[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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    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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