[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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