[Senate Report 104-70]
[From the U.S. Government Publishing Office]



                                                        Calendar No. 93
104th Congress                                                   Report
                                 SENATE

 1st Session                                                     104-70
_______________________________________________________________________


 
 FERC VOLUNTARY LICENSING OF HYDROELECTRIC PROJECTS ON FRESH WATERS IN 
                          THE STATE OF HAWAII

                                _______


   April 27 (legislative day, April 24), 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. 225]
    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 225) to amend the Federal Power Act to 
remove the jurisdiction of the Federal Energy Regulatory 
Commission to license projects on fresh waters in the State of 
Hawaii, having considered the same, reports favorably thereon 
without amendment and recommends that the bill do pass.

                         Purpose of the Measure

    The purpose of S. 225 is to remove the authority of the 
Federal Energy Regulatory Commission to issue a voluntarily-
requested license for hydroelectric projects located on fresh 
waters of the State of Hawaii.

                          Background and Need

    Section 4(e) of the Federal Power Act contains the Federal 
Energy Regulatory Commission's basic authority to issue a 
license for hydroelectric projects. Section 23(b) of the 
Federal Power Act requires the licensing of a hydroelectric 
project built after 1935 on navigable waters or affecting 
interstate commerce.
    Section 4(e) has been interpreted by the courts as 
permitting the voluntary licensing of a hydroelectric project 
where licensing is not required by section 23(b). (Cooley v. 
Federal Energy Regulatory Commission, 843 F.2d 1464 (D.C. Cir. 
1988)
    S. 225 would amend the Federal Power Act to remove the 
jurisdiction of the Federal Energy Regulatory Commission to 
issue a voluntarily-requested license for hydroelectric 
projects on fresh waters in the State of Hawaii. The policy 
justification for exempting Hawaii from the voluntary licensing 
provisions of the Federal Power Act is based on the uniqueness 
of Hawaii's situation.
    The Hawaiian islands are over 2,000 miles from the nearest 
land mass. They are the most geographically isolated group of 
islands in the world.
    Unlike the long interstate rivers of the continental United 
States, Hawaii's streams are isolated on individual islands and 
run quickly off steep volcanic slopes. Hawaii has a total of 
376 streams that flow year-round in at least part of their 
course. These streams are located on five islands--Hawaii 
(132), Maui (90), Kauai (61), Oahu (57), and Molokai (36). Only 
twenty-eight are longer than ten miles and only seven have an 
average flow greater than 80 cubic feet per second. Hawaii's 
streams are generally not navigable except for a few which have 
brief wide stretches near their mounts as they open to the sea. 
There are no interstate rivers, few if any streams crossing 
Federal lands, and no Federal dams.
    Over one-half of Hawaii's streams have been diverted for a 
variety of uses. Irrigating taro fields was the chief historic 
use of Hawaii's surface water. During the past century, 
irrigation of sugar-cane and a booming tourist industry have 
become major water users.
    The populations and distribution of native Hawaiian aquatic 
species are in decline due to stream modification and the 
introduction of non-native competitors and predators. Although 
Hawaiian streams contain a small number of native fish, insect, 
crustacean, and mollusk species, most are only found in Hawaii. 
The middle and lower sections of Hawaii's streams contain eight 
diadromous fauna (animals that migrate between fresh and salt 
water) and two euryhaline fishes (animals that exist in waters 
with varying levels of salt). All require access to the ocean. 
There are no native freshwater species.
    The islands of Hawaii contain one-third of all listed 
threatened and endangered species. Eighteen species of 
threatened and endangered birds live in the riparian zone of 
199 of Hawaii's 376 streams. Four of the species are 
waterbirds, and the rest are forest birds whose habitat include 
streams. Although none of the currently listed threatened and 
endangered plants are associated with Hawaiian streams, about 
180 taxa and rare plants are associated with 86 of those 
streams.
    Eighteen Hawaiian streams are listed on the nationwide 
inventory of potential wild, scenic, and recreational rivers. 
Seventeen are listed because of outstanding scenic value. Four 
are listed because of outstanding recreational value. Ten 
perennial, four intermittent and four minor streams pass 
through or along parts of the National Park System.
    Hawaii's streams are subject to protection under Article 
XXII of the State Constitution, the State Water Code, and a 
comprehensive statewide stream assessment which serves as a 
basic for protecting stream resources. They are still subject 
to the Rivers and Harbors Act of 1899.
    Only about 1.5 percent of the State's electric energy 
currently comes from hydroelectric power. The island of Kauai 
receives 16 percent its electricity from hydroelectric power. 
On the islands of Hawaii, Kauai, and Maui, there is a total of 
eighteen operating plants--sixteen run by sugar companies and 
two managed by a local utility. The combined capacity of the 
existing plants is only 18.5 megawatts (MW). The new 10 MW 
Wailuku River Project, which went into operation in 1993, is 
the only hydropower project built in Hawaii in the past fifty 
years. None are FERC-licensed projects.
    The FERC estimates that there is about 50 MW of unused 
generated capacity in Hawaii, at twenty-eight potential sites. 
All of these potential sites would have a capacity of 5 MW or 
less, with the exception of a potential 11.7 MW site in the 
Wailua River Basin on Kauai. Nine operating plants are 
proposed, with a total potential generating capacity of 21 MW.
    There are about 28 state permits and 30 to 35 county 
permits and approvals that are applicable to land and water use 
proposals. The Department of Land and Natural Resources has the 
primary responsibility for overseeing many of the regulatory 
programs involving hydropower development. Proposed 
hydroelectric projects are subject to a thorough review both 
when they seek to amend instream flow standards to obtain a 
State water lease and when they seek to obtain a Conservation 
District Use Permit.
    Section 2408 of the Energy Policy Act of 1992 (Public Law 
102-486) directed the Federal Energy Regulation Commission 
(FERC), in consultation with the State of Hawaii, to study 
hydroelectric licensing in Hawaii. The purpose of the study is 
to determine whether such licensing should be transferred to 
the state. Section 2408 required the FERC to analyze the 
following:
          (1) the State regulatory programs applicable to 
        hydroelectric power production and the extent to which 
        such programs are suitable as a substitute for 
        regulation of such projects under the Federal Power 
        Act, taking into consideration all aspects of such 
        regulation, including energy, environmental, and safety 
        considerations;
          (2) any unique geographical, hydrological, or other 
        characteristics of waterways in Hawaii or any other 
        aspects of hydroelectric power development and natural 
        resource protection in Hawaii that would justify or not 
        justify the permanent transfer of FERC jurisdiction 
        over hydroelectric power projects to that State;
          (3) the adequacy of mechanisms and procedures for 
        consideration of fish and wildlife and other 
        environmental values applicable in connection with 
        hydroelectric power development in Hawaii under the 
        state programs referred to in paragraph (1);
          (4) any national policy considerations that would 
        justify or not justify the removal of FERC jurisdiction 
        over hydroelectric power projects in Hawaii; and
          (5) the precedent-setting effect, if any, of 
        provisions of law adopted by the Congress removing FERC 
        jurisdiction over hydroelectric power projects in 
        Hawaii.
    On April 13, 1994, the FERC submitted its report to the 
House Committee on Energy and Commerce and to the Senate 
Committee on Energy and Natural Resources as required by 
section 2408. In addition to consulting with the State of 
Hawaii, the FERC solicited the views of other Federal agencies 
involved with the regulations of hydropower projects. The 
report did not reach any overall conclusion as to whether the 
Federal Power Act should be amended to exempt projects on the 
fresh waters of Hawaii from FERC's jurisdiction. The FERC 
stated that the Commission will express no opinion on this 
issue because it properly falls within the purview of the 
Congress to decide.
    S. 225 amends section 4(e) of the Federal Power Act to 
exempt projects on the fresh waters of the State of Hawaii from 
the voluntary licensing authority of the FERC.
    S. 225 does not amend section 23(b) of the Federal Power 
Act which requires the licensing of hydroelectric projects 
built after 1935 on navigable waters or affecting interstate 
commerce or are located on federal lands or use water from a 
government dam.
                          Legislative History

    S. 225 was introduced by Senator Akaka on January 12, 1995. 
Last Congress, a broader measure, S. 2115, was introduced. A 
hearing was held on July 8, 1994, and it was reported by the 
Committee as part of S. 2384. S. 2384, as amended on the floor, 
passed the Senate on October 5, 1994. As amended, S. 2384 
contained a provision identical to S. 225.

            Committee Recommendation and Tabulation of Votes

    The Senate Committee on Energy and Natural Resources, in 
open business session on March 15, 1995, by a majority vote of 
a quorum present, recommends that the Senate pass the bill as 
described herein.
    The rollcall vote on reporting the measure was 18 yeas, 0 
nays, as follows:
        YEAS                          NAYS
Mr. Murkowski
Mr. Hatfield \1\
Mr. Domenici
Mr. Nickles \1\
Mr. Craig
Mr. Thomas
Mr. Kyl \1\
Mr. Grams
Mr. Jeffords \1\
Mr. Burns
Mr. Campbell
Mr. Johnston
Mr. Bumpers
Mr. Ford
Mr. Bradley
Mr. Bingaman \1\
Mr. Akaka
Mr. Wellstone

    \1\ Indicates vote by proxy.
                   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, March 30, 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. 225, a bill to amend the Federal Power Act to 
remove the jurisdiction of the Federal Energy Regulatory 
Commission to license projects on fresh waters in the State of 
Hawaii, as ordered reported by the Senate Committee on Energy 
and Natural Resources on March 15, 1995. CBO estimates that 
enacting the bill would have no net effect on the federal 
budget.
    The bill would provide exemptions for certain hydroelectric 
projects currently subject to licensing by the Federal Energy 
Regulatory Commission (FERC). These provisions may have a minor 
impact on FERC's workload. Because FERC recovers 100 percent of 
its costs through user fees, any change in its administrative 
costs would be offset by an equal change in the fees that the 
commission charges. Hence, the bill's provisions would have no 
net budgetary impact.
    Because FERC's administrative costs are limited in annual 
appropriations, enactment of this bill would not affect direct 
spending or receipts. Therefore, pay-as-you-go procedures would 
not apply to the bill. In addition, CBO estimates that enacting 
the bill would have no significant impact on the budgets of 
state or local governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kim Cawley.
            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:

                      Federal Energy Regulatory Commission,
                                    Washington, DC, March 14, 1995.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: Thank you for your letters of February 
27 and March 2, 1995, and Committee staff's inquiries of March 
13 and 14, requesting my comments on a number of bills to allow 
for the extension of the construction deadlines applicable to 
nine hydroelectric projects licensed by the Federal Energy 
Regulatory Commission. Because it is my understanding that the 
Committee is scheduled to mark all these bills on March 15, I 
have combined my comments on these bills in one letter.
    This letter also responds to your March 2, 1995 request for 
comments on S. 225, a bill to remove the Commission's 
jurisdiction to license projects on fresh waters in the State 
of Hawaii; and to Committee staff's March 13 request for 
comments on S. 522, a bill to exempt from Part I the Federal 
Power Act the primary transmission line for a project in New 
Mexico. The bills fall into four general categories. Each bill 
is discussed below.
          * * * * * * *
                    3. hydropower projects in hawaii

    S. 225 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 FPA 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 if 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. 225, 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.
    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. Therefore, 
enactment of S. 225 would not significantly disrupt the 
Commission's current operations. However, as noted in the 
study, there are two pending requests for rehearing of 
Commission decisions concerning proposals to develop a 
hydroelectric project to be located on the Hanalei River in 
Kauai County, Hawaii. In Island Power Co. (Docket No. EL87-5-
001), an intervenor is seeking rehearing of a determination by 
the Director of the Commission's Office of Hydropower Licensing 
that the proposed project need not be licensed under Section 
23(a)(1) of the FPA because of its effect on diadromous fish 
and anadromous shrimp. 42 FERC para. 62,129 (1988). In Hanalei 
Hydropower, Inc. (Project No. 11161), the State of Hawaii is 
seeking rehearing of the Director's issuance of a preliminary 
permit for the project pursuant to licensing authority under 
Section 4(e) of the FPA because of its location on a Commerce 
Clause water. 57 FERC para. 62,142 (1991).
          * * * * * * *
    Thank you for offering me an opportunity to comment on 
bills affecting the Commission's hydropower program. If I can 
be of further assistance to you in this or any other Commission 
matter,
    With best wishes,
            Sincerely,
                                         Elizabeth A. Moler, Chair.
                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill S. 225, as ordered reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

                           FEDERAL POWER ACT

                 The Act of June 10, 1920, Chapter 285

    Sec. 4. * * *
          * * * * * * *
    (e) To issue licenses to citizens of the United States, or 
to any association of such citizens, or to any corporation, 
organized under the laws of the United States, or any State 
thereof, or to any State or municipality for the purpose of 
constructing, operating, and maintaining dams, water conduits, 
reservoirs, power houses, transmission lines, or other project 
works necessary or convenient for the development and 
improvement of navigation and for the development, 
transmission, and utilization of power across, along, from or 
in any of the streams or other bodies of water over which 
Congress has jurisdiction under its authority to regulate 
commerce with foreign nations and among the [several States, or 
upon] several States (except fresh waters in the State of 
Hawaii, unless a license would be required by section 23 of the 
Act), or upon any part of the public lands and reservations of 
the United States (including the Territories), or for the 
purpose of utilizing the surplus water or water power from any 
Government dam, except as herein provided: Provided, That 
licenses shall be issued within any reservation only after a 
finding by the Commission that the license will not interfere 
or be inconsistent with the purpose for which such reservation 
was created or acquired, and shall be subject to and contain 
such conditions as the Secretary of the department under whose 
supervision such reservation falls shall deem necessary for the 
adequate protection and utilization of such reservation. 
Provided further, That no license affecting the navigable 
capacity of any navigable waters of the United States shall be 
issued until the plans of the dam or other structures affecting 
navigation have been approved by the Chief of Engineers and the 
Secretary of the Army. Whenever the contemplated improvement 
is, in the judgement of the Commission, desirable and justified 
in the public interest for the purpose of improving or 
developing a waterway or waterways for the use or benefit of 
interstate or foreign commerce, a finding to that effect shall 
be made by the Commission and shall become a part of the 
records of the Commission: Provided further, That in case the 
Commission shall find that any Government dam may be 
advantageously used by the United States for public purposes in 
addition to navigation, no license therefor shall be issued 
until two years after it shall have reported to Congress the 
facts and conditions relating thereto, except that this 
provision shall not apply to any Government dam construction 
prior to June 10, 1920. And provided further, That upon the 
filing of any application for a license which has not been 
preceded by a preliminary permit under subsection (f) of this 
section, notice shall be given and published as required by the 
proviso of said subsection. In deciding whether to issue any 
license under this Part for any project, the Commission, in 
addition to the power and development purposes for which 
licenses are issued, shall give equal consideration to the 
purposes of energy conservation, the protection, mitigation of 
damage to, and enhancement of, fish and wildlife (including 
related spawning grounds and habitat), the protection of 
recreational opportunities, and the preservation of other 
aspects of environmental quality.
          * * * * * * *