg. We strongly support streamlining through
    administrative process, yes. If you mean do we support the
    current licensing process, we think that a lot of things need
    to be fixed, but we do not believe that that needs to be done
    legislatively. It can be done administratively, and we're
    working toward that end.
        Mr. Towns. How long has the task force been in existence?
        Mr. Rosenberg. It's a year and a half? Two years? Two
    years, I believe, sir.
        Mr. Towns. What have you accomplished up to this point?
        Mr. Rosenberg. There has been work in several areas
    including so-called ex partite rules, the rules that constrain
    discussion between the parties outside of a legal setting, the
    overall communication and licensing process. There's been
    discussion on economics. There's a fourth area which----
        Mr. Towns. Would the commissioner agree with that? You
    know, let me--this is a very serious issue. I mean, and I'm
    hoping you realize, you know, how serious it is. Any time you
    have a situation where people do not know how many lawyers they
    will need, how much money they will have to spend, or what year
    they will ever be relicensed, I mean--I mean, to me, that's a
    very serious issue. And I think that to form a task force is
    one thing, but the question in my mind is what are you going to
    accomplish with this task force?
        Mr. Rosenberg. Well, one of the main focal areas,
    Congressman, for the task force has been development of a
    collaborative process for working through licensing issues with
    the applicants. It certainly is true that this is a complicated
    process, but these license are issued for a very long period of
    time and cover a very wide range of issues as well as trust
    resources. So through that collaborative process, we believe
    that there can be much greater certainty in the licensing
    activity. We do not believe that that would occur through some
    of the legislative changes proposed. I certainly don't think
    I've done any damage to your reputation or anyone else's by
    making that statement.
        Mr. Barton. We're just kidding about the reputation. Don't
    take us seriously on that.
        You cannot damage a Congressman's reputation.
        Mr. Towns. Especially if that Congressman is from New York.
        Yes, Commissioner?
        Mr. Hebert. If I may, you had asked the commission, but
    what I'd rather do is yield to the chairman first and then
    answer after him unless he would like for me to go ahead.
        Mr. Hoecker. No. Thank you, Commissioner. Do we agree that
    the task force and the advisory committee can be productive?
    Absolutely. The FERC was instrumental in asking for this
    process. We intend to help drive the process. And we are
    looking for some very specific results in terms of
    collaboration, in terms of how we apply the NEPA statute, in
    terms of what best practices we can adopt to expedite the
    development of conditions, noticing techniques, even model
    conditions under the Clean Water Act. A number of things have
    been talked about.
        But you're absolutely right, Congressman, that your
    patience in regard--and ours--shouldn't be infinite. And at
    some point we need to produce some very specific results. I
    think that the collaborative process is assisted by the
    attention that this subcommittee has focused on this entire
    range of issues. And so I certainly applaud your efforts to
    shine that light.
        Mr. Towns. Thank you. Commissioner.
        Mr. Hebert. Congressman Towns, you and I had an opportunity
    to speak together at a conference about a year ago and had the
    opportunity to speak about a couple of issues. And at that time
    I told you I did agree with you and I thought that the process
    was broken. I continue to think that way, and I do support
    2335, and let me tell you quickly why I support it and why I
    think it moves us in the right direction.
        Your comments in the beginning, your summary as to that it
    does not repeal mandatory conditioning, I think that's an
    important observation. I think it's something that everyone
    needs to understand, that it does not repeal mandatory
    conditioning, but that it requires a reasonable implementation
    of the law with regard to costs and benefits.
        That is something similar to, I think, what we have
    certainly done when it comes to pipeline certification. And as
    you know, FERC has combined its offices of pipeline
    certification and hydro licensing into an office of projects
    now, so an office of one. So I certainly think that would be
    consistent. It would move us in the right direction.
        But if I may point something out, too, which really alarms
    me----
        Mr. Barton. Point it out quickly, because we've got 5
    minutes to vote.
        Mr. Hebert. I'll do that, Mr. Chairman. I've had an
    opportunity to look over the written testimony of Andrew
    Fahlund, Director of Hydropower Programs for American Rivers,
    and in his testimony on page three he says, ``these decisions
    have a relatively small impact on energy generation, electric
    rates, or industry viability.'' And if you go over to page six
    where he qualifies that, ``according to the chair of the
    Federal Energy Regulatory Commission, the relicensing of more
    than 140 hydropower projects resulted in an average reduction
    of generation of only 1 percent.'' Well, only 1 percent in a
    time where we not only have the administration but we certainly
    have Members of Congress concerned about reliability this
    summer, I'm asking who's going to lose that 1 percent?
        And the Internet is a wonderful thing, and I had an
    opportunity to pull up some numbers this morning, and based on
    the 1 percent, I assume we should make a phone call to Idaho,
    Montana and Wyoming and tell them that over the years, they're
    not going to have their 1 percent. And if we're not willing to
    do that, what I suggest we do is make a phone call and say,
    well, perhaps you're going to have electricity, but we are
    going to have to burn something for you to have that
    electricity.
        And the last point is this. And he makes it on page 7.
    ``One would reasonably expect at least some loss with meeting
    environmental laws. A 1-percent loss in generation is a small
    price to pay for the benefits received. We need not trade
    healthy rivers for clean air.'' I think that's right. I think
    we need to have a balance. But nor do I think we should trade
    clean air for clean rivers necessarily. I think a balance is
    right. I think Congressman Markey said it right, not torpedo
    the dams, but not damn the environment. I think a balance of
    the laws in relicensing is what is necessary, and I think we
    can do that, and I don't see how anyone could suggest that
    balancing is a bad idea.
        Mr. Barton. Let the record show I think that gentleman's
    from Mississippi, so his one more comment took about 3 minutes.
        Mr. Hebert. We talk slower than the rest of you.
        Mr. Barton. We're going to recess briefly. We've got this
    vote, one more vote. We should be back, or at least the
    chairman intends to be back, by 11:30. So members that wish to
    ask questions, if you'll come back at 11:30. In recess till
    11:30.
        [Brief recess.]
        Mr. Barton. The subcommittee will come to order. I see
    we've been joined by the distinguished Congressman Sawyer. Glad
    to have you. As soon as we get our witnesses back at the table,
    we will recognize Congressman Shadegg for his 5 minutes of
    questions. And it looks like Commissioner Massey is about to be
    seated, so the Chair would recognize Congressman Shadegg for 5
    minutes for questions.
        Mr. Shadegg. I thank the chairman. Let me begin with you,
    Dr. Rosenberg. You were in the room when Senator Murkowski
    testified that as a specific project, it took 7 years to get
    the license and a year to build the plant, I believe, were you
    not?
        Mr. Rosenberg. Yes.
        Mr. Shadegg. Do you think that that's appropriate?
        Mr. Rosenberg. Certainly not. But I don't know the
    specifics of the case at all.
        Mr. Shadegg. I don't, either. Do you--as I understand your
    testimony it is that you believe the statute or the process now
    is flawed and does not move quickly enough but you argue that
    Congress should simply defer to your efforts and the efforts of
    those involved to simply allow you to proceed with this now 2-
    year process to try to improve the relicensing process. Is that
    right?
        Mr. Rosenberg. Yes, sir.
        Mr. Shadegg. Okay. I guess I should begin by extending my
    welcome to John Leshy. John Leshy was a professor at ASU law
    school years ago when he and I worked together on projects.
        Mr. Leshy. I still am, Congressman. I'm on leave and
    working on the world's longest leave.
        Mr. Shadegg. What's the doctrine that we worked together
    on? The doctrine that provides that the government owns the
    beds of all navigable----
        Mr. Leshy. Oh, right. The public trust doctrine.
        Mr. Shadegg. The public trust doctrine.
        Mr. Leshy. Right.
        Mr. Shadegg. We were shoulder to shoulder in that fight and
    had a lot of fun. Let me ask you, Mr. Leshy, you also heard the
    testimony of Senator Murkowski to the effect that it took 7
    years to license a--what was evidently a very small plant,
    because they built it in a year--in Alaska. Do you feel that 7
    years to license a plant that can be built in a year is
    appropriate?
        Mr. Leshy. No, I don't, Congressman. And I'm happy to have
    the opportunity to talk about that a little bit. I don't know
    the specifics of that case.
        There are many reasons for delay. It's part of this
    process. The conditioning authority, the Interior Department
    and its share is--and Forest Service's share is one aspect of
    delay, but it is by no means the only aspect. A lot of times in
    our experience, frankly, the problem is that we get
    applications that aren't fully developed and don't have enough
    information them.
        Mr. Shadegg. I appreciate that. My time is very limited, so
    if you'll just say what you have to say on that issue in a
    sentence, and if you want to expand your answer writing that's
    fine. But as you know, my time is----
        Mr. Leshy. If I could make one quick other point, and that
    is, during the delay process, the existing project goes on, so
    the incentive of people who want to improve the project from an
    environmental standpoint such as our agencies is to get this
    process going forward. Because the existing process continues
    under annual licenses during this entire period of whatever
    delay is involved.
        Mr. Shadegg. You do agree, Professor Leshy--I'll call you
    that if you will--that the current law requires FERC to give
    equal consideration to the purposes of energy conservation, the
    protection and mitigation of damage to and enhancement of fish
    and wildlife, the protection of recreational opportunities and
    the preservation of other aspects of environmental quality. You
    do agree that the law requires equal consideration be given to
    essentially those two different aspects?
        MR. Leshy. Yes. I think that was added by the legislation
    that Congressman Markey talked about.
        Mr. Shadegg. But you also agree, I guess I understand from
    your testimony, with Dr. Rosenberg that we should not pass 2335
    at this time, we should simply trust you?
        Mr. Leshy. Well, the existing conditioning authority that
    we have, we've had since 1920. And Congress did not change that
    in 1985, 1986 when it gave the Commission the direction to give
    equal consideration.
        Mr. Shadegg. Do you know if it took--in 1920, do you know
    if it took 7 years to license a project?
        Mr. Leshy. I don't know, Congressman.
        Mr. Shadegg. I guess I just want to make a statement, and
    then I want to ask you a series of other questions. You are a
    part now of the administrative branch of the government and not
    the legislative branch. Is that correct?
        Mr. Leshy. Yes.
        Mr. Shadegg. I just want to make it clear that----
        Mr. Barton. He had to think about it.
        Mr. Shadegg. I just want to make it clear that we have
    different responsibilities, and my concern is that the voters
    of the 4th Congressional District of Arizona when they see
    issues like this of a law that the Congress passes and then
    what appears to be inordinate delay--and I haven't heard a
    witness say yet that there isn't excessive delay--that it's a
    tough sell for me to go home to Arizona and say, yes, I
    recognize there's a problem here, but I didn't do anything
    about it because the administration, the other branch of
    government said, well, they were working on it and had been
    working on it for 2 years, and I ought to just trust them. So I
    hope you'll appreciate that I have to come at this from a
    different position than you do.
        I also want to just clarify from your testimony and from
    your written statement that you oppose certain aspects of Mr.
    Towns' legislation. Specifically you oppose requiring
    scientific peer review. You oppose allowing an administrative
    law judge or other independent review body to be inserted in
    the process. You oppose requiring the Commission to conduct an
    economic analysis of each section 4(e) condition, and you do
    not want to be required to rely on the Commission's NEPA
    statement. Is that correct?
        Mr. Leshy. Basically, yes, because we're concerned about
    essentially the layering and the delay that's involved in that
    process. You know, is the issue, should we take cost into
    account in setting our conditions? Of course we should. but
    should we have an elaborate independent appellate process----
        Mr. Shadegg. I just want it on the record that you oppose
    all of those. You don't want independent scientific peer
    review, you don't want an administrative law judge or
    independent review, you don't want an economic analysis of each
    section or of each section 4(e) condition, and you don't want
    to rely solely on the NEPA 4(a)--the NEPA analysis by the
    Commission.
        If I can, Mr. Chairman, with your indulgence, I'd like to
    turn to the chairman, Mr. Hoecker, and say, I assume that you
    agree with the other two witnesses that 7 years to license a
    project which can be built in 1 year is too long?
        Mr. Hoecker. Yes. We don't want the process to be any
    longer than necessary. And we have worked very hard to reduce
    the processing time for hydro licenses.
        The average time for the class of 1993, the 160-some-odd
    projects whose licenses expired in that general timeframe, was
    about 3\1/2\ years. Under our new alternative licensing
    procedure, the average time in those few cases where we have
    actually applied it is a year.
        Mr. Shadegg. I want to make it clear that I support your
    efforts, the administrative efforts to try to improve the
    process. But Commissioner, I want to commend you for working in
    I think a good faith way with us to say, look, I applaud the
    goal of Congressman Towns' legislation, which you have done
    here today, and to come in and constructively say, these are
    things in the legislation that I think would help. And I heard
    your testimony and listened carefully to it and took notes on
    it. And I genuinely appreciate that you're not just saying,
    ``trust us. We've been at this 2 years. We'll solve it
    someday.''
        I would conclude, Mr. Chairman, by commending Commissioner
    Hebert. I want to completely associate myself with your
    remarks, your support of this legislation, your thoughtful
    analysis of the testimony that's before us, including the
    analysis of the American Rivers testimony. You were pointing
    out that the notion that losing only 1 percent of generation is
    insignificant and shouldn't be worried about, and also
    associate myself with your remarks saying we can strike a
    balance here. I favor environmental protection and certainly
    don't diminish that.
        And I think the current law where it says we must strike a
    balance between those is appropriate, but I also think it's
    important to understand that this is a Nation which needs more
    energy, and if we don't produce it through hydroelectric power,
    almost every other source that we know of results in the
    combustion of a fuel and damage to our air quality. So, I
    commend you for your testimony.
        Mr. Hebert. Thank you, Congressman.
        Mr. Barton. Mr. Sawyer for 5 minutes for questions.
        Mr. Sawyer. Thank you, Mr. Chairman. I apologize for not
    being here earlier. I was in another meeting. And so if the
    matters I'm going to ask about have been covered, please don't
    hesitate to tell me.
        I'd like to have you comment, both commissioners, on the
    kind of success that you've had in the use of settlements and
    whether there are other avenues that might be pursued in order
    to achieve collaborative processing.
        Mr. Hoecker. I identified several projects in my written
    testimony where we've had some considerable success in
    advancing the timetable for resolving licensing--relicensing
    cases, the latest one being the Avista case, which was the
    Clark Fork Project in Montana and Idaho. A couple of very major
    projects, a lot of power at those sites.
        We managed to license that project in a year because we did
    a tremendous amount of collaboration. The applicant selected a
    process, brought the consulting agencies, the other parties
    into the process, and a settlement was achieved. We've had
    other instances like that where we have achieved success.
        It's my expectation that this procedure, coupled with what
    we will be able to achieve in the context of our task force,
    which hopefully will help develop licensing conditions more in
    the open through public process of some kind, will make our
    processes less of a mystery to all the affected parties and
    will encourage settlements. And that's where we're focused.
        Within this existing statutory framework, our only choice
    is to try and reach some kind of administrative accommodations,
    and that's where we're putting our effort.
        Mr. Massey. Congressman, to be brief, I will associate
    myself with the remarks of Chairman Hoecker. I think settlement
    is the key to getting the cases through the process very
    quickly. I think licensees and others know that we support
    settlements. They're hard to accomplish, but I am bullish with
    our alternative licensing process, that the chairman talked
    about, will bear substantial fruit.
        I also believe that the interagency task force will bear
    fruit. I wouldn't expect Congress to wait forever, but I do
    believe it will ultimately result in processes and procedures
    that are more reasonable.
        Mr. Hebert. Congressman Sawyer, my comments will be very
    similar, and I'll attempt to be brief as well. The only problem
    that we continued to have with the collaborative process--and I
    do think it's working. I think it's been a wonderful benefit--
    is Section 18. Regardless of what we try to do with the
    collaborative process, if we have the mandatory conditioning
    requirement over our head, there's nothing we can do with that,
    and therein lies the problem.
        I think the balancing should be the requirement, and I
    don't think anyone would argue that there is anything wrong
    with moving forward with objective criteria. I don't think we
    would have imposed SOX and NOX emission
    requirement had we not had some type of scientific evidence
    suggesting that something should be done, nor do I suggest we
    should do that with hydropower as well. And I think that is
    something that has to be considered.
        And a comment that Dr. Rosenberg made as well, as far as
    the 30 to 40 years that they are strapped with these conditions
    or the lack thereof in his case, I would suggest the one thing
    that has to be considered as well is that the government can at
    any time move forward and reopen that license. The operator
    cannot.
        Mr. Sawyer. Thank you, Mr. Chairman. Thank you all.
        Mr. Barton. Thank you, Congressman Sawyer. Congressman
    Dingell, would you wish to be recognized for questions now?
    Would you like to----
        Mr. Dingell. Mr. Chairman, thank you. I'd like to address
    first, if you please, with Mr.--I can't see the name there.
        Mr. Hebert. Hebert.
        Mr. Dingell. Hebert. On the question of fish and wildlife.
    Under the Towns bill, you get 180 days in which to respond. Is
    that right?
        Mr. Hebert. That's correct. Yes, sir.
        Mr. Dingell. Now, and can you do that in that period of
    time?
        Mr. Hebert. Yes, sir, I think we can.
        Mr. Dingell. You can? So the 180 days you're telling me is
    not a problem?
        Mr. Hebert. I think if it's a deadline, we can meet it,
    sir. It's been my experience that the only thing that forces us
    most of the time to make decisions is deadlines themselves.
        Mr. Dingell. All right. Now you've indicated, however, that
    you would recommend a veto on this legislation. Is that
    because--is it, Mr. Leshy, you've suggested that you'd
    recommend----
        Mr. Hebert. Yeah. No, sir, I would not recommend a veto.
    Quite the opposite.
        Mr. Leshy. That's me, Congressman Dingell, from the
    Department of the Interior. We would recommend a veto of this
    legislation.
        Mr. Dingell. Why?
        Mr. Leshy. Because we think it actually will result in more
    delay and more complication--more complicated structure in this
    already complicated process, and it will really be a step
    backwards. It won't serve the objective that I think we all
    share, including members of this committee, which is to make
    this a better, faster, more efficient process.
        Mr. Dingell. Can you make the 180 day limit that is imposed
    on you?
        Mr. Leshy. In terms of--I'm not sure exactly which limit
    you're talking about.
        Mr. Dingell. You have 180 days in which to comment. Is that
    sufficient or not?
        Mr. Leshy. Oh, okay. I see. I'm sorry. I don't think we can
    do that. Certainly if----
        Mr. Dingell. Why not?
        Mr. Leshy. I'm sorry?
        Mr. Dingell. Why not?
        Mr. Leshy. Setting these conditions can be a very
    complicated matter, and it depends in large part on what the
    applicant is proposing to do, which we often don't find out
    until much later, and we are--the way I understand this bill,
    it would require us essentially to set conditions at the very
    beginning of the process before we fully understand what the
    impacts of the license are going to be.
        That's why in fact we support and are important
    participants in this collaborative process, because the big
    advantage of the collaborative process is that we sit down with
    the applicant and the Commission before its plans get locked in
    stone and it submits an application. And we can work with the
    applicant through the development of the application to solve a
    lot of these problems. And we think that holds great promise.
    We have had some successes already, and there's a lot of
    interest among the license applicants in going through this
    process. Our agency has a lot of interest in using that
    alternative process, and we think it's going to solve a lot of
    the problems the committee is concerned about.
        Mr. Dingell. Now, Mr. Rosenberg, do you have any comments
    on these points that I've been just raising?
        Mr. Rosenberg. Yes, sir. I think that the deadline is
    problematic. We might be able to make a 180-day deadline if you
    had full information. But we rarely do. Most of the delay in
    developing the prescriptions is waiting for additional
    information from the applicant, from FERC, additional analyses
    to be done by contractors and so on.
        If you put in the timelines as in the bill, there is no
    incentive for them to complete those, because if we miss the
    timeline, then the prescriptions are no longer mandatory.
        So there's no reason why they would want to be forthcoming
    with information more quickly if it would downgrade the actual
    prescriptions if they are not forthcoming with information.
    That's not a matter of ill will, it's just a matter of common
    sense.
        Mr. Dingell. You're saying what this does is to actually
    discourage cooperation by the applicant?
        Mr. Rosenberg. Yes, sir. I believe it does.
        Mr. Barton. Would the gentleman yield?
        Mr. Dingell. I don't know how much time I've got.
        Mr. Barton. Well, we'll give you extra.
        Mr. Dingell. But I'll be glad to yield----
        Mr. Barton. I think I'm pretty generous with extra time.
    You could still make a determination with imperfect
    information. And we do it every day in the Congress, so----
        Mr. Rosenberg. Yes, sir, we can. But those would then be
    mandatory prescriptions, and we would be worse off and the
    applicant would be worse off, so that's why we don't feel that
    those timelines are actually helpful either to the applicant or
    to us.
        Mr. Barton. But you understand that sometimes this quest
    for perfect knowledge drags the process on into infinity?
        Mr. Rosenberg. Yes, sir. But I don't believe we're----
        Mr. Barton. So there is some validity in Mr. Towns' idea of
    putting a timeline. And I know the bureaucracy hates to make
    decisions, but sometimes you can make a decision based on
    relevant information and don't have to wait for total,
    complete, perfect knowledge.
        Mr. Rosenberg. Sir, in this field, we always make decisions
    in that circumstance. And I believe that's the case for fishway
    prescriptions as well. But having a mandatory timeline with the
    consequence of that being an actual downgrading of the
    recommendation makes this a one-way process. There really does
    not seem to be any incentive at that point to engage in a full
    collaboration. If you had a timeline and reversed that process,
    maybe in fact you would get better cooperation, but I can't see
    how it would work in this circumstance.
        Mr. Dingell. Well, and in point of fact, the applicant
    would have every incentive to run the clock----
        Mr. Rosenberg. Yes, sir.
        Mr. Dingell. [continuing] to delay delivering the
    information, to deliver less than the required information. So
    as a result, that puts you in greater and greater difficulty in
    terms of your ability to address the problem. Isn't that right?
        Mr. Rosenberg. Yes, sir. And that's one of the primary
    reasons we oppose the bill.
        Mr. Dingell. Okay. Now I can understand that FERC would not
    object to this. They're in a different line of work. And I've
    had to deal with FERC over the years, and I find you gentlemen
    to be quite uncooperative in terms of preserving and protecting
    fish and wildlife values, and that tends to--that was one of
    the reasons I directed the question at you that I did.
        Having said these things, Mr. Burns, we have been
    requesting from the Department of Energy for a goodly period of
    time certain answers to certain questions. We finally wrote a
    nasty letter to the Secretary on Monday. Last night after close
    of business, we got your responses. The questions that were
    asked were essential to us achieving an understanding of the
    legislation so we could understand what it is that we ought to
    do about the legislation.
        I hope that you will take back to the department that I'm
    very displeased, that I feel that this was not a lack of proper
    cooperation, and that you have essentially slowed down the
    process and made our business more difficult. I want you to
    know that I find this very displeasing. I hope you'll carry
    this thought from here with you and that were I the chairman of
    this committee, you would feel rather noticeably more pained on
    this matter than you are this morning.
        So, Mr. Chairman, I thank you for your kindness.
        Mr. Barton. Thank you. The Chair recognizes himself. I'm
    going to--I have a series of questions. I'm not going to set
    the clock. But after my questions or during my questions if the
    members here wish to ask questions, we'll do that, and then
    we'll let this panel go so they can have lunch.
        I want to make a statement first, and then I'll ask the
    questions. This is a hearing to get information on all these
    bills for potential mark-up. And I talked to Congressman Towns
    on the way to our vote and told him that I'm not afraid of
    controversy. I'm ready to go to mark-up if we can find a
    consensus that's a bipartisan consensus. I don't want for it to
    be a Republicans on one side and Democrats on the other. But if
    we can get--as I told Congressman Towns, I just want friends
    and enemies on both sides of the issue. And so, you know, the
    fact that these bills have been languishing tells me that if
    they can pass the Senate, we ought to be able to improve them
    in the House and then go to conference with the Senate if we
    can find consensus at all.
        The second statement I want to make, it looks like we've
    got two categories of bills. We have a category of bills that
    tries to reform the process, and then we have a category of
    bills that tries to escape the process. I can understand why no
    one would support the bills that give specific exemptions from
    the regulatory process. I can understand the concerns of the
    regulatory agencies that you perhaps don't approve of
    Congressman Towns' approach, but it stuns me, Mr. Leshy, that
    the Department of the Interior would recommend a veto before
    we've even had a hearing.
        I mean, that is a record for this subcommittee. We have had
    lots of veto threats by EPA and DOE, but it's normally after
    we've done something, not before we've even thought about doing
    something. So we'll give you the record for the earliest veto
    threat.
        I also want to commend the Department of the Interior
    because at least you gave us a definite position. I mean, you
    didn't kind of waffle around. I mean, you know, we sometimes
    get 40 pages of testimony that tell us nothing. At least in
    Interior's case you told us why you opposed it and up front in
    language that even a Texan could understand, so I appreciate
    that.
        So but now I want to get down to my questions. And this
    first question is a general question. I don't think anybody
    accepts that the current system really works. I think
    Congressman Towns has an excellent point when he says that it
    really takes an inordinate amount of time to relicense some of
    these hydro projects. Surely there are people in the
    administration that are thinking about ways to improve the
    process. And why not adopt an approach where you take one
    agency, perhaps the FERC, give them ultimate authority and let
    the other agencies work with them so that they all have
    jurisdictional input but you have one agency that makes the
    final decision. What's wrong with that? And I'll let anybody
    answer that.
        Mr. Leshy. I'm happy to take a crack at it. My written
    statement addresses this to some extent. The decision that
    Congress made in 1920 that it has stuck by ever since is that
    on a couple of aspects of hydropower licensing, namely, where
    Federal Reservations are involved and where fishways are
    involved, there ought to be conditions set by agencies outside
    the Federal Power--what was then called the Federal Power
    Commission--to prescribe those conditions as the sort of
    baseline. This is the conditions these projects have to meet,
    and then you go on to the balancing that takes place by looking
    at all aspects of the project. We think that decision that
    Congress made then was sound, and we think it's still
    necessary.
        Mr. Barton. So your basic position is in the golden era of
    1920, we had smarter congressmen, and if we'd just revert back
    to all laws that were established in 1920, the country would be
    better off? Is that your position?
        Mr. Leshy. No. I'm not saying that, Mr. Chairman. But I'm
    saying in this instance we don't think the system has proved to
    work out badly in practice. That in fact it is important to
    retain a notion of mandatory conditioning for those aspects
    of----
        Mr. Barton. Do you happen to know--I didn't see this in any
    of the testimony, so any of the witnesses can answer this
    question. What's the average time it takes to relicense a hydro
    project? Dr. Rosenberg?
        Mr. Rosenberg. Thank you, Mr. Chairman. I believe that the
    commissioner noted that the average time was between 3 and 5
    years if I heard him note that for the recent projects, and it
    was as short as 1 year in----
        Mr. Barton. For relicensing?
        Mr. Rosenberg. For relicensing, yes, sir.
        Mr. Barton. Three to 5 years.
        Mr. Rosenberg. If I may answer or contribute to the
    answer----
        Mr. Barton. You may answer or contribute or obfuscate. It's
    up to you, sir.
        Mr. Rosenberg. Well, I'll try not to do the latter if
    that's all right with you. I think that the reason why you
    would not include all of the decisionmaking in a single agency
    is because each of the agencies has different expertise. To do
    that, you would have to duplicate the expertise that's been
    built up in the Department of the Interior and the Department
    of Commerce with regard to spe-
    cific----
        Mr. Barton. No, I'm not saying put it all in one agency. I
    would still let each agency have input, but I'd put one agency
    in charge to make the final decision.
        Mr. Rosenberg. If that agency had the mandate to in fact
    meet the mandates of the other agency as opposed to simply
    consult, then I think you could do that. And I would argue that
    is exactly what we do now, put effective decisionmaking
    authority. But they have to account for our mandates as well,
    for very specific sections and only those sections. So I think
    that's exactly the system we have. They are primarily
    responsible for relicensing. But with regard to our specific
    mandates, in our case, Section 18, then they must account for
    the mandates that we're required to meet.
        Mr. Barton. Let me ask the distinguished chairman of FERC,
    do you think you've got the ultimate decision and that you're
    supreme among equals? I was not aware of that from your
    testimony, but----
        Mr. Hoecker. Well, it depends on which part of the Federal
    Power Act you read. I mean, we have authority to ensure that
    there is a comprehensive plan of development for any water
    resource. We are the agency that is given the responsibility to
    balance the competing interests. But we must include under the
    statute and under current case law any mandatory conditions
    that are developed elsewhere.
        If I might, Mr. Chairman, a small history lesson, that in
    the era of 1920 to 1930, the Federal Power Commission indeed
    did have absolute control over the entire process because the
    Secretaries of Interior, War and Agriculture were the Federal
    Power Commission.
        In 1930, this became a five-member body, and when the--Mr.
    Barton. Well, those guys in 1920 were smarter than us today.
        When the Secretaries went off to do things other than
    regulate the power market and hydroelectric projects, they took
    their mandatory conditioning authority with them, obviously.
        I think it's important that we at the Commission
    acknowledge two things. No. 1, we have an excellent staff. We
    do a great job. We have a lot of environmental expertise, and
    we do care about the environment. But the resource agencies are
    on the ground. They have much larger staffs. They understand
    these projects and their environments as well as we do. And so
    it's not the mandatory conditioning authority that I
    necessarily would challenge. What it is is the opaqueness of
    the process for developing conditions for the licenses;
    conditions that we must include in the licenses.
        And what I would advocate, what we are advocating in the
    context of the interagency task force, is more public process
    so that participants other than the resource agencies and the
    FERC can have input into the scientific adequacy and the
    environmental and cost justifiability, if you will, of these
    conditions.
        Mr. Barton. Okay. Mr. Massey? Commissioner Massey.
        Mr. Massey. Yes, Mr. Chairman. I respect the environmental
    values that underlie the mandatory conditioning process, so I
    wouldn't necessarily change that. But I think the concept that
    is represented in this bill of requiring some balance in the
    conditions, requiring the other agencies to take into account
    additional factors, as we have to, would mean that the
    conditions are more balanced when they come to our agency. And
    so I would support that.
        I would also support some tightening of the timelines.
    Having said that, I do believe this task force will bear fruit
    by the end of the year with rational and reasonable changes.
    And I look forward to that. But if the agencies were to balance
    more in their processes, I believe the proposed condition as it
    comes to our agency would be much more rational and reasonable.
        Mr. Barton. How much of these resource agency
    recommendations are based on jurisdictional and turf
    considerations as opposed to public policy as we go through
    this interagency task force? I mean, the testimony reeks of
    bureaucratic jurisdictional turf protection, quite frankly.
        Mr. Massey. Yes, well, I can't endorse every word of their
    testimony, but I do endorse the environmental values that
    underlie their decisionmaking.
        Mr. Barton. We're not--I don't believe anybody on this
    subcommittee, Congressman Towns, who's not on the subcommittee,
    but the full committee, is trying to do away with the
    environmental protection.
        Mr. Massey. I understand that.
        Mr. Barton. What we're trying to do is come up with a
    legislative vehicle that actually creates an executive
    administrative process that doesn't take 3 to 5 years. And I
    guarantee you, there are a lot of projects we've heard about
    that take a lot longer than 3 to 5 years.
        Mr. Massey. Yes.
        Mr. Barton. So you must have some that go through in a
    month and some that take 15 years, because--so that your
    average comes out to that figure.
        Mr. Massey. I respect that goal of this legislation. I
    think some of the processes and procedures in the bill will be
    too cumbersome. But I think a short bill that required the
    other agencies to balance as we do and that tightened up the
    timeframes would be very reasonable and would be one that I
    could fully endorse.
        Mr. Barton. Okay. Let me ask three or four questions that
    the staff put together, and then we'll let this panel go.
        Would the FERC support legislation to require Federal
    resource agencies to consider a broad range of public interest
    factors as well as costs in their development of mandatory
    conditions, much as FERC is required to do under current law?
    FERC has concerns about the administrative review provisions of
    H.R. 2335, but we could work with the FERC to help alleviate
    those concerns.
        Mr. Hoecker. I agree with Commissioner Massey that the
    resource agency should consider a range of factors. I'm not--I
    don't necessarily think the range of factors that are listed in
    the bill are the appropriate ones. But certainly economic and
    power values, low-cost alternatives and so forth that are
    mentioned there would be appropriate.
        Mr. Barton. Should legislation require mandatory conditions
    attached by the Federal resource agencies to a FERC license be
    limited to the mitigation of project impacts?
        Mr. Hoecker. I believe they are.
        Mr. Barton. Mr. Massey?
        Mr. Massey. I think they should. The agencies strive for
    that, but a statutory requirement to achieve that goal would
    not trouble me in any way.
        Mr. Barton. Commissioner Hebert?
        Mr. Hebert. Yes, sir, Mr. Chairman. I would agree with
    that. And what I'd like to point out to you as well is the fact
    that the problem we have had is in fact the balancing. And as
    much as we hear from the other agencies, the fact that they
    don't want to do away with mandatory conditioning, as
    Congressman Towns pointed out, his piece of legislation does
    not do that. It merely requires a balance. And we have
    circumstances like the Enlow Dam case that we heard just
    recently where in fact NMFs wanted one thing and then we even
    had the Northwest Council, Bonneville Power Association and the
    Bureau of Reclamation no longer advocating or suggesting
    removal of Enlow Dam. And continually we had to fight that. So
    I think the balance is the key, and I think it will work.
        And if I can make one other qualifying remark. I don't want
    Congressman Dingell to think I didn't answer his question
    correctly. The 180 days that he's speaking of is the 180
    administrative days. There are 90 days prior to that that the
    resource agency will have to give those mandatory conditioning
    requirements to the licensee, and then there's the 180 days.
    After that, there's a year that the Commission has to act, with
    at least one 30-day extension. So that's 1 year and 10 months.
    That's not too far afield of where we are today, but requiring
    balancing. And I don't think anyone could suggest that that
    couldn't be done.
        Mr. Barton. Okay. Dr. Rosenberg, you testified that the
    current exemptions in the Federal Power Act provide adequate
    protections for fish and wildlife. Would legislation that
    expanded current exemptions to include small hydroelectric
    projects in Alaska also provide adequate protection for fish
    and wildlife?
        Mr. Rosenberg. I think the answer to that question is no.
    We believe that it's not clear in the legislation whether the
    State conditions would provide the same protection for fish and
    wildlife as the Federal----
        Mr. Barton. Well, it would appear to me the answer would be
    yes, so why would you say it's no? Because you'd still--you and
    the other resource agencies would still have the same ability--
    --
        Mr. Rosenberg. We only have a consultative authority in
    that case, and there's no requirement for them to consider our
    comments in the way the legislation is drafted.
        Mr. Barton. Well, we're not talking about the specific
    Murkowski bill.
        Mr. Rosenberg. Oh, I'm sorry, sir.
        Mr. Barton. We're talking about simply giving an exemption
    for small hydroelectric projects in Alaska, but you would still
    have the same ability to attach mandatory conditions, expanding
    the current exemptions in the Federal Power Act.
        Mr. Rosenberg. Well, then I guess the answer is I'm not
    sure.
        Mr. Barton. I'm not an expert on this. This is a question
    I'm reading. I want the audience to know that.
        Mr. Rosenberg. Yes. And I'm not sure, because I was
    thinking about the specifics of the Murkowski bill, how that
    would be structured. My understanding was that the current act
    provides that exemption for small power projects in an
    abbreviated process. But if I could respond to your question in
    writing.
        Mr. Barton. Well, under current law in a project that is
    exempted, can your agency attach a mandatory condition?
        Mr. Rosenberg. Yes, I believe so.
        Mr. Barton. So I think you can, too. So it would seem like
    this question that I've probably garbled in asking you, if we
    could get where great minds understand the details, we might
    actually agree on the answer to this.
        Mr. Rosenberg. I think so. But the question I'd like to
    look into a little more is whether that's already a provision
    that does not require additional legislation.
        Mr. Barton. Right. I understand that. And Mr. Burns, you've
    been so quiet, we can't let you go without answering one
    question.
        Mr. Burns. That would be okay, but----
        Mr. Barton. There are some of your customers that want to
    limit Bonneville's authority to new contracts to 5-year terms.
    What impact would that have on Bonneville's financial
    stability?
        Mr. Burns. Well, there's a couple of reasons why we believe
    it's the best thing to proceed with contracts up to a 10-year
    term. One is it provides financial stability. Typically in the
    past, we've had the situation where every 5 years, 2, 3, and
    most recently 5 years, all of our contracts expire at a single
    point in time. That puts us under a lot of pressure to
    renegotiate those deals, and the uncertainty of market changes,
    prices rising and falling relative to our cost, and what our
    revenue stream is going to be like.
        So having a split among customers signing 3, 5, 7, 10 years
    will help to mitigate that uncertainty we face.
        Mr. Barton. Final question unless Congressman Towns has a
    wrap-up question. Mr. Leshy, your statement was the most
    militant--or your agency statement was the most militant of the
    ones we received. Does that mean that you are not interested in
    working with the subcommittee to develop compromises, or are
    you willing to engage in a collaborative process?
        Mr. Leshy. Mr. Chairman, we're happy to work with the
    subcommittee on this. I should note that--and Congressman Towns
    earlier raised--asked an important question and a useful
    question, which is, okay, we've seen all this interagency
    activity going on to try to improve this process. When are we
    going to see results?
        And I think--my answer to that is, you're already seeing
    some results, and you're going to see many more results in the
    next few months. This interagency task force, we put a deadline
    on it of completing its work by the end of the year. We have
    about 6 or 7 initiatives underway. There are two I'm happy to
    share the results of with the committee--subcommittee in
    writing. Immediately in the next couple of months we'll have
    two more initiatives out in public I'm happy to share with you.
        So we are moving forward. We're going to show this
    subcommittee results in terms of that process, and I'm happy to
    work with you on that.
        Mr. Barton. Well, our deadline's a little bit sooner. It's
    called the first Tuesday in November, and we'll actually
    adjourn in probably the third week in October if not sooner.
    And as I said before I asked questions, I would really like to
    see this subcommittee move some of these bills to full
    committee if we can get some support from the administrations
    and from a bipartisan group of congressmen.
        So we're going to help your task force as much as we can.
        Congressman Towns and then Congressman Shadegg, if you've
    got a wrap-up question before we let this panel go.
        Mr. Towns. Let me just say, Mr. Chairman, I'm willing to
    work with you to try to put together that bipartisan effort
    that you so eloquently described. And let me just say what my
    problem really is. You know, you mentioned the word ``task
    force.'' You know, I'm not impressed with that word; not when
    it comes to the U.S. Congress after being around here close to
    all these--18 years, I'm not impressed with the word ``task
    force.'' Because task force around here means, you know, shut
    up, be quiet, because we're not going to do anything about it.
    That's what it means.
        And the other word that, you know, the ``reform.'' Those
    are two words that, you know, I really don't feel too
    comfortable with the two of them. You know, when you say, you
    know, ``reform'' and ``task force,'' I want to let you know
    that I'm not impressed with that for a lot of reasons. You
    know, when you say ``reform,'' you know, the question is what
    are you going to do? You know, I mean--and reformers can be
    either positive or negative. You know, task force can--and you
    can do absolutely nothing.
        You know, just the fact that you keep saying you have a
    task force. And every time we start to move forward with
    legislation, you have a bigger task force.
        You know, and I'm concerned about that. You know, those
    words are like my dad used to tell my brother and I about
    prayer. He said, ``Son, prayer is neither positive or negative.
    It's just if somebody asks and say they're going to pray for
    you, try to find out what they're going to say.''
        They might pray that you break your neck, you know.
        So I just want to let you know that ``reform'' and ``task
    force,'' you know, ``reform'' around here means cut the budget,
    you know what I mean, you know? So these are words that, you
    know, I must admit that doesn't hit me well. So I'm concerned,
    you know, about the fact that there has not been any movement.
        And, Mr. Chairman, I'm hoping that we can put together a--
    and we can have some dialog as we move along, you know. But I
    think, Mr. Leshy, that those are strong terms. But I think we
    should talk about some aspects of it. But the point is, I think
    that we cannot continue to just sit and do nothing, you know. I
    think that that--we can't afford the luxury of that. And I'm
    hoping that, you know, at some point we can discuss this
    further. But, Mr. Chairman, I hope that we can move it forward,
    you know. I will work very hard on my side of the aisle to try
    and get support for it, and I think once you explain it and I
    think the way you explain it is important.
        And I'm going to say this and I'm going to shut up. You
    see, I think the way you explain it is very, very important,
    too. You know, I remember years ago in Niagara Falls, New York,
    where they were changing the insurance policy, and everybody
    was signed up but one man. He flatly refused to sign, so they
    couldn't move it forward because this guy had been with the
    company like 30 years and he wanted to make certain he was a
    part of it. So the foreman came by and asked him to sign it and
    he said, ``No. I'm not signing it.'' And ``No. Forget it. Get
    out. I'm not signing it.'' The supervisor--``I'm not signing.''
    Then they took him to the general manager of the entire plant,
    and he said, ``Look,'' he says, ``we're moving to a new plant.
    Here's the application. If you do not sign it, you're fired.''
    So he signed it. And he said, ``Well, why did you put us
    through all this?'' He said ``Nobody never explained it to me
    like that before.''
        So we want to explain it to you right. You know, we're
    going to do something here. You know, I just want to explain
    it. Mr. Chairman, thank you very much for allowing me to have
    extra time. You can see I'm a little frustrated.
        Mr. Barton. Yes, well. For the last word before this panel
    is released, Congressman Shadegg.
        Mr. Shadegg. Mr. Chairman, I'll be very brief. First of
    all, I guess I have to be hypertechnical because, as Mr. Leshy
    knows, I used to do election law, and it's not technically the
    first Tuesday in November, it's the first Tuesday after the
    first Monday in November.
        Mr. Barton. All right.
        Mr. Shadegg. But I do want to make that----
        Mr. Barton. Hydro Man is also Election Expert Man.
        Mr. Shadegg. That's right. I do want to highlight the
    importance of that, because I think that highlights the fact
    that we are in different branches of the government, and I
    think there has to be a healthy respect for those two branches
    of the government. That people affected by what you do in the
    executive branch, what FERC does, have a right to appeal to you
    for a relief, and I commend them for doing that, and I commend
    you for putting together the task force and for doing what
    you're doing. And if you've reached conclusion on two issues
    and believe you'll have conclusion on two others soon, I
    commend you for that. And I'm anxious to look at your work
    product.
        But the Constitution sets up three co-equal branches of
    government. We have our job. And I strongly concur, Mr.
    Chairman, with you, that it is a part of our duty to move
    forward with legislation. The fact that these problems exist,
    the fact that some people believe that serious reforms are
    needed, reforms beyond which the administration could itself
    enact are needed, suggest that we have a duty to move forward
    legislatively. And so I am encouraged that this is bipartisan
    legislation. I am anxious to hear the input of the
    administration and its representatives and everyone affected--
    those who operate dams, those who are affected by dams, those
    who regulate dams. And each of those was ``dams.''
        Mr. Barton. I understand.
        Mr. Shadegg. But I commend the chairman for this, and I'm
    anxious to work forward in moving legislation--work with him in
    moving legislation forward.
        Mr. Barton. All right. We want to thank the panel. We'll
    have written questions for the record. We appreciate your
    willingness to testify, and we look forward to working with
    you. So if Panel II would excuse itself, we'll now call forward
    Panel III.
        All right. If we could get everybody up. And we also want,
    if our Department of Agriculture witness is still in the room,
    we'd like for him to come forward.
        All right. Let's see here. See if we--we'll do a roll call.
    We have Mr. Michael Murphy, who's with the National Hydropower
    Association.
        Mr. Murphy. Good afternoon, Mr. Chairman.
        Mr. Barton. We have Mr. Kevin Lynch, who is with
    PacifiCorp. Is that correct, sir? We have Mr. Andrew Fahlund.
        Mr. Fahlund. Fahlund.
        Mr. Barton. Fahlund, who is with Hydropower Programs for
    American Rivers. We have Mr. Robert Grimm, who is the president
    of Alaska Power & Telephone. We don't show that Mr. Piper is
    here. Oh, he is here. He's standing up. He's the chief
    executive officer of the Pacific Northwest Generating Coop. Mr.
    Steve Waddington?
        Mr. Waddington. Yes, sir.
        Mr. Barton. Who's with Reynolds Metals Company. Ms. Lynn
    Kennedy, who is a hydroelectric specialist on behalf of the
    Western Governors' Association, and Mr. Paul Brouha, who is the
    associate deputy chief of the Forest Service of the U.S.
    Department of Agriculture. So we've got everybody here, and we
    have a young lady with Mr. Brouha. What's her name, sir?
        Mr. Brouha. Her name is Mona Janopaul. She is our national
    hydropower program manager.
        Mr. Barton. Okay. And I think we knew that she was--no we
    didn't? How did I know? I knew that. Ah, I read the testimony,
    that's how I knew. I read it this morning. All right. We're
    going to start with Mr. Murphy, give each of you gentlemen 5
    minutes to summarize your statements, and then we'll have
    questions for the record. All statements are in the record in
    their entirety, so. Mr. Murphy, welcome to the subcommittee,
    and you're recognized for 5 minutes.

          STATEMENTS OF MICHAEL A. MURPHY, PRESIDENT, NATIONAL
    HYDROPOWER ASSOCIATION; KEVIN A. LYNCH, DIRECTOR OF GOVERNMENT
       AFFAIRS, PACIFICORP; ANDREW FAHLUND, POLICY DIRECTOR FOR
        HYDROPOWER PROGRAMS, AMERICAN RIVERS; ROBERT S. GRIMM,
      PRESIDENT, ALASKA POWER & TELEPHONE COMPANY; DAVE E. PIPER,
         CHIEF EXECUTIVE OFFICER, PACIFIC NORTHWEST GENERATING
        COOPERATIVE; STEVE WADDINGTON, NORTHWEST POWER MANAGER,
     REYNOLDS METALS COMPANY; LYNNE KENNEDY, OREGON DEPARTMENT OF
    ENVIRONMENTAL QUALITY; AND PAUL BROUHA, ASSOCIATE DEPUTY CHIEF,
             FOREST SERVICE, U.S. DEPARTMENT OF AGRICULTURE

        Mr. Murphy. Good afternoon, Mr. Chairman and members of the
    committee. My name is Michael Murphy. I am a founder and
    principal of E/PRO Engineering & Environmental Consulting based
    in Augusta, Maine. I appear before you today as President of
    the National Hydropower Association. I'd like to thank you for
    holding today's hearing. I also want to commend Congressman
    Towns for his hard work and leadership on H.R. 2335, and I
    greatly appreciate this opportunity to appear.
        Before becoming president of NHA, and before I founded E/
    PRO, I worked for Central Maine Power in Maine and Green
    Mountain Power Corporation in Vermont. Since 1988 I have worked
    on environmental issues related to hydropower, and more
    importantly, I have been directly involved in the relicensing
    of dozens of hydroelectric projects.
        It is from that experience that I can sit before you today
    and tell you that FERC's hydro relicensing process is in major
    need of repair. What's more, the time to repair that process is
    now.
        Here are the facts. Within the next 15 years over two-
    thirds of the nonFederal hydro capacity must go through the
    relicensing process. Electricity consumption in America is
    increasing. The electric power industry is in the midst of a
    monumental restructuring that will lead to customer choice and
    competition, and in some places, as where I'm from in Maine, it
    already exists.
        Our Nation faces rising energy prices. The need to reduce
    greenhouse gases and other air pollutants is greater than ever.
    Since the last committee hearing on relicensing, we have seen
    again and again cases where the process simply does not work.
    In the midst of all of this, for the first time DOE's Energy
    Information Administration is saying that hydropower capacity
    will decline through 2020, and I quote, ``as regulatory actions
    limit capacity at existing sites.'' The relicensing process is
    in need of repair for many reasons. And I can assure you the
    hydropower industry isn't the only stakeholder who believes
    this. NHA, along with its partners at the Edison Electric
    Institute and the American Public Power Association, are
    members of WaterPower: the Clean Energy Coalition. WaterPower's
    membership consists of over 575 entities from all over the
    Nation, including hydro producers and suppliers, but more
    importantly, it includes environmental, labor, agricultural,
    recreational and consumer groups. WaterPower's message is
    clear: Congress must act now.
        Let me briefly tell you what is wrong with the process.
    Federal agencies are allowed to set conditions on license
    without regard to their effects on project economics, energy
    benefits and values protected by other statutes or regulations,
    including other environmental benefits. Many times we have
    agencies fighting agencies and issuing inconsistent demands.
    All too often, conditions are placed on a license that have
    nothing to do with project impacts, merely because the licensee
    is a deep pocket. Hydropower licenses have no recourse to
    appeal or even question the basis of mandatory conditions set
    by the agencies except through a costly process we know as
    litigation.
        The end result is a loss of operational flexibility and
    generation capacity which on average is not a negative 1
    percent, but on average is a negative 8 percent.
        The Towns bill, which enjoys broad, bipartisan support, is
    a moderate approach to reforming the process. It does not
    repeal mandatory conditioning authority nor does it attempt to
    undermine any environmental laws or diminish the power of the
    agencies to protect the environment. It does assign a new level
    of responsibility and accountability to the agencies with
    conditioning authority and requires agency conditions to
    reflect sound scientific evidence. It will bring a new
    discipline to the process, will prevent time-consuming and
    costly litigation, and will bring a general balance and
    efficiency to the relicensing process.
        Let me tell you what has changed since ECPA was passed in
    1986. First, a nonpartisan governmental statistical agency has
    projected a decline in hydropower generation due to regulatory
    actions. Second, as you shall hear in a moment, and with the
    written documentation I am providing today, we have many new
    cases showing how the process fails both industry and the
    environment.
        Third, over 575 organizations across the country have told
    Congress it's time to improve the process. And fourth and most
    important, the hydro industry has modified its approach to
    resolving this problem and has embraced the moderate framework
    of Congressman Towns' bill.
        In closing, let me state that the hydropower industry takes
    very seriously its role in promoting environmental stewardship
    of the rivers and lands we are so privileged to use. One of the
    reasons I enjoy working in this industry and why I'm so
    involved with the National Hydropower Association is I truly
    believe that supporting hydropower--an emissions-free,
    domestic, reliable, renewable and clean source of energy--is
    the right thing to do not only for our consumers but for our
    environment. By responsibly reforming the hydro relicensing
    process, we have an excellent opportunity to preserve the
    Nation's leading renewable resource and to protect the
    environment. But we need your help to do it, and without your
    action on reform legislation, it is safe to say hydropower
    could be facing a crisis in the not-too-distant future.
        Thank you again.
        [The prepared statement of Michael A. Murphy follows:]
    Prepared Statement of Michael A. Murphy, President, National Hydropower
                                  Association
                                  introduction
        Good morning, Mr. Chairman and members of the Committee. My name is
    Michael A. Murphy, and I am founder and a principal of E/PRO
    Engineering & Environmental Consulting, based in Augusta, ME. I appear
    before you today as President of the National Hydropower Association.
        NHA is the national trade association committed exclusively to
    representing the interests of the hydroelectric power industry. Our
    members represent 61% of domestic, non-federal hydroelectric capacity
    and nearly 80,000 megawatts overall. Its membership consists of more
    than 140 companies including public utilities, investor owned
    utilities, independent power producers, equipment manufacturers,
    engineers and consultants. NHA seeks to secure hydropower's place as an
    emissions-free, renewable and reliable energy source 1 which
    serves the nation's environmental and energy policy objectives.
    ---------------------------------------------------------------------------
        \1\  Please see attached NHA policy papers on hydropower facts and
    benefits.
    ---------------------------------------------------------------------------
        I'd like to thank Chairman Barton for holding today's hearing. I
    also want to commend Congressman Towns for his hard work and leadership
    on H.R. 2335. And, I greatly appreciate the opportunity to appear
    before the Committee today to share with you the hydropower industry's
    views on the relicensing process, give some examples of how things have
    changed since the Committee's last hydro hearing, as well as to urge
    your broad support for Congressman Towns' bill.
        Before becoming president of NHA, and before I founded E/PRO, I
    worked for Central Maine Power and Green Mountain Power Corporation.
    Since 1988, I have worked on environmental issues related to hydropower
    and, more importantly, I have been directly involved in the relicensing
    of dozens of hydropower projects. It is from that experience that I can
    sit before you today and tell you that FERC's hydro relicensing process
    is in major need of repair. What's more, the time to repair the process
    is now.
                              why we must act now
        Here are the facts: Within the next 15 years, over two-thirds of
    non-federal hydro capacity must go through the relicensing process.
    Electricity consumption in America is increasing. The electric power
    industry is in the midst of a monumental restructuring 2
    that will lead to customer choice and competition. Our nation faces
    rising energy prices. The need to reduce greenhouse gases and other air
    pollutants is greater than ever. Since the last Committee hearing on
    relicensing, we have seen again and again, cases where the process
    simply does not work. And in the midst of all this, for the first time,
    DOE's Energy Information Administration is saying that hydropower
    capacity will decline through 2020 ``as regulatory actions limit
    capacity at existing sites.''
    ---------------------------------------------------------------------------
        \2\ Please see attached NHA policy paper on electric industry
    restructuring.
    ---------------------------------------------------------------------------
                why the relicensing process needs to be repaired
        The relicensing process is in need of repair for many reasons--and
    I can assure you, the hydropower industry isn't the only stakeholder
    who believes this. NHA, along with its partners at the Edison Electric
    Institute and the American Public Power Association, are members of
    WaterPower: the Clean Energy Coalition. WaterPower's membership
    consists of over 575 entities from all over the nation, including hydro
    producers and suppliers, as well as environmental, labor, agricultural,
    recreational and consumer groups. WaterPower's message is clear:
    Congress must act now to improve the FERC hydro relicensing process if
    we are to preserve the future viability of hydropower.
        So what is wrong with the relicensing process? Let me briefly tell
    you.
        A multitude of statutes, regulations, agency policies and court
    decisions has made the process time-consuming, costly, contentious and
    generally frustrating for all. A typical hydro project can take from
    eight to 10 years to weave its way through the relicensing process--
    some have taken more than 20 years--and cost up to a million dollars a
    year. In comparison, gas fired plants which emit large amounts of CO2
    can be sited and licensed in as little as 18 months.
        Federal agencies are allowed to set conditions on licenses without
    regard to their effects on project economics, energy benefits and
    values protected by other statutes or regulations. Many times, we have
    agencies fighting agencies and issuing inconsistent demands. All too
    often, conditions are placed on a license that have nothing to do with
    project impacts. Hydropower licensees have no recourse to appeal, or
    even question, the basis of mandatory conditions set by the agencies,
    except through litigation. The end result is the loss of operational
    flexibility and generation capacity--on average 8%--possibly putting
    system reliability at risk and certainly resulting in the loss of
    clean, renewable power.
        But there are other relicensing problems as important as the ones I
    just mentioned. Often we find that relicensing can lead to conflicting
    resource management goals between federal agencies, different
    objectives in managing resources between the state and federal
    agencies, species versus species conflicts and dealing with broader
    quality of life issues, such as recreation, air quality and regional
    economics. It's not as simple as power values versus fish values as
    some may believe.
        Today you will hear from PacifiCorp, an NHA member company. They
    are here to share with you the details of the attempted relicensing of
    their North Umpqua project in Oregon. Their case illustrates how the
    relicensing process can break down, even when the parties try to use
    the collaborative process.
        However, I can assure you they are not the only ones who have faced
    very difficult and troubling relicensing experiences. As NHA President,
    I have heard time and time again of relicensing efforts that unraveled
    with no clear benefit to the environment and where everyone goes to
    court to resolve matters. Below you will find several cases that point
    to the excessive length of the relicensing process, agencies
    inappropriately applying their authorities, judicial calls for
    legislative improvements, conditions making projects uneconomic,
    insufficient impact analysis and the overall duplicative and arbitrary
    nature of the process. I urge you take a very close look at these cases
    as you consider moving forward on this important issue.
     what's wrong with the hydropower licensing process? real-life examples
        Two-thirds of all federally-regulated hydroelectric capacity--284
    projects in 39 states, representing 28,917 megawatts of electricity
    generation--is due to be relicensed by FERC in the next fifteen years.
    An inefficient licensing process that is time-consuming, arbitrary, and
    costly places all of these projects, and the future of hydropower as a
    clean, renewable energy source, at risk. The following examples, taken
    from hydro projects around the nation, illustrate some of the many
    problems associated with the current hydropower licensing process.
    Arbitrary and Unilateral Exercise of Mandatory Conditioning Authority
        On February 23, 2000 FERC rescinded a license previously issued for
    the 4.1 MW Enloe Dam Project in Okanagan County, Washington. Although
    FERC was in the process of engaging all parties in addressing fish
    passage issues at the dam, the National Marine Fisheries Service (NMFS)
    challenged that process as encroaching its unilateral conditioning
    authority under Section 18 of the Federal Power Act. NMFS insisted on
    imposing a fish passage requirement in the project license despite i)
    opposition to such passage by the Washington Department of Fish and
    Wildlife, the Okanagan Indian Nation, and the Canadian government; and
    ii) the desire of the Congressionally authorized Northwest Power
    Planning Council to assign financial responsibility for fish passage at
    Enloe Dam to regional entities.
        NMFS had stated that its preferred position in the proceeding was
    license denial and dam removal. By insisting on fish passage as a
    condition of the license and at the licensee's expense, NMFS not only
    acted, in the words of FERC Commissioner Massey, ``out of sync with
    regional planning,'' but ultimately prevailed in gaining denial of the
    license application. As FERC Commissioner Hebert explained in his
    concurring opinion:
              ``Unfortunately, the Commission's hope that this protracted
            dispute could result in a mutually-acceptable agreement has
            been undermined by the recalcitrance of a single agency . . .
            In today's order, the Commission states that it no longer has
            the discretion to continue to resist NMFS' overtures . . .
              One party, carrying mandatory conditioning authority, and
            focusing myopically on its own particular interest, can upset
            the collaborative process if so inclined. To a party opposing
            licensing, stalemate may mean victory for one party and defeat
            to the rest of America''
              I view this process, where some participants, bearing veto
            power, have more negotiating authority than others, if indeed
            inclined to negotiate at all, as absurd. As a result, I am
            encouraged by pending legislative efforts to rationalize this
            process, by requiring a greater level of cooperation among
            federal and state resource agencies. Such reform would benefit
            consumers by forcing all parties to the table in an effort to
            resolve such disputes in a fashion that is best suited for the
            benefit of all Americans.''
    Arbitrary Nature of Process/Inappropriate Application of Agency
            Authorities
        PacifiCorp is currently seeking a new FERC license for its eight-
    dam, 185 MW North Umpqua project in Douglas County, Oregon. PacifiCorp
    initiated the process in 1992 and went far beyond the normal
    requirements for public involvement and science collection in the hope
    that the North Umpqua licensing process would become a model of how a
    utility could work collaboratively with all stakeholders.
        After submitting its relicense application in 1995, PacifiCorp
    initiated the North Umpqua cooperative Watershed Analysis to identify
    and address specific resource concerns that emerged during the
    relicensing process. The watershed analysis was the first-of-its-kind
    for a hydro project and involved PacifiCorp, federal and state resource
    agencies, academic institutions and interested members of the public.
    PacifiCorp and other interested parties then entered detailed
    settlement discussions in 1997.
        After two years of discussions, yielding little consensus, the U.S.
    Forest Service (USFS) insisted--without providing an adequate
    scientific explanation--that Soda Springs Dam (one of the eight dams on
    the project) be removed as a condition of settlement to meet objectives
    contained in the President's Forest Plan. This, despite the fact that
    removal of Soda Springs Dam would put the viability of the entire
    project at serious risk, from both an operational and economic
    standpoint, and despite there being other mitigation alternatives
    available. This also represents the first time that the Forest Service
    has indicated it intends to use its 4 (e) conditioning authorities
    under the Federal Power Act to require a dam removal. This would create
    a broad, adverse precedent for other hydroelectric projects in the West
    located wholly or in part on Forest Service lands.
        PacifiCorp had recently agreed to remove its Condit Dam in south
    central Washington because compelling reasons existed. By contrast, no
    compelling reason exists for removal of Soda Springs. Citing an
    unreasonable bargaining position by USFS, and concerns over the
    precedential nature of the removal requirement, PacifiCorp walked away
    from settlement negotiations in November, 1999.
        Despite its withdrawal from the settlement discussions, PacifiCorp
    remains committed to achieving a settlement that balances the need to
    mitigate for project impacts and the need for cost-effective renewable
    resources. FERC has since announced that it will restart the
    traditional licensing process--which had been on hold while the parties
    pursued settlement talks.
        The most recent news though is that North Umpqua may yet have a
    happy ending: the Forest Service has now indicated it does not have an
    official policy of using 4(e) to compel dam removal and that it did not
    intend to create such a policy via the North Umpqua settlement talks.
        In fact, the agency recently indicated it is willing to return to
    the settlement table to see whether a mutually-acceptable resolution
    for relicensing this project can be achieved. It also is saying that
    dam removal will not be a precondition to a return to the table.
        PacifiCorp would like to return to the talks because they still
    believe that settlement and collaboration is a good approach to
    resolving the tough issues that will arise in any relicensing. However,
    this is not to say the licensing process doesn't need fixing--it does.
    In fact, PacifiCorp believes that settlement processes would work much
    better if there is more accountability built into the process
    throughout.
    Excessive Length of Process/Judicial Call for Legislative Improvements
        In March, 1997, the Eugene Water & Electric Board (EWEB) received a
    new FERC license for two projects (23.2 MW combined) on the McKenzie
    River in Oregon. In the license, FERC incorporated certain fishery
    conditions prescribed by federal resource agencies under Section 18 of
    the Federal Power Act (FPA)--at a cost to EWEB of $14,000,000--but
    rejected several conditions because they did not meet the requirements
    of the FPA for ``fishway prescriptions.''
        Despite the $14,000,000 of project improvements, several interest
    groups and agencies requested an administrative rehearing of the
    license before FERC; upon denial of the requests, the parties
    challenged the license before the U.S. Court of Appeals for the Ninth
    Circuit. Among other claims, the parties contended the FPA does not
    authorize FERC to refuse to accept any condition prescribed under
    Section 18. In other words, the parties asked the court to rule that
    the resource agencies had absolute power to dictate license conditions
    under the FPA whether they met the intent of the FPA for a fishway
    prescription or not.
        In its August, 1999 decision, the court did just that--concluding
    the FPA denied FERC the authority to modify, reject, or reclassify
    prescriptions submitted by resource agencies under Section 18, even
    while noting FERC's observation that the resource agencies ``do not
    concern themselves with the delicate economic versus environmental
    balancing required in every license.'' The court went on to acknowledge
    Congressional ``failure'' to require agencies to develop improved
    ``regulations, procedures or standards for implementing Section 18.''
    The court noted that, absent Congressional action, the court was
    powerless to rewrite the statute. ``Our task,'' the opinion stated,
    ``is to apply the statute's text, not to improve upon it.'' The court's
    decision means that currently only a federal court of appeals has the
    authority to determine whether a fishery condition offered by a federal
    resource agency and required to be included in a license meets the
    requirements for a ``fishway prescription'' under the FPA.
        With its hands thus tied, the court's decision will mean a remand
    of the license back to FERC to be re-written once the appeal is
    completed--8 years after EWEB first submitted its license application;
    with only the Ninth Circuit then having the authority to decide whether
    any condition prescribed by a resource agency meets the FPA
    requirements for ``fishway prescriptions.''
    Conditions Making Project Uneconomic/Arbitrary Nature of Process/
            Insufficient Impact Analysis
        In 1996, during the relicensing of the Edwards Dam near Augusta,
    Maine, the US Fish and Wildlife Service (USFWS) and the National Marine
    Fisheries Service (NMFS) prescribed a fishway system on the dam to
    safeguard a few species of fish. The fishery agencies estimated this
    fishway system would cost approximately $9 million dollars while the
    licensee estimated the cost at $12 million--both of these estimates
    effectively rendered the project uneconomic. Lacking the authority to
    amend the prescription or otherwise balance it against the energy or
    other resource values of the project, FERC instead ordered the removal
    of the dam in November 1997.
        During the relicensing process, the USFWS and NMFS also recommended
    that flows of 4,500 cubic feet per second be released annually in July
    into a deep hole below the dam they determined was a spawning and
    nursery habitat for the Atlantic sturgeon. This flow recommendation had
    severe economic implications on the project since it would force the
    project to forgo power generation completely in July most years. This
    deep hole was located just below the area where the dam was eventually
    breached and this once-important spawning and nursery habitat is now
    assumed to be filled with rubble.
        The US Department of Interior and segments of the environmental
    community have hailed FERC's decision as a means of restoring a 17-mile
    stretch of the Kennebec River to its ``natural condition''. Moreover,
    certain environmental groups are now claiming that the simple act of
    removing the dam has successfully restored this section of the river
    yet no comprehensive studies are being planned to actually measure the
    success of this dam removal on the restoration of the river ecosystem.
    Arbitrary Nature/Excessive Length of Process
        In an ongoing relicensing of a 35.5 MW facility in New York State,
    arbitrary fishway prescriptions have been proposed by the USFWS, at a
    cost of over $2 million. Why arbitrary?

     The blueback herring, the primary species on which the
            prescriptions were premised, is not native to the river where
            the project is situated.
     With an 80-foot waterfall blocking upstream fish passage,
            there would be no migration without the man-made lock system
            adjacent to the project.
     The project (and other hydro facilities on the river) have
            operated without fishways for several decades--and during that
            time the fish population has grown to over 100 million
            annually.
        Pre-filing consultation started on this project in 1986, and a
    final license order still has not been issued. If the fishway
    prescription is included in the license along with other resource
    protection measures, the project would become economically unviable.
    Arbitrary Nature of Process/FERC Approval of Inappropriate Conditions
        In a recent relicensing of a Western project, the U.S. Forest
    Service imposed numerous conditions, including one that required the
    project owner to annually send the Forest Service a set payment,
    expected to cover all operation and maintenance costs associated with
    existing campgrounds in the project vicinity. The owner pursued an
    administrative appeal of this condition at the Forest Service, arguing
    that the Forest Service failed to demonstrate that most of the
    campgrounds' use was related to the project. Furthermore, the Forest
    Service did not attempt to justify the amount of the annual payment for
    the operation and maintenance costs it sought from the licensee.
        Nonetheless, FERC included the condition in the project license,
    concluding that it lacked the authority to even consider if a
    relationship between the condition and the project justified the Forest
    Service condition. Similarly, FERC was unable to reject an instream
    flow release imposed upon the project by the Bureau of Land Management,
    even though FERC summarily dismissed as inappropriate and unsupported
    the same exact amount of instream flow release recommended by the
    California Department of Fish and Game.
        After FERC issued the new license for the project, containing the
    contested condition, the owner challenged the condition at FERC and
    took the case before the U.S. Court of Appeals. Just prior to the case
    being heard and five years after the first of the two administrative
    appeals were filed with the Forest Service, the Forest Service decided
    that the operation and maintenance costs were indeed inappropriate and
    accepted an owner-proposed method for reimbursement of only those
    campground operation and maintenance costs related to the project--
    approximately 1.25% of the amount originally demanded by the Forest
    Service.
    Duplicative Nature of Process
        The Energy Policy Act of 1992 specifically prohibits federal land
    managing agencies from requiring an existing hydropower project to
    obtain a Special Use Permit. However, in a number of licenses, the
    Forest Service has taken the standard Special Use Permit terms and
    included them in the conditions submitted to FERC under section 4(e) of
    the Federal Power Act. In turn, FERC has had no choice but to impose
    these conditions on the project license. These Special Use Permit
    conditions are designed to allow the Forest Service to regulate the
    project in the same manner that FERC administers the licensed project.
    Thus, despite the Energy Policy Act prohibition, the Forest Service is
    duplicating FERC's legislative mandate to administer federally licensed
    hydropower projects.
    FERC Approval of Conditions That Result in ``No Quantifiable Benefit''/
            Excessive Length of Process
        After FERC asserted jurisdiction over a 70 year old, 1.2 MW project
    in New England, the project owner reached agreement with one state
    agency on the level of minimum flows to be released from the project.
    However, a resource agency from an adjacent state and the USFWS
    prescribed a minimum flow that was nearly twice the agreed upon level.
    In its final environmental assessment for the project, FERC concluded
    that the owner's minimum flow could be provided with existing project
    equipment and that there was no ``quantifiable benefit'' from requiring
    the USFWS flow level rather than the level proposed by the owner.
        However, because the recommendation was made under section 10(j) of
    the FPA, and because the recommendation appeared ``consistent with the
    FPA,'' FERC incorporated the higher minimum flow requirement in the
    license. FERC's rubber stamp approval of the USFWS 10(j)
    recommendation, along with other conditions imposed on the project, had
    the effect of reducing net revenue from the project by 60%, making the
    project economically marginal at best. (Note: Issuance of the license
    for this small project took more than 8 years.)
    Conditions Making Project Uneconomic
        In 1997, six years after the licensee filed its initial plan, FERC
    issued an order approving a mitigation and management plan for the 170
    MW Kerr Project in Montana. The FERC plan incorporated conditions
    submitted by the Department of the Interior requiring a variety of non-
    operational measures, including: a fish and wildlife implementation
    strategy to be funded through a one-time payment of $12.5 million and
    annual payments of $1.27 million, a fish stocking plan, the acquisition
    of 6,800 acres to serve as replacement wildlife habitat, the
    construction of five islands to serve as waterfowl habitat and
    construction of erosion control structures.
        The FERC environmental impact statement (EIS) on the mitigation and
    management plan concluded that the conditions imposed by Interior would
    ``eliminate the project's positive economic benefits.'' The EIS found
    that the project's current annual net benefits were approximately $9
    million, but that with Interior's conditions, the annual net benefits
    would be a negative $2.7 million. Not even Interior disputed that the
    conditions would reduce the project's net annual benefits by many
    millions of dollars. However, the Commission noted that ``any economic
    analysis of the impact of Interior's conditions is of at best
    tangential relevance to our decision,'' since FERC was obligated to
    impose the Interior conditions.
    Conditions Making Project Uneconomic/Insufficient Impact Analysis/
            Arbitrary Nature of Process/Litigation As Only Recourse
        The 700kw Yaleville project in upstate New York is one of the
    smallest hydro facilities operated by Niagara Mohawk Power Corporation.
    In pre-filing consultation in connection with the 1988 licensing of the
    project, the USFWS raised the issue of fish passage. The agency
    recommendation was to provide for downstream passage of freshwater non-
    migratory resident species, namely bass and walleye. This, despite:

     spillage over the dam provided natural passage of fish at
            least 85% of the time;
     despite decades of hydro project operation,--an abundance of
            bass and walleye was evident on the river both above and below
            the project; and
     the $400,000 price tag for the agency-recommended fishway was
            prohibitive for such a small project.
        Niagara Mohawk disputed the agency recommendation in its license
    application and FERC, in its 1991 draft Environmental Assessment (EA)
    for the project, agreed with the owner and recommended a lower cost
    fish protection alternative. USFWS, after failing to sway FERC away
    from its position in dispute resolution proceedings, responded by
    prescribing the downstream passage fishway under its Section 18
    mandatory conditioning authority.
        FERC denied the fishway prescription in its 1992 license order
    because it did not meet the day's definition of ``fishway'' [at the
    time, a fishway had to serve the purpose of passing fish whose life
    cycle depended entirely on migration past the hydro facility which was
    not the case with the Yaleville bass and walleye.] A broader
    ``fishway'' definition was established with the passage of the Energy
    Policy Act of 1992; accordingly, FERC had to rescind its prior denial
    and require Niagara Mohawk to install the fishway--despite the lack of
    biological basis and the fact that its cost would negate the economic
    operation of the project.
        Niagara Mohawk promptly appealed the FERC order. Negotiations with
    USFWS ultimately led to an agreement to install a less expensive
    fishway design (at a cost one-tenth of that originally prescribed.) If
    the owner had not pursued an aggressive litigation action, USFWS would
    likely never had agreed to negotiate. Litigation, in this case, spawned
    reason; but only after more than 8 years of licensing process and a
    cost to the owner of nearly $300,000.
    Conditions Making Project Uneconomic
        In 1997, FERC issued a license for a 70 MW project in Washington
    state. In the text of the license itself, FERC noted that the
    prescribed resource agency conditions would result in a yearly
    operating loss of over $6.5 million for the project owner. Indicating
    that the project as licensed would not be ``economically beneficial'',
    FERC issued the license with the conditions, leaving it to the owner to
    ``make the business decision whether [to operate the facility] in view
    of what appear to be the net economic costs.''
                       how to fix the relicensing process
        I've just given you several reasons why the relicensing process is
    in need of repair. But the real question is how do we fix it? Quite
    simply, enact H.R. 2335. By passing this legislation, Congress will
    ensure that the relicensing process is balanced, cost-effective, timely
    and environmentally sound. Without legislation, the country will
    undoubtedly lose the many benefits of hydropower, America's leading
    renewable resource.
        The Towns bill, which enjoys broad bipartisan support, is a
    moderate approach to reforming the process. It does not repeal
    mandatory conditioning authority, attempt to undermine any
    environmental laws or diminish the power of the agencies to protect the
    environment. It does assign of new level of responsibility and
    accountability to the agencies with conditioning authority and requires
    agency conditions to reflect sound, scientific evidence.
        It will bring a new discipline to the process, will prevent time
    consuming and costly litigation and will bring a general balance and
    efficiency to the relicensing process. Reform legislation will bring
    certainty to a process that desperately needs it while protecting the
    environment. In short, it will provide the balance that was sought in
    1986 with the passage of the Electric Consumers Protection Act.
                changes since the committee's last hydro hearing
        At the last hydropower hearing before this Committee two years ago,
    a member of the Committee posed this question to our industry: What has
    changed since ECPA that should cause Congress to act? Allow me, in
    summation, to answer that question.

     First, a non-partisan government statistical agency has
            projected a decline in hydropower generation due to regulatory
            actions.
     Second, as I have shown with the written documentation I am
            providing today, we have many new cases displaying how the
            process fails both industry and the environment.
     Third, over 575 organizations across the country have told
            Congress its time for action to improve the process.
     Fourth, and perhaps most important, the hydropower industry
            has modified its approach to resolving this problem and has
            embraced the moderate framework of the Towns bill in an effort
            to see relicensing reform before the bulk of our nation's non-
            federal hydro projects comes up for relicensing.
          what hasn't changed since the committee's last hydro hearing
        Before I close, let me remind you of some things that haven't
    changed:

     Hydropower is a clean, emissions-free, renewable and reliable
            energy source which has long played a vital role in the U.S.
            energy portfolio.
     Hydropower accounts for 81 percent of the nation's total
            renewable electricity generation and ranges between 10 and 12
            percent of U.S. electrical generation.
     Of the 75,000 plus existing dams in the U.S., less than 3
            percent are used for hydroelectric generation.
     Hydropower's operational flexibility--its unique ability to
            change output quickly, its voltage control, load-following and
            peaking capabilities--help maintain the stability and
            reliability of the electric grid ensuring economic growth and a
            high quality of life.
                                    closing
        In closing, let me state that the hydropower industry takes very
    seriously its role in promoting the environmental stewardship of the
    rivers and lands we are so privileged to use. One of the reasons I
    enjoy working in the industry and why I am so involved in NHA is
    because I truly believe that supporting hydropower--an emissions free,
    domestic, reliable, renewable and clean source of energy--is the right
    thing to do.
        By responsibly reforming the hydro relicensing process, we have an
    excellent opportunity to preserve the nation's leading renewable
    resource and protect the environment.
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        Mr. Shadegg. Thank you, Mr. Murphy. Mr. Lynch?

                       STATEMENT OF KEVIN A. LYNCH

        Mr. Lynch. Thank you, Mr. Chairman and members of the
    subcommittee. My name is Kevin Lynch. I'm Director of
    Government Affairs for PacifiCorp. My company serves 1.5
    million retail electric customers in six Western States. The
    company holds 20 FERC licenses for hydro projects totaling
    about 1,100 megawatts in capacity.
        PacifiCorp supports H.R. 2335, and I'll briefly explain
    why. Virtually every one of our hydro projects is in some stage
    of relicensing right now. To date, we've only succeeded in
    obtaining new licenses for two relatively small projects. Both
    of them are located in the State of Utah.
        The company is also pending at the FERC a settlement
    agreement for its Condit hydroelectric project in Washington
    State. The Condit settlement includes removal of the project in
    7 years. As the Condit settlement indicates, our record on
    hydro relicensing is not great, but it's not for want of
    trying. And it's not for want of being flexible in trying to
    achieve a resolution that balances economics and environmental
    imperatives.
        In southern Oregon, on the other hand, PacifiCorp has
    already spent $20 million to $30 million on studies and
    activities to obtain a new license for our 186 megawatt
    capacity North Umpqua project. Last November, PacifiCorp exited
    a collaborative process for its multi-facility North Umpqua
    project after the U.S. Forest Service insisted on removal of a
    key part of the North Umpqua facility, one of the eight dams
    that make up the entire project, as a precondition to reaching
    settlement on relicensing. Further, the agency asserted if the
    company did not agree to removal of this facility as a
    precondition to settlement, it would mandate removal through
    the exercise of its claimed conditioning authority under
    Section 4(e) of the Federal Power Act. This assertion came more
    than 18 months into the collaborative effort, with little or no
    scientific justification, and virtually no analysis of any of
    the alternatives available--alternatives to removal of that
    facility.
        We're hopeful the action by the Forest Service will be
    reconsidered, and we're under some impression that the Forest
    Service is in fact giving some more thought to trying to
    restart the negotiation process. We're eager to do that. But
    the episodes demonstrated to us a fundamental problem with the
    Federal Power Act. Federal agencies have the power to mandate
    conditions in relicensing with little justification, without
    examining alternatives, and with no need to balance other
    considerations.
        H.R. 2335 would add some much-needed accountability over
    agency conditioning authority. Accountability to us is an
    essential element to making a collaborative process work. So
    PacifiCorp urges you to support this bill as a reasonable
    response to a real problem. Thank you.
        [The prepared statement of Kevin A. Lynch follows:]
     Prepared Statement of Kevin A. Lynch, Director of Government Affairs,
                                   PacifiCorp
        Mr. Chairman and members of the Subcommittee, my name is Kevin A.
    Lynch. I am Director of Government Affairs for PacifiCorp. PacifiCorp
    is an electric utility headquartered in Portland, Oregon. We serve
    nearly 1.5 million retail electric customers in six western states.
        PacifiCorp holds 20 hydroelectric licenses issued by the Federal
    Energy Regulatory Commission for 53 hydro plants totaling 1100
    megawatts of electric generating capacity across seven states. These
    facilities provide about 10 percent of our customers' electric supply.
    Our hydro plants are crucial elements of our generation portfolio,
    providing energy, peaking capacity, voltage support, and other
    benefits.
        Nearly all our hydro projects are in some stage of relicensing
    under the Federal Power Act. Since enactment of the 1986 amendments,
    however, PacifiCorp has been successful in licensing only two projects,
    both located in Utah (30 Mw and 1 Mw). We have also agreed to remove a
    significant facility as part of a relicensing settlement agreement--the
    14 megawatt Condit project on the White Salmon River in Washington
    state. The Condit settlement should indicate to you that PacifiCorp is
    willing to be flexible in achieving results that balance economic and
    environmental objectives.
        These achievements, however, are few in comparison to the
    difficulties we face in relicensing most of our other projects. We are
    concerned for the future of much of our entire hydro portfolio as a
    direct result of the current hydroelectric relicensing process.
        This tenuous situation is due to the fact that the process now
    affords state and federal agencies ``trump'' cards via their mandatory
    conditioning authorities. Agencies may impose license conditions on
    existing facilities without regard to economics or other public values.
    Further, the process lacks any requirement for agencies to quantify
    expected environmental benefits of a mandated license condition.
        H.R. 2335 would reduce the arbitrary nature by which mandatory
    conditions are imposed. It would impose a level of accountability on
    agencies to the decision making process that is currently lacking. This
    lack of accountability has, in some of our experiences, created a
    frustrating, dysfunctional process. H.R. 2335 is needed to restore
    balance to the process.
        To illustrate our concerns, PacifiCorp has participated in a number
    of collaborative relicensing processes around our system. Our
    experience with these processes has been mixed.
        The Condit process resulted in a mutually-agreeable outcome among a
    diverse group of stakeholders. Participants included the company, three
    federal agencies (excluding the FERC), two state government agencies,
    four Native American tribes, and several environmental groups. Dam
    removal was not a result we sought at Condit; but the collaborative
    process brought together a rationalization of steps and conditions that
    made dam removal acceptable to us.
        We also are probably one of the first utilities to leave a
    collaborative process over the issue of dam removal. Our experience
    with relicensing the North Umpqua hydro project in western Oregon
    illustrate the problem with lack of agency accountability for mandatory
    prescriptions in the relicensing process.
        At North Umpqua, PacifiCorp felt it had done ``all the right
    things'' for a successful relicensing:

     First-ever watershed analysis of a project on federal forest
            lands,
     Created a Citizens Advisory Committee,
     Initiated collaborative settlement proceeding even before FERC
            had developed its Alternative Licensing Process.
        In short, we worked collaboratively in a settlement proceeding
    using the best science available over a four year period to try to
    arrive at a consensus-based solution involving all stakeholders.
        That all ended when PacifiCorp exited the settlement negotiations
    last November. We were driven to this action by the Forest Service's
    insistence that we remove the downstream dam (known as Soda Springs) as
    a starting point to reaching any accord. The agency based its directive
    on ambiguous language in its Northwest Forest Plan, stating removal was
    the only way to achieve those objectives.
        The agency further indicated that if PacifiCorp would not agree to
    removal of Soda Springs voluntarily as part of settlement, the agency
    would simply mandate it using its 4(e) conditioning authorities under
    the Federal Power Act.
        In a September, 1999 memorandum from the Forest Service to
    PacifiCorp, the agency stated, ``Dam removal will be a condition of
    settlement for the Resource Team as well as the Forest Service--Forest
    Service will submit preliminary 4(e) terms and conditions for dam
    removal and other mitigation.''
        As a company that has agreed to remove a dam, we believe we have a
    good understanding of when it is right--and when it is wrong. It is
    clearly wrong in the case of the North Umpqua project where a number of
    other ways exist to meet the objectives of the NW Forest Plan:
    installation of fish passage facilities and off-site habitat
    restoration among them. The Forest Service discounted these
    alternatives, however, in insisting on agreement to remove of the Soda
    Springs facility before negotiating any other mitigation measures.
        The Forest Service's actions at North Umpqua illustrate how
    difficult it is to achieve true collaboration if agencies bring their
    mandatory conditioning authorities into the process.
        At North Umpqua there may yet be a happy ending: the Forest Service
    has now indicated it does not have an official policy of using 4(e) to
    compel dam removal and that it did not intend to create such a policy
    via the North Umpqua settlement talks.
        In fact, the agency recently indicated it is willing to return to
    the settlement table to see whether a mutually-acceptable resolution
    for relicensing this project can be achieved. It also is saying that
    dam removal will not be a precondition to a return to the table.
        We would like to return to the talks because we still believe that
    settlement and collaboration is a good approach to resolving the tough
    issues that will arise in any relicensing.
        However, this is not to say the licensing process doesn't need
    fixing--it does.
        In fact, PacifiCorp believes that settlement processes would work
    much better if there is more accountability built into the process
    throughout.
        Major flaws with the process as it currently exists include:
        Lack of a mechanism to ensure a final licensing decision will be in
    the overall public interest. Under Sections 18 and 4 (e) of the FPA,
    agencies tend to focus narrowly on the resources under their
    jurisdiction and to the exclusion of other important factors.
        Additionally, agency conditions are often written at a technical
    level within the agencies with little or no policy-level review or
    consideration of federal energy policy or other public interests,
    including the need for flexible, reliable low cost power that does not
    emit greenhouse gases.
        A single Section 18 or 4(e) condition imposed by a single agency
    can render a beneficial project uneconomic yet FERC must include the
    conditions in a final license.
        FERC cannot balance different kinds of public interests and
    benefits against one another and there is no opportunity for
    administrative or judicial review until after FERC issues its final
    order. Even then, conditions can only be challenged in court on narrow
    legal grounds.
        H.R. 2335 addresses these key problems in several ways that we
    strongly support:

     It requires agencies to take into consideration project
            benefits, including economics and power values, system
            reliability, air quality and flood control, and requires the
            agencies to document consideration of these factors.
     It allows for administrative review of contested conditions
            before the issuance of a final order. This review could both
            improve the license and shorten the licensing process by
            eliminating much potential post-license litigation.
     It requires a scientific basis for all conditions and peer
            review. While peer review may not be needed for all conditions,
            it is certainly desirable where the scientific merit of a
            condition is contested.
        In conclusion, PacifiCorp believes that settlement processes would
    have a higher chance of success with this legislation in place because
    ALL of the parties (not just the license applicant) would need to
    consider the full range of relevant factors--both the impacts and
    benefits of hydroelectric projects--in the licensing process.
        H.R. 2335 merits support because it does not take away the agencies
    conditioning authorities--it simply requires them to be used under the
    right conditions in an appropriate way, taking into account all the
    values associated with hydropower.

        Mr. Shadegg. Thank you, Mr. Lynch. Mr. Fahlund? Is that how
    you pronounce it?
        Mr. Fahlund. Yeah. Fahlund.
        Mr. Shadegg. Fahlund.

                       STATEMENT OF ANDREW FAHLUND

        Mr. Fahlund. Mr. Chairman and members of the subcommittee,
    thank you for allowing me to testify before you today. I
    represent American Rivers as Policy Director for Hydropower
    Programs and serve as the Chair of the Hydropower Reform
    Coalition, a consortium of 62 conservation organizations from
    around the country with a combined membership of more than
    800,000.
        The licensing provides significant benefits to rivers.
    Changes in law in the 1980's and 1990's provided an opportunity
    to restore rivers and fisheries degraded by decades of
    unmitigated harm caused by hydropower operations. These
    changes, coupled with administrative improvements at FERC,
    resources agencies, have established an appropriate balance
    between power and nonpower values and ensured a more efficient
    process. H.R. 2335 would turn back the clock on this progress.
        The licensing takes a 19th century technology--hydropower--
    and brings it up to 21st century standards without significant
    losses in power generation or profitability. Rivers are complex
    systems, and their management impacts the interests of millions
    of Americans. Relicensing reflects this complexity.
        Congress made FERC responsible for issuing licenses that
    protect the public interest in power and nonpower values of
    rivers. However, they established three basic provisions: water
    quality, fish passage, and Federal lands management as a
    foundation of minimum protection assigned--and assigned expert
    resource agencies to carry out these mandates. These are
    commonly referred to as mandatory conditions.
        H.R. 2335, described as a process bill, would have the
    effect of fundamentally changing this balance. How? H.R. 2335
    makes a complex process more so and burdens resource agencies
    with limited resources so that they are unable to act. It
    creates three new processes and a host of new standards of
    review, several of which duplicate those already undertaken by
    FERC. This redundancy, inefficiency--this creates redundancy,
    inefficiency and forces State and Federal resource agencies
    outside of their expertise and sets them up to fail.
        Because it is so vague and open-ended, the provisions of
    this bill create countless openings for new litigation that
    will leave us in court for years to come. It is also
    unworkable. One provision of the bill would require agencies to
    submit conditions for review before a dam owner even files an
    application for a new license. Agencies cannot submit
    conditions on a project without an application and the
    associated study results.
        Agencies are not solely to blame for delays. In fact,
    delays in the relicensing process only prolong ongoing
    environmental harm. That is because once a license term
    expires, dam owners receive an annual license that grants them
    status quo conditions until a new license is issued. Delaying
    the expensive studies and the facility upgrades gives project
    owner a significant incentive to draw out the process.
        Finally, H.R. 2335 forces agencies to consider the
    profitability of a hydropower project in determining basic
    environmental standards for protection of public trust
    resources. This fundamentally changes the mandate of these
    agencies and threatens public rivers.
        Federal agencies cannot and should not guarantee the
    profitability of private industry, especially at the expense of
    resource protection. Industry does not even make information
    available to do the kind of analysis they are asking for.
        FERC's previously testified in the class of 1993 that it
    resulted in an average loss of generation of 1 percent, which
    has been stated here several times and attributed to me. Let's
    remember that this is measured against projects--that loss is
    measured against projects that operated for 50 to 100 years
    with virtually no environmental protection. That's a small
    price to pay for the significant benefits to our rivers,
    wildlife, and recreation.
        Hydropower will do just fine in this new era of
    competition, and there is only sporadic anecdotal evidence to
    suggest otherwise. After receiving a 30- to 50-year term, these
    projects should be fully amortized. Projects both facing
    relicensing and having just been relicensed are selling for
    very competitive rates. Stories of successful settlements far
    outnumber the horror stories of lengthy process or expensive
    requirements. There are several ongoing administrative
    improvements that are working and should be made to work to
    protect everyone's interest.
        Congress should ensure agencies have sufficient staff,
    resources and training to effectively participate in
    relicensing.
        Second, everyone should promote ongoing collaboration and
    cooperation using FERC's alternative process.
        Third, Federal agencies should implement comprehensive
    policies and guidance already under development that will
    address coordination of and public input for mandatory
    conditioning.
        Fourth, FERC should ensure that applicants complete all
    necessary environmental studies in a timely manner, and should
    place interim conditions on annual licenses to give applicants
    an incentive to act quickly.
        If the committee has any questions about this or any of the
    other bills before us today which I have not referred to, I'd
    be happy to answer them. American Rivers is ready to work with
    Congress, agencies, and industry to make reasoned improvements
    to the process and substance of hydropower relicensing. Thank
    you for your attention.
        [The prepared statement of Andrew Fahlund follows:]
     Prepared Statement of Andrew Fahlund, Policy Director for Hydropower
                           Programs, American Rivers
                                  introduction
        Mr. Chairman and members of the Subcommittee, thank you for
    allowing me to testify before you today regarding federal regulation of
    hydropower dams. I am Policy Director of Hydropower Programs for
    American Rivers, a national river conservation organization with more
    than 30,000 members nationwide. In addition, I am the Chair of the
    Hydropower Reform Coalition, a consortium of more than 60 conservation
    and recreation organizations from around the country (see attachment).
    The Coalition was formed in 1992 with the purpose of improving river
    health and recreational opportunities through the licensing,
    relicensing, and regulatory enforcement of hydropower dams under the
    jurisdiction of the Federal Energy Regulatory Commission (FERC).
    Coalition members are national, regional and local conservation
    organizations, and together have a combined membership totaling more
    than 800,000. Coalition members are active in more than 75 percent of
    the relicensing cases currently pending before FERC and have
    constructively contributed to numerous policy discussions concerning
    FERC regulated hydropower.
        There are four basic messages in my testimony, geared primarily
    toward HR 2335 ``The Hydropower Licensing Process Improvement Act'':

    1. Hydropower relicensing results in significant improvements to
            environmental quality;
    2. On average, relicensing results in relatively modest costs to
            industry in exchange for the privilege of utilizing a public
            resource;
    3. The FERC process has never worked better to protect the public
            interest. Continued use of the collaborative process, coupled
            with adequate resources for participating agencies, and minor
            administrative reforms will further this progress;
    4. Single project or state exemptions to the Federal Power Act, as a
            matter of policy, are inappropriate and unnecessary.
        While the bulk of my testimony focuses on hydropower regulation
    generally and my organization's opposition to HR 2335 specifically,
    American Rivers and the members of the Hydropower Reform Coalition have
    strong reservations about single project or state exemptions to
    existing rule or law and therefore cannot support any of the other
    bills docketed for this hearing with the exception of S. 1937 for which
    we take no position at this time.
        I would like to stress that we believe that hydropower relicensing
    is a natural resource issue--a rivers issue--not simply an energy
    issue. That is because the improvements and changes that we are making
    at these projects will have enormous implications for hundreds of
    species, thousands of river miles, and millions of dollars in
    recreational opportunities for decades to come. In contrast, these
    decisions have a relatively small impact on energy generation, electric
    rates, or industry viability.
        I would also like to make clear that American Rivers and members of
    the Hydropower Reform Coalition are NOT anti-hydropower. We simply wish
    to ensure that these dams are operated to protect and restore river
    resources using best available technologies and best management
    practices. While decommissioning is a popular topic these days, we
    believe that dam removal will be the exception and not the rule.
                  all dams are not created (or operated) equal
        It is important to remember that rivers are owned by the public.
    Licenses to operate non-federal hydropower dams last 30 to 50 years. It
    has always been Congress' intent that at the end of a license term, the
    Federal government reviews its commitment of the public's resource
    based on the knowledge and values of the time.
        As early as 1908, President Teddy Roosevelt understood the need to
    safeguard our nation's rivers and helped to devise a system of periodic
    review to protect these national treasures.
            ``The public must retain control of the great waterways. It is
            essential that any permit to obstruct them for reasons and on
            conditions that seem good at the moment should be subject to
            revision when changed conditions demand.''
        More than 75 years later, the 9th Circuit Court of Appeals in
    Yakima Indian Nation v. FERC found that:
            ``Relicensing is more akin to an irreversible and irretrievable
            commitment of a public resource than a mere continuation of the
            status quo. Simply because the same resource had been committed
            in the past does not make relicensing a phase in a continuous
            activity. Relicensing involves a new commitment of the resource
            . . .''
        While hydropower has provided significant benefits to society over
    the past 100 years, this has not come without a cost to our nation's
    rivers. Dams harm the physical, chemical, and biological function of
    rivers by disrupting flows, degrading water quality, and blocking
    passage of fish and other species. Although hydropower's energy
    source--water--is relatively renewable, the river ecosystems that dams
    affect are not. The profound impacts of hydropower dams on river
    systems have been widely documented in scientific literature. For
    example, dams cut off free-flowing rivers, blocking not only fish and
    wildlife migration, but also the flow of nutrients and sediments. By
    diverting water out of the river for power production, hydropower
    projects often remove water from entire river channels leaving them
    completely de-watered.
        By withholding and then releasing water to generate power for peak
    demand periods, dams cause downstream stretches to alternate between no
    water and powerful surges. These drought to torrent episodes
    dramatically erode soil and vegetation and alternately flood or strand
    wildlife. Such peaking operations also lead to massive fluctuations in
    reservoir levels harming flatwater recreation and shoreline habitat.
    Dam operations can also cause water quality problems in rivers and
    reservoirs that can result in fish kills and permanent elimination of
    naturally occurring fish and wildlife species.
        The cumulative impacts that multiple dams have on rivers can spell
    disaster for fish and wildlife. For example, 16 million salmon once
    traveled up the Columbia River and its tributaries from the Pacific
    Ocean each spring to spawn. Now fewer than 2% make the trip largely
    because dozens of hydropower dams bar their way. Both coasts have seen
    dramatic declines in river spawning species that were once mighty
    commercial industries from the Carolinas to Maine and all along the
    Pacific Coast. These declines are in large part attributed to
    alteration and fragmentation of river habitat.
                 ecological and economic benefits of relicensing
        Because these licenses are issued for 30 to 50 year terms,
    hydropower relicensing is a once-in-a-lifetime opportunity to bring a
    19th century technology up to 21st century environmental standards. By
    requiring dam owners to build passage for fish, protect critical
    riparian habitat, adjust river flows to conform to a more natural
    pattern, and provide recreational access and opportunity we can protect
    valuable fisheries, native species diversity, recreational amenities,
    and natural ecosystem functions, while enhancing economic opportunities
    such as recreation, tourism, and ecological services. Because original
    licenses were issued prior to the enactment of modern environmental
    statutes and prior to our understanding of the impacts of dams on river
    ecosystems, virtually none of these environmental conditions were
    required.
        There are hundreds of examples where these improvements to river
    environments have been made while maintaining the viability of the
    other benefits of the project. On the Manistee, Muskegeon, and AuSable
    Rivers in Michigan, Consumers Power, the State, the US Forest Service
    and Fish and Wildlife Service, and NGOs, reached a settlement that
    resulted in significant improvements to anadromous fish runs, sport
    fishing, and water quality and has restored these rivers to a more
    healthy condition. Studies are showing dramatic improvements in natural
    fish reproduction simply from changing the flow regime out of one dam
    to a more natural condition.
        Many changes obtained through relicensing of hydropower dams can
    also bring economic benefits to communities. For example, in rural
    areas such as Western Massachusetts, hydropower dams provide very few
    jobs as they are highly automated. But improved river conditions from
    relicensing created significant numbers of jobs and increased revenue
    for this rural community. Improved flows on the Deerfield River have
    created a multi-million dollar rafting and fishing industry in this
    once economically depressed region while still maintaining profitable
    energy production.
                          healthy rivers and clean air
        Simply because hydropower is emissions free, does not automatically
    mean that it is without significant impacts on the environment. The
    overwhelming evidence of the impacts of dams on rivers runs contrary to
    the assertion that hydropower is ``green''. This argument is often used
    to get around critical river protection measures, without any showing
    of actual impacts. Ironically, some of the same companies that tout the
    climate change benefits of hydropower vehemently deny that climate
    change is a problem when talking about their fossil generation.
        The benefits derived from relicensing provide significant
    protection to rivers with a low cost to air emissions. According to the
    Chair of the Federal Energy Regulatory Commission, the relicensing of
    more than 140 hydropower projects resulted in an average reduction in
    generation of only 1%! Based on this track record, we can reasonably
    expect a 1% average generation loss from projects due to be relicensed
    over the next ten years (these represent 2.5% of the annual generation
    of the US). This would result in a 0.025% reduction in the nation's
    overall annual generation, which would need to be offset by an
    alternative--most likely natural gas. That assumes no gains through
    energy efficiency or other demand side improvements and fails to
    consider emerging technologies such as wind and fuel cells.
        In any case, the amount of ``lost'' generation is significantly
    less than the 5% average fluctuation of energy demand caused by factors
    such as weather, fuel prices, and advances in technology.1
    These losses in generation are derived from comparing a baseline of
    operation that had NO environmental conditions to one with modern
    environmental standards. One would reasonably expect at least some loss
    with meeting environmental laws. A 1% loss in generation is a small
    price to pay for the benefits received. We need not trade healthy
    rivers for clean air. We can have both.
    ---------------------------------------------------------------------------
        \1\ The mean net generation of electric utilities and non-utility
    power producers for 1990 to 1996 is 3,203,998 million kilowatt-hours,
    with a standard deviation of +/-159084.6 million kwh or +/-4.96%.
    ---------------------------------------------------------------------------
        In response to the clean air benefits that hydropower dams do
    provide and to create an incentive for operating hydropower dams to
    protect river resources, American Rivers and Green Mountain Energy have
    consulted with numerous power companies, resource managers and others
    in the hydropower community to establish a market incentive for
    environmental improvements at hydropower dams. The Low Impact
    Hydropower Institute was created as an independent body that rates the
    operation of hydropower dams using objective and measurable criteria
    for factors such as water quality, fish passage, and land protection.
    Those projects that meet these standards of environmental protection
    are given a certification that will allow their owners to sell the
    power from the project at a premium.
                     relicensing--an important balancing act
        Because rivers are public resources with many competing interests
    and significant environmental impacts, the licensing process for
    hydropower dams involves multiple stakeholders. Unlike most electricity
    generating technologies, hydropower does not have ``end of pipe''
    standards to ensure that the dam's operations do not unduly damage the
    environment. This is because every dam and every river is different,
    and generic standards cannot be applied to each project. Most
    hydropower dam licensing conditions--including conditions to protect
    natural resources--are determined by FERC after giving equal
    consideration to power (electricity generation) and non-power (fish and
    wildlife protection, recreation, etc.) benefits of the river. The
    economics of the hydropower facility are taken into account in this
    balancing process.
        Congress, however, determined that some basic environmental
    protections must be afforded at every dam, and should not be balanced
    away to promote cheap hydropower. Expert federal and state resource
    managers establish conditions based on substantial evidence to protect
    public trust resources. These basic protections form a floor above
    which FERC can do it's balancing of license conditions in the public
    interest.
        Sometimes referred to as mandatory conditions, these requirements
    assure that:

    1. Fish can be passed upstream and downstream of a dam (FPA Section
            18);
    2. If the private dam is located on federally-owned land, the uses of
            the federal land are protected (FPA Section 4(e)); and
    3. The dam does not result in a violation of state-developed water
            quality standards (CWA Section 401).
        Both fish passage and federal lands protection have been part of
    the relicensing process since enactment of the Federal Power Act in
    1920. The current construction of the Act, which sets fishways apart as
    a special consideration, is in keeping with the law and practice that
    came to us from Europe at the time of settlement. Requiring millers
    (dam owners) to provide fishways at their own expense dates back many
    hundreds of years due to the fact that fish are equally important to
    interstate commerce. The changes proposed in HR 2335 to balance the
    financial needs of a privately held hydropower project with the
    protection of lands and fish resources held in trust by the government
    for the people reflects a tension that has existed for generations. The
    proposed changes to the Federal Power Act in HR 2335 would upset
    hundreds of years of precedent and tip the balance that has existed.
        The provision under Section 4(e) of the Federal Power Act that
    grants authority to land management agencies to ensure that projects on
    their lands meet current management goals and objectives is simple,
    common sense. Projects that are located on federal or tribal lands are
    already getting the benefit of cheap rent. In order to adequately
    manage the lands entrusted to them, federal land management agencies
    must have control of how these projects are operated.
        Even today, mandatory conditioning by federal agencies in the
    relicensing process is rare. According to a University of Michigan
    study, fish passage conditions were required outside of settlement at
    fewer than 10% of projects between 1980 and 1996. This hardly seems
    like a crisis given the dire need of salmon and other fisheries in both
    the Atlantic and Pacific coasts. The instances where agencies are
    exercising this authority are critical cases where improvements must be
    made.
                 hr 2335--a bad solution to the wrong problems
        The legislation before the Committee, HR 2335, is complex and rife
    with detail about a process that is foreign to most. Rather than walk
    through the bill step by step, the comments here simply refer to
    several of its most obvious problems. For a complete critique of the
    bill, see attachment to this testimony.
        No regulatory process is perfect and this one is no exception. Many
    in the environmental community believe that there should be stricter
    environmental conditions at hydropower projects, while many in the
    industry believe that there should be fewer. Perhaps that is a signal
    that things are working. Whichever position one believes, HR 2335 will
    only make the relicensing process more complex and litigious and will
    threaten public trust resources in the name of private gain.
    HR 2335 will make a complex process more so
        Efficiency in the hydropower relicensing process is a constant
    challenge because of the complexity of the issues and the number of
    stakeholders involved. There are a wide variety of requirements,
    checks, and balances. But HR 2335 only makes a complex process more so.
    It adds three new administrative processes at a time when agency
    budgets are limited and when the same bill seeks to avoid duplication.
    It further requires federal resource agencies to consider eight new
    factors in developing their environmental conditions, and then places
    on them a series of deadlines, procedural hoops, and resource
    constraints, most of which are completely out of their control.
        Many of the new procedures and considerations placed on resource
    agencies are redundant with FERC's role in relicensing. HR 2335
    requires agencies to consider several factors beyond the scope of their
    resource protection responsibilities and well beyond their expertise.
    Evaluation of these factors currently falls to FERC. The bill would
    require both federal and state resource agencies to undertake this
    analysis as well. It is unclear what is gained from having agencies
    duplicate this kind of evaluation.
        One of the most egregious elements of the bill requires federal
    agencies to submit their mandatory conditions to a new administrative
    review process before the applicant has even filed its application for
    a new license! How can agencies write license conditions for a project
    that has no application? At that stage, FERC does not even recognize
    that there is a formal proceeding. Further, there is no guarantee that
    the applicant has concluded the studies that agencies must use when
    drafting their license conditions. Even if the agencies chose to rely
    on their own studies and environmental review, the bill prohibits them
    from doing so and forces them to rely on FERC's review. Without an
    application on file, FERC will not have begun to scope their
    environmental analysis, therefore it is unreasonable to require
    agencies to submit conditions at this stage in the process.
    Delays in relicensing are often within the applicant's control
        Relicensing typically is a five to seven year process involving
    multiple stakeholders, dozens of studies, and numerous meetings.
    However, dam owners receive a license that entitles them to utilize a
    public resource for 30 to 50 years. Delays in the process are not
    uncommon but everyone shares some of the blame and the impacts of delay
    are most often borne by the environment.
        License applicants have caused significant delay of the relicensing
    process by failing to provide complete license applications. Of the 157
    relicensing applications filed by industry in 1993, only nine provided
    sufficient scientific information about project impacts, forcing FERC
    to issue hundreds of additional information requests in the other 148
    cases.2 The subsequent need to conduct these studies to
    complete their applications was a significant reason that there were
    major delays in these relicensings. In written testimony for the Senate
    Energy and Natural Resources Committee, FERC identified only 7
    instances since 1992 where mandatory conditions were filed after the
    regulatory deadline without support from all parties to the proceeding.
    ---------------------------------------------------------------------------
        \2\ Barnes, FERC's ``Class of '93'': A Status Report, Hydro Review
    (Oct., 1995).
    ---------------------------------------------------------------------------
        Who is really harmed by delay? Most often it is the interests of
    the environment. That is because when a license expires the dam owner
    receives an ``annual license'' that maintains status quo conditions at
    the project until a final license is issued. That means that the longer
    the process takes, the longer the applicant can stave off the cost of
    having to comply with modern environmental conditions.
        When one takes a closer look at ``horror stories'' of never ending
    relicensings one can see that these dams operated for up to 30 years
    beyond their original license term under requirements based upon 1940s
    and 50s environmental laws and science. That provides a huge incentive
    for dam owners not to cooperate! The environment and the public are the
    parties most harmed by delay in the relicensing process. However, just
    as most resource agencies are not guilty of purposeful delay, neither
    are most power companies. But if we want to reduce the time required to
    relicense projects, we should reevaluate the way in which FERC issues
    these annual licenses to allow for interim amendments or abolish the
    practice altogether.
    We should not guarantee profitability of hydropower
        Being a good environmental steward is a legitimate cost of doing
    business. Acquiring a new license necessitates an upgrade of facilities
    and operations to meet modern environmental standards. This is
    appropriate and fair.
        Should the federal government guarantee profitability of
    hydropower? If a project is already unprofitable because of market
    forces or because it is run poorly, should it be exempted from any
    environmental conditions? The answer to these questions is clearly no.
    According to the courts, ``There can be no guarantee of profitability
    of water power projects under the Federal Power Act; profitability is
    at risk from a number of variable factors, and values other than
    profitability require appropriate consideration.'' 3
    ---------------------------------------------------------------------------
        \3\ Wisconsin Public Service Corp. v. FERC, 32 F.3d 1165, 1168 (7th
    Cir. 1994)
    ---------------------------------------------------------------------------
        Applicants are not even required to provide economic information
    about their projects. According to FERC's own general counsel,
    ``Licensees are not required to file information with the Commission
    from which it (the Commission) could determine whether they (licensees)
    earn a profit on hydropower projects.'' How are agencies supposed to
    measure the impacts of their conditions on project economics when
    industry does not share this information and the information itself is
    speculative?
        Federal agencies in fact do consider least cost alternatives
    provided that those conditions meet the necessary level of
    environmental protection to fulfill statutory obligations. Agencies are
    not insensitive to the needs of industry any less than the industry is
    insensitive to protection and restoration of the public's rivers.
        Forcing agencies responsible for protection of public trust
    resources to consider economics in the development of environmental
    conditions changes the fundamental nature of their mandate and forces
    them beyond their expertise. This shift runs counter to the principles
    upon which Congress created these laws.
        While couched in process, the bill effectively eliminates mandadory
    conditioning for most cases. The result of this bill clearly sets
    agencies up to fail. All of this additional process, review, and
    requirements appear to be set up to provide avenues for new litigation.
    Why are we moving in a direction of litigation, mistrust, and acrimony
    at a time when trust, cooperation, and settlement are flourishing?
                   facts don't support the claims of a crisis
        To date, federal resource agencies have not caused any hydropower
    owner to abandon its project because of environmental conditions. The
    courts place an appropriate check on this discretion and require a
    substantial record of evidence to support these conditions. The Energy
    Information Administration has forecasted only a 1% decline in total
    hydropower output over the next twenty years. This does not represent
    significant economic hardship after having operated under licenses with
    little or no environmental protections for the past 30 to 50 years. The
    original capital costs of these projects should be fully amortized.
        In reality, dams are not being surrendered or abandoned due to
    environmental regulation. Since 1996, only three operating licenses
    have been surrendered--each because they fell into disrepair or were
    damaged by flooding. According to FERC, since1993 ``no licensee has
    refused to accept or surrender their license citing project
    economics.'' 4
    ---------------------------------------------------------------------------
        \4\ Written supplemental testimony of Doug Smith, FERC General
    Counsel, before the Senate Energy and Natural Resources Committee, 10/
    27/99
    ---------------------------------------------------------------------------
        In its entire history, FERC has ordered only one dam removed
    against the owner's wishes and that was later settled. The hydropower
    projects likely to come off line in the next several years will be
    those that are too old and too costly to upgrade and maintain and
    therefore won't be competitive in the new market. While meeting modern
    environmental standards in a few cases may lead to project
    decommissioning, upgrades for safety, operating efficiency, and the
    competition from natural gas are the greatest threats to hydropower.
        In fact, hydropower is doing well in a deregulated market, even
    while maintaining modern environmental standards. Sales of recently
    relicensed hydropower facilities have been quite competitive and have
    brought in purchase prices well beyond industry expectations. New
    England Power Company was sold in 1998 to US Gen for $1.8 billion, well
    above its assessed value. And 30 dams previously owned by Central Maine
    Power Company--all with modern FERC licenses--were recently sold to
    Florida Power and Light for reportedly three times their assessed
    value. Recent divestiture proceedings in California have independent
    power producers salivating over Pacific Gas and Electric's (PG&E)
    hydropower complex, most of which is just coming up for relicensing.
        If members of the hydropower industry are concerned with either
    environmental conditions imposed by recent relicensing or by the threat
    of pending conditions in upcoming relicensing, why are they so willing
    to pay a premium for hydropower projects?
        administrative improvements to the relicensing process can work
        There are appropriate ways to make incremental improvements to the
    way that we license hydropower dams that do not place all blame on one
    sector and that meet at least some of the interests of all
    stakeholders.
        Provide Adequate Resources for Agency Participation--To ensure that
    the relicensing process is efficiently implemented, state and federal
    natural resource agencies must have sufficient staff, resources and
    training to enable productive involvement in individual relicensings.
    At present, many of the relevant state and federal agencies do not have
    sufficient staff dedicated to relicensing. As a result, a range of
    individuals (few of whom are trained in the relicensing process) may
    participate in different parts of a relicensing proceeding as time
    allows, or the appropriate staff is overburdened and cannot spend the
    time to conduct an adequate review of the environmental needs at the
    site or participate constructively in the relicensing. Because of the
    complex nature of the proceedings, and because of the new, more
    productive trend toward collaborative relicensing efforts, a consistent
    presence of qualified staff with an appropriate workload would make
    agency efforts more efficient and productive.
        In the state of Alabama, licenses for 12 dams on three major rivers
    will expire by 2007. Relicensing these projects will involve regular
    meetings, extensive studies, and detailed negotiation. Currently, the
    US Fish and Wildlife Service, which has significant statutory
    responsibilities for participating in this process, has only one staff
    person to cover this area. His situation is not unique. Without
    additional resources, there is a risk of inefficient or incomplete
    participation on the part of USFWS and potential disruption or delay in
    the process. This can be avoided with additional resources.
        One potential solution is Section 1701(a) of the Energy Policy Act
    of 1992, which provides authority for FERC to reimburse resource
    agencies for their costs associated with licensing FERC projects. The
    provision calls for FERC to pass these costs on to licensees through
    annual fees. Since 1992, FERC has been collecting fees from licensees
    for some of the federal resource agency relicensing expenses but this
    money has not found its way back to these agencies. Instead, it has
    gone to the Treasury where these reimbursements to federal and state
    resource agencies have not been made available through annual
    appropriations from Congress. This system is not working. To provide
    adequate resources to these agencies that can facilitate more efficient
    relicensings, this provision of law should be implemented such that
    state and federal natural resource agencies are reimbursed off-budget.
        Collaboration Not Confrontation--Since the codification of FERC's
    rules on the alternative relicensing or collaborative process, an
    increasing number of projects have reached successful settlement
    leading to positive project economics and greater environmental
    protection. In an independent evaluation of the costs of hydropower
    relicensing, the Electric Power Research Institute (EPRI) found that on
    average, savings of 20 to 50 percent can be realized by using a
    collaborative approach. EPRI also found that the settlement process, on
    average, leads to reduced mitigation costs of 5 to 20
    percent.5
    ---------------------------------------------------------------------------
        \5\ EPRI, Hydro Relicensing and Mitigation Cost Data, Excerpted
    from EPRI Report TR-104858, Water Resource Management and Hydropower:
    Guidebook for Collaboration and Public Involvement (Dec., 1995).
    ---------------------------------------------------------------------------
        In a recently signed settlement agreement in Montana and Idaho
    between Avista Corporation and tribes, conservation groups, and federal
    and state agencies, each party came out with what they viewed as a
    significant win. Even with a commitment of environmental protection
    valued at $250 million, Avista can move forward with a profitable
    license that ensures profitability and contains certainty in their
    future operating conditions and environmental stakeholders can have
    assurance that environmental needs will be met over the next forty
    years.
        This kind of cooperation must be fostered. Piecemeal legislation
    that targets only one stakeholder group--resource agencies--threatens
    the present and future progress and good will developed through this
    sort of collaboration.
        Increase Cooperation and Coordination among FERC and Resource
    Agencies--Cooperation among FERC and state and federal resource
    agencies will greatly improve the efficiency of the relicensing
    process. Resource agencies and FERC have begun meeting to discuss ways
    to better meld their respective authorities. A better working
    relationship among FERC and resource agencies will make the relicensing
    process more efficient, and will likely result in better licensing
    decisions.
        Under a charter signed in October 1998, the four principle federal
    agencies involved in relicensing--FERC, Interior, Agriculture, and
    Commerce--formed an Interagency Task Force to Improve Hydroelectric
    Licensing Processes (ITF). This committee was established to coordinate
    federal and state mandates.
        In July of 1999, the ITF established a Federal Advisory Committee
    to provide a forum for non-federal entities to review and provide
    feedback on the activities of the ITF. The Hydropower Reform Coalition
    is represented by three members and is urging each of the members of
    the ITF to effect meaningful change through this process by advocating
    changes in guidance, policy, and regulations. The Coalition hopes to
    work with members of industry and others on this committee to advance
    common goals and interests.
        At our last meeting in March 2000, the Department of the Interior
    announced the intention of Interior and Commerce to explore the
    possibility of developing a process that would allow public input into
    the development of draft conditions for fish passage and federal lands
    protection under FPA Sections 18 and 4(e) respectively. Such a process
    would be welcomed by American Rivers and others in the Hydropower
    Reform Coalition. We also encourage these same agencies to come out
    with a uniform policy on the development of FPA Section 18 fishway
    prescriptions and similarly urge the US Forest Service to finalize its
    handbook for field staff on the development of FPA Section 4(e) land
    management conditions. These policies and guidance will provide
    necessary consistency and uniformity across agencies and regions.
        Another promising forum where coordination and cooperation are
    leading to positive reforms is a multi-stakeholder National Review
    Group (NRG) sponsored by the Electric Power Research Institute (EPRI).
    Since January of 1999, members of industry, agencies, and NGOs have
    been working together to develop a guidance document of best practices
    in the relicensing process to assist stakeholders in relicensing
    dealing with difficult issues and typical roadblocks. Development of
    this document has enabled experienced practitioners from differing
    camps to reach consensus about practical ways to make the process work
    better. Over the next several months, this document will be published
    and a training and outreach program put forward to train stakeholders
    and implement its ideas.
        Proposed amendments to the Federal Power Act address the wrong
    issues and fail to offer comprehensive improvements to the process or
    substance of hydropower regulation. Real reforms can protect the
    environment and meet the needs of industry and other stakeholders.
    These administrative processes are making progress toward systematic
    improvements in the relicensing process. They should be given an
    opportunity to work.
         special exemptions to the federal power act are inappropriate
        In addition to HR 2335, several other bills are being given
    consideration during this oversight hearing but rather than address the
    merits of each, I would like to reserve my comments for a more general
    overview of single state or single project exemption. These bills are
    often justified because the projects that they exempt are ``small'' in
    terms of generation capacity or they are proposed for states that have
    ``unique'' circumstances. While we acknowledge that there can be unique
    circumstances on a case-by-case basis, it is generally bad public
    policy to create unique loopholes for only some projects.
        In particular, American Rivers and our conservation partners have
    particular objection to S 439, which passed the Senate by unanimous
    consent in June 1998, and would among other things, amend the Federal
    Power Act (FPA) to allow the State of Alaska assume jurisdiction over
    hydropower projects of 5 megawatts or smaller. We urge the House to
    reject any attempts to introduce or pass this bill, now or in the
    future.
        Small hydropower does not necessarily mean small impacts. Even dams
    generating less than 5 megawatts can have profound negative impacts on
    valuable migratory and resident fisheries, water quality, riparian
    habitats, and river recreation and should therefore not receive less
    environmental review. If a project is non-controversial, it will move
    through FERC's existing process quickly, making exemption or
    duplication unnecessary. FERC already has in place a procedure to
    exempt ``small'' projects. Under Section 30 of the FPA, projects are
    subject to a shorter and less regulatory licensing process in exchange
    for accepting the terms and conditions of appropriate state and federal
    resource agencies.
        Exemption for one state sets a dangerous precedent for further
    unnecessary individual exemptions to the Federal Power Act. Granting
    individual state jurisdiction of hydropower projects would lead to a
    piecemeal regulatory system with gross inefficiencies in environmental
    review and enforcement. While we support the general intent of S. 334,
    which would provide an exemption preventing projects in Hawaii from
    seeking a voluntary license, we believe that the State of Hawaii can
    adequately protect its unique water resources from hydropower
    development through state standards under the Clean Water Act. Again, a
    single state exemption, even if done for the right reasons, is
    inappropriate and in this case, unnecessary.
        The Federal Power Act has established a process to ensure
    environmental and economic values are considered and duplication is
    unnecessary. FERC also issued a Rule in October 1998 that advances a
    more cooperative and collaborative alternative to the current
    relicensing process, which is being used widely in cases throughout
    Alaska.
        American Rivers and our partner organizations in Michigan also
    oppose HR 1262, which would exempt hydropower facilities on the
    Pentwater River and owned by the City of Hart, Michigan from regulation
    under the Federal Power Act. The Pentwater River is a tributary to Lake
    Michigan and a small but important steelhead fishery that currently
    suffers from inadequate flows from the Hart Project. These flows, which
    drop down to almost zero at night, cause wild fluctuations that harm
    migrating fish and cause significant problems with water temperature,
    all for a small amount of power. There is no reason that this project
    should be exempted from the same environmental standards that others
    must meet.
        As a general matter, American Rivers and the members of the
    Hydropower Reform Coalition oppose Congressional extensions for
    commencement to construct new hydropower projects. The Federal Power
    Act currently provides for a two-year period in which to commence
    construction of a dam with an option to extend that period for an
    additional two years. Extending commencement of construction to 10
    years as proposed in S. 439 could render environmental and economic
    evaluations conducted during the licensing process useless as
    conditions in the project area may change. Such extensions also limit
    alternative economic activity at the site, including alternative power
    development. Projects should not be licensed unless they are fully
    prepared to carry out their obligations and responsibilities. Congress
    should simply not accept so many extension bills.
                                   conclusion
        Our nation's rivers and fisheries are facing a crisis of slow but
    steady extinction. Resource agencies with expertise in these areas are
    in the best position to address this threat. The relicensing process
    can always benefit from incremental administrative improvements, and
    perhaps one day we will come to a conclusion that it is time to look at
    an entirely new way of doing business, but until that point, HR 2335,
    and bills like it, will only turn back the clock to an era of
    litigation, hostility, and continued environmental decline. We can
    endeavor to find better ways to generate hydropower and new sources of
    energy but we cannot bring back species once they have gone extinct.

        Mr. Shadegg. Thank you. And I'd like to compliment each of
    the witnesses so far for staying quite close to the timeline.
    Mr. Grimm?

                      STATEMENT OF ROBERT S. GRIMM

        Mr. Grimm. Thank you, Mr. Chairman and members of the
    subcommittee. My name is Robert Grimm. I serve as president of
    Alaska Power & Telephone Company. AP&T is an investor-owned,
    employee-owned corporation which has been providing public
    utility services in Alaska since 1957.
        We currently provide service to 25 different communities
    from above the Arctic Circle to the very southern portions of
    Alaska. Most of these communities are very small and due to
    lack of infrastructure, have isolated electric systems
    utilizing small diesel electric generating units that use
    fossil fuel.
        In addition to representing my own company, I'm speaking
    today on behalf of Alaska's electric utility industry through
    our statewide association known as ARECA. We strongly support
    S. 422 for the reasons I would like to outline, using my
    utility experience as an example, but emphasizing that many
    other companies in Alaska have similar experiences.
        One of the solutions to fossil fuel generation in these
    remote areas is the development of small hydro to provide a
    renewable and nonpolluting source of energy. We at AP&T began
    the program to identify and develop cost-effective projects in
    1984. In 1987 we applied for a preliminary permit from FERC,
    which we received in June, for 36 months. In November 1993,
    FERC issued the license authorizing the project with a capacity
    of 4.5 megawatts. The project was completed and began
    commercial operation in 1995. The permitting and licensing
    process took 7 years and cost $1.2 million. The actual
    construction took 1 year and cost $10 million. It's interesting
    to note that the licensing cost and permitting cost exceed the
    installed cost of equivalent diesel electric generating units.
        This is not just a bad example or an anecdotal thing. We
    also have another project in Skagway, Alaska with a capacity of
    4 megawatts. It's at Goat Lake, which is near Skagway. Filed
    for the preliminary permit in 1991. In 1994 a license
    application. Got the license in 1996. Took over 5 years and
    cost over $1 million. The project was completed in the fall of
    1998 at a cost of $10 million.
        Additionally, we have a couple of other projects that are
    currently under license. We've been through a relicense in our
    Dewey Lake system. Hence, we have first-hand experience with
    FERC during the last decade. It appears to us that the lack of
    flexibility, large project, small project, large impact, small
    impact in the FERC rules, regulations and requirements for
    these small projects has been the major reason so few have been
    developed in Alaska. Thus, we're forced to use fossil fuel in
    these remote areas, with the significant impacts associated
    with fuel storage, fuel spills, air emission, more than offset
    any of the adverse effects that have been identified in any of
    the projects that we've already completed or have currently
    under license.
        These projects are very similar to small community water
    systems which are being developed in Alaska under State law.
    Small hydropower is a resource that has prove itself, yet the
    regulatory maze continues to hinder its development. Those of
    us on the front line trying to implement renewable energy
    policies are bewildered. With all the benefit associated with
    the development of small hydropower when compared to the
    continued use of fossil fuel, why is everybody making it so
    hard and difficult to develop?
        My last point is tidal power. In Alaska, a lot of the
    communities are either on coastal sites, because there's no
    roads--very few roads in Alaska--or along rivers. And we've
    looked at several different free-flowing turbines which are
    essentially an adapted windmill type of a thing that is
    actually put into the water. Uses the--captures the free-
    flowing energy of the river that many of these villages sit by.
        Unfortunately, these units are very small--in the
    neighborhood of 100 KW. Well, because these rivers are
    navigable, that would make a FERC permit required. So we would
    be looking at $1 million or more to permit a project of 100 KW
    in these villages where we're now using--it just makes some of
    the alternative energy a non-option.
        To reiterate, S. 442 will not diminish public interest,
    environmental or conservation considerations and protection as
    under FERC. The bill will simply transfer regulatory
    jurisdiction from a very distant Washington, DC to our State
    government in Juneau.
        My understanding is that because of our special situation
    in Alaska, FERC does not object to the Alaska-only program
    contained in S. 422, and the State of Alaska supports it. Thank
    you.
        [The prepared statement of Robert S. Grimm follows:]
       Prepared Statement of Robert S. Grimm, President, Alaska Power &
                               Telephone Company
        My name is Robert S. Grimm. I serve as President of Alaska Power &
    Telephone Company (AP&T). AP&T is an investor-owned and employee-owned
    corporation which has been providing public utility services in Alaska
    since 1957. We currently provide services to 25 different communities
    from above the Arctic Circle to very southern portions of Alaska. Most
    of these communities are very small and, due to the lack of
    infrastructure, have isolated electric systems utilizing small diesel
    electric generating units that use fossil fuel.
        In addition to representing my own company, I'm speaking today on
    behalf of Alaska's electric utility industry, through our statewide
    association known as ARECA. We strongly support S.422 for reasons I
    would like to outline, using my utility's experience as an example, but
    emphasizing that many other of our rural utilities have similar
    experiences.
        One of the solutions to fossil fuel generation in these remote
    areas is the development of small hydroelectric projects to provide a
    renewable andnon-polluting source of energy. We at AP&T began a program
    to identify and develop cost-effective projects in 1984.
        In July 1987 we applied to the Federal Energy Regulatory Commission
    (FERC) for a preliminary permit for the Black Bear Lake Project on
    Prince of Wales Island in Southeast Alaska. In June 1988, FERC issued a
    preliminary permit for a term of 36 months. During this period, as
    evidenced by progress reports filed with the agency, AP&T spent a
    considerable amount of time and effort consulting with the agencies. In
    May 1991, we filed our license application. In November 1993, FERC
    issued the license authorizing the project with a capacity of 4.5 MW.
    The project was completed and began commercial operation on August 28,
    1995. The permitting and licensing phase took seven years and cost
    nearly $1.2 million. The actual construction took one year and cost $10
    million. It is interesting to note that the permitting costs alone
    almost exceed the installed cost of equivalent diesel electric
    generating units. I would like to point out that this project was
    funded entirely from private funds.
        Another of our projects is located near Skagway, Alaska and has a
    capacity of 4 MW. The project is called the Goat Lake Hydropower. We
    filed for a FERC preliminary permit in January 1991 and the FERC issued
    that permit in June 1991. In May 1994, we filed our license application
    and FERC issued the license in July 1996. The permitting and licensing
    process took over five years and cost us $1,043,100. The project was
    completed in the fall of 1998 at a cost of about $10 million. Again,
    this project was funded entirely with private funds.
        Another small hydroelectric project, Wolf Lake, is also located on
    Prince of Wales Island, and has a capacity of about 2 MW. The
    preliminary permit was issued by the FERC in April 1995. We fulfilled
    our obligations under the permit and filed our license application
    March 27, 1998. We are still awaiting a FERC license. This project
    would have been already permitted and under construction if the
    proposed legislation before you had been in place five years ago.
        Additionally, as part of the Upper Lynn Canal Regional Energy Plan,
    we are waiting for FERC licensing for a 3 MW project located on
    Kasidaya Creek north of Juneau near Skagway and Haines in Southeast
    Alaska. We filed for our preliminary permit in July 1996 and FERC
    issued the permit in November 1996. We then followed an Applicant
    Prepared Environmental Assessment Process. That process took three
    years, and we applied for the license last October.
        In addition, we have had the opportunity to re-license and amend
    our 1 MW project for Dewey Lakes FERC Project No. 1051 at Skagway,
    Alaska.
        Hence, we have had extensive first hand experience with FERC during
    the last decade. It appears to us that the lack of flexibility (i.e.
    large impact vs. small impact) in the FERC rules, regulations, and
    requirements for these small projects has been the major reason that so
    few have been developed in Alaska.
        The continued use of fossil fuel generation in these remote areas
    and the significant impacts associated with fuel storage and air
    emissions more than offset the minor impacts of these hydroelectric
    projects. These projects do not have large dams that constrict free-
    flowing rivers. These projects are very similar to the small-community
    water systems being developed in Alaska under state law.
        As you are aware, the environmental costs associated with the
    continued use of fossil fuels are significant. One authority has
    attempted to estimate the ``bottom line'' cost of fossil fuels.
    Included in this assessment were health costs, damage to water
    resources, treatment costs necessary to counteract the adverse effect
    of fossil fuel use on food supplies, water resources, climate, and
    health. These costs, when tabulated, equal 3.35 cents per kilowatt-hour
    of fossil fuel energy. Even this assessment does not include the
    environmental costs of cleaning up contaminated fossil fuel storage
    sites, which in rural Alaska alone is a $300 million dollar problem
    waiting to be addressed. These facts are understood and widely
    accepted.
        Small hydropower in Alaska is a resource that has proven itself,
    yet the regulatory maze continues to hinder its development. Those of
    us on the front line trying to implement renewable energy policies are
    bewildered. With all of the benefits associated with the development of
    small hydropower when compared to the continued use of fossil fuels,
    why is it that small hydro is so difficult to develop?
        The proposed legislation will provide us significant regulatory
    relief from the hardship we are now encountering when trying to
    displace fossil fuel generation with a proven renewable and non-
    polluting resource. That relief translates into dollars and time
    savings.
        You may hear how FERC regulations contain shortcuts to be used by
    smaller projects and how the Applicant Prepared Environmental
    Assessment can deliver a FERC license in a shorter time period. We have
    had direct experience with these shortcuts and have found them to be
    largely ineffective. While we appreciate the intent and efforts of
    individual FERC staff, the Applicant Prepared Environmental Assessment
    process simply has not saved us time or money.
        A major underlying problem is the diffusion of hydropower oversight
    that once was exclusively FERC's. Over the years FERC's overall
    authority under the Federal Power Act has been eroded by court
    decisions and legislative initiatives giving multiple state and federal
    agencies authority over various aspects of the licensing process. The
    process has become very inefficient and confrontational and results in
    very long licensing time periods and additional costs. Many small
    hydropower projects simply cannot afford these costs.
         My last point is tidal power. Currently we believe that small
    tidal or free flowing hydropower plants placed upon navigable waters
    will be subject to the jurisdiction of FERC. In Alaska this technology
    may have promise for many small coastal or riverside villages. However,
    the cost and time required for a FERC license make this technology a
    non-option for small-scale development.
        S.422 recognizes the special circumstances that exist in rural
    Alaska: very small communities, remote sites, no interstate (or for the
    most part intrastate) power grid, stand-alone generation that is
    largely diesel, limited local financial resources and much undeveloped
    small hydroelectric potential. Hence, S.422 would greatly facilitate
    the development of Alaska's small hydro potential by removing
    regulatory overlay while still requiring applicants to receive
    approvals from all other local, state and federal agencies.
        To reiterate, S.422 will not diminish public interest,
    environmental or conservation considerations and protections as under
    FERC. The bill will simply transfer regulatory jurisdiction from a very
    distant Washington, D.C. to our state government in Juneau. This
    jurisdictional transfer would only occur upon submission by the Alaska
    governor of a state regulatory program and the approval of that program
    by FERC after consultation with the secretaries of the Interior,
    Agriculture and Commerce. My understanding is that, because of our
    special situation, FERC does not object to the Alaska-only program
    contained in S.422, and the State of Alaska supports it.
        We ask for your support and passage of S.422. I will gladly respond
    to any questions.
        Thank you for this opportunity.

        Mr. Shadegg. Mr. Grimm, thank you very much for your
    testimony. Mr. David Piper.

                       STATEMENT OF DAVID E. PIPER

        Mr. Piper. Thank you, Mr. Chairman, members of the
    subcommittee. My name is Dave Piper. I'm President and Chief
    Executive Officer of PNGC Power, which is also known as the
    Pacific Northwest Generating Cooperative.
        We're located in Portland, Oregon. We're a cooperatively
    based energy service provider for our 11 owners who are mostly
    small, rural electric systems throughout the Pacific Northwest.
        I want to thank you and the staff particularly for
    convening this hearing and the courtesies that have been
    extended to us in this process over the last period of weeks
    and months. I'd like to submit my complete written testimony
    for the record, but I can quickly summarize our support of the
    Joint Operating Entity legislation with the following three
    points:
        No. 1, time is of the essence. BPA has some limited
    authorities but no clear guidance on selling preference power
    to aggregators such as Joint Operating Entities. Because of the
    September 31 deadline for completing the present Bonneville
    contract negotiations and the lead time that's necessary for
    analysis and contract negotiation, we would like to see this
    enacted as soon as possible. We need it, in fact.
        No. 2, as it's currently drafted, Senate bill 1937 does not
    expand nor contract the amount of preference power sold by BPA.
    It does not impact BPA's revenue. It does not create any
    incentive for the formation of new public power entities, nor
    does it create a loophole for diverting preference power sales
    outside of the Pacific Northwest. What S. 1937 does do is allow
    BPA to sell to aggregators acting on behalf of existing
    preference customers so that administrative and operational
    efficiencies can be achieved by both Bonneville and their
    customers. For instance, we estimate that for our PNGC members,
    the total combined power scheduling operational billing costs
    would be at least 60 percent higher without this piece of
    legislation.
        And finally, Mr. Chairman, over the past 2 years that this
    legislation has been circulated in the region, we have achieved
    as much of a consensus as any Northwest energy matter in my
    recent memory. S. 1937 has passed the Senate with the support
    of the entire bipartisan delegation. Congressmen Hastings and
    Walden introduced companion legislation late last session,
    which also enjoys bipartisan support. The Northwest Power
    Planning Council with members appointed by each Governor from
    the region have reviewed this legislation and have submitted
    positive statements to the Congress.
        On a substantive basis, we believe regional and Federal
    energy policy goals are enhanced with the passage of this
    legislation. On a procedural basis, there are organizations
    which believe Senate 1937 should wait for comprehensive reform
    of BPA and argue that Congress should not pass piecemeal
    legislation. I personally have been an advocate for
    comprehensive reform and review, and I have been involved in
    regional discussions on this matter. In this instance, however,
    relative to this piece of legislation, there is no effect on
    any other Bonneville customer group. It creates important
    benefits to members of my organization, but it does so in a way
    that does not disadvantage anyone else.
        I firmly believe the Senate recognized this when they
    passed S. 1937 last year. I would hope that this subcommittee
    and the House would do the same. I appreciate the time and am
    available for questions.
        [The prepared statement of David E. Piper follows:]
      Prepared Statement of David E. Piper, President and CEO, PNGC Power
        Mr. Chairman and Members of the Subcommittee, my name is Dave
    Piper, and I am the President and Chief Executive Officer of PNGC
    Power. PNGC Power, also known as the Pacific Northwest Generating
    Cooperative, is a Portland, Oregon-based energy-services cooperative
    that is owned by 11 mostly rural electric distribution utilities
    located throughout the Northwest.
        First and foremost, I would like to thank the Chairman and the
    Subcommittee for holding this hearing. PNGC appreciates the courtesy
    with which we have been treated by the Committee and its staff in our
    quest to see adoption of S.1937. We also we appreciate the sense of
    urgency with which the Subcommittee has chosen to act. As I will
    explain later in my testimony, we are particularly concerned that this
    bill be enacted into law in time for our members to be able to use its
    provisions.
    PNGC Power Overview
        In the parlance of the industry, PNGC Power is a wholesale
    aggregator. Our mission is very simple--to minimize the wholesale power
    costs of our members. Because we lack any substantial ``owned''
    resources, we are principally in the business of purchasing wholesale
    power and/or managing wholesale power contracts. The overwhelming bulk
    of that power comes from the Federal government, through the Bonneville
    Power Administration (BPA). PNGC also makes market purchases to meet
    the needs of its members, for which we acquired the nation's first FERC
    power-marketing license granted to a cooperative entity.
        The ability of our members to efficiently manage power supply rests
    on their ability to work together through PNGC Power. Put simply, our
    members formed PNGC to bring some economies of scale to their power-
    supply efforts. We provide technical expertise, participate in
    ratecases, negotiate power contracts, manage transmission arrangements,
    and, in the case of non-federal power, purchase and resell power. As a
    wholly owned and not-for-profit entity, we look out for our members'
    best interests in all that we do. By centralizing the wholesale power-
    supply management, we spread costs, increase economies, and create
    administrative and operational efficiencies for systems that are not
    big enough to justify power management staffs on their own.
        Allowing our members to consolidate their federal power-supply
    contracts through PNGC is a natural extension of the role we already
    play on their behalf. S.1937 would allow BPA to sell preference power
    to an aggregation entity called a Joint Operating Entity, or JOE, so
    long as the amounts of power sold to the JOE, and the terms and
    conditions of those sales, are the same as would otherwise apply if the
    power were sold directly to the individual customer. Pursuant to the
    text of S.1937, a JOE would have to have been formed as a public body
    or cooperative under relevant state law as of the date of enactment and
    consist of two or more public bodies or cooperatives that were BPA
    customers as of January 1, 1999. This is included in the bill to
    specifically address concerns about this legislation leading to new
    public power formation. A JOE would be eligible to purchase preference
    power for resale exclusively to its members for the purpose of meeting
    those systems' net requirements.
        Effectively, what all of this means is that consumer-owned
    utilities in the Northwest would have the option of consolidating their
    Bonneville contracts through a central entity--effectively purchasing
    their BPA power through a jointly owned entity in order to achieve
    operational and administrative efficiencies.
        As I explained earlier, S.1937 would not expand the pool of
    preference-eligible customers or alter the amount of preference power
    that customers are eligible to receive from Bonneville. Its provisions
    would also not alter the status quo with regard to the ability to
    resell either requirements or surplus power purchased from the agency.
    Why we want it
        The provisions of S.1937 do not grant any opportunities to PNGC
    Power that are not currently available to its member systems. However,
    as a result of working together, our members do anticipate meaningful
    operational and administrative savings.
        For instance, under future power-supply scenarios that involve PNGC
    providing load-following capability for its members, the JOE provisions
    would allow PNGC to file a single schedule rather than individual
    schedules for each member as it arranges power deliveries with control
    area operators on both a preschedule and real-time basis. Because
    filing multiple schedules with BPA and other parties involves
    exponentially more complicated scheduling requirements, both PNGC and
    the control-area operator (primarily BPA) can expect lower staffing
    requirements and significantly reduced paper and electronic transaction
    costs as a result of joint operations.
        We have estimated that, for PNGC, the total combined scheduling and
    operations costs would be as much as 60% higher without the ability to
    operate on a joint basis. Spread over 400-500 average megawatts of
    load, those costs are significant as our members attempt to minimize
    the retail rates of their customers.
        The second major opportunity presented to our members through
    enactment of S.1937 is the ability to save money through more efficient
    management of billing processes.
        Currently, Bonneville bills PNGC members separately on the basis of
    hourly demands at metered points of delivery, all read at the hour of
    the BPA system peak. Consolidating systems' contracts through a JOE
    will not change the basis on which points of delivery are metered and
    read, but will result in one single bill rather than multiple bills.
        Accordingly, the administrative burden of rendering separate
    statements and monitoring individual accounts and payments will give
    way to a more streamlined process involving one single account and one
    monthly statement received and managed centrally. As is the case with
    joint scheduling, this would reduce administrative burden and cost. The
    savings could be substantial for both BPA and PNGC members, since
    Bonneville's billings are very complex and are frequently problematic
    for the agency to prepare correctly and for the customer to understand
    and respond properly. We also believe that this simplification in
    billing process will save time and money for the agency.
        Also, it should be pointed out, no other customers of BPA would
    experience any increased costs as a result of the JOE legislation, nor
    are BPA's total revenues affected.
        The provisions of S.1937 do not provide an ability to match up
    divergent load profiles in a way that allows a JOE to purchase less
    power from BPA than its members would individually. Accordingly, there
    is no impact on the revenues collected by BPA as a result of S.1937. As
    mentioned above, each BPA customer is separately metered and is billed
    based on its load during the hour of the BPA system peak. As a
    consequence, S.1937 does not provide an ability to capture additional
    ``diversity'' benefits because the power usage and consequent charges
    do not change as a result of operating under a single contract.
        Conversely, enactment of S.1937 will also not allow for a JOE to
    purchase more BPA power than its members could individually. These
    purchases are effectively limited by the inability to resell cost-based
    ``preference'' power beyond what is used to meet the requirements of
    its member systems. Section 5(a) of the Northwest Power Planning and
    Conservation Act (Regional Act) and Section 5(a) of the Bonneville
    Project Act, as interpreted by BPA, prohibit the agency's customers
    from reselling requirements power. Accordingly, any contract between
    BPA and an eligible JOE would include a provision expressly restricting
    its resale other than to meet the net requirements of its members.
    The politics and timing of the JOE bill
        The provisions of S.1937 have achieved as much consensus as any
    Northwest energy matter in recent memory. No member of the Northwest
    delegation opposes its provisions. Congressmen Hastings and Walden
    introduced companion legislation late in the session last year,
    H.R.3447, which still enjoys bipartisan support. Virtually every member
    of the delegation with committee jurisdiction involving energy policy
    has actively supported enactment of the bill. And, the region's
    Northwest Power Planning Council also has fully vetted the JOE
    legislation and submitted supportive comments to the Congress.
        The Bonneville Power Administration and the Department of Energy do
    not oppose its provisions. It has substantial support from those
    entities seeking its adoption--primarily small to medium sized
    consumer-owned utilities. It is not, to my knowledge, opposed by any
    entity, regional or national, on the substance of its merits.
        With all of that said, there may be those who do not support
    enacting S.1937 into law. As I understand them, the basis of their
    arguments revolve around a desire not to amend the Regional Act in a
    piecemeal fashion. Frankly, for me, this is a difficult argument to
    swallow. The idea behind more ``comprehensive'' amendments to the
    Regional Act can only be forwarded by those with changes of their own
    in mind. Some of those changes may have merit, some may not. However, I
    would say to them that if they too can come up with legislation that
    creates benefits without disadvantaging any other parties--I will be
    the first to support its timely adoption.
        Unless they pass that test--as I believe S.1937 does--I believe
    that any efforts to delay passage of this bill on that basis would
    represent an attempt to hold the JOE bill hostage to other, more
    controversial agendas. I would entreat the Committee not to be party to
    efforts of this kind. Instead, S.1937 should be seen for what it is--a
    non-controversial measure that creates benefits at no one's expense.
    Its enactment, I believe, would constitute a clear case of forwarding
    good public policy.
        As mentioned above, the timing of the enactment of S.1937 is of
    particular concern to PNGC Power and its members. PNGC is participating
    in the BPA Power Business Line's rate case on behalf of its members.
    That rate case is scheduled to conclude at the end of April 2000.
    Pursuant to the agency's Power Subscription Strategy, the deadline for
    signing power purchase contracts with the agency on the terms and at
    the rates set in the rate case is September 31, 2000.
        In order to make informed decisions by BPA's deadline, PNGC and its
    members must undertake a myriad of analyses and decisions, as well as
    to negotiate appropriate contract forms and plan to meet substantial
    operational and staffing requirements. Without timely consideration of
    S.1937, we will not be able to adequately plan for our energy future
    and we will not be able to utilize the bill's provisions for the
    purposes of signing those contracts. This would effectively foreclose
    our ability to achieve the savings mentioned above.
    Summary
        While our business and this amendment may appear complex upon
    initial review, we believe that our case for S.1937 is straightforward.
    It achieves savings for small to medium-sized utilities by allowing
    them to administer their BPA power contracts jointly. We also believe
    it achieves modest savings for the agency as well. Those benefits
    ultimately accrue to ratepayers. It achieves those outcomes at no
    expense to any other interest.
        I would again like to thank the Subcommittee for its expeditious
    review of this bill. As is obvious by my comments above, PNGC Power and
    its member utilities strongly support its adoption. Further, we believe
    that without timely consideration, we will lose the opportunity to
    achieve the benefits that its provisions entail.
        I would be happy to answer any questions that the Subcommittee may
    have.

        Mr. Shadegg. Thank you, Mr. Piper. Mr. Steve Waddington.

                      STATEMENT OF STEVE WADDINGTON

        Mr. Waddington. Thank you, Mr. Chairman, members of the
    subcommittee. My name is Steve Waddington. I'm the Northwest
    Power Manager for Reynolds Metals Company. Reynolds operates
    two aluminum reduction plants in the Northwest, and for nearly
    60 years has relied upon Bonneville for direct power service.
        I'm here today also to testify on the JOE bill, S. 1937, on
    behalf of Reynolds and six other aluminum companies, all with
    operations in the Pacific Northwest.
        S. 1937 is a bill to amend the Northwest Power Act. It
    would create a new obligation for Bonneville to sell power to a
    new customer class. This new class would be Joint Operating
    Entities or JOEs, composed exclusively of existing public
    agencies that purchase their power from BPA today. For the
    small public utilities that would qualify to purchase from
    Bonneville as a Joint Operating Entity, this bill provides some
    administrative efficiency.
        The aluminum companies may ultimately have no opposition to
    Bonneville's selling to JOEs. However, we believe this idea
    should not be viewed in isolation but rather as one element in
    a comprehensive reexamination of the Northwest Power Act. The
    aluminum companies believe strongly that Congress should not
    amend the Northwest Power Act in a piecemeal fashion. The act
    is now 20 years old and was never designed for application in a
    deregulated electric industry. All of the act's basic
    assumptions are out of date because of industry restructuring
    and the movement by the States to allow retail access.
        S. 1937 would contribute to amending this act little by
    little with no contemplation of this larger picture, and we
    believe this is inappropriate, given the ongoing changes in the
    electric industry.
        Many interests affected by the Northwest Power Act,
    including the aluminum companies, would like to amend certain
    sections. We believe that all parties should work together in a
    comprehensive revision of the entire act. However, should
    Congress decide to open the Northwest Act at this time and move
    S. 1937, we would like to work with you to repeal the New Large
    Single Load Provision in this act.
        This New Large Single Load or NLSL clause blocks certain
    loads from being served by a local utility and thereby
    receiving the benefit of Bonneville Power. This provision is
    preventing the aluminum companies from turning to their local
    utilities for needed electric supply. Historically, the
    aluminum companies in the Northwest received electric service
    directly from Bonneville rather than from our local utility.
    The times are changing. Bonneville once supplied all of the
    aluminum load. They are now planning to serve only half. As a
    result of this new BPA policy, in combination with this
    outmoded provision in the act, companies are caught in a Catch-
    22. BPA is reducing direct service, and this New Large Single
    Load clause prevents low-cost service from our local utilities.
        This NLSL clause is just one example of the many elements
    in the act that no longer make sense. Again, we believe the
    NLSL provision would be best considered in the context of
    reexamining the entire Northwest Power Act. But if the
    subcommittee wants to open the act now, we would like to
    eliminate the unfairness of this provision.
        In addition, if the subcommittee decides to approve S.
    1937, the bill should be amended to limit Bonneville's
    obligation to sell to Joint Operating Entities to a term of 5
    years. In the light of the need for reexamining the Northwest
    Power Act, longer term contracts between Bonneville and Joint
    Operating Entities may limit the ability for Congress to make
    more comprehensive change.
        The aluminum companies look forward to working with you and
    with the Northwest delegation on a review of the Northwest Act,
    and thank you for this opportunity to testify.
        [The prepared statement of Steve Waddington follows:]
       Prepared Statement of Steve Waddington, Northwest Power Manager,
                            Reynolds Metals Company
        My name is Steve Waddington. I am the power manager for the
    Reynolds Metals Company in the Pacific Northwest. Reynolds operates two
    aluminum reduction plants in the Northwest and for nearly 60 years has
    relied upon direct power service from the Bonneville Power
    Administration (``BPA'') to operate these electric-intensive
    facilities. Reynolds' future viability, and that of the other aluminum
    companies in the Northwest, depends on continued access to low-cost
    power.
        I am here to testify regarding S. 1937 on behalf of the following
    companies: Reynolds, Alcoa Inc., Columbia Falls Aluminum Company,
    Goldendale Aluminum, Kaiser Aluminum and Chemical Corporation,
    Northwest Aluminum and Vanalco, Inc. (``the Companies''). Recently, in
    response to a request from Representative John D. Dingell, these
    Companies joined in a letter expressing our concerns regarding this
    proposed legislation. A copy of the letter is attached for your review.
        As background, the Northwest aluminum industry employs almost
    10,000 Northwest citizens directly and over 30,000 indirectly. The
    Companies' direct annual economic contribution to the region is
    estimated at over $3 billion. The aluminum plants in the Northwest
    produce 40 percent of the nation's aluminum, making the Northwest the
    top aluminum-producing region in the country. Close to $1 billion worth
    of aluminum is exported overseas from the Northwest each year,
    contributing substantially to the nation's balance of trade.
        S. 1937 is a bill to amend the Northwest Power Planning and
    Conservation Act (``the Act''). It would create an obligation for the
    Bonneville Power Administration to sell power to a new customer class.
    This new class would be joint operating entities (or ``JOEs'') composed
    exclusively of existing public agencies that purchase power from BPA
    today. For the small public utilities that would qualify to purchase
    from BPA as a joint operating entity, this bill provides some
    administrative efficiency. The Companies may ultimately have no
    opposition to Bonneville selling to joint operating entities; however,
    this idea should not be viewed in isolation, but rather as one element
    in a comprehensive reexamination of the Northwest Power Act.
        The Companies strongly believe that Congress should not amend the
    Northwest Power Act in a piecemeal fashion. The Act is now 20 years old
    and was never designed for application in a deregulated electric
    industry. All of the Act's basic assumptions are being called into
    question because of pending industry restructuring and the movement by
    state governments into the realm of open and competitive energy
    markets. S. 1937 would contribute to amending the Act, little by
    little, with no contemplation of this larger picture. We believe this
    is inappropriate, given dramatic changes in the electric industry.
        Many interests affected by the Northwest Power Act, including the
    aluminum Companies, would like to amend certain sections of the Act. As
    stated above, the Companies' believe that all parties should work
    together in a comprehensive revision of the entire Northwest Power Act.
    On the other hand, should Congress decide to open up the Regional Act
    this year and move the JOE amendment, the Companies believe one of the
    most important issues for Congressional action would be to eliminate
    the New Large Single Load (NLSL) provision from the Act.
        The New Large Single Load provision blocks any new load of 10 MW or
    more from being served by a local public utility and receiving the
    benefit of BPA's cost-based power. Thus, the aluminum Companies--whose
    loads are all much larger than 10 MW--cannot turn to their local public
    utility for needed economical power as Bonneville reduces their access
    to direct service.
        This is an anomaly the Northwest Power Act did not, we believe,
    foresee. The aluminum Companies, unlike other industrial consumers in
    the region, have received electric service directly from BPA, rather
    than from their local utility. There were a number of historical
    reasons for this direct service relationship with BPA, but times are
    changing. Where in the past, BPA supplied 100 percent of the aluminum
    load, they are now planning to serve only 50 percent of the load.
    Although the Companies that signed BPA's Compromise Approach to supply
    partial power needs, support it, it has become apparent that BPA no
    longer intends to supply the full power needs of the Companies at cost-
    based rates. As a result of this new BPA policy, and in combination
    with an outmoded provision in the Act, the Companies are caught in a
    Catch-22. BPA is reducing direct access to cost-based power while the
    New Large Single Load provision precludes meaningful access through a
    local public utility. Ironically, had BPA not preferred to serve the
    aluminum plants directly in the past, these companies would have been
    served all this time by their local public utilities at BPA cost-based
    rates, just like other industrial loads, and thus would not be ``new''
    loads blocked off by the NLSL provision.
        The NLSL provision is just one example of the many provisions in
    the Act that no longer make sense as circumstances change. Again, we
    believe the NLSL provision would be best considered in the context of
    reexamining the entire Northwest Power Act. However, if the
    Subcommittee decides to open the Act to amendment, the NLSL needs to be
    corrected. It is a matter not just of administrative efficiency to the
    Companies (as is the JOE provision to its supporters), but of
    fundamental fairness and basic economic viability. To that end, if the
    Subcommittee decides to move S. 1937 we would like to work with you to
    include an amendment eliminating the NLSL provision.
        In addition, if the Subcommittee decides to approve S. 1937, apart
    from consideration of the overall Act, the bill should limit
    Bonneville's obligation to sell to joint operating entities to a
    contract term of five years. In light of the need for comprehensive
    review of the Northwest Power Act, longer-term contracts with joint
    operating entities may prejudge or limit the ability for Congress to
    make more comprehensive changes to the Northwest Power Act.
        In the meantime, as Bonneville intends to offer new contracts to
    its customers in the near future, the Companies would support language
    in these contracts to permit assignment of the purchase obligations to
    joint operating entities. Public agencies that are supporters of S.
    1937 can individually sign contracts with BPA--as they always have
    done--and assign those contracts to a joint operating entity at the
    time when future legislation may authorize BPA to contract with a JOE.
    This assignment clause will ensure no need for a rush to judgement on
    this bill without adequate consideration of this amendment as part of
    an overall reexamination of the Regional Power Act.
        Thank you for the opportunity to testify. The Companies look
    forward to working with you and the Northwest Delegation on a
    comprehensive review of the Northwest Power Act. Concurrent with
    national energy restructuring, it is time for a review of all of the
    Act's assumptions in the content of an open access, market-based
    industry.

        Mr. Shadegg. Thank you for your testimony, Mr. Waddington.
    Ms. Lynne Kennedy.

                       STATEMENT OF LYNNE KENNEDY

        Ms. Kennedy. Mr. Chairman, members of the subcommittee and
    the full committee, my name is Lynn Kennedy and I'm a
    hydroelectric certification program coordinator for the Oregon
    Department of Environmental Quality. I appreciate the
    opportunity to speak today to you on behalf of Governor John
    Kitzhaber and the Western Governors' Association.
        My testimony today only addresses House Resolution 2335.
    The Western Governors' Association has no position on the other
    bills, but some Governors may choose to submit independent
    written testimony on those bills.
        The main point of what I want to tell you today is that the
    Western Governors' Association opposes House Resolution 2335.
    We think the goals of the bill are laudable, but we don't
    believe the bill will reach those goals. In fact, we think the
    bill will create less efficient, less equitable government and
    provide less resource protection.
        Before I go into our specific concerns with the bill, I'd
    like to talk some about the reasons that we're interested in
    relicensing in the first place. Western Governors have long
    recognized the economic importance of hydroelectric production
    and supported its development. Utilities are valued and
    essential partners in our goal to have strong, healthy
    economies. At the same time, the projects that are coming up
    for relicensing were originally licensed 50 or more years ago
    when the scientific understandings of natural resource needs as
    well as societal values were significantly different than
    today. Relicensing is our one attempt to bring those facilities
    up to modern day environmental standards, and it's our one shot
    for the next 30 to 50 years to do that.
        In the West, over 100 projects will be in relicensing in
    the next 10 years. Thirteen of those are in Oregon. Some of
    these projects have multiple developments and they affect
    entire watersheds.
        Western States are interested particularly in developing
    and maintaining balanced, diverse economies while still
    protecting the natural resources on which those economies were
    traditionally based and those resources which provide the
    quality of life that we enjoy. We necessarily view hydropower
    in a context that includes other sectors and values. We believe
    that the Federal Power Act as amended under ECPA also
    recognizes that same need to accommodate diverse values. We see
    the Federal Power Act with ECPA as allowing FERC to balance
    among various interests by setting a floor of resource
    protection that holds some things safe from that balancing.
        The agencies that are given the responsibility to set that
    resource protection floor are the same agencies that set that
    floor in other sectors of our economies, for example,
    agriculture, forestry and urban development. And this is a key
    point, is that we need to look beyond just the energy sector to
    all the sectors that affect our economies. We want to have a
    level playing field where everyone provides the appropriate
    mitigation for their impacts.
        Some of the authorities that create that resource
    protection floor are best at the State level. In Oregon the
    Federal and State agencies have collaborated well. We have
    appreciated the Federal expertise that they bring to the
    process in areas where we don't have expertise, and we've
    particularly appreciated their authority to backstop our 10(j)
    fish and wildlife recommendations.
        Now I'd like to move on to briefly discuss the reasons that
    we oppose House Resolution 2335. First, we believe that the
    bill will create duplication and spinning of wheels in
    government. The bill requires agencies to evaluate a broad set
    of criteria, criteria for which these agencies don't have the
    expertise or jurisdiction to make such evaluations. For
    example, they're required to look at drinking water and air
    quality. These are areas of expertise that fall under my
    agency, the Department of Environmental Quality, and we don't
    think it would be helpful to have the fish and wildlife
    agencies making separate, independent assessments of those
    values.
        Second, the bill requires submittal and justification of
    conditions prior to application--to the submittal of a license
    application. The conditions really should be based on what's in
    the license application, so this is kind of putting the cart
    before the horse and making agencies do a lot of justification
    up front that they'll probably have to change later when they
    know what's actually in the license application.
        Another example is that the bill requires substantial
    scientific evidence--which I think we all agree we want
    scientific evidence to be substantial--and then it turns around
    and it prohibits those agencies from conducting their own
    environmental reviews, aside from what FERC might do. So I
    think it undermines their ability to meet the very standards
    that it specifies.
        Our second significant issue with the bill is that it will
    result in less resource protection. It explicitly removes that
    balance--the floor--by causing the agencies to balance with
    economics and other factors. Remember, where there's no floor,
    there's not going to be equity across sectors. Other sectors
    may have to pick up the mitigation that hydro should justly
    have had to provide.
        Having explained why we oppose the bill, we believe there
    are other collaborative efforts that we can support. We've
    talked about one of those, that's the Federal agencies task
    force. EPRI had brought together some national stakeholder
    meetings which have produced some very useful papers. And then
    the Western Governors, National Governors have worked with the
    NHA and EPRI to foster conferences to the same goals.
        Finally, I'd like to say that Oregon has put together a
    process in which our agencies must collaborate and must come
    out with a unified position. So even though we sometimes have
    conflicting mandates, we have a way of working that through
    within the State of Oregon. We offer that as a model.
        This concludes my remarks. Mr. Chairman, once again I thank
    you on behalf of Governor John Kitzhaber and the Western
    Governors' Association for this opportunity to share our views.
    I'd be happy to answer any questions.
        [The prepared statement of Lynne Kennedy follows:]
      Prepared Statement of Lynne Kennedy, State of Oregon, Office of the
     Governor, on Behalf of the State of Oregon and the Western Governor's
                                  Association
        Mr. Chairman, members of the subcommittee, my name is Lynne
    Kennedy. I am the Hydroelectric Certification Program Coordinator for
    the Oregon Department of Environmental Quality. I appreciate the
    opportunity to appear here today before the subcommittee on behalf of
    Governor John Kitzhaber and the Western Governors' Association.
        The Subcommittee is hearing testimony on a number of bills today
    related to hydroelectric power production. I will be testifying on only
    one of those bills, HR 2335. The Western Governors have taken no
    position on the other bills; Governor Kitzhaber's Office may submit
    separate written comments on S. 1937, which concerns the Northwest
    Power Act.
        The main point that I want to communicate today is that the State
    of Oregon and the Western Governor's Association oppose HR 2335. We
    believe that while improving the hydroelectric relicensing process is a
    laudable goal, the bill will not meet this goal. In fact, we believe
    the bill will result in inefficiency, inequity, and undesirable loss of
    natural resource protection.
        Before I address specifics of the bill, I'd like to highlight the
    reasons for our interest in it. Oregon has 13 hydroelectric projects
    that will be involved in the Federal Energy Regulatory Commission's
    (FERC) relicensing process within the next ten years. In the West as a
    whole, the licenses of over 100 hydropower projects will expire in the
    same timeframe. Many of these projects include multiple developments,
    some of which affect the movement of fish and wildlife populations,
    quality of habitat, and water quality across entire watersheds.
        Western governors have long recognized the economic importance of
    hydropower and supported its development--subject to a strong state
    role. Utilities are valued and essential partners in the economic
    development and health of our states. At the same time, socioeconomic
    conditions, scientific knowledge, and society's values have all changed
    dramatically in the last fifty years, since those hydropower licenses
    were first issued.
        We owe it to our citizens to ensure that hydroelectric projects
    address current knowledge and public policy concerns. Relicensing may
    provide the only opportunity during the next thirty to fifty years to
    address the effects a hydroelectric facility has on water quality,
    fisheries, and other natural resources. Many of these effects were not
    understood and were not addressed when the projects were first
    licensed.
        Perhaps the most obvious illustration of the need to re-evaluate
    the impacts of hydropower projects is the status of salmon in the
    Northwest. Today we know that the cumulative impact of human
    activities, including hydropower production, has exceeded the ability
    of many populations to adapt. Oregon is now working to save our
    signature species from a human-caused slide toward extinction.
        Western states are interested in developing and maintaining diverse
    economies, while protecting the natural resources that traditionally
    served as the base for both our economies and our quality of life. We
    necessarily view hydropower in a context that includes economic and
    social values beyond just those related to power production. We believe
    that the Federal Power Act (FPA), as modified by the Electric Consumers
    Protection Act (ECPA) also recognizes this need to accommodate diverse
    values.
        The FPA gives FERC responsibility to balance power-related
    interests, but limits its ability to ``balance away'' certain resource
    protection requirements that are best evaluated in contexts broader
    than just power production. Under the FPA, resource agencies with
    mandatory conditioning authority set a ``floor'' of natural resource
    protection, above which FERC is free to make economic tradeoffs to
    ensure an efficient and plentiful power supply. The agencies who
    provide the floor for the energy sector are the same ones who provide
    the floor for other economic activities such as agriculture, forestry,
    and urban development. This promotes a level playing field across
    sectors. To encourage local involvement and decision-making, these
    authorities are vested in federal and state agencies according to their
    respective expertise and geographic scope.
        In Oregon, State and Federal agencies have used their respective
    authorities in a collaborative and productive manner. While we haven't
    always agreed on every issue, better outcomes have resulted from our
    discussions. Oregon state agencies have relied on specific expertise
    that the federal agencies bring to the relicensing table, such as fish
    passage design and geomorphologic process evaluation, to assist us in
    making better recommendations for protection and mitigation measures at
    a project. FPA Section 18 fishway authority has been a critical federal
    tool for helping meet state goals, and Section 4(e) authorities can
    serve to backstop state recommendations under FPA Sections 10(a) or
    10(j).
        I'd like to move on to discuss the reasons we oppose HR 2335. For
    each reason, I've tried to provide at least one example to illustrate
    the point.
        Contrary to its stated goals, HR 2335 will increase duplication of
    effort--thereby increasing inefficiency in government. By way of
    example, Section 32 requires that agencies such as NMFS and USFWS
    consider diverse factors such as economic values, air quality,
    irrigation, and drinking water supply when writing license conditions.
    Unfortunately, these agencies have neither the expertise, nor the
    information required to evaluate such factors. There are other agencies
    who already have responsibility and expertise to evaluate and condition
    for those factors. For example, my own agency, the Department of
    Environmental Quality, has obtained federal delegation under both the
    Clean Air and Clean Water Acts to protect air and water quality. We do
    not believe that it is either practical or useful for other agencies to
    make their own independent determinations concerning these issues
    during relicensing.
        My second major point concerning HR 2335 is that it promotes waste
    in government by establishing standards, and then creating roadblocks
    that impede compliance with those standards. For example, among the
    requirements in Section 32 is a statement that consulting agencies must
    take into account the mandatory conditions of other agencies. While
    this may seem reasonable, the bill later adds a process requirement
    that conditions be submitted to the applicant 90 days prior to the
    filing of a license application. At this point in the process agencies
    cannot know how the applicant proposes to operate the project under the
    new license, nor how it should best be conditioned. Agencies don't have
    enough information to determine their own conditions--much less to
    conform them to other agencies' mandatory conditions. The likely
    outcome is that conditions would have to be written and fully justified
    twice, creating extra work with little payoff.
        Our third major objection to HR 2335 is perhaps the most important:
    the bill will result in inadequate protection of natural resources. By
    requiring federal resource agencies to meet untenable process standards
    and to base their conditions on a balance of factors outside their
    expertise and traditional jurisdiction, the bill will greatly diminish
    those agencies' ability to write defensible conditions. The bill even
    addresses the recommendations made by state fish and wildlife agencies
    under FPA 10(j), making it easier for FERC to simply balance away those
    recommendations.
        In addition, the bill removes the natural resource protection floor
    I mentioned earlier by including economics as a primary consideration
    in every resource-protection decision affected by the bill. This
    reduces the ability of agencies such as my own to balance the burden of
    resource protection across sectors, leaving others to repair damage
    caused by the hydropower industry. Where this damage can't be repaired,
    it may deprive future generations of the opportunities and quality of
    life that is their proper heritage.
        At this point, I'd like to note that there are ongoing efforts to
    improve the hydropower relicensing process within the existing legal
    framework. These are collaborative efforts that recognize the needs of
    all participants. There are at least three such ongoing efforts. (1)
    Federal agencies and states are participating in workgroups designed to
    improve coordination and communication during relicensing. These
    agencies are seeking input from a broader stakeholder group formed
    under FACA rules to ensure the usefulness of the workgroups' products.
    (2) Stakeholders nationwide are meeting to resolve issues under the
    facilitation of the Electric Power Research Institute (EPRI.) These
    discussions have resulted in a number of useful issue papers that
    include recommendations that can be adopted by relicensing
    participants. (3) The National and Western Governor's Associations have
    worked with EPRI and NHA to sponsor nationwide and regional conferences
    to discuss and resolve relicensing issues.
        Finally, I'd like to mention that the State of Oregon has developed
    a very successful collaborative approach for participating in
    hydroelectric reviews that could be a model for others. The State has
    designed its water right review to coincide with and track the FERC
    relicensing process, with a goal of minimizing effort, and maximizing
    shared information. The process was the brainchild of a Task Force that
    included state agencies and a broad range of stakeholders. Oregon's
    process respects differing agency mandates, but ultimately resolves
    conflicts so that one unified state position results. We believe that
    collaboration--not legislation that favors one interest at the expense
    of others, is the best way to improve the relicensing process.
        This concludes my remarks. Mr. Chairman, once again I thank you, on
    behalf of the State of Oregon and the Western Governor's Association,
    for this opportunity to share our views with the subcommittee. I look
    forward to answering any questions the committee might have.

        Mr. Shadegg. Thank you, Ms. Kennedy. Mr. Paul Brouha.

                        STATEMENT OF PAUL BROUHA

        Mr. Brouha. Good afternoon, Mr. Chairman, Mr. Towns. The
    Department of Agriculture and the Forest Service have made the
    licensing of hydropower projects on national forest system
    lands a very high priority. Of the approximately 200 federally
    licensed projects due for relicensing in the next 10 years,
    more than half are partially or wholly within national forests,
    while the remainder lie in watersheds--most of the remainder
    lie in watersheds that contain national forests.
        The Forest Service is responsible for conditions in
    hydropower licenses necessary for the adequate protection and
    utilization of the national forest, as stated in Section 4(e)
    of the Federal Power Act and the Wild and Scenic Rivers Act,
    Section 7.
        We recognize that hydropower is a valid use of National
    Forest System lands. However, without appropriate protections,
    hydropower projects can have adverse impacts upon National
    Forest System resources; notably, water quality, fisheries, and
    wildlife.
        Since hydropower licenses are for terms of 30 to 50 years,
    it's important that we exercise our conditioning authority as
    necessary at the time of licensing to ensure that adequate
    resource protection measures are included in the license. The
    Forest Service is very active in this licensing, working with
    the licensees, other Federal and State resource agencies, the
    FERC, and other users of National Forest System lands to reduce
    the negative environmental and recreational impacts of
    hydropower projects and create partnerships with others that
    will protect and enhance National Forest System resources.
        In addition, we have created national and regional
    hydropower assistance teams led by my colleague, Ms. Janopaul,
    that facilitate the involvement of national forests with
    licensees, National Forest System stakeholders and other
    agencies.
        The Forest Service is determined to effectively participate
    in both alternative and traditional licensing. To date, we have
    been able to provide sufficient staff and resources to accept
    all licensee invitations to participate in collaborative
    licensing processes.
        Along with other Federal agencies, USDA and the Forest
    Service are taking an active role in a number of ongoing
    national processes mentioned by other people testifying here
    today. We are aimed at improving hydropower licensing and
    industry relationships and protecting our national resources.
        During this year's review of our regional hydropower
    programs, the Forest Service invited licensees and other
    stakeholders to participate and comment on the Forest Service's
    performance in hydropower relicensing and licensing.
        In the interest of good communication and improved
    hydropower licensing, the Forest Service ensures three
    opportunities to comment on its license terms and conditions
    before such conditions are finalized. The first opportunity is
    provided through the FERC licensing process when parties to the
    licensing process can comment upon the Forest Service's
    preliminary conditions in response to the license application.
        The second opportunity for comments to FERC is upon draft
    conditions in respond to FERC's NEPA process. The third
    opportunity for comment is offered to the general public and
    the established Forest Service NEPA process. To elaborate, this
    process supplement's FERC's NEPA document, provides the Forest
    Service information and analysis record used to develop and
    support the conditions, and provides the proposed final
    conditions themselves.
        The Forest Service joins in the concerns raised by the
    Department of Interior and NOAA on the bills under
    consideration. We also offer the following additional comments.
    H.R. 2335 would create onerous, costly and time-consuming
    burdens on the Forest Service that would lead to additional
    complexity and possible conflicts in law and authority. Far
    from streamlining FERC licensing process, this bill would
    create delays, conflicts, confusion, and impossible
    requirements. The bill does not fully recognize the different
    responsibilities of each agency or the potential impacts of
    hydropower generation.
        The most objectionable proposal was the potential loss of
    the mandatory 4(e) conditioning authority. Some of our other
    concerns are included in our written testimony, which I'll just
    include in the record with your permission, sir.
        On Senate 422, the Forest Service has previously testified
    in opposition to this proposal to eliminate protections for
    National Forest System resources by removing small hydropower
    projects in Alaska from FERC jurisdiction. The bill would
    significantly impair the ability of the Forest Service to
    manage National Forest System lands and eliminate comprehensive
    fisheries management in Alaska. The bill creates a confusing
    configuration of State and Federal jurisdictions. The Federal
    Power Act already provides for special treatment of small
    hydropower while maintaining the ability of the Forest Service
    to protect National Forest System resources.
        Senate 1236, H.R. 1262, and H.R. 3852 provide for special
    exemptions for particular hydropower projects, and the Forest
    Service objects to such measures, sir.
        Thank you, and I'd be happy to answer questions.
        [The prepared statement of Paul Brouha follows:]
      Prepared Statement of Paul Brouha, Associate Deputy Chief, National
         Forest System, Forest Service, U.S. Department of Agriculture
        Good morning Mr. Chairman and members of the Subcommittee. I
    appreciate the opportunity to testify regarding hydropower legislation
    currently under your consideration. My name is Paul Brouha, Associate
    Deputy Chief for the National Forest System. With me is Mona Janopaul,
    National Hydropower Program Manager.
    Background
        The Department of Agriculture and the Forest Service have made the
    licensing of hydropower projects on National Forest System (NFS) lands
    a very high priority. Of the approximately 200 federally licensed
    projects due for relicensing in the next ten years, more than half are
    partially or wholly within national forests, while most of the
    remainder lie in watersheds that contain national forests. The Forest
    Service is responsible for conditions in hydropower licenses
    ``necessary for the adequate protection and utilization of--the
    national forest (Section 4(e) Federal Power Act (FPA)), and Wild and
    Scenic rivers (Section 7, FPA).
        We recognize that hydropower is a valid use of NFS lands, however,
    without appropriate protections hydropower projects can have adverse
    impacts upon NFS resources, including water quality, fisheries, and
    wildlife.
        Since hydropower licenses are for terms of 30 to 50 years, it is
    important that we exercise our conditioning authority, as necessary, at
    the time of licensing to insure that adequate resource protection
    measures are included in the license. The Forest Service is very active
    in these licensings, working with the licensees, other federal and
    state resource agencies, the Federal Energy Regulatory Commission
    (FERC), and other users of NFS lands to reduce the negative
    environmental and recreational impacts of hydropower projects and
    create partnerships with others that will protect and enhance NFS
    resources.
        In addition, we have created national and regional Hydropower
    Assistance Teams that facilitate the involvement of the national
    forests with licensees, national forest system stakeholders, and other
    agencies. The Forest Service is determined to effectively participate
    in both alternative and traditional licensings. To date, we have been
    able to provide sufficient staff and resources to accept all licensee
    invitations to participate in collaborative licensing processes.
        Along with other federal agencies, USDA and the Forest Service are
    taking an active role in a number of ongoing national processes that
    are aimed at improving hydropower licensing, industry relationships,
    and protecting our natural resources. National processes include the
    Interagency Task Force and its Federal Advisory Committee, as well as
    the hydropower-industry sponsored Electric Power Research Institute's
    National Review Group. In addition, many of our staff have met with
    various members of the hydropower industry and attended industry
    conferences around the country. During this year's review for our
    regional hydropower programs, the Forest Service invited licensees and
    other stakeholders to participate and comment on the Forest Service's
    performance in hydropower licensing.
        In the interest of good communication and improved hydropower
    licensing, the Forest Service ensures at least three opportunities to
    comment on its license terms and conditions before such conditions are
    finalized. The first opportunity is provided through the FERC licensing
    process when parties to the FERC licensing can comment upon the Forest
    Service preliminary conditions in response to the license application.
    The second opportunity for comments to FERC is upon draft conditions in
    response to FERC's NEPA process. The third opportunity for comment is
    offered to the general public in the established Forest Service NEPA
    process.
                                hydropower bills
        The Forest Service joins in the concerns raised by Department of
    the Interior and NOAA on H.R. 2335, H.R. 1262, H.R.3852, S.422, and
    S.1236 and defer to their positions on these bills. We also offer the
    following additional comments on these bills.
    H.R. 2335
        H.R. 2335 would create onerous, costly, and time-consuming burdens
    on the Forest Service that would lead to additional complexity and
    possible conflicts in authority and law.
        Far from streamlining or improving the FERC licensing process, this
    bill would create delays, conflicts, confusion and impossible
    requirements. The bill does not fully recognize the different
    responsibilities of each agency or the potential impacts of hydropower
    generation. Some of our specific objections include:

            Section 32(b)
              Section 32(b) would eliminate consideration of measures
            necessary for the protection of NFS resources, and instead
            direct the Forest Service to consider issues outside its realm
            of expertise and outside NFS lands, e.g., economic and power
            values, electricity generation, capacity and reliability, air
            quality, flood control, and compatibility with other agencies'
            terms and conditions. Forest Service analyses would also be
            duplicative of other resource agencies and FERC analyses. The
            bill would undermine Forest Service authority over NFS lands
            and introduce a possible conflict between the FPA and Federal
            Land Policy and Management Act that was resolved by Congress in
            the 1992 amendments to the FPA.
            Section 32(c):
              Section 32 (c) would require that each condition proposed by
            the Forest Service or other agencies be subject to
            ``appropriately substantiated scientific review.'' This
            proposed standard is nebulous and untested. In contrast, the
            current standard for determining the adequacy of conditions and
            recommendations in licenses is whether they are supported by
            ``substantial evidence,'' and is well-settled in law. The
            Forest Service makes science-based decisions, and we must
            retain the final decision-making authority and comport with
            individual Forest Plans when issuing mandatory terms and
            conditions designed to protect NFS resources.
            Section 32(e):
              Section 32 (e) would require that agencies issue their terms
            and conditions before the licensee has filed its application.
            An agency cannot adequately assess conditions appropriate for a
            license before the license application is filed. Based upon
            each license application, the Forest Service creates specific
            terms and conditions for that hydropower project. The
            responsibility to manage NFS lands cannot be delegated to any
            other entity by creating an additional reviewing authority over
            Forest Service conditions. As the Ninth Circuit Court of
            Appeals has observed, if the license applicant desires to
            construct or operate a hydropower project on NFS lands, the
            applicant should rightly answer to the Forest Service.
              This Section would also delay licensing by adding a six-month
            appeal process (before an administrative law judge or other
            independent reviewing body) prior to the finalization of agency
            conditions and separate economic analysis by FERC of each term
            and condition. This Section would open the door to significant
            harm to NFS resources by reducing mandatory conditions
            regarding fish, wildlife, habitat, and other resources to mere
            recommendations if the independent reviewer takes more than 180
            days to complete the review. Finally, this Section would
            duplicate the appeal process available to the general public
            under the Forest Service NEPA process.
            Section 6:
              This section is unnecessary. Under the FPA, when FERC is
            considering an exemption from licensing for a small hydropower
            project, the Forest Service is allowed to participate and
            condition the exemption so as to protect NFS resources. These
            existing FPA provisions regarding exemptions for small
            hydroelectric projects are sufficient and further study of a
            separate licensing process for such facilities is not
            warranted.
              If a study were conducted and a new procedure for licensing
            small hydropower projects were enacted into law, the Forest
            Service would oppose any procedure that would diminish our role
            in the protection of NFS resources under such licensings
    S. 422:
        The Forest Service has previously testified in opposition to this
    proposal to eliminate protections for NFS resources by removing small
    hydropower projects in Alaska from FERC jurisdiction.
        This bill would significantly impair the ability of the Forest
    Service to manage NFS lands, and eliminate comprehensive fisheries
    management in Alaska. The bill creates a confusing configuration of
    state and federal jurisdictions. As stated above, regarding Section 6
    of H.R. 2335, the FPA already provides for special treatment of small
    hydropower while maintaining the ability of the Forest Service to
    protect NFS resources.
    S. 1236 and H.R. 1262, and H.R. 3852:
        These bills provide for special exemptions for particular
    hydropower projects, and the Forest Service objects to such measures.
    The Forest Service NEPA process provides for public participation and
    timely environmental analysis. By extending a construction period or
    eliminating licensing altogether, Congress would be impairing the
    public's opportunity to participate in the process and to receive
    electric power from a more efficient licensee. Such extensions take the
    matter beyond the scope of the original environmental review, and may
    lead to conflicts with ESA and other statutory obligations. Eliminating
    applicability of FPA to a non-federal hydropower project, as proposed
    in H.R. 3852, defeats the FPA's purpose of development of the waterway
    and protection of its resources.
        Thank you. I would be happy to answer any questions.

        Mr. Shadegg. Thank you for your testimony. And before we
    move to questioning, I'd like to ask unanimous consent that
    statements submitted by stakeholders be made a part of the
    record. Without objection, so ordered. And questions submitted
    by our colleague, Mr. Dingell, to stakeholders on S. 1937 and
    the response to those questions also be made a part of the
    record. Without objection, so ordered.
        Let's begin by turning to Mr. Towns for his questions.
        Mr. Towns. Let me--first of all, let me begin by asking--
    we've heard a lot of talk about task forces. You've heard a lot
    of talk about the task force this morning. How many of you feel
    comfortable just moving forward with the task force?
        Mr. Lynch. Mr. Towns, I'll try that one first. The task
    force may be a good process and it may come up with some good
    results, but in the meantime, we're licensing projects.
        Mr. Towns. Right.
        Mr. Lynch. And we can't wait that long.
        Mr. Murphy. And just on behalf of all the members of the
    National Hydropower Association, we do support that task force
    and we want that to move forward. Do we think it will do all
    the things that this legislation will do? No, it won't. And do
    we know when it will get done or what we will exactly
    accomplish? We don't know that at that point. We think this
    legislation remains a very important facet as well as the task
    force, but neither one of them will work alone.
        Mr. Towns. Thank you.
        Mr. Fahlund. As a member of the Federal advisory to that
    task force, I'd like to respond. I do think that the task force
    won't do all of the things that are in this bill, and that's
    precisely why I think it's a good avenue, because I think that
    what this bill does is effectively creates unnecessary and
    additional process, whereas it doesn't actually get at the
    heart of the matter in some instances.
        There is a need, I think----
        Mr. Towns. Could you be specific?
        Mr. Fahlund. Sure. I believe that there is a need to create
    some certainty of process within relicensing, and I think that
    there are ways that the Federal agencies can do that, and they
    are, I believe, moving in that direction through the task
    force.
        I think that we're going to see some products coming out of
    that task force in the next several months that are going to
    result in some significant improvements in terms of creating
    certainty of process, in terms of how conditions are developed,
    and as well as giving the public an opportunity to at least
    have some input on how those conditions are developed. I don't
    believe that anything coming out of the task force is going to
    lead to any guarantee of profitability of projects. I don't
    believe that anything coming out of the task force is going to
    give industry the ultimate in assurance that every project is
    going to make it through without some problems.
        This is a very complicated process, and we are inevitably
    going to run into projects where there are stumbling blocks.
    The individual unique characteristics of all of these river
    resources and all of the stakeholders involved necessitate
    complexity. It's almost an inevitability. And that's why we
    grant 50-year licenses for these projects; 30 to 50-year
    licenses for these projects. That's--these industries
    dominate----
        Mr. Towns. But it takes 30 years to get it.
        Mr. Fahlund. In fact, actually, the 30 years to get it is
    as much upsetting--at least as upsetting to me as it is to
    anyone here. As a representative of the environmental
    community, we sit year after year with projects that are beyond
    expiration that receive annual licenses of status quo terms and
    conditions. That status quo condition basically prolongs harm
    to the environment, because we don't upgrade those projects.
    Now, that's not to say that industry is the only one to blame
    in that instance. But it is an incentive not to move forward
    and not to meet environmental responsibilities.
        Mr. Towns. You know, I hear all these horror stories, you
    know, and that's the reason why I keep asking about this task
    force, you know, because I keep getting this, you know. And I'm
    certain there's probably a lot of you sitting there probably
    have some horror stories that you could tell. I wish I had the
    time to tell you a horror story and you tell your horror story.
    I wish I could go down the line.
        Mr. Fahlund. We probably could all come up with horror
    stories I'm sure. But I think it's also important to remember
    that a lot of the horror stories that you hear are really
    relics of the past. Things like Cushman, for instance, the
    Cushman project, which is the 30-year relicensing. That started
    30 years ago. It was a morass. Nobody benefited from that. It's
    in court today. It's not doing any--none of that did anybody
    any good. But we've learned a lot since then, and I think we're
    on a trajectory to make some real improvements. I think we're
    actually working well with industry for the first time in most
    folks' memory. And I think that a lot of this can jeopardize
    those efforts.
        Mr. Towns. And I don't know. I mean, I could go on. Just
    recently a project in Wisconsin, where it was moving along. All
    of a sudden the State came into the picture in Section 401 of
    the Clean Water Act, and now that's a mess. I mean, so it's one
    thing after another. So, I mean, you know----
        Mr. Brouha. Mr. Towns, may I address your question, sir?
        Mr. Towns. Sure. You can.
        Mr. Brouha. The Forest Service is committed to that process
    with the interagency task force. That said, however, we feel
    the FERC needs to be more forthright in addressing our concerns
    with respect to modification of the NEPA process so that we
    could get out of the NEPA business and they could effectively
    address our concerns in their process. And I'd be pleased to
    discuss that at greater length with you. And I believe Ms.
    Kennedy has a follow-up.
        Ms. Kennedy. You asked if people actually think the task
    force activities will result in the necessary changes. I think
    they have high potential to do that. My experience is that
    actually the folks in our--that work in hydropower in Oregon
    have similar goals to ours. They really do want to protect the
    resource. And yet, commonly, you know, we come up against
    roadblocks, and it's more of the timing, the scheduling of
    things, and just the opportunity to have discussions that is
    lacking. And I think these Federal task forces are going to
    address those types of issues so that we can in fact get on the
    ground and resolve them.
        I sit on the State Mandates Task Force, which is one of the
    subgroups of the Federal task force. And we recently came out
    with a document which is just our first, which is looking at
    how can States write conditions in a way that will be actually
    implementable and enforceable by FERC. And we just produced a
    document. The FACA looked at that and thought that it was
    really helpful. So I think that's an example of ways that this
    task force actually is furthering the process and will make it
    far more efficient.
        Mr. Murphy. Mr. Towns, Mr. Chairman, may I just respond
    again?
        Mr. Towns. Yes.
        Mr. Murphy. A couple things that have come up here that I'd
    like to clarify. One is whether these horror stories are old
    horror stories. You heard Mr. Lynch speak today about the North
    Umpqua project. That is not a 30-year-old story. That is a
    story that has occurred within the past few months. And if you
    go through my testimony, when you look at the stories that
    we've talked about, these are not old stories. These are
    stories that have been occurring within the past year. Do I
    think we're making progress on some fronts? Sure. But do I have
    enough trust that we don't need some other things? No, I don't.
    We do need these other things.
        The other thing I do want to point out is when people talk
    about delays, appreciating that the delays are for various
    causes, there is absolutely no truth to the fact that a
    licensee has an incentive to delay the issuance of a license.
    With deregulation happening, licensees are trying to sell
    projects. New owners are coming in who are becoming generators
    rather than your typical old-style utility. And for a generator
    to delay the issuance of that license only does one thing to
    that project--it lowers the price and the value of that
    project, because no one wants to buy a project that has the
    questionable issues in front of it that a project in the middle
    of relicensing does.
        Also as a project continues to sit on the books, and we
    continue to look at more things, more millions of dollars are
    spent looking at more and more issues until the licensee
    finally gets to a point where it knows what it's going to do.
    So these licensees are very interested in getting those
    licenses issued.
        Mr. Towns. Thank you very much, Mr. Chairman.
        Mr. Shadegg. Okay. We can have a second round of
    questioning if you want. And let me ask a series of questions.
    First of all, Ms. Kennedy, I want to--you testified on behalf
    of the Western Governors' Association. Did they--how did they
    reach their decisions? Is this a unanimous position of all of
    the Western Governors?
        Ms. Kennedy. My comments here reflect a position that was
    developed I believe at the end of the 1980's and then renewed
    more recently. And it was a fairly----
        Mr. Shadegg. Wait, wait, wait, wait. It's a position that
    was developed at the end of the 1980's?
        Ms. Kennedy. Right. And then----
        Mr. Shadegg. On Mr. Towns' bill, which was introduced----
        Mr. Towns. Just recently.
        Mr. Shadegg. I'm having a little trouble here.
        Ms. Kennedy. I was speaking more generally. There was a
    general position on hydropower and resource protection done in
    the late 1980's. And then more recently, there was a Western
    Governors' position on--I believe on the Craig bill, which is
    very similar to this one.
        Mr. Shadegg. But not on Mr. Towns' bill?
        Ms. Kennedy. I believe it's the same bill.
        Mr. Towns. What? I'm sorry? No.
        Mr. Shadegg. Is that S. 422?
        Ms. Kennedy. I don't know the number of that.
        Mr. Shadegg. So you're not sure if it was on Mr. Towns'
    bill or not? You think maybe it was, but you're not sure?
        Ms. Kennedy. My understanding was that it was the same
    bill. It is the same bill. I'm getting feedback that it's the
    identical bill.
        Mr. Shadegg. Can I--now can I get to my question? Is this a
    unanimous position of the Western Governors' Association, or is
    this a staff position that they've reviewed? Is it a unanimous
    decision of the Western Governors? To oppose Mr. Towns' bill?
        Ms. Kennedy. I don't know how that decision was arrived at.
        Mr. Shadegg. Okay.
        Ms. Kennedy. I can get back to you on that.
        Mr. Towns. Is anyone on the task force, any of those
    Governors on the task force?
        Ms. Kennedy. On the Federal task force?
        Mr. Towns. Yeah.
        Ms. Kennedy. There are State representatives on there who
    report to their Governors, but no Governor is actually on that
    task force. It's more a staff level task force.
        Mr. Shadegg. Thank you very much. Let me turn to Mr.
    Fahlund and Mr. Murphy. And Mr. Fahlund, I wanted to ask you a
    question. As I can tell the testimony, as I understand the
    testimony, there is a dispute over the degree of reduction in
    hydropower as a result of the relicensing process. Mr. Murphy
    has indicated he believes it's 8 percent or at least that
    amount. And you've indicated in your testimony that it's 1
    percent. But it's a dispute over the reduction in the
    electrical--in the generating capacities or process of the
    relicensing. Is that right?
        Mr. Fahlund. Yeah. I guess there is a dispute in what
    number is most appropriate.
        Mr. Shadegg. Okay. I want to ask you. I would certainly
    agree with the concept that in the relicensing process, it
    could be that you would look at environmental impacts of a
    particular project in a particular location and decide, you
    know, there are more negatives here than positives, so we're
    going to shut that one down in order to mitigate the
    environmental impact. That's a plausible circumstance. My
    question of you is, a series of questions. No. 1, it's my
    understanding that there are literally hundreds if not
    thousands of hydro--of dams across America where there is no
    turbine, and yet there could be. The dam's already there, but
    no one ever built a turbine.
        Second, there is a category of dams where there is a
    turbine or turbines, but not as many turbines as could be
    present. And third, there is a category of dams where you have
    an older, inefficient turbine which could be replaced with a
    newer, more efficient turbine.
        If Congress accepts the premise that some dams, upon
    examination, are causing--and some hydropower producing
    plants--are causing more environmental damage than the benefit
    they're producing, would--and so therefore should be shut
    down--would American Rivers and the others that you represent
    support the addition of hydroelectric generating capacity
    either at existing dams where there is no generating capacity
    or where there's less generating capacity than there could be,
    or where we could put in more efficient generating capacity?
        Mr. Fahlund. I guess I'd like to respond first by stressing
    something, and that is that we by no means seek removal or
    decommissioning of all hydropower. In fact, it's a rare
    instance where we actually seek decommissioning of hydropower.
    But that said, I think your point is a good one actually. I
    think given that there is actually--there are many sites across
    the country where there is either no capacity or there's
    underutilized capacity or perhaps just inefficient capacity,
    I'll address the second two first of all.
        Where there's older, inefficient turbines, relicensing--
    oftentimes licensees will put in new turbines at that time, or
    they'll rewind old turbines and they will do upgrades and
    things of that nature that basically improve the efficiency of
    those projects. And provided that the environmental
    considerations of--the impacts of those changes are considered
    in doing that, I have no objection to it.
        I think that with respect to the thousands of dams without
    hydropower across the country, I think it's necessary to take a
    look on a case-by-case basis. There is one company out there
    that I'm aware of that has applied for preliminary permits on
    160, 170 Army Corps-owned lock and dams, particularly in
    throughout the Midwest, and while we don't have a good
    understanding of that technology just yet, I have no objection
    per se in building capacity where it's the environmentally
    responsible thing to do.
        Mr. Shadegg. In your answer to those, you said ``I have no
    objection.'' I assume you were testifying on behalf of American
    Rivers?
        Mr. Fahlund. I am. I am speaking for American Rivers.
        Mr. Shadegg. Let me ask you another question. Has American
    Rivers ever supported an expansion or increase in hydropower
    capacity under any of those three circumstances in the past?
        Mr. Fahlund. Not to my--I have no idea, and I can get back
    to you with an answer to that question to the best of my
    ability, but our records are a little fuzzy when it gets back
    into the 1970's.
        Mr. Shadegg. I would like to know that. As you well know, I
    have some legislation trying to encourage the development of
    hydro in the future because it is clean, and my goal is not to
    damage the environment, my goal is to look at, particularly
    where we have existing dams. I mean, you get pretty radical if
    you say, well, we'll build a dam today. But when we have
    existing dams where we're not producing power----
        Mr. Fahlund. Sure.
        Mr. Shadegg. Let me----
        Mr. Fahlund. And might I add that I don't necessarily have
    objection to supporting further development as long as the
    environment is adequately protected.
        Mr. Shadegg. I guess that's where the rub comes.
        Mr. Fahlund. Pardon me?
        Mr. Shadegg. I guess that may be where the rub comes.
        Mr. Fahlund. Perhaps.
        Mr. Shadegg. We can't go at great length, but I do want to
    ask another point that--I believe Mr. Grimm raised a very
    interesting point, and that is, he talked about two things,
    really. One, the question of having the law distinguish between
    the relicensing process that applies to very large hydro plants
    and the relicensing process that applies to a very small
    process, or a small plant. And it seems to me that that makes a
    great deal of sense.
        And then the second point that he raised--and I guess, Mr.
    Grimm, I'll give you a chance to expand on this--but I'd like
    to hear Mr. Fahlund's testimony on it. The second point he
    raised is the concept of in-stream generation, where you put a
    very small generator into a stream. You don't even build a dam.
    You just capture Mr. Newton's concept, as Mr. Markey talked
    about earlier, and yet--and yet, because of the cost of
    licensing such a facility, you make that impossible. And I
    guess I'd be interested in getting first of all your position
    on those two issues and then allow Mr. Grimm to comment.
        Mr. Fahlund. Well, let me say that FERC currently has a
    process to address small projects; projects in fact of five
    megawatts or less, and that's FERC's exemption.
        Mr. Shadegg. Does that take the Forest Service out of the
    process or----
        Mr. Fahlund. No it does not. What it does is it in fact--
    agencies are given the--well, a licensee is required to accept
    the terms and conditions of State and Federal agencies, as I
    understand how exemptions work. They're required to accept
    those terms and conditions on their face, and they can then
    operate in perpetuity. There's not a relicensing or reexemption
    process. And as long as they accept those reasonable terms and
    conditions, then that's effectively how it works, as I
    understand it.
        Now, in an instance where we had described to us a
    propeller at the base of a river, for instance, no dam
    involved, my suspicion is that the agencies would have
    virtually nothing to say about those sorts of projects. I can't
    imagine that there would be a whole lot to be said in that
    instance.
        However, let me also say that just because a project is
    small does not mean that its impacts are small--are equally
    small. There can be relatively large impacts for relatively
    small projects. And I think what's important here is that we
    recognize that size doesn't really factor into this. I almost
    said something that I really didn't want to say, but----
        Mr. Shadegg. Mr. Grimm, I have my own response, but why
    don't I let you respond.
        Mr. Grimm. Well, we--the numbers I testified to of over $1
    million on projects under five megawatts was using the
    accelerated. Lord only knows what it would have been on the
    regular basis. It's the process. The process drags out several
    years. There's plenty of time for input and output. A lot of
    the agencies are late. We had an excellent working relationship
    with the Forest Service on our projects on Forest Service land.
    They weren't the problem. It was the multitude. We did
    essentially three or four different public scoping meetings
    because the Forest Service had different NEPA requirements than
    FERC had. It's the process that's broken.
        Mr. Shadegg. Does Mr. Towns' bill address this issue?
        Mr. Grimm. I can testify in support of S. 422. Mr. Towns'
    bill is very interesting to us. But we're out of our league
    here. We want to build new, small hydro to replace fossil fuel.
    We do not want to play----
        Mr. Shadegg. I like that idea myself, as you know.
        Mr. Grimm. We can't afford, on behalf of our customers, to
    play at this level. That's why we're proposing some alternative
    process that it would allow more local representation by
    moving--not forsaking--if it was on Forest Service property, we
    would still need a special use permit issued by the Forest
    Service. So the Federal guidelines would be there. But we would
    have it locally where we can control the costs and make the
    licensing and permitting costs proportionate to the benefit and
    the size and the impact of the project. So we're kind of taking
    a different tact.
        Mr. Shadegg. I think Mr. Murphy is dying to make a comment,
    as is Mr. Brouha, and we have a vote on, and the chairman's
    returned. So, Mr. Chairman, I guess I'll leave it at your will.
    Mr. Murphy.
        Mr. Murphy. As you point out, there are almost 80,000 dams
    in this country. There are 2,400 with hydroelectric added.
    That's a sizable difference between those two groups of dams.
    There's a sizable opportunity there. If the current system was
    encouraging small projects to be built, you would be seeing it
    happen, but it's not happening. And it's not happening because
    of what was just talked about, because the process does not
    distinguish. Mr. Towns' bill does ask that it be studied and
    that a proposal be put forward for smaller projects. But at
    this point, we're not seeing development of new hydro, whether
    it's large or small. And when there's 80--77,000 dams in this
    country that do not have hydroelectricity added, we certainly
    wouldn't expect that we're going to take a sizable portion of
    that. But are there some there that are going to be benign to
    the environmental--negative environmental impacts? We would
    have to believe so.
        Mr. Shadegg. Mr. Brouha?
        Mr. Brouha. I'd like to follow up a little bit about the
    NEPA process requirements that we have that are different from
    FERC's and the reason behind that.
        We do a separate NEPA process on our 4(e) conditions
    because the NEPA process for the Forest Service is open to the
    public and all users of the national forests. It's a final
    agency action. It's subject to appeal. And we feel that this
    process is necessary in order to provide the legally defensible
    documentation of the scientific and management basis for these
    terms and conditions, these mandatory conditions.
        The FERC NEPA document only presents the conditions without
    the supporting rationale. And a lot of times we--well, we do
    all the time provide that supporting rationale. At FERC, they
    just don't choose to include it. Hence, the commissioners don't
    have any basis for their subsequent decision because they can't
    see the rationale. If there's subsequent court proceedings,
    that's also obscured from their view.
        Mr. Shadegg. I take----
        Mr. Barton. We're going to have to adjourn this hearing in
    the next two to 3 minutes.
        Mr. Shadegg. I take it that you do not approve of the
    preconditioning that Mr. Lynch referred to and do not think
    that was an appropriate--if it occurred--that that was an
    appropriate exercise of Forest Service authority?
        Mr. Brouha. Well, we don't know the conditions on the
    ground of what's proposed, sir. And as a result----
        Mr. Shadegg. Well, I think Mr. Lynch's position is that at
    6 months--how many months into the process? Eighteen months
    into the process, the Forest Service walked in and said, we're
    only going forward if you shut down a dam.
        Mr. Brouha. Let me point out, sir, that that was part of a
    confidential settlement discussion which was largely informal.
        Mr. Barton. We'll keep it a secret, I promise you.
        Mr. Brouha. What I mean, they walked off the table. And
    instead of advancing through that process to this level, the
    Washington level, they chose to go public.
        Mr. Shadegg [presiding]. Mr. Lynch, did you want to
    respond? And then I guess we have to adjourn.
        Mr. Lynch. I'm not sure it was--well, we did walk from the
    table, but we felt, to add to the metaphors, we felt like we
    had a gun to our head. We didn't have much of a choice. And I
    guess I'd just leave it at that.
        Mr. Brouha. We're hopeful we can fix this problem.
        Mr. Lynch. And we are, too.
        Mr. Shadegg. I'd like to----
        Ms. Kennedy. If I could just add one thing. I actually sat
    on that negotiating settlement team. And there was a working
    document, a working model for how the relicensing would proceed
    that included a lot of conditions for 2 years, and that working
    model included removal of the dam in question. It was only
    after that 2-year period and a change in staff with PacifiCorp
    that the company made it apparent that that working model
    wasn't acceptable. So I think it would have been incumbent upon
    the applicant to have had an alternative model that was
    acceptable also being developed. I just wanted to say that
    there are two sides to this issue.
        Mr. Barton. We rarely get issues that have two sides to
    them.
        Mr. Shadegg. At the risk of making you miss a vote----
        Mr. Barton. Well, you're not. I'm going to take back over
    the gavel.
        Mr. Shadegg. Thank you, Mr. Chairman.
        Mr. Barton. I'm going to thank everybody. We're going to
    have some written questions. I have several that I wanted to
    ask, but Hydro Man was doing such a good job.
        And he's to be commended for being here when apparently no
    other member was here.
        We are going to work with the minority to see if we can
    develop some consensus positions to go to mark-up in the next 6
    weeks on some of these bills. So I would encourage you to look
    at the bills that are pending, get with your congressman or
    congresswoman or somebody that you consider friendly to your
    position on the committee if you don't have a direct
    congressman from your area and offer constructive suggestions
    on how to improve them so that you could support them.
        Mr. Shadegg. I would like to thank all the witnesses. And I
    do think we can continue this dialog and work together.
        Mr. Barton. You've got to bang the gavel. The hearing is
    adjourned.
        [Whereupon, at 1:27 p.m., the subcommittee was adjourned.]
        [Additional material submitted for the record follows:]
                                        State of Alaska
                                         Office of the Governor
                                                         March 29, 2000
    The Honorable Joe Barton
    Energy and Power Subcommittee
    United States House of Representatives
    2125 Rayburn House Office Building
    Washington, DC 20515-6115
        Dear Representative Barton: The State of Alaska supports S. 422
    which would offer the state the opportunity to assume jurisdiction over
    licensing hydroelectric projects of five megawatts or less. Development
    of small hydroelectric projects is critical to the economic development
    of our state. Of the 29 hydropower projects supplying power to public
    utilities in Alaska, 17 are five megawatts or less in size.
        Small hydro is especially important in rural Alaska where the cost
    of other energy sources is high and the resulting availability of power
    can be limited. The only practical alternative in many rural villages
    is small-scale diesel generation, which can also create undesirable
    environmental impacts. Where hydropower generation is feasible, it
    offers reliability unmatched by other currently available alternatives.
    Unfortunately, the financial feasibility of many small hydroelectric
    projects is impeded by the relatively high cost and lengthy process it
    takes to license these plants under the existing Federal Energy
    Regulatory Commission (FERC) regulatory regime.
        Alaska's rural electrical production is unique. Over 150 villages
    in Alaska are isolated from any larger electrical grid, and each
    village is supplied with power almost exclusively from its own diesel
    generators. The cost of power in these communities is very high. Median
    residential rates are between 40 and 45 cents per kilowatt-hour, which
    is four to five times the average elsewhere in the United States.
        Small hydro projects can help reduce these rates if the projects
    can be built economically. For example, at King Cove, Alaska, which is
    a remote community of 900 people in the Aleutian Islands, an 800-
    kilowatt hydro project completed in 1995 not only reduced costs but
    provides cost stability over the long-term by displacing most of the
    utility's diesel generation. Similar long-term benefits are expected
    from the new 825-kilowatt Tazimina hydro project, which serves a remote
    population of 450 people who live about 200 miles from Anchorage.
        My Administration requires that development be done right. We apply
    this standard equally to hydroelectric development. For example, every
    hydroelectric project must also protect fish and wildlife. In the past,
    we have worked closely--and successfully--with the FERC to ensure
    minimal environmental impacts and to consider the cumulative impacts of
    development. It is critical this cooperation continues under S. 422 as
    well.
        The State of Alaska is not presently able to assume exclusive
    authority to authorize small hydroelectric projects, because state law
    does not provide a regulatory regime for project review, monitoring, or
    licensing of these projects. We feel such a framework must be in place
    at the state level before the State of Alaska could apply to the
    Secretary of Energy to take jurisdiction. The regulatory framework
    needs to include regulations to ensure proper project design and
    construction, and to protect fish and wildlife populations at least as
    well as under existing federal law. Present FERC authority is broader
    than that held by the state, in that FERC may assert jurisdiction over
    watersheds, while the regulatory authority of the Alaska Department of
    Fish and Game is confined to the area between stream banks.
        In addition to the lack of a state regulatory regime, the state has
    established no appropriate funding mechanism to support small hydro
    licensing and monitoring. Such a funding mechanism could be either a
    direct appropriation or based on a user fee system.
        Again, the state appreciates the opportunity to express its support
    of S. 422. Although we desire the benefits this legislation offers, it
    is important to state clearly we are not currently in a position to
    implement the option that this legislation would present to Alaska.
                Sincerely,
                                                   Tony Knowles
                                                               Governor
                                     ______

                          Congress of the United States
                                       House of Representatives
                                                         March 29, 2000
    The Honorable Joe Barton
    Chairman
    House Commerce Subcommittee on Energy and Power
    2125 Rayburn House Office Building
    Washington, D.C. 20515
        Dear Mr. Chairman: I would like to thank you for the opportunity to
    submit a statement today on behalf of my legislation, H.R. 1262. I
    believe this bill is a common-sense solution to a costly, bureaucratic
    and controversial regulatory process required for the re-licensing of a
    small hydroelectric dam in my district.
        The regulatory process and scrutiny hydroelectric dams undergo to
    be re-licensed by the Federal Energy Regulatory Commission (FERC) was
    brought to my attention by the small community of Hart, Michigan. In a
    meeting with members of the Hart City Council and the city manager, I
    was dismayed to learn of the extravagant costs, environmental scrutiny
    and time this rural city faces as part of the FERC re-licensing
    process. This process will cost the community an estimated $400,000-
    $600,000 and take three to five years for completion. For that reason,
    I introduced H.R. 1262, to provide that existing facilities located on
    the Pentwater River in Michigan are not required to be licensed by the
    Federal Energy Regulatory Commission under part I of the Federal Power
    Act. I feel this legislation represents a reasonable attempt to
    alleviate the unnecessary environmental scrutiny and costs associated
    with the FERC re-licensing process.
        The Hart Dam which serves a predominately rural community,
    generates about 2 percent of the city's electrical power and has
    contributed to the creation of the Hart Lake. The lake has created
    millions of dollars in surrounding development and lakefront property
    for the community. The generation of hydropower provides inexpensive,
    efficient and environmentally safe energy for 1,300 residents of Hart.
        The prospect of breaching the Hart Dam or requiring costly
    environmental structures looms heavily over the city as environmental
    groups weigh in and scrutinize all operations of the dam. The city is
    subject to finance all studies related to the ecological and
    recreational impacts from environmental groups that are adamant about
    tearing down hydropower dams. Dismantling the Hart Dam would be
    catastrophic to the developments and property values surrounding the
    Hart Lake, not to mention the cost passed onto consumers for the loss
    of energy generation from the hydropower plant.
        I am frustrated by the prospect of complications in the re-
    licensing process for city of Hart, despite the fact the dam was
    rebuilt just more than 10 years ago with no objections or environmental
    concerns by the Michigan Department of Natural Resources, Michigan
    Department of Environmental Quality or FERC. Is the city of Hart to
    believe these agencies now have environmental concerns they didn't have
    10 years ago?
        As the amount of hydropower projects facing re-licensing will
    drastically increase over the next years, small communities across the
    country like Hart will continue to bear the burden of this costly
    system. I am particularly concerned with the costs passed on to
    communities as the result of environmental groups pressure to perform
    costly and unnecessary studies. The economic impacts associated with
    this process must be considered before conditions of re-licensing are
    mandated from a state or federal agency. At this point these
    considerations are not being made and I feel it is unnecessary to
    subject the city of Hart to this process.
                Sincerely,
                                                  Pete Hoekstra
                                                     Member of Congress
                                     ______

                                           City of Hart
                                                 Hart, Michigan
                                                         March 29, 2000
    Chairman Barton
    Subcommittee of Energy and Power:
        The City of Hart, located in west central Michigan, is currently in
    the midst of FERC relicensing for our small hydro electric facility
    having filed a notice of intent in September 1997. If all goes well, we
    anticipate issuance by 2002. Five years and an estimated $650,000
    later! For one of the smallest municipal electric utilities in the
    state and perhaps the nation, this is unacceptable. The time and
    financial burdens of relicensing for a system of 1300 customers and
    four employees on top of day to day operations, growth management, and
    pending deregulation will certainly tax our capabilities.
        We understand and fully accept the licensing requirements. We
    welcome with open arms the participation of all interested parties.
    However, the scales of balance have tipped from participation to
    elimination. Non-pollutant sources of energy should be encouraged, not
    economically regulated out of business.
        The costs of relicensing will consume an excess of 16% of our
    annual operating revenues over the next two years causing us to dip
    into capital improvement reserves. The City must delay expansion to a
    substation to keep pace with industrial growth and forestall
    improvements to the diesel generation plant to provide the reliable
    back up power our customers demand in an increasingly unreliable market
    in order to obtain a piece of paper.
        The relicensing process for the City has been positive to date as
    the participation has been very cooperative. We entered the process as
    a child visiting the dentist for the first time. We have heard, first
    hand, the horror stories. Now that we are in the chair, it has not been
    all that bad. Will Hart continue to be ``Lucky'' or is the dentist
    reaching for a drill without administering novocaine?
        The Hart Dam was built in the 1920's and rebuilt in 1986 under the
    watchful eyes of FERC, the Michigan Department of Environmental
    Quality, and the Michigan Department of Natural Resources. It is our
    belief that such a newer facility should be held to less stringent
    relicensing requirements, if not exempt.
        Even under the best scenario, dam relicensing is too lengthy and
    too costly. The City of Hart urges this committee to support procedural
    changes to make relicensing practical for all parties.
                Respectfully yours,
                                               Scott K. Huebler
                                                      Hart City Manager
                                     ______

          Prepared Statement of the American Public Power Association
        By the year 2015, over half of all federally regulated
    hydroelectric capacity--284 projects in 39 states--will be up before
    FERC for license renewals. This group, which includes many large and
    complex projects, has a combined capacity of approximately 29,000 MW,
    or 20 percent of the nation's installed hydroelectric capacity. By the
    year 2010, 16,000 MW of publicly owned hydro capacity will be up for
    license renewal. This represents nearly 50% of all hydro capacity
    subject to the re-license renewal process.
        The experience of projects that completed relicensing in the early
    1990's demonstrated that the process was costly, time-consuming and
    resulted in capacity losses. Studies are showing that there may be an
    average of 8% loss of hydropower generation per project resulting from
    new conditions imposed on existing projects up for relicensing in the
    next 20 years. At this rate, nearly 2400 MW of total hydro capacity may
    be lost. In the 2000 edition of its annual Energy Outlook report, the
    Energy Information Administration--the Department of Energy's
    statistical agency for the first time predicts that hydropower
    generation will decline through 2020, ``as regulatory actions limit
    capacity at existing sites.''
        The costs of the licensing process has brought into focus a system
    that is broken and in conflict with the pressures to meet the demands
    of electricity competition. As states open their regions and electric
    utilities to competition, utilities are under increasing pressure to
    lower prices or risk losing customers. The ability of hydro licensees
    to pass to their customers ever increasing costs of environmental
    compliance will be limited by the market. These increasing costs
    threaten to significantly reduce hydropower's economic viability.
        The regulatory process and resulting problems are also at odds with
    current concerns over rising gasoline prices and the impact these costs
    will have on the nation's energy security. As one of the cleanest and
    most efficient sources of energy, hydropower should play a greater role
    in the nation's energy mix. Along with its ability to provide clean,
    efficient and renewable electric power, this energy source offers
    operational flexibility for maintenance of system reliability as well
    as drinking water, flood control, fish and wildlife habitat
    improvement, irrigation support, transportation recreational and
    environmental enhancement funding. Despite these numerous and important
    benefits, policymakers have chosen to discount hydropower's energy
    resource potential.
        One of the disturbing outcomes of the existing licensing process,
    as evidenced by a hydropower owner in the Northwest, is the inability
    to improve environmental conditions around the project. Without a
    license in hand, this particular hydropower owner cannot install
    recommended fish improvements. Thus, it is in the interest of all
    project stakeholders--power and nonpower interests--to bring
    reasonableness and fairness to the process. No one wins under current
    law.
        H.R. 2335 and its counterpart in the Senate, S. 740, represent a
    reasonable and well-meaning approach to the licensing process. The
    legislation limits reform to allow project owners and operators timely
    knowledge of the impact of mandatory conditions on project economics
    and other values. When agencies develop their statute-authorized
    mandatory conditioning authority, they will be required to consider key
    factors and document their consideration of those factors. These
    factors are to include the benefits gained or lost to the project's
    economics and to the environment.
        As entities of the public domain, public power electric utilities
    are not interested, capable or supportive of any measure that would
    weaken the public input process. We regularly work with citizen and
    environmental groups through public processes and meetings. Through
    these activities we learn and are guided by what our citizens demand--a
    regulatory process that preserves and protects the environment. For
    that reason, we remain strong supporters of a hydropower licensing
    process that provides significant and meaningful environmental
    protections granted by law to the federal resource agencies involved in
    the licensing process. In our view, the legislation achieves this
    important objective.
        Hydropower stakeholders, which includes electricity providers,
    consumers, recreational interests, labor, agriculture and farming
    groups, are supportive of reform. Working with these groups, APPA is
    convinced that common agendas can be met to construct a process that is
    more predictable, less time-consuming and results in adequate resources
    being committed to protection of the environment.
        The legislation before the committee is a reasonable solution to
    the problems that face this industry and the country. We strongly
    encourage Congress to take steps, such as those represented in H.R.
    2335, to improve the hydropower licensing process. As with the
    important and needed reforms that were made to accommodate
    environmental concerns in the 1980's, the pendulum has swung in the
    opposite direction requiring a hard look at what is happening to the
    hydropower energy resource in this country. The future of this
    emissions-free, reliable and domestic-based energy resource rests in
    your hands.
                                     ______

    Prepared Statement of James R. Goodheart, Executive Director, Michigan
                           United Conservation Clubs
        On behalf of the 100,000 members and 510 affiliated clubs of the
    Michigan United Conservation Clubs (MUCC), I would like to express our
    opposition to HR 2335 and HR 1262 which have been recently referred to
    the House Committee on Commerce, Subcommittee on Energy and Power,
    regarding hydroelectric licensing under the Federal Power Act.
        Generally speaking, the MUCC views the issue of hydroelectric
    licensing as imperative in protecting and wisely using our public river
    resources. MUCC supports the re-licensing, renovation, and
    reconstruction of dams for hydroelectric power where it can be proven
    to be both economically feasible and environmentally sound.
        MUCC recognizes that if not properly managed, the trade-off of
    generating power from rivers is the river ecosystem. Hydro facilities
    can negatively impact liver ecosystems, fish habitat, and fish
    reproduction through river flow or temperature alterations, blocking
    fish movement or impeding the natural cycling of nutrients throughout
    the river. As an organization of hunters, anglers, boaters, and other
    outdoors enthusiasts, MUCC has participated as part of the Michigan
    Hydro Relicensing Coalition in its efforts to monitor the progress of
    the Federal Energy Regulatory Commission's re-licensing of the 113
    hydroelectric dams in Michigan.
        Licensing hydroelectric projects is a commitment of our natural
    river resources as they are only re-licensed every 30 to 50 years. For
    this reason, MUCC stresses the importance of incorporating the
    protection, enhancement, and long-term sustainability of the natural
    resources into the licensing process.
    H.R. 2335--The Hydropower Licensing Improvement Act
        MUCC's membership clearly supports the existing Federal. Energy
    Regulatory Commission (FERC) licensing program as the only opportunity
    to address natural resources concerns, particularly in regards to
    protecting fish populations and natural reproduction. The MUCC strongly
    believes that the existing rules and laws of the current hydroelectric
    licensing process have demonstrated clear and successful results in
    providing hydro power that is not detrimental to the river ecosystems.
        The benefit of the current FERC licensing process is widely
    distributed across many of Michigan's 36,350 miles of rivers and
    streams, and applauded by the anglers, boaters, and other recreational
    users who benefit from the vast improvements to these river systems--
    physically, chemically, and biologically--as a result of the current
    process.
        The membership of the MUCC already benefits from the recent
    improvements through re-licensing on highly utilized river systems such
    as the Muskegon, Manistee, and Au Sable Rivers. The importance of these
    river enhancements can be defined by angler usage alone, as anglers
    travel from throughout the state and country to take part in the
    popular trout and salmon fishing of these rivers. This is demonstrated
    through sportfishing hours spent on these systems in 1999. The Muskegon
    River accounted for about 374,895 hours of angler effort 96,329 angler
    trips, while on the Manistee River, anglers spent approximately 528,766
    hours fishing during 111,863 trips. The Au Sable River accounted for
    nearly 280,000 hours of angling effort and almost 80,000 fishing trips.
    MUCC's conservation approach of protecting a usable resource stands to
    benefit not only the river and fishery, but also those who enjoy the
    fishery through recreation and the community, which benefits
    economically through tourism.
        The re-licensing process for hydroelectric projects may not be
    perfect. However, the current process incorporates industry, state and
    federal agencies, as well as private citizens into the re-licensing
    process, significantly increasing the benefits to our natural resources
    while minimizing economic impacts on the hydroelectric facilities.
    Current attempts to reform this process appear to the benefit of
    hydroelectric projects, as changes would create an easier and less
    restrictive licensing process to work through and an corresponding
    short-term economic gain for the hydroelectric facility. MUCC does not
    support the proposed changes in H.R. 2335 as they are at the potential
    cost of the sustaining the long-term biological integrity of these
    river ecosystems.
    H.R. 1262--Exempting existing facilities located on the Pentwater River
            in Michigan from the FERC licensing under the Federal Power Act
        MUCC firmly opposes Representative Hoekstra's bill, H.R. 1262,
    exempting the hydroelectric projects on the Pentwater River in Michigan
    from licensing under the Federal Power Act. The sportsmen and women of
    the MUCC point to the many hydro projects in Michigan that have already
    been re-licensed through the FERC process. These projects provide
    significant protection and enhancements to the public river and fishery
    resources while allowing the hydro facilities to continue generating
    power and private economic gain.
        As a member of the Michigan Hydro Relicensing Coalition, the MUCC
    has long supported and advocated for a wise and conservative use of our
    natural resources including public rivers and river fishery resources.
    The currently existing federal licensing is a common sense approach to
    managing hydroelectric projects that need be applied to all projects,
    including those on the Pentwater River. Improvements to hydro licenses
    that provide for run-of-river flow management, temperature monitoring
    and controls, upstream and downstream fish passage, and other habitat
    improvements allow for a wise and conservative use of the natural
    resources our rivers provide. This ensures that all favorable benefits
    can be derived for all users from a river resource, from power
    generation to a healthy, sustainable fishery.
        MUCC believes there is no reason to exempt projects on the
    Pentwater River in Michigan from a licensing process that has proven
    beneficial to the river, the fishery, anglers, and other public users
    of the river resources while maintaining operation of the hydroelectric
    facilities. In promoting conservation, MUCC contends that the re-
    licensing of hydro projects in Michigan demonstrates that hydro
    projects can utilize river resources while promoting long term sustain
    ability of fish and wildlife populations valued by the public in our
    state's rivers,
        MUCC urges that this philosophy be maintained throughout the state
    of Michigan, if not across the nation. Considering the exemption of the
    Pentwater hydro projects in Michigan sets a dangerous precedent that
    the public of Michigan would be willing to sacrifice the long-term
    recreational and economic benefits of our rivers for short-term
    economic gain to the hydroelectric facilities on that river. This is a
    sacrifice that the sportsmen and women of the Michigan United
    Conservation Clubs are not willing to make.
        MUCC opposes any legislation that would exempt hydro projects from
    the licensing process under the Federal Power Act. Furthermore, MUCC
    opposes proposed legislation to change this process. This license
    process allows hydroelectric projects to generate power from a
    renewable resource while providing for the proper consideration and
    minimization of the impacts of these projects on the river and fishery
    resources.
        The Michigan United Conservation Clubs appreciates your
    consideration of our comments, and asks your support in opposing bills
    H.R. 2335 and H.R. 1262, regarding the hydroelectric licensing process
    under the Federal Power Act and exemption of projects from this
    process.
                                     ______

     Prepared Statement of Oregon Utility Resource Coordination Association
        The Oregon Utility Resource Coordination Association (OURCA)
    supports the intent of H.R. 3447 and urges timely enactment. Passage of
    this legislation will facilitate coordinated power supply planning
    among BPA's public preference customers, providing both them and BPA
    with added efficiencies. This legislation will enable municipal
    utilities, people's utility districts, and cooperatives in the Pacific
    Northwest to manage their resource planning similar to how customers of
    other federal power marketing agencies do today. We do not believe
    passage of this legislation would have an adverse impact on BPA or
    other BPA customers. To the contrary, we believe that this legislation
    will provide enhanced efficiencies that directly or indirectly serve
    the entire region.
    Background on OURCA
        OURCA is an intergovernmental agency, formed under the laws of
    Oregon. OURCA was formed in September 1999 by the action of three
    municipalities and four people's utility districts (PUDs) which operate
    electric utilities in Oregon. These utilities include the City of
    Ashland, McMinnville Light & Power, the Eugene Water & Electric Board,
    and the Clatskanie, Emerald, Northern Wasco County, and Tillamook PUDs.
    The first action of the OURCA Board of Directors was to expand the
    membership to include the City of Forest Grove.
        OURCA qualifies under the legislative definition contained in H.R.
    3447. In fact, OURCA was formed largely for the purpose of performing
    the coordinated operational functions as envisioned by H.R. 3447.
    Benefits of the Legislation
        OURCA envisions a number of potential operational and fiscal
    opportunities through coordinated utility purchasing, planning and
    administration. Many of these opportunities, such as joint purchasing
    of distribution poles or transformers, are available absent this
    legislation.
        As drafted, this legislation provides opportunities for OURCA
    specifically and exclusively in terms of the joint purchasing and
    scheduling of power from the Bonneville Power Administration (BPA).
    Each of the current members of OURCA is a public preference customers
    of BPA.
        Passage of H.R. 3447 enables OURCA to act as an agent to coordinate
    the power purchases of the OURCA members from BPA. OURCA has not yet
    decided what form that coordination will take. Options range from joint
    billing and coordinated management of multiple contracts to a single
    contract based on the combined net requirements of OURCA members.
    Impact of Legislation on Other Customer Groups
        OURCA does not believe enactment of H.R. 3447 adversely impacts any
    other Northwest customer group--in terms of either power supply or
    costs.
        Under the Pacific Northwest Electric Power Planning and
    Conservation Act (Northwest Power Act), BPA has a legal obligation to
    provide a power exchange with participating regional investor-owned
    utilities (IOUs) for service to such IOUs' residential and small farm
    consumers. In addition, any regional utility can seek to have BPA
    provide power to serve its net requirements. Nothing in H.R. 3447
    alters or limits these provisions. BPA is not statutorily required to
    provide service to the Direct Service Industries (DSIs) post-2001.
        More importantly, OURCA does not believe that enactment of H.R.
    3447 will reduce the power available to serve other customers in the
    region. The intent of the legislation is to limit the purchase of power
    by the JOE to the sum of its members' net requirements. In other words,
    if a JOE's members could individually purchase a total of 100 MW of
    requirements power from BPA, then the JOE could purchase no more than
    100 MW of requirements power from BPA under this legislation.
        Nor will enactment of H.R. 3447 increase costs to other regional
    customers. To the contrary, enactment of H.R. 3447 could provide BPA
    with some administrative efficiencies, the benefit of which will inure
    to all regional customers.
    Impact of Legislation on Resale of Power
        Some parties have expressed concern that enactment of this
    legislation could promote resale of preference power.
        Other than sales to its retail customers or to its members or
    participants, OURCA has no intention of reselling requirements power
    purchased from BPA. In fact, such resale could violate current legal
    and contractual prohibitions.
        The intent of the legislation is to restrict the JOE's purchase of
    requirements power from BPA to the sum of the net requirements of its
    members, and OURCA supports that intent. However, OURCA would note that
    the language could potentially create a problem for a JOE whose members
    have generation resources of their own and are not full requirements
    customers of BPA.
        The current language of H.R. 3447 authorizes BPA to sell power to a
    JOE ``solely for the purpose of meeting the regional firm power
    customer loads'' of its regional public preference customer members.
    This language does not fully mirror the language of Section 5(b) of the
    Northwest Power Act, which provides that BPA shall offer to sell power
    to meet a customer's firm load, to the extent that the firm load
    exceeds the customer's own resources. OURCA is concerned that this
    might potentially create confusion and lead to the unintended
    circumstance where BPA would be required to sell to the JOE an amount
    of power that is more than the actual requirements of the JOE
    membership due to the existence of other utility power supply resources
    of the JOE's members. Similarly, the language might unintentionally
    preclude BPA from selling other non-requirements products to a JOE that
    other public preference customers (or even non-preference customers)
    could purchase.
        Notwithstanding this potential statutory construction, the
    legislation is not intended--and should not--alter any existing resale
    restrictions that are contained in present law or contract.
        Finally, we would note that the legislation does not preclude a JOE
    from purchasing ``surplus power'' from BPA which does not have resale
    restrictions associated with it (Note: Under the Northwest Power Act
    any entity may purchase ``surplus power'' from BPA, and such purchases
    do not have a resale restriction.)
    Eligibility
        OURCA sees no compelling reason for either the January 1, 1999
    member eligibility restriction or the restriction that JOEs must form
    by the date of enactment.
        The legislation is designed to provide public preference customers
    of BPA with opportunities to capture administrative and operational
    efficiencies. OURCA sees no legitimate public policy reason why certain
    current (those who fail to form a JOE before enactment of this
    legislation) or future public preference customers should be denied the
    opportunity to capture these benefits.
        For instance, the City of Hermiston, Oregon is in the process of
    forming a municipal utility. Because Hermiston was not a customer of
    BPA on or before January 1, 1999, Hermiston would not be an eligible
    member of a JOE. Ironically, based on a strict interpretation of H.R.
    3447, Hermiston could not participate in a JOE in any form--even to
    simply receive newsletters' without negating the eligibility of a JOE.
    State laws provide for formation of municipal, PUD and cooperative
    utilities, and federal law provides these public preference customers
    with priority purchase rights to BPA power. OURCA fails to see a public
    policy rationale for arbitrarily precluding lawfully constituted public
    preference customers from managing their lawfully purchased BPA
    resources under this legislation.
    Timing of Legislation
        OURCA believes that the legislation needs to be enacted as soon as
    possible, preferably before the end of April, in order to realize the
    intended benefits as soon as possible.
        BPA is in the process of finalizing its rates and developing and
    executing contracts for post-2001 sales. Under the current schedule,
    rates for power will be finalized by April 21, 2000 and contracts must
    be signed by September 30, 2000. However, OURCA would note that
    enactment needs to occur as soon as possible in order to provide JOE
    participants: (a) the opportunity to select their form of coordinated
    power purchases, (b) draft the necessary operating agreements and
    protocols, (c) negotiate contracts with BPA, (d) undertake any needed
    billing or metering purchases and installations, and (e) consider and
    arrange for any alternate power supplies. Given the required steps
    needed to make a JOE fully functional, OURCA believes the legislation
    needs to be enacted by the end of April.
        Enactment of H.R. 3447 after September 30, 2000 would preclude
    Pacific Northwest public preference customers from utilizing a JOE for
    requirements power purchases until the next contract period in 2006 (or
    2011 for BPA customers choosing 10 year contracts). While BPA power
    contracts are assignable (with the concurrence of BPA), such post-
    subscription assignment would not enable JOE participants to truly
    realize the benefits of the legislation: the JOE members would not be
    able to have the potential existence of the JOE influence their post-
    2001 power supply decisions.
    Conclusion
        OURCA strongly supports timely enactment of H.R. 3447 to facilitate
    coordinated power supply planning among BPA's public preference
    customers. As noted above, OURCA would prefer minimal refinements to
    the legislation to: (1) clarify that the intent of the law is for BPA
    to serve the cumulative net requirements of the JOE members and no
    more, and (2) to remove the eligibility restrictions. In sum, we
    believe that the legislation should grant JOEs the same rights,
    responsibilities and restrictions as those that apply to its public
    preference customer members: no more, and no less. If the Committee
    determines that such refinements are appropriate, OURCA would be happy
    to assist in the necessary drafting changes.
                                     ______

                  Prepared Statement of Idaho Energy Authority
        The Idaho Energy Authority (IDEA) strongly supports enactment of
    H.R. 3447 and deeply appreciates the Committee's efforts to promote
    prompt consideration of this common sense legislation.
        Throughout the country, consumer-owned utilities (municipals, PUDs
    and co-ops) have formed entities to provide coordinated power supply
    and other services. These entities are generally formed on the basis of
    geography, organizational form and historic relationships. Given these
    factors, the cities of Burley, Idaho Falls, Soda Springs, and United
    Electric Cooperative chose to form the Idaho Energy Authority (IDEA)
    under the provisions of existing Idaho law enabling establishment of
    nonprofit membership corporations consisting of intergovernmental and
    cooperative members. The cities of Heyburn and Rupert and East End
    Mutual Electric, Farmers Electric, Idaho County, Lower Valley Energy,
    Salmon River Electric, South Side Electric Lines, and Fall River Rural
    Electric Cooperatives have also joined, and other consumer-owned
    utilities in Idaho are considering membership in IDEA. We expect the
    membership to continue to expand.
        Although IDEA anticipates providing a number of services for its
    members, the timing of IDEA's formation was greatly influenced by our
    desire to meet the eligibility standards of the pending legislation and
    to jointly manage our requirements purchases from the Bonneville Power
    Administration (BPA).
    Purpose of H.R. 3447
        The bill enables existing BPA preference customers (e.g., public
    body and cooperative utilities) to designate a joint operating entity
    (JOE) as their agent for contracting with BPA for the purchase and
    delivery of power to meet the members net power requirements. Such
    coordination can provide the members of IDEA with administrative
    savings by providing for centralized interaction with BPA personnel. In
    addition, IDEA members can capture operational savings by having
    centralized billing, metering and scheduling and potentially achieving
    diversity benefits that reflect the different load characteristics of
    IDEA's members. The extent to which these benefits are realized will
    depend, in part, on (1) the purchasing form IDEA chooses (e.g., single
    administration of multiple contracts or a single contract reflecting
    the pooled requirements of IDEA's members), (2) the type(s) of
    product(s) that IDEA chooses to purchase from BPA and how those
    products are managed with other resources either owned by IDEA members
    or contracted for with other parties and (3) the design of BPA's rates.
        BPA's existing statutes provide a first right of purchase--or
    ``preference''--to cooperative and public body utilities (See Section
    5(b) of the Pacific Northwest Electric Power Planning and Conservation
    Act). The statutes further direct BPA to make such sales in compliance
    with BPA's standards of service (See Section 5(b)(1) of the Pacific
    Northwest Electric Power Planning and Conservation Act). Those
    standards of service provide that the applicable preference customer
    must own distribution facilities necessary to deliver the BPA power to
    end-use consumers.
        While IDEA (or another JOE) is itself a public body, it neither
    directly serves end-use consumers nor directly owns distribution
    facilities. The responsibilities and facilities needed to provide
    retail service are owned by IDEA's members. While IDEA's members meet
    the statutory test and the requirements of the BPA standards of
    service, BPA has determined that IDEA's members cannot assign their BPA
    purchases to IDEA nor authorize IDEA to act as their agent in
    purchasing requirements power from BPA. H.R. 3447 provides the clear
    authority for BPA to make sales to Joint Operating Entities.
        In addition to the coordination of BPA purchases authorized by the
    legislation, IDEA may provide the following additional services to its
    members: diversification power supply acquisition and management,
    transmission planning and contracting (including with BPA), materials
    purchase, public purpose services, safety programs, etc. Enactment of
    H.R. 3447 is not necessary for IDEA to engage in these other functions.
    Eligibility Restrictions are Inappropriate
        Existing Idaho law allows for the formation of new cooperative and
    municipal utilities and creation of joint powers agencies and
    cooperative associations. IDEA sees no reason why future consumer-owned
    utilities or future JOE's should be prevented from receiving the
    benefits of this legislation.
        IDEA would support removing the eligibility restrictions from the
    legislation.
        Alternately, IDEA would support granting the Secretary of Energy
    authority to add other JOEs by rule as well as authorizing the
    Secretary to permit future BPA preference customers the right to
    purchase and or manage requirements power through an existing or future
    JOE.
    Legislation Does Not Harm Other Customers
        While benefiting public preference customers in the Northwest, H.R.
    3447 does not harm the interests of other regional customers in either
    the cost or availability of power.
        IDEA does not believe that enactment of this legislation would
    result in a reduction of power available to serve other customers in
    the region. The legislation establishes a maximum purchase authority
    for any JOE equal to the combined load of its members. The legislation
    intends that a JOE would not be able to purchase firm requirements
    power in excess of what the members could purchase through individual
    contracts. Thus, enactment of this legislation should not reduce the
    power available for other regional customers.
        Similarly, IDEA does not believe that enactment of H.R. 3447 will
    result in increased costs to other regional customers. To the contrary,
    enactment of this legislation is likely to result in some
    administrative savings for BPA which will benefit all regional
    customers.
        IDEA is aware that some have expressed potential concern that a JOE
    might be able to realize diversity savings--reduced purchases during
    peak periods as a result of differences in the coincident peak of a
    JOE's member loads. While it is true that, depending on the details of
    future BPA power contracts, such diversity savings may be realized and
    may result in reduced purchases from BPA, this would result in either
    (a) additional peak power available for sale to other regional
    entities, or (b) surplus peak power that could be sold by BPA with the
    revenue credited to regional customers. Under either circumstance, it
    would appear that regional parties would benefit--not face increased
    costs.
    Legislation Does Not Promote Merchant Marketing of Preference Power
        H.R. 3447 does not provide preference customers any authority to
    purchase power surplus to the needs of the JOE participants. Current
    law and BPA contracts restrict the resale of requirements power. H.R.
    3447 does not alter these current statutory or contractual
    restrictions.
        Nor does IDEA intend to resell requirements power. Such action
    would be in violation of existing statutory and contractual
    restrictions, and IDEA and its members intend to comply fully with all
    applicable laws and restrictions.
    Legislation Should be Enacted Promptly
        Based on a variety of contractual, operational and system
    requirements, IDEA believes that the legislation should be enacted
    before the end of April.
        In order for this legislation to be of value to IDEA during the
    2001-2006 BPA contract term, it needs to be enacted prior to the
    September 2000 conclusion of the BPA subscription contract window.
    However, considerable time will be needed prior to this date for the
    legislation to realize its intended benefits. As noted above, IDEA has
    been in existence for a short period of time. IDEA and its members will
    need to review the existing BPA power products, assess alternative
    power supply opportunities , and determine which purchases (or mix of
    purchases) are most desirable. Once this decision is made, IDEA will
    need to prepare and execute the relevant contracts (with BPA, any other
    selected power suppliers, and between the IDEA members). In addition,
    we may need to purchase and install computer hardware and/or software
    to provide for real-time scheduling and joint billing. Given these
    potential requirements and the established closing date for BPA
    contracts, we believe the legislation should be enacted before the end
    of April to provide the time needed to properly and diligently fulfill
    our power supply responsibilities to our consumer-owners.
        Some have questioned whether, if the legislation is not enacted in
    time, if IDEA members could assign their contracts to IDEA if the
    legislation were passed in a subsequent Congress. First, it should be
    recognized that assignment of BPA contracts is dependent on BPA
    concurrence. More importantly, such action would be largely ministerial
    and would not enable JOE members to realize the full benefit of the
    legislation during the pending subscription period. Specifically, IDEA
    members may make different power supply decisions--both from BPA and
    alternative power suppliers--if they can act jointly rather than
    individually. In the absence of timely enactment of the legislation,
    IDEA members will purchase power products from BPA or elsewhere without
    realizing the benefits of joint purchasing decisions envisioned by this
    legislation.
    Conclusion
        IDEA supports H.R. 3447 in its current form. As noted above, IDEA
    would support relaxation or elimination of the eligibility restrictions
    contained in the legislation. However, we would still support the
    legislation without any such changes if needed to ensure swift
    enactment.
                                     ______

                   Center for Energy Efficiency and
             Renewable Technologies, Environmental Defense,
                 Natural Resources Defense Council, Sierra Club
                                                         March 30, 2000
    The Honorable Joe Barton
    Chairman, Subcommittee on Energy and Power
    The House Committee on Commerce
    2125 Rayburn House Office Building
    Washington, DC 20515

    Re: H.R. 2335/S. 740--Hydropower Licensing Process Improvement Act--
    OPPOSE

        Dear Chairman Barton: Legislation has recently been introduced that
    would dramatically change the hydropower licensing process and
    jeopardize a critical restoration opportunity for rivers that have
    suffered for decades. Pitched as a process reform bill, the legislation
    actually adds nine new requirements for federal agencies and three new
    administrative processes to an already complex process. The result? A
    significantly diminished ability of resource agencies to protect public
    trust resources such as fish, wildlife, water quality, as well as
    economically beneficial recreational resources.
        While the hydropower relicensing process is not perfect, the
    industry is not what is in jeopardy here. They warn that the
    relicensing process will render their dams uneconomic. In fact, no
    license issued in the last seven years has been rejected by its owner.
    Industry also threatens that reduced generation capacity will result in
    increased greenhouse gas emissions. In fact, in the last decade,
    relicensing has yielded dramatic improvements in rivers around the
    country while reducing average generation by only 1%! That is just
    0.05% of the nation's overall electrical capacity. Surely we can afford
    such a small price for such enormous benefits.
        It is important to remember that licenses are issued for 30 to 50
    year terms. Relicensing is a once-in-a-lifetime opportunity to ensure
    that private use of the nation's public river resources is balanced and
    fair. Judicious changes to a dam's operations can provide dramatic
    benefits to fish, wildlife, and recreation opportunities. H.R. 2335 is
    a transparent attempt by the hydropower industry to circumvent its
    accountability to the public.
        In recent years, industry, state and federal resource agencies, and
    private citizens have worked together to resolve many inefficiencies
    with the relicensing process, significantly reducing the need for
    litigation. Parties are working toward administrative solutions for
    remaining issues. Legislative fixes, particularly this legislation,
    will only set back the substantial progress and trust that stakeholders
    have built and dramatically tilt the balance away from protecting
    public trust resources.
        Please join us in opposing H.R. 2335.
                Sincerely,
                             V. John White, Executive Director,
                Center for Energy Efficiency and Renewable Technologies
                   Johanna Thomas, Hydropower Project Director,
                                                  Environmental Defense
                          Sheryl Carter, Senior Policy Analyst,
                                      Natural Resources Defense Council
                                          Dan Becker, Director,
                         Global Warming and Energy Program, Sierra Club
    cc: Subcommittee on Energy and Power
                                     ______

        International Association of Fish and Wildlife Agencies
                                                         March 28, 2000
    Hon. Joseph Barton, Chairman
     Subcommittee on Energy and Power
    Commerce Committee
    U.S. House of Representatives
    2125 Rayburn House Office Building
    Washington, DC 20515
        Dear Chairman Barton: This is in reference to H.R. 2335, the
    ``Hydroelectric Licensing Process Improvement Act of 1999,'' scheduled
    for hearing March 30, 2000 before your subcommittee. The Association
    strongly opposes H.R. 2335 because it would significantly constrain the
    US Fish and Wildlife Service (USFWS) and National Marine Fisheries
    Service (NMFS) from fulfilling their responsibility under law to submit
    permit conditions that could ensure that hydroelectric projects are
    consistent with the conservation of the public trust resources of fish
    and wildlife. We also believe H.R. 2335 would impede the significant
    progress now being made under the Interagency Task Force to Improve
    Hydroelectric Licensing Processes. For those reasons, the Association
    is strongly opposed to H.R. 2335.
        The International Association of Fish and Wildlife Agencies was
    founded in 1902 as a quasi-governmental organization of public agencies
    charged with the protection and management of North America's fish and
    wildlife resources. The Association's governmental members include the
    fish and wildlife agencies of the states, provinces, and federal
    governments of the U.S., Canada, and Mexico. All 50 states are members.
    The Association has been a key organization in promoting sound resource
    management and strengthening federal, state, and private cooperation in
    protecting and managing fish and wildlife and their habitats in the
    public interest.
        While the goal of enhanced permit efficiency is laudable, our
    analysis is that, as currently drafted, H.R. 2335 would actually create
    more problems than it would solve. We believe the bill would 1) impose
    new, difficult, and burdensome process requirements and increase
    government cost, and 2) inappropriately change the process from the
    wise use and conservation of public trust resources of a whole river,
    to one that makes each individual project economically viable, no
    matter what the impact on public's resources. The impact of this bill
    as drafted would especially compromise the resource stewardship role of
    the US Fish and Wildlife Service and the National Marine Fishery
    Service in maintaining the Nation's fish and wildlife resources. Since
    the Federal Power Act preempted traditional State's rights to protect
    fish and wildlife in hydropower licensing, the role reserved under
    Section 18 (16 USC 811) for the Secretaries of Interior and Commerce to
    prescribe fishways is of critical concern to our State fish and
    wildlife agency membership.
        The IAFWA recognizes the significant role of hydropower in the
    Nation's mix of energy sources; however, inadequately mitigated
    hydroelectric facilities have the potential for exacting a substantial
    toll on the surrounding environment. Hydroelectric plants can obstruct
    fish movements and migration, alter water temperature and depth, injure
    or kill fish entrained through turbines, deter normal river sediment
    flows and even desiccate rivers entirely, devastating ecosystems and
    endangering fish populations. Often with only a few modifications,
    these facilities can operate while mitigating most adverse impacts on
    fish and wildlife resources. It is important that the law continue to
    provide the U.S. Fish and Wildlife Service and the National Marine
    Fisheries Services adequate time and authority to examine the
    operations of hydroelectric plants and submit reasonable conditions for
    licensing.
        The following concerns are submitted for your consideration:

     Consulting agencies are required to consider the various
            economic impacts of their conditions under Sec. 32, subsection
            (b)(1)(A) of the bill. However, these agencies do not have the
            legal authority and staff resources to compel submission of
            relevant economic data from license applicants and to interpret
            and challenge such submissions.
     The requirements under Sec. 32, subsection (c) would limit the
            ability of consulting agencies to submit supporting evidence
            for the conditions they impose. Though the provision requires
            the use of current data, the use of historical data in
            conjunction with current data is necessary to demonstrate the
            long-term impact of these facilities on environmental quality
            and aquatic populations. Furthermore, the provision which
            mandates ``peer review'' may obviate timely submission of
            environmental data. Field studies are currently reviewed by
            supervising biologists for competency and accuracy. Additional
            ``peer review'' would be time-consuming, costly and
            unnecessary.
     Administrative review under Sec. 32, subsection (e) would
            allow a hydroelectric facility operator, prior to filing a
            license application, to obtain an expedited review of
            conditions imposed by a consulting agency. However, the Federal
            Energy Regulatory Commission (FERC) requires environmental
            studies to be conducted after the submission of the application
            and any Additional Information Requests, when the case is
            deemed ``ready for environmental review''. The bill's new
            provision would require the consulting agency to defend its
            conditions before an administrative law judge without access to
            relevant information contained in the license application.
     Also under Sec. 32, subsection (e), an administrative law
            judge in a court of competent jurisdiction would be instructed
            to consider the effect of the conditions on ``energy and
            economic values of the project''. The judge would not be
            required to consider the reasonableness of the conditions given
            the potential environmental impacts of a project. An impartial
            determination would require consideration of both environmental
            impacts as well as economic impacts.
     Section 32, subsection (f) would set a maximum limit of one
            year as the deadline for submission of conditions from
            consulting agencies, but would not legislate a minimum time
            frame, which could permit FERC to set unreasonably short
            deadlines.
        We believe there is a cooperative process already well underway
    which could achieve improvements to the hydropower licensing and
    relicensing processes without the negative impacts on both process and
    natural resources of H.R. 2335. That effort is being conducted by the
    Interagency Task Force To Improve Hydroelectric Licensing Processes.
    Its steering committee is comprised of senior representatives from the
    Federal Energy Regulatory Commission, the Department of the Interior,
    the Department of Commerce, the Department of Agriculture, the
    Environmental Protection Agency, and the Council on Environmental
    Quality. We understand that its working groups are making great
    progress cooperatively, and urge you to consider their recommendations.
    Until such time as those recommendations become available, we urge that
    no further legislative action be taken on H.R. 2335.
        Thank you for this opportunity to express the Association's
    concerns about H.R. 2335. I have attached a more detailed analysis of
    the bill for your consideration and use.
                Sincerely,
                                                 Gary J. Taylor
                                                   Legislative Director
    cc: Hon. Thomas Bliley, Chairman, Commerce Committee
        Hon. John Dingell, Ranking Minority Member, Commerce Committee
        Hon. Ralph Hall, Ranking Minority Member, Energy and Power
    Subcommittee
        State Fish and Wildlife Directors

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