[Senate Report 104-107]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 140
104th Congress                                                   Report
                                 SENATE

 1st Session                                                    104-107
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                   HYDROELECTRIC FACILITY IN MONTANA

                                _______


    July 11 (legislative day July 10), 1995.--Ordered to be printed

_______________________________________________________________________


  Mr. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 552]
    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 552) to allow the refurbishment and 
continued operation of a small hydroelectric facility in 
central Montana by adjusting the amount of charges to be paid 
to the United States under the Federal Power Act, and for other 
purposes, having considered the same, reports favorably thereon 
without amendment and recommends that the bill do pass.

                         purpose of the measure

    The purpose of S. 552 is to allow the refurbishment and 
continued operation of a small hydroelectric facility in 
central Montana by adjusting the amount of charges to be paid 
under the Federal Power Act.

                          background and need

    The Flint Creek Project, FERC project number 1473, was 
completed in 1900. It consists of a dam 55 feet high and 525 
feet long, a reservoir with a surface area of 2,850 acres 
(Georgetown Lake), a 7,775 foot long wooden flowline, and a 
1,100 kilowatt powerhouse. The project was licensed to the 
Montana Power Company in 1940. The project is now operated 
primarily to accommodate recreation, irrigation and natural 
resources.
    In 1988, Montana Power allowed its original license to 
expire. In November 1989, project operations ceased. On May 8, 
1992, FERC accepted surrender of Montana Power's license 
(effective upon transfer) and issued a new license to Granite 
County, Montana. Granite County is a political subdivision of 
the State of Montana. Granite County has refused to accept the 
FERC-issued license because without a reduction of the Federal 
annual charges the project is uneconomic given the needed 
repair work. Major repair work is needed because of the age of 
the project. For example, the wooden flowline needs to be 
substantially upgraded. The cost of the work is expected to 
exceed $2 million.
    The Flint Creek project occupies 2,143 acres of Forrest 
Service lands within the Deerlodge National Forest. Pursuant to 
the Federal Power Act, the Federal Energy Regulatory Commission 
imposes annual charges on hydroelectric projects for the use of 
Federal lands. According to the FERC, since 1977 the annual 
charges for the Federal lands occupied by the Flint Creek 
project have increased from $5,138 to $73,784--a 1,436 percent 
increase. In the last full year of project operation, 1988, 
annual rents constituted 45 percent of project revenue.
    The Committee on Energy and Natural Resources does not 
consider this legislation to be precedent setting because of 
the unique nature of the Flint Creek Hydroelectric project. The 
project is unique because without the reduction in rents, 
Granite County, Montana, will not accept the license. No other 
entity has expressed an interest in accepting the license, and 
the current license holder is seeking to surrender its license. 
Without a license, there is no revenue to the Treasury of the 
United States whatsoever from this facility.

                          legislative history

    S. 552 was introduced by Senator Burns (for himself and Mr. 
Baucus) on March 14, 1995. A hearing was held on May 18, 1995.

            committee recommendation and tabulation of votes

    The Senate Committee on Energy and Natural Resources, in 
open business session on June 14, 1995, by a unanimous voice 
vote with a quorum present, recommends that the Senate pass the 
bill as described herein.

                   cost and budgetary considerations

    The following estimate of costs of this measure has been 
provided by the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 23, 1995.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed S. 552, a bill to allow the refurbishment and 
continued operation of a small hydroelectric facility in 
central Montana by adjusting the amount of charges to be paid 
to the United States under the Federal Power Act, and for other 
purposes, as ordered reported by the Senate Committee on Energy 
and Natural Resources on June 14, 1995. We estimate that 
enacting this bill would result in a small additional cost to 
the federal government and to state and local governments. 
Because enactment of S. 552 would increase direct spending by 
resulting in a small loss of offsetting receipts, pay-as-you-go 
procedures would apply. We estimate that the increase in direct 
spending would be about $50,000 per year.
    S. 552 provides that if a political subdivision of the 
state of Montana accepts the license for Federal Energy 
Regulatory Commission project number 1473 in Granite and Deer 
Lodge Counties, Montana (the Flint Creek Hydroelectric 
Facility), it would not, for the first five years after such 
acceptance, be required to pay annual charges under section 
10(e) of the Federal Power Act for the project's occupancy of 
federal lands. Thereafter, the political subdivision would pay 
no more than $20,000 a year in federal land-use charges. The 
license for the facility is currently held by, and annual 
charges are paid by, Montana Power Company.
    Land-use charges for this project were $73,784 in fiscal 
year 1995. Annual payments are adjusted each year to reflect 
changes in land values and we estimate that, under current law, 
gross receipts to the U.S. Treasury from 1996 to 2000 would 
average about $80,000 per year. The state of Montana would 
receive about $30,000 of these funds annually without 
appropriation. CBO therefore estimates that the annual, net 
cost to the U.S. Treasury from enacting S. 552 would be about 
$50,000 to the U.S. Treasury and $30,000 to the state of 
Montana.
    We will be pleased to provide further details regarding 
this estimate on request. The CBO staff contact is Gary Brown.
            Sincerely,
                                           June E. O'Neill,
                                                          Director.
                      regulatory impact evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out this measure.
    The bill is not a regulatory measure in the sense of 
imposing Government-established standards or significant 
economic responsibilities on private individuals and 
businesses.
    No personal information would be collected in administering 
the provisions of the bill. Therefore, there would be no impact 
on personal privacy.
    Little, if any additional paperwork would result from the 
enactment of this measure.

                        executive communications

    The pertinent communications received by the Committee from 
the Federal Energy Regulatory Commission setting forth 
Executive agency relating to this measure are set forth below:
   Statement By Elizabeth A. Moler, Chair, Federal Energy Regulatory 
                               Commission

    Mr. Chairman and members of the committee; thank you for 
the opportunity to be here today to comment on nine bills 
affecting 14 hydroelectric projects licensed by the Federal 
Energy Regulatory Commission.
    Seven of the bills would extend the statutory deadline for 
the start of construction of twelve licensed projects. The 
eighth bill would extend the non-statutory deadline for 
completion of project construction for one licensed project. 
The ninth bill would partially waive annual charges assessed 
for one licensed project's occupancy of federal land. I will 
address each subject matter in turn. Detailed information about 
each bill is included in an appendix to my testimony.
          * * * * * * *


             s. 552: special exemption from annual charges


    Section 10(e)(1) of the Federal Power Act requires all 
licensees to pay annual charges for the use, occupancy, and 
enjoyment of United States lands. The Commission bases these 
charges on the Forest Service's periodic determination of land 
values for each county. Section 17 of the Act provides that the 
land use charges collected by the Commission are paid to the 
U.S. Treasury, for disbursement to miscellaneous receipts (12.5 
percent), a reclamation fund (50 percent), and the State in 
which such public land is situated (37.5 percent).
    In May 1992, the Commission issued a new license to Granite 
County for the Flint Creek Project No. 1473. The project 
reservoir is located in part on 2,143 acres of federal lands 
within the Deerlodge National Forest. The prior licensee, 
Montana Power Company, surrendered its license for the project, 
which ceased generating in 1988 due to deterioration of the 
project works. If Granite County accepts the new license, it 
will refurbish the project and increase the installed capacity 
to 2,500 kilowatts. Because Granite County is a political 
subdivision of the State of Montana, the Commission's 
regulations exempt it from annual land use (and other) charges 
until it completes the reconstruction, begins generating power 
at the project, and earns a profit.
    Granite County has so far refused to accept the new license 
for the Flint Creek Project, arguing that the annual charges 
for the project's occupancy of federal lands are too high for 
the size of the project, and that amount of energy the project 
can generate is low in relation to the size of the reservoir 
for which the licensee must pay land use charges. In a series 
of orders, the Commission has responded by noting that it is 
not unusual for a substantial percentage of federal lands 
occupied by a project to be inundated by the project reservoir, 
and that the Flint Creek Project is not particularly small in 
the context of licensed projects, 44 percent of which are 2,500 
kilowatts or smaller.
    S. 552 would give Granite County a special exemption from 
the federal land use annual charge if the County accepts the 
new license. For the first five years of the license, the 
County would not be required to pay annual charges for the 
project's occupancy of United States lands. Thereafter, the 
County would not pay more than $20,000 a year for such 
occupancy. By comparison, the project's annual land use charges 
have in recent years been about $66,000.
    I am certain that all licensees would prefer not to pay for 
the use of United States lands. In my view, the Flint Creek 
Project does not involve extraordinary circumstances 
distinguishing it from many other licensed projects. However, 
aside from that fact, I have no particular opposition to the 
bill.
    This concludes my prepared remarks. I would be pleased to 
answer any questions you may have.
                        changes in existing law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by S. 552, as ordered 
reported.