[Senate Report 105-111]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 216
105th Congress                                                   Report
                                 SENATE

 1st Session                                                    105-111
_______________________________________________________________________


 
                      FEDERAL POWER ACT AMENDMENTS

                                _______
                                

                October 15, 1997.--Ordered to be printed

  Filed, under authority of the order of the Senate of October 9, 1997

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

                              R E P O R T

                         [To accompany S. 439]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 439) to provide for Alaska State 
jurisdiction over small hydroelectric projects, to address 
voluntary licensing of hydroelectric projects on fresh waters 
in the State of Hawaii, to provide an exemption for a portion 
of a hydroelectric project located in the State of New Mexico, 
and for other purposes, having considered the same, reports 
favorably thereon with amendments and recommends that the bill, 
as amended, do pass.
    The amendments are as follows:
    1. On page 2, strike line 1 and all that follows through 
page 4, line 6 and insert the following:

SECTION 1. ALASKA STATE JURISDICTION OVER SMALL HYDROELECTRIC PROJECTS.

    Part I of the Federal Power Act (16 U.S.C. 792 et seq.) is 
amended by adding at the end the following:

``SEC. 32. ALASKA STATE JURISDICTION OVER SMALL HYDROELECTRIC PROJECTS.

    ``(a) Discontinuance of Regulation by the Commission.--
Notwithstanding sections 4(e) and 23(b), the Commission shall 
discontinue exercising licensing and regulatory authority under 
this Part over qualifying project works in the State of Alaska, 
effective on the date on which the Commission certifies that 
the State of Alaska has in place a regulatory program for 
water-power development that--
          ``(1) protects the public interest, the purposes 
        listed in paragraph (2), and the environment to the 
        same extent provided by licensing and regulation by the 
        Commission under this Part and other applicable Federal 
        laws, including the Endangered Species Act (16 U.S.C. 
        1531 et seq.) and the Fish and Wildlife Coordination 
        Act (16 U.S.C. 661 et seq.);
          ``(2) gives equal consideration to the purposes of--
                  ``(A) energy conservation,
                  ``(B) the protection, mitigation of damage 
                to, and enhancement of, fish and wildlife 
                (including related spawning grounds and 
                habitat),
                  ``(C) the protection of recreational 
                opportunities,
                  ``(D) the preservation of other aspects of 
                environmental quality,
                  ``(E) the interests of Alaska Natives, and
                  ``(F) other beneficial public uses, including 
                irrigation, flood control, water supply, and 
                navigation; and
          ``(3) requires, as a condition of a license for any 
        project works--
                  ``(A) the construction, maintenance, and 
                operation by a licensee at its own expense of 
                such lights and signals as may be directed by 
                the Secretary of the Department in which the 
                Coast Guard is operating, and such fishways as 
                may be prescribed by the Secretary of the 
                Interior or the Secretary of Commerce, as 
                appropriate,
                  ``(B) the operation of any navigation 
                facilities which may be constructed as part of 
                any project to be controlled at all times by 
                such reasonable rules and regulations as may be 
                made by the Secretary of the Army, and
                  ``(C) conditions for the protection, 
                mitigation, and enhancement of fish and 
                wildlife based on recommendations received 
                pursuant to the Fish and Wildlife Coordination 
                Act (16 U.S.C. 661 et seq.) from the National 
                Marine Fisheries Service, the United States 
                Fish and Wildlife Service, and State fish and 
                wildlife agencies.
    ``(b) Definition of `Qualifying Project Works''.--For 
purposes of this section, the term ``qualifying project works'' 
means project works--
          ``(I) that are not part of a project licensed under 
        this Part or exempted from licensing under this Part or 
        section 405 of the Public Utility Regulatory Policies 
        Act of 1978 prior to the date of enactment of this 
        section;
          ``(2) for which a preliminary permit, a license 
        application, or an application for an exemption from 
        licensing has not been accepted for filing by the 
        Commission prior to the date of enactment of subsection 
        (c) (unless such application is withdrawn at the 
        election of the applicant);
          ``(3) that are part of a project that has a power 
        production capacity of 5,000 kilowatts or less;
          ``(4) that are located entirely within the boundaries 
        of the State of Alaska; and
          ``(5) that are not located in whole or in part on any 
        Indian reservation, a conservation system unit (as 
        defined in section 102(4) of the Alaska National 
        Interest Lands Conservation Act (16 U.S.C. 3102(4))), 
        or segment of a river designated for study for addition 
        to the Wild and Scenic Rivers System.
    ``(c) Election of State Licensing.--In the case of 
nonqualifying project works that would be a qualifying project 
works but for the fact that the project has been licensed (or 
exempted from licensing) by the Commission prior to the 
enactment of this section, the licensee of such project may in 
its discretion elect to make the project subject to licensing 
and regulation by the State of Alaska under this section.
    ``(d) Project Works on Federal Lands.--With respect to 
projects located in whole or in part on a reservation, a 
conservation system unit, or the public lands, a State license 
or exemption from licensing shall be subject to--
          ``(1) the approval of the Secretary having 
        jurisdiction over such lands, and
          ``(2) such conditions as the Secretary may prescribe.
    ``(e) Consultation With Affected Agencies.--The Commission 
shall consult with the Secretary of the Interior, the Secretary 
of Agriculture, and the Secretary of Commerce before certifying 
the State of Alaska's regulatory program.
    ``(f) Application of Federal Laws.--Nothing in this section 
shall preempt the application of Federal environmental, natural 
resources, or cultural resources protection laws according to 
their terms.
    ``(g) Oversight by the Commission.--The State of Alaska 
shall notify the Commission not later than 30 days after making 
any significant modification to its regulatory program. The 
Commission shall periodically review the State's program to 
ensure compliance with the provisions of this section.
    ``(h) Resumption of Commission Authority.--Notwithstanding 
subsection (a), the Commission shall reassert its licensing and 
regulatory authority under this Part if the Commission finds 
that the State of Alaska has not complied with one or more of 
the requirements of this section.
    ``(i) Determination by the Commission.--
          ``(1) Upon application by the Governor of the State 
        of Alaska, the Commission shall within 30 days commence 
        a review of the State of Alaska's regulatory program 
        for water-power development to determine whether it 
        complies with the requirements of subsection (a).
          ``(2) The Commission's review required by paragraph 
        (1) shall be completed within one year of initiation, 
        and the Commission shall within 30 days thereafter 
        issue a final order determining whether or not the 
        State of Alaska's regulatory program for water-power 
        development complies with the requirements of 
        subsection (a).
          ``(3) If the Commission fails to issue a final order 
        in accordance with paragraph (2), the State of Alaska's 
        regulatory program for water-power development shall be 
        deemed to be in compliance with subsection (a).''.
    2. At the end of the bill, add the following:

SEC. 5. TECHNICAL CORRECTION.

    Section 6 of the Federal Power Act (16 U.S.C. 799) is 
amended by adding at the end the following:
    ``Licenses may be revoked only for the reasons and in the 
manner prescribed under the provisions of this Act, and may be 
altered or surrendered only upon mutual agreement between the 
licensee and the Commission after thirty days' public notice.''

                         Purpose of the Measure

    S. 439, as reported, has five purposes. Section 1 
authorizes the State of Alaska to assume jurisdiction to 
license hydroelectric projects 5 megawatts or smaller. Section 
2 precludes the voluntary licensing of hydroelectric projects 
on fresh waters in the State of Hawaii. Section 3 provides an 
exemption from licensing for the transmission line facilities 
associated with the El Vado hydroelectric project located in 
the State of New Mexico. Section 4 gives the FERC the authority 
to extend for up to ten years the deadline for commencement of 
construction of hydroelectric projects. Section 5 corrects an 
inadvertent deletion of a sentence from the Federal Power Act.

                          Background and Need

                              current law

    Part I of the Federal Power Act was enacted in 1920 to 
establish a ``complete scheme of national regulation which 
would promote comprehensive development of the water resources 
of the Nation.'' First Iowa Hydro-Electric Coop. v. FPC, 328 
U.S. 152, 180 (1946). Section 4(e) of the Federal Power Act 
authorizes the Federal Energy Regulatory Commission (FERC) to 
issue licenses for hydroelectric projects that (1) are located 
on waters over which Congress has jurisdiction under the 
Commerce Clause, (2) are located on public land or a federal 
reservation, or (3) use surplus water or power from a federal 
dam. Section 23(b) of the Act requires anyone building or 
operating a hydroelectric project to obtain a FERC license if 
the project (1) is located on navigable water, (2) is located 
on public land or a federal reservation, (3) uses surplus water 
or power from a federal dam, or (4) is located on a body of 
water over which Congress has jurisdiction under the Commerce 
Clause, was built after 1935, and affects interstate or foreign 
commerce.
    Although Congress' power to regulate interstate and foreign 
commerce includes the power to regulate navigation, Gibbons v. 
Ogden, 22 U.S. (9 Wheat.) 1, 189 (1824), Federal Commerce 
Clause jurisdiction is broader than the concept of 
navigability. United States v. Appalachian Power Co., 311 U.S. 
377, 426-427 (1940). Thus, the circumstances in which the FERC 
may issue licenses under section 4(e) of the Federal Power Act 
are broader than the circumstances in which developers of 
hydroelectric projects must obtain a FERC license. As a result, 
the FERC has the power to issue a license for a hydroelectric 
project in response to a voluntary application under section 
4(e) of the Federal Power Act, even though the applicant is not 
required to obtain a license under section 23(b) of the Act. 
Cooley v. FERC, 843 F.2d 1464, 1469 (D.C. Cir. 1988).
    Current law also gives the FERC the discretion to exempt 
small hydroelectric projects from the licensing requirements of 
section 23(b) of the Federal Power Act. Section 30 of the 
Federal Power Act permits the FERC to exempt hydroelectric 
projects of up to 40 megawatts located on certain types of 
conduits and on non-Federal land. Section 405 of the Public 
Utility Regulatory Policies Act of 1978 permits the FERC to 
exempt certain projects with a capacity of 5 megawatts or less 
located at non-Federal dams built before 1977.

                         the alaskan exemption

    In 1991, the Bush administration proposed a National Energy 
Strategy designed to reduce our nation's dependence on foreign 
oil and increase domestic energy security. Among other things, 
the President's strategy called for legislation ``exempting 
from FERC regulation non-Federal hydropower projects with a 
capacity of 5 MW or less.'' The Bush administration asserted 
that a nationwide 5 MW exemption was ``appropriate because the 
issues raised by small hydropower projects are local and ought 
not to require a FERC decision; and small projects have little 
or no impact on navigation and interstate commerce, the 
motivation for FERC jurisdiction over many projects.'' National 
Energy Strategy, p. 123 (1991).
    The Committee on Energy and Natural Resources included a 
nationwide 5 megawatt exemption in the energy policy bill (S. 
1220) it reported in 1991. S. Rept. 102-72, pp. 51-52, 243-244. 
The Senate adopted an amendment to strike the exemption, 
however, and the Energy Policy Act of 1992 became law without 
the 5 megawatt exemption.
    In both the 103rd and 104th Congresses, the Committee 
included 5 megawatt exemptions for projects in Alaska only in 
hydroelectric bills (S. 2384 in the 103rd Congress; S. 737 in 
the 104th Congress). These provisions would have given the 
State of Alaska the option of assuming licensing authority over 
hydroelectric projects in Alaska that have a capacity of 5 
megawatts or less. Although the Senate passed both bills, 
neither was enacted into law.
    Section 1 of S. 439, like the two earlier provisions, is 
premised on the belief that Alaska presents special 
circumstances that favor local control over projects that would 
otherwise be subject to FERC licensing. Unlike the lower 48 
states, Alaska is not connected to the interstate electric 
grid. Small hydro is especially important in remote sections of 
Alaska, where the availability of energy sources is limited and 
the resulting cost of producing electricity is high. Over 150 
villages in Alaska are not interconnected into any larger 
electrical grid, and each is supplied with power almost 
exclusively from its own diesel generators--the most expensive 
type of electric power producer. As a result, the cost of power 
in these communities is the highest in the United States. 
Residential rates are between 40 and 45 cents per kilowatt-
hour, for to five times the average residential rate in the 
United States. In the absence of hydroelectric power, the only 
practical source of electric power is small-scale diesel 
generation, which is not only very expensive but also can have 
undesirable environmental impacts. FERC testified at the 
hearing on S. 439 that, while they would object to a generic 5 
MW exemption for projects located in the lower 48 States, they 
would not object to an Alaska exemption, based on Alaska's 
unique circumstances, provided an Alaska program would 
adequately evaluate project impacts.

                         the hawaiian exemption

    The State of Hawaii has also made a case for a limited 
exemption from FERC licensing based on Hawaii's unique 
circumstances. Hawaii's streams are isolated on individual 
islands and run quickly down steep volcanic slopes. There are 
no interstate rivers in Hawaii, few if any streams crossing 
Federal land, and no Federal dams. Hawaii's streams are 
generally not navigable. Hawaii has a unique body of water law 
that has evolved from Native Hawaiian custom and a 
comprehensive regulatory program that protects water resources.
    In short, none of the bases for FERC's licensing 
jurisdiction under section 23(b) of the Federal Power Act 
appear to exist in Hawaii. Indeed, FERC has never licensed a 
hydroelectric project in Hawaii and has no applications to 
license one pending.
    Nonetheless, as explained under ``Current law'' above, 
section 4(e) of the Federal Power Act gives FERC the discretion 
to license hydroelectric projects in response to voluntary 
applications even though the project is not required to be 
licensed under section 23(b) of the Act. The Attorney General 
of Hawaii has testified that FERC's voluntary licensing 
authority ``can lead to: (1) claim jumping by business 
competitors; and (2) attempts to use FERC's claimed preemptive 
authority to override state stream regulation'' to the 
detriment of Hawaii's waters. S. Hrg. 103-924, p. 14 (1994).
    In 1991, the Committee on Energy and Natural Resources 
favorably reported legislation to eliminate the FERC's 
voluntary licensing authority over hydroelectric projects on 
fresh waters in Hawaii as part of its energy policy bill (S. 
1220) in the 102nd Congress. S. Rept. 102-72, p. 245. The 
Senate passed an energy bill (S. 2166) with the Hawaiian 
exemption in it in 1992, but the provision was substantially 
rewritten in conference. As ultimately enacted, the provision 
did not eliminate the FERC's voluntary licensing authority over 
projects in Hawaii, though it did direct the FERC to study 
hydroelectric licensing in Hawaii and report to Congress on 
whether projects in Hawaii should be exempt from FERC 
licensing.
    The FERC submitted its report in 1994. 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 the FERC's jurisdiction, though it did note that 
the FERC had never licensed a hydroelectric project in Hawaii.

                         The El Vado exemption

    In 1985, the FERC granted a license to the County of Los 
Alamos, New Mexico for the El Vado Hydroelectric Project, an 8 
megawatt project on the Rio Chama, a tributary of the Rio 
Grande. The licensed project includes a 12-mile-long 
transmission line, which is essential to the project's 
operation. The transmission line is, however, owned and 
operated by a separate entity, the Arriba Electric Cooperative.
    Because the transmission line is critical to the operation 
of the licensed project, the FERC required the County of Los 
Alamos to obtain control over the line, either by purchase or 
contract. Alternatively, FERC said that Arriba could join Los 
Alamos as a co-licensee of the project or obtain a separate 
license for the transmission line. Twelve years after FERC 
licensed the project, Los Alamos still has not complied with 
this licensing requirement.
    Legislation is needed to exempt the transmission line from 
FERC's licensing requirement or FERC will be compelled to 
initiate enforcement action against Los Alamos.

         Extension of the commencement of construction deadline

    Section 13 of the Federal Power Act requires a licensee to 
commence construction of its hydroelectric project within two 
years. Failing that, section 13 allows the FERC to issue a 
single, two-year extension. If the licensee does not commence 
construction by the end of that time, it loses its license. By 
law, FERC can grant no more extensions.
    In the current electric market, a number of licensees are 
not able to obtain the power sales contracts necessary to 
secure financing to permit them to commence construction. If 
the license is lost, the licensees's substantial time and 
monetary investment in obtaining a FERC license are likely to 
be lost. Subsequently, if the licensee tries to resume the 
project, it must begin the FERC licensing process anew.
    Over two dozen bills were introduced in the House and 
Senate during the 104th Congress to extend the commencement of 
construction deadline for individual projects on a case-by-case 
basis. Congress ultimately passed legislation to extend all of 
the projects, but not before some licenses had terminated by 
operation of law. Additional extension bills have been 
introduced and are now pending before the Committee on Energy 
and Natural Resources in this Congress. Legislation is needed 
to give the FERC general authority to extend the commencement 
of construction deadline administratively to avoid the need for 
Congress to act on individual extensions on a case-by-case 
basis.

                          Legislative History

    The first three sections of S. 439 were reported from the 
Committee on Energy and Natural Resources and passed by the 
Senate as part of S. 2384 in the 103rd Congress and S. 737 in 
the 104th Congress, Section 2, the Hawaiian exemption, also 
passed the Senate separately as S. 2115 in the 103rd Congress. 
Section 2 is also being separately reported as S. 846 in this 
Congress.
    S. 439 was introduced by Mr. Murkowski, along with Senators 
Akaka, Domenici and Kyl on March 13, 1997. A hearing was held 
by the Subcommittee on Water and Power on June 10, 1997. At the 
Committee's September 24, 1997, business meeting, the Committee 
adopted an amendment offered by Senator Bumpers in the form of 
a full substitute to section 1, as further amended by an 
amendment offered by Senator Murkowski. The Committee also 
adopted a joint-staff recommended amendment.

            Committee Recommendation and Tabulation of Votes

    The Senate Committee on Energy and Natural Resources, in 
open business session on September 24, 1997, by a unanimous 
vote of a quorum present, recommends that the Senate pass S. 
439 as amended.
    The rollcall vote on reporting the measure was 20 yeas, 0 
nays, as follows:
        YEAS                          NAYS
Mr. Murkowski
Mr. Domenici
Mr. Nickles\1\
Mr. Craig
Mr. Campbell
Mr. Thomas\1\
Mr. Kyl
Mr. Grams
Mr. Smith
Mr. Gorton
Mr. Burns\1\
Mr. Bumpers
Mr. Ford
Mr. Bingaman\1\
Mr. Akaka
Mr. Dorgan
Mr. Graham\1\
Mr. Wyden\1\
Mr. Johnson
Ms. Landrieu

    \1\ Indicates vote by proxy.

                          Committee Amendments

    The Committee adopted an amendment in the nature of a 
substitute to section 1. As introduced, section 1 transferred 
licensing and regulatory authority over qualifying 
hydroelectric projects in Alaska from the FERC to the State of 
Alaska by purporting to grant the State ``exclusive authority 
to authorize such project works under State law.'' The 
Committee amendment accomplishes the transfer by directing the 
FERC to discontinue exercising its licensing and regulatory 
authority, notwithstanding sections 4(e) and 23(b) of the 
Federal Power Act.
    Section 1 as introduced made the transfer of authority 
effective when the Governor of Alaska notified the Secretary of 
Energy that the State had an adequate regulatory program in 
place. The Committee amendment requires the Federal Energy 
Regulatory Commission, in consultation with the Secretaries of 
the Interior, Agriculture, and Commerce, to certify that the 
State's program is adequate.
    The Committee amendment to section 1 defines in greater 
detail the tests the State's regulatory program must meet for 
certification. First, it must protect the public interest, 
certain enumerated interests, and the environment to the same 
extent provided by licensing and regulation by the FERC under 
federal law. Second, consistent with the last sentence of 
section 4(e) of the Federal Power Act, the State program must, 
in addition to the power and development purposes for which 
licenses are issued, give equal consideration to the purposes 
listed in section 4(e) of the Federal Power Act, the interests 
of Alaska Natives, and other beneficial public uses, including 
irrigation, flood control, water supply, and navigation. Third, 
the State must condition licenses upon the navigation and fish 
and wildlife conditions set forth in sections 4(e), 10(j), and 
18 of the Federal Power Act.
    The Committee amendment to section 1 also requires the 
State of Alaska to notify the FERC not later than 30 days after 
making any significant modification to its regulatory program 
and it requires the FERC to review the State's program 
periodically to ensure compliance. If the FERC finds that the 
State of Alaska has not complied with one or more requirements, 
the Committee amendment requires the FERC to reassert its 
licensing and regulatory authority under section 4(e) and 23(b) 
of the Federal Power Act.
    Finally, the Committee amendment to section 1 requires the 
FERC to commence its review of the State's regulatory program 
no later than 30 days after the Governor of Alaska requests the 
FERC to certify its program. The FERC must complete its review 
within one year and issue a final order approving or 
disapproving the State's plan within 30 days after completing 
its review. If the Commission fails to issue a final order 
within the allotted time, the State's program shall be deemed 
to be in compliance.
    In addition, the Committee adopted a second amendment 
adding a new section 5 to the bill. Section 5 restores language 
mistakenly deleted from section 6 of the Federal Power Act in 
1996. Section 6 of the Federal Power Act originally consisted 
of four sentences. Both the National Defense Authorization Act 
for Fiscal Year 1996 (Public Law 104-106, sec. 4321(i)(6))and 
the General Accounting Office Act of 1996 (Public Law 104-316, sec. 
108(a)) struck the ``last sentence'' of section 6, which required the 
FERC to file copies of licenses with the General Accounting Office. By 
the time the General Accounting Office Act became law on October 19, 
1996, however, the ``last sentence'' was the third sentence since the 
fourth sentence had already been repealed by the Defense Authorization 
Act when it became law in February 1996. As a result, the General 
Accounting Office Act repealed the third sentence, which governed 
license revocation and which the FERC testified is ``highly 
significant.'' The second Committee amendment restores the original 
text of the third sentence to section 6 of the Federal Power Act.

                      Section-by-Section Analysis

    Section I directs the FERC to discontinue exercising its 
licensing and regulatory authority over qualifying project 
works in the State of Alaska upon certifying that the State has 
in place a regulatory program for such projects that provide 
the same level of protection to the public interest and the 
environment as Federal regulation, gives certain non-power 
interests equal consideration with power development interests, 
and requires licensees to observe the same conditions for 
navigation and fish and wildlife protection that are now 
required by Federal law.
    Section 2 eliminates the FERC's authority to issue 
voluntarily requested licenses for hydroelectric projects 
located on fresh waters in the State of Hawaii.
    Section 3 exempts from FERC licensing a transmission line 
associated with the El Vado hydroelectric project in New 
Mexico.
    Section 4 amends section 13 of the Federal Power Act to 
give the FERC the authority to extend for up to 10 years the 
deadline for the commencement of construction of a 
hydroelectric project.
    Section 5 reenacts the third sentence of section 6 of the 
Federal Power Act, which was inadvertently repealed by the 
General Accounting Office Act of 1996.

                   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, September 30, 1997.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 439, a bill to 
provide for Alaska state jurisdiction over small hydroelectric 
projects, to address voluntary licensing of hydroelectric 
projects on fresh waters in the state of Hawaii, to provide an 
exemption for portion of a hydroelectric project located in the 
state of New Mexico, and for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts for this 
estimate are Kim Cawley (for federal costs) and Pepper 
Santalucia (for the state and local impact).
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).
    Enclosure.

S. 439--A bill to provide for Alaska state jurisdiction over small 
        hydroelectric projects, to address voluntary licensing of 
        hydroelectric projects on fresh waters in the state of Hawaii, 
        to provide an exemption for portion of a hydroelectric project 
        located in the state of New Mexico, and for other purposes

    The bill would provide exemptions for certain hydroelectric 
projects currently subject to licensing by the Federal Energy 
Regulatory Commission (FERC) in Alaska, Hawaii, and New Mexico. 
It also would allow FERC to extend the deadline for 
commencement of hydroelectric construction projects for up to 
ten years.
    CBO estimates that enacting this bill would have no net 
effect on the federal budget. S. 439 contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act of 1995. The bill would limit 
FERC's authority to issue licenses for hydroelectric projects 
in Hawaii, leaving the state with the authority to license any 
affected projects. Any increase in the state's workload would 
be the result of its own regulatory process. The bill would 
also allow the state of Alaska to apply to FERC for 
jurisdiction over certain small hydroelectric projects.
    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.
    The CBO staff contacts for this estimate are Kim Cawley 
(for federal costs), and Pepper Santalucia (for the state and 
local impact). This estimate was approved by Paul N. Van de 
Water, Assistant Director for Budget Analysis.

                      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, the Department of the 
Interior and the Department of Commerce setting forth Executive 
agency views relating to this measure are set forth below:

 Prepared Statement of Susan Tomasky, General Counsel, Federal Energy 
                         Regulatory Commission

    Mr. Chairman and Members of the Subcommittee: My name is 
Susan Tomasky, and I am General Counsel for the Federal Energy 
Regulatory Commission. I am appearing before you as a 
Commission staff witness and do not speak for individual 
members of the Commission.
    Thank you for the opportunity to be here today to comment 
on S. 439, a bill affecting the Federal Energy Regulatory 
Commission's regulation of non-federal hydropower projects 
pursuant to Part I of the Federal Power Act and related 
statutes.


       s. 439, section 1: small hydroelectric projects in alaska


    Section 1 of S. 439 provides (with certain exceptions 
discussed below) that, at such time as the Governor of the 
State of Alaska notifies the Secretary of Energy that the State 
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 nor 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, 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.


       ferc-regulated hydropower projects in the state of alaska


    The Commission authorizes the construction, operation, and 
maintenance of hydropower projects under three different 
instruments: licenses issued pursuant to Part I of the Federal 
Power Act; exemptions from licensing, issued pursuant to 
Section 30 of the FPA for hydropower projects of up to 40 MW 
located on certain types of conduits and on non-federal land 
(conduit exemptions); and exemptions from licensing, issued 
pursuant to Section 405 of the Public Utility Regulatory 
Policies Act of 1978 for certain projects with 5 MW capacity or 
less located at non-federal pre-1977 dams (5 MW exemptions). In 
addition, under Section 4(f) of the Federal Power Act the 
Commission issues preliminary permits under which permittees 
may study the feasibility of a project proposal while holding 
the right of priority to apply for a license or exemption.
    There are currently 21 licensed projects in Alaska. Of 
these, 15 projects occupy National Forest lands administered by 
the U.S. Forest Service, and 6 projects occupy federal lands 
administered by the U.S. Bureau of Land Management (BLM). Of 
the total of 21 licensed projects, 11 projects are 5 MW or 
less, and 10 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.
    According to the Commission's computer data base, it 
appears that none of the licensed or exempted projects occupies 
an Indian reservation. One project occupies a National Moose 
Range; one project is at least partly within the Skagway-White 
Pass National Historic Landmark; one project occupies a segment 
of the Deer Mountain-John Mountain Trail, which is part of the 
National Recreation Trail System; and one project occupies the 
Kodiak National Wildlife Refuge. Effective with the passage of 
the Energy Policy Act of 1992, there are new criteria governing 
the Commission's power to authorize projects that would occupy 
a unit of the National Park System.
    The data base does not indicate that there are any existing 
projects located on rivers that are now included, or being 
studied for inclusion, in the National Wild and Scenic Rivers 
System. I note that under Section 7(a) of the Wild and Scenic 
Rivers Act the Commission is barred from licensing (or 
exempting from licensing) the construction of hydropower 
project works on or directly affecting any river included, or 
being studied for inclusion, in the System.
    There are currently pending before the Commission two 
Alaska license applications, both of which have been accepted 
for filing. The applications are for a 6 MW project, to be 
located on lands belonging to a Native corporation, and a 9.6 
MW project, to 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, both to occupy 
National Forest lands. Six would be projects 5 MW or less, of 
which three would occupy National Forest lands, one would 
occupy BLM lands, and two would occupy non-federal lands. There 
are also pending three Alaska permit applications, to study a 
2.5 MW, 1.7 MW, and 0.8 MW project, all on National Forest 
lands.


                                comments


    As a general matter, we 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 very significant impact both at the 
project site and far beyond its immediate environs. That impact 
must be evaluated. Pursuant to the mandates of the Federal 
Power Act, the Commission performs that evaluation, and in 
doing so 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, we do not object to the legislation, provided that 
the state program will adequately evaluate project impacts. 
However, we would object to 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.
    There are a number of technical issues associated with 
Section 1 of S. 439. I will address these next.
    The bill requires the Governor of the State of Alaska to 
notify the Secretary of Energy that the State has a regulatory 
program in place. Under the Department of Energy Organization 
Act, the Secretary is not charged with responsibility for 
administering the hydropower development program. Rather, that 
responsibility resides with the Commission. I would 
respectfully suggest that the notification be addressed to the 
Chair of the Commission rather than to the Secretary. We would, 
in turn, notify the Secretary of Energy, the Secretary of the 
Interior, the Secretary of Commerce, and the Secretary of 
Agriculture, as required according to the jurisdiction of 
federal lands affected.
    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.'' Pursuant to Section 
3(11) of the Act, these include all powerhouses, water 
conduits, dams and appurtenant works and structures (including 
navigation structures) which are a part of a complete 
hydropower unit of development; all associated storage, 
diverting, or forebay reservoirs, the primary transmission 
lines carrying projects power to the distribution system, and 
all miscellaneous structures used and useful in connection with 
the hydropower unit; and all ditches, dams, or reservoirs that 
are necessary or appropriate in the maintenance and operation 
of such unit.
    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. Or a developer may deliberately 
underutilize the water power potential of a stream in order to 
evade Commission jurisdiction. Creating these incentives would 
not in our view foster public interest objectives. We 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.
    The bill does not address the Commission's exemption 
authority. As I described above, the Commission has two sources 
of statutory authority to issue exemptions from licensing for 
qualifying projects. An exemption is not tantamount to federal 
deregulation; rather, it is a form of lesser regulation 
designed for projects which by their nature should not 
ordinarily entail a significant impact on the environment. 
Exempted projects are subject to mandatory fish and wildlife 
conditions imposed by state and federal fish and wildlife 
agencies. Inasmuch as the bill does not mention exemptions, 
projects exempted as of the date of the bill's enactment would 
not be subject to transfer to State regulation.
    Any future development proposal of 5 megawatts or less (and 
not located on expected federal lands), whether or not it would 
have qualified for an exemption, apparently comes under State, 
not Commission, jurisdiction. This would appear to be the 
intent, even though the bill states that, as to qualifying 
project works, ``the State of Alaska shall have the exclusive 
authority to authorize such project works under State law, in 
lieu of licensing by the Commission under otherwise applicable 
provisions of this part [Part I of the FPA].'' Assuming I am 
correctly understanding the intent, the bill should provide for 
the State's exclusive authority, ``in lieu of licensing and 
exemption from licensing by the Commission under otherwise 
applicable provisions of this part and of Section 405 of the 
Public Utility Regulatory Policies Act of 1978.''
    As noted, the State's ``exclusive'' authority over 
qualifying project works is in lieu of the Commission's 
authority. However, the bill provides that no transfer of 
authority to the State ``shall preempt the application of 
Federal environment, natural, or cultural resources protection 
laws according to their terms.'' In addition, with the removal 
of the Commission's authority, other Federal agencies may have 
jurisdiction over certain projects. For example, removal of the 
Commission's jurisdiction leaves intact the jurisdiction of the 
U.S. Army Corps of Engineers under the Rivers and Harbors Act 
of 1899, which requires a Corps permit for new construction in 
navigable waters. Presumably, any Corps action under the 1899 
Act would be a federal action subject to applicable federal 
procedural and resource protection laws, such as the National 
Environmental Policy Act, the Clean Water Act, the Historic 
Preservation Act, the Endangered Species Act, and so forth.


s. 439, section 2: voluntary licensing of hydroelectric projects in the 
                            state of hawaii


    Section 2 of S. 439 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. Air. 1988).
    Under S. 439, 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.


                                comments


    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. Our data bases 
currently do not show any pending or outstanding preliminary 
permits, license, or exemptions in the State of Hawaii. 
Therefore, Section 2 of S. 439 would not disrupt the 
Commission's current operations, and we would not object to its 
enactment.


          s. 439, section 3: el vado project transmission line


    Section 3 of S. 439 would exempt from regulation under Part 
I of the Federal Power Act a 12-mile transmission line which is 
a project work of the licensed El Vado Hydroelectric Project, 
FERC No. 5226.
    In 1985, the Commission issued a license to the County of 
Los Alamos, New Mexico, for the 8-megawatt El Vado 
Hydroelectric Project, on the Rio Chama, a tributary of the Rio 
Grande, in Rio Arriba County, New Mexico. The licensed project 
includes a 12-mile-long, 69-Kilovolt primary transmission line, 
which is necessary to the operation of the project. The 
transmission line is, however, owned and operated by a separate 
entity, Arriba Electric Cooperative. The license gave Los 
Alamos five years to acquire the necessary title or contractual 
operational control over the transmission line. Alternatively, 
the Cooperative could have joined Los Alamos as co-licensee, or 
could have obtained a separate license for the transmission 
line. The Cooperative apparently did not wish to pursue either 
course. Twelve years after the license was issued, the licensee 
has still failed to comply with the requirement that it obtain 
necessary property rights over the line, despite repeated 
letters and compliance orders from the Commission staff.
    The transmission line has been constructed and is in 
operation, and we are not aware of any problems associated with 
it. We are also not aware of any aspect of this particular 
primary transmission line that would distinguish it from other 
hydroelectric project primary transmission lines. In addition, 
this licensee's years-long lack of compliance with a 
fundamental license requirement is a troubling factor. 
Consequently, we do not support Section 3 of S. 439.
    Whatever course of action the Congress ultimately chooses, 
we do urge prompt resolution of this matter. We have had 
pending a compliance action regarding this line for three 
years. We have held the action in abeyance because of 
congressional interest in addressing the matter legislatively.


s. 439, section 4: extension of statutory deadline for commencement of 
                          project construction


    Section 4 of S. 439 would amend Section 13 of the Federal 
Power Act to authorize the Commission to extend the period for 
the commencement of project construction to not longer than ten 
years from the issuance date of the license, when not 
incompatible with the public interest.
    As a general matter, we believe the four-year period 
provided under existing law is long enough for licensees to 
determine if a project is viable and to begin construction. 
Sometimes four years is not adequate due to externalities such 
as lack of a dredge and fill permit under Section 404 of the 
Clean Water Act, the need to await modifications to the Federal 
dam at which the project is to be located, or the pendency of 
Endangered Species Act issues. In such cases, the Commission 
will generally stay the construction deadline until the 
obstacle is removed. However, the most common reason for 
failure to commence project construction is the licensee's lack 
of a power sales contract or other form of financing. The 
Commission has declined to stay construction deadlines for this 
reason, and we do not believe a generic amendment to the 
statutory deadline is warranted. However, because the bill 
permits the Commission to refuse an extension if it is 
incompatible with the public interest, we do not object to 
enactment of this amendment.
                                ------                                

                             The Secretary of the Interior,
                                    Washington, September 19, 1997.
Hon. Frank Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: This responds to your request for the 
views of this Department with respect to a bill, S. 439, to 
Provide for Alaska State jurisdiction over small hydroelectric 
projects, and for other purposes.
    The Department is strongly opposed to S. 439.
    The proposed legislation would make several amendments to 
the Federal Power Act (FPA) (16 U.S.C. 179a et seq.). Section 1 
would amend section 23 of the FPA to transfer jurisdiction over 
hydroelectric projects of 5,000 kilowatts or less from the 
Federal Energy Regulatory Commission (FERC) to the State of 
Alaska. Section 2 would provide for voluntary licensing of 
hydroelectric projects in fresh waters in the State of Hawaii. 
Section 3 would exempt from licensing the transmission line 
portion of a hydroelectric project located in New Mexico. 
Section 4 extends the period for the commencement of 
construction for hydroelectric projects.
    Section 1 of S. 439 would amend section 23 of the FPA by 
adding new subsections (c), (d), (e), and (f). Subsection (c) 
would transfer to the State of Alaska hydroelectric projects in 
the State that are not part of a project already licensed, that 
are not part of a project for which an application for license 
has been received, that have a production capacity of 5,000 
kilowatts or less, and that are not located on any Indian 
reservation, unit of the National Park System, component of the 
Wild and Scenic Rivers System or segment of a river designated 
for study for potential addition to the system. Subsection (d) 
allows licensees already licensed by FERC to transfer 
jurisdiction to the State.
    In general, the Department objects to the focus of this 
legislation, which seeks to remove certain hydroelectric 
projects from Federal jurisdiction. The Department opposed 
similar amendments in 1994, and we continue to oppose the 
effort to remove hydroelectric projects from Federal 
jurisdiction. Allowing Alaska or Hawaii to assert jurisdiction 
over certain hydroelectric projects contradicts the intent of 
the FPA, which was enacted to establish a uniform system of 
licensing over hydroelectric projects in the United States. The 
FPA already includes provisions for exempting small projects 
and excludes from its jurisdiction certain projects which fail 
to meet the mandatory licensing criteria in section 23. 
Allowing one or two States to begin exercising independent 
jurisdiction will very likely lead to similar provisions for 
other States and a patchwork of regulatory programs and of 
related environmental review and enforcement, thereby defeating 
the intent of Congress in enacting the FPA in 1920 and 
subsequent Federal laws.
    The transfer would take effect upon the Governor's 
notification to the Secretary of Energy that the State has in 
place a comprehensive process for regulating the facilities. 
The State process is to give appropriate consideration to the 
improvement or development of the State's waterways for the 
user or benefit of commerce, for the improvement and use of 
water power development, for the adequate protection, 
mitigation and enhancement of fish and wildlife (including 
related spawning grounds), for Indian rights, and for other 
beneficial public uses, including irrigation, flood control, 
water supply, recreational and other purposes.
    We object to the Governor's unilateral determination and 
notification. Under this proposal the determination that the 
State's regulations give appropriate consideration to a variety 
of factors and circumstances is made unilaterally by the State. 
The State merely notifies the Secretary of Energy when it has 
regulations in place. There is no provision for approval or 
even review or consultation in the development of the State 
process by the Secretary of Energy or by any other Federal 
agency with an interest in the many purposes specified to be 
covered by the plan to be proposed by the Governor.
    We also object to the limited exceptions provided in 
subsection (c). Exceptions include Indian reservations, 
National Parks, and wild and scenic rivers systems lands, but 
not National Wildlife Refuge System units and other 
conservation units, components of the National Wilderness 
Preservation System, wilderness study areas, other areas of 
critical environmental concern, and lands provided to Alaska 
Natives pursuant to the Alaska Native Claims Settlement Act.
    Subsection (e) requires that State authorizations for 
project works located in whole or in part on Federal lands be 
subject to the approval of the Secretary having jurisdiction 
with respect to such lands, and subject to such terms and 
conditions as the Secretary may prescribe. Subsection (f) 
States that Federal environmental, natural and cultural 
resource protection laws continue to apply to the lands 
transferred under subsection (c). These provisions, while 
potentially helpful, leave many questions unanswered.
    Would the State enforce compliance of federally-identified 
terms and conditions under the State authorization? What 
mechanism or procedure would be available if the Secretary with 
jurisdiction did not agree with the State's enforcement 
actions?
    Applications for license filed with FERC under Sec. 24 of 
the FPA withdraw public land from the operation of public land 
laws. The issuance of a license by FERC further withdraws the 
land from mining. Would applications and authorizations filed 
with and granted by the State of Alaska also segregate the 
public lands Section 24 of the FPA also controls the opening of 
withdrawn lands. What would the State's role and authority be 
with regard to opening Federal lands?
    Since enactment of Federal Land Policy and Management Act 
(43 U.S.C. 1701 et seq.) (FLPMA), power projects involving 
Bureau of Land Management (BLM) lands require both a FERC 
license (or an exemption from licensing) and a FLPMA right-of-
way. Does this section include Federal land use authorization 
with the issuance of the State authorization, or would there be 
a separate FLPMA right of way?
    This bill would remove small projects in Alaska from the 
Commission's evaluation under the National Environmental Policy 
Act (NEPA). How would NEPA be applied to the State process?
    In the absence of a current State capability, the 
Department cannot predict which role and authority we would 
have in an as yet undisclosed State process. This legislation 
could seriously impair or eliminate our review and mitigation 
formulation roles under the Federal Power Act and the Fish & 
Wildlife Coordination Act and the mandatory conditioning 
authority now exercised by the Federal fishery agencies to 
prescribe conditions for fish passage. Our mission requires us 
to exercise trust responsibility for migratory birds, resident 
and anadromous fish, endangered species, and certain marine 
mammals. If we do not have authority under this bill at least 
as strong as under the FPA, we will be unable to undertake our 
trust responsibilities and the Nation's and Alaska's fish and 
wildlife resources will suffer.
    The references included in the bill to ``Federal lands'' 
and to ``any Indian reservation'' do not adequately address the 
rights of Alaska Natives afforded under the Alaska Native 
Claims Settlement Act, and the Alaska National Interest 
Conservation Lands Act and thus may fail to provide adequate 
protection of Alaska Natives, their lands, and their 
traditional way of life. The bill is silent on Alaska Native 
corporations, their lands and their selections. Moreover, the 
Department objects to any provision in the bill which may be 
construed to assign to a State authority to delineate Indian 
rights.
    There is no provision in the proposed legislation to assure 
that State promulgated regulations would provide appropriate 
consideration of responsibilities under the subsistence 
provisions of section VIII of ANILCA.
    Section 2 of the bill amends section 4(e) of the FPA to 
``except fresh waters in the State of Hawaii, unless a license 
would be required by section 23 of the Act.'' The applicability 
of this provision is unclear. Apparently, it seeks to exclude 
projects on fresh waters in Hawaii from Federal licensing, but 
limits that exclusion to those projects which do not require 
licensing under section 23 and which would be exempt from 
Federal licensing even without this proposal. In any case this 
provision will likely fragment Federal licensing authority.
    Section 3 would exempt from FERC jurisdiction a 12-mile 
transmission line extending from the El Vado Project 
switchyard. FERC issued a compliance order in 1993, finding the 
Project Licensee in violation of its license, in that the 
transmission line was not located within the project 
boundaries. Apparently, through this exemption, the Licensee 
seeks to remove itself from FERC's enforcement and penalty 
authority, even though when accepting the license, it accepted 
the condition requiring location of the transmission line 
within the project boundaries. We oppose this exception. FERC's 
enforcement authority, and the various reviews and conditions 
attendant to the license, will be meaningless if licensees can 
seek legislative exemption from the license conditions to which 
they originally agreed.
    Section 4 amends section 13 of the FPA, which currently 
provides for a two year period in which to commence 
construction of a project, to extend the commencement of 
construction period up to 10 years. Currently, section 13 
allows the Commission to grant an extension of two years for 
commencement, and additional extensions for the completion of 
construction. Numerous licensees now obtain legislative 
extensions, a practice about which the Department expressed 
concerns on the 1994 amendments, which contained several 
project-specific extensions. This proposal for a general 
extension is new.
    The Department's concerns about the specific legislative 
extensions are even more applicable to this long general 
extension. Extending the time for commencement of construction 
up to 10 years will render the environmental evaluation, and 
other evaluations performed in the licensing proceeding, stale. 
Conditions can change drastically in 10 years. Protections 
afforded by license reviews may be rendered meaningless. 
Licenses should not be granted if projects are not ripe for 
development and construction is to be delayed for such an 
extended period. Extensions are much better handled 
administratively and on a case-specific basis.
    For all of the above reasons, the Department is strongly 
opposed to S. 439.
    The Office of Management and Budget advises that there is 
no objection to the presentation of this report from the 
standpoint of the Administration's program.
            Sincerely,
                                                     Bruce Babbitt.
                             General Counsel of the
                               U.S. Department of Commerce,
                                Washington, DC, September 22, 1997.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: This letter responds to your request for 
the views of the Department of Commerce on S. 439, a bill to 
amend the Federal Power Act (FPA). The Department is strongly 
opposed to S. 439, because it would eliminate certain important 
marine resource protections provided under the FPA. 
Specifically, by removing small hydropower projects in Alaska 
and all freshwater hydropower projects in Hawaii from the 
jurisdiction of the Federal Energy Regulatory Commission 
(Commission), the bill would eliminate the ability of the 
Federal Government to provide adequate protection of anadromous 
fish and other federally protected and managed resources.
    The Department, through the National Oceanic and 
Atmospheric Administration (NOOA), is responsible for ensuring 
the protection of anadromous and marine fishery resources and 
their habitats, pursuant to the Magnuson-Stevens Fishery 
Conservation and Management Act and other statutes. The 
National Marine Fisheries Service (NMFS) exercises this 
authority with respect to hydropower licensing on rivers 
pursuant to certain sections of the FPA, including sections 
10(j) and 18, as well as the Fish and Wildlife Coordination 
Act.
    In general, the FPA authorizes the Commission to require 
licensees of hydroelectric projects to undertake actions to 
protect fish and wildlife resources. These protections are 
imposed as conditions of operating licenses granted by the 
Commission. The Commission must, with certain exceptions, 
include the license NMFS recommendations for the protection of, 
mitigation of damages to, and enhancement of fish resources as 
required by section 10(j). The Commission must also include 
fishway prescriptions issued by NMFS pursuant to section 18. 
When a hydropower project qualifies for a license exemption, 
the Commission must include NMFS' conditions for fish 
protection.
    We believe the current responsibilities under the FPA 
should continue, providing necessary fish protection at the 
state and Federal level. However, S. 439 would remove small 
hydropower projects in Alaska and all freshwater hydropower 
projects in Hawaii from the jurisdiction of the Commission.
    Alaska has the last remaining healthy stocks of anadromous 
fish, and we have a statutory responsibility to protect them. 
We believe that the existing exemption requirement 
appropriately addresses the interests of states and the Federal 
Government. However, by making small projects subject to the 
exclusive authorizing authority of the state, S. 439 fails to 
ensure that fish protection measures determined to be necessary 
pursuant to Federal statute would be undertaken. Projects of 
5,000 kilowatts or less may have significant environmental 
consequences. Damming an anadromous fish stream will have 
adverse impacts regardless of the project's size. Further, 
small hydroelectric projects in particular are often located 
near anadromous fish spawning habitat and can effectively block 
fish access to the upstream areas. We believe that such 
projects should remain subject to conditions for fish 
protection issued by Federal agencies such as NMFS.
    In addition, S. 439 would limit the Department's ability to 
protect species listed under the Endangered Species Act (ESA). 
The ESA requires that Federal agencies undertaking an action 
that would potentially affect a listed species first consult 
with the appropriate Federal resource agency. However, S. 439 
would eliminate Federal agency actions in connection with the 
licensing of hydropower projects, without imposing a 
corresponding requirement for the state to consult with the 
Federal resource agencies.
    The Department also has concerns regarding hydropower 
projects located in whole or in part on Federal lands. S. 439 
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, the bill 
fails to require any consultation with the Federal fish and 
wildlife resource agencies before such approval is provided. 
Federal trust resources may be affected, as well as Federal 
resource management plans.
    The Department has similar concerns regarding the bill's 
exemption for all hydroelectric projects on fresh waters in the 
State of Hawaii from the jurisdiction of the Commission. The 
effect would be to free operators of hydroelectric projects in 
Hawaii from requirements needed to protect fish and wildlife 
resources that are imposed as conditions of operating licenses 
granted by the Commission. While the Department currently has 
not needed to become involved in hydropower licensing in 
Hawaii, we should not be precluded from doing so in the future, 
if appropriate.
    We have been advised by the Office of Management and Budget 
that there is no objection to the submission of this report 
from the standpoint of the Administration's program.
            Sincerely,
                                                  Andrew J. Pincus.

                        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. 439, 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

                                 Part I

          * * * * * * *
    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.\1\ 
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 judgment 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 constructed 
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.
          * * * * * * *
    Sec. 6. Licenses under this Part shall be issued for a 
period not exceeding fifty years. Each such license shall be 
conditioned upon acceptance by the licensee of all the terms 
and conditions of this Act and such further conditions, if any, 
as the Commission shall prescribe in conformity with this Act, 
which said terms and conditions and the acceptance thereof 
shall be expressed in said license. Licenses may be revoked 
only for the reasons and in the manner prescribed under the 
provisions of this Act, and may be altered or surrendered only 
upon mutual agreement between the licensee and the Commission 
after thirty days' public notice.
          * * * * * * *
    Sec. 13. That the licensee shall commence the construction 
of the project works within the time fixed in the license, 
which shall not be more than two years from the date thereof, 
shall thereafter in good faith and with due diligence prosecute 
such construction, and shall within the time fixed in the 
license complete and put into operation such part of the 
ultimate development as the Commission shall deem necessary to 
supply the reasonable needs of the then available market, and 
shall from time to time thereafter construct such portion of 
the balance of such development as the Commission may direct, 
so as to supply adequately the reasonable market demands until 
such development shall have been completed. [The periods for 
the commencement of construction may be extended once but not 
longer than two additional years and the period for the 
completion of construction carried on in good faith and with 
reasonable diligence may be extended by the Commission when not 
incompatible with the public interests.] The period for the 
commencement of construction may be extended by the Commission 
for not longer than ten years from the issuance date of the 
license when not incompatible with the public interest, and the 
period for the completion of construction carried on in good 
faith and with reasonable diligence may be extended by the 
Commission when not incompatible with the public interest. In 
case the licensee shall not commence actual construction of the 
project works, or of any specified part thereof, within the 
time prescribed in the license or as extended by the 
commission, then, after due notice given, the license shall, as 
to such project works or part thereof, be terminated upon 
written order of the Commission. In case the construction of 
the project works, or of any specified part thereof, have been 
begun but not completed within the time prescribed in the 
license, or as extended by the commission, then the Attorney 
General, upon the request of the Commission, shall institute 
proceedings in equity in the district court of the United 
States for the district in which any part of the project is 
situated for the revocation of said license, the sale of the 
works constructed, and such other equitable relief as the case 
may demand, as provided for in section 26 thereof.
          * * * * * * *

SEC. 32. ALASKA STATE JURISDICTION OVER SMALL HYDROELECTRIC PROJECTS.

    (a) Discontinuance of Regulation by the Commission.--
Notwithstanding sections 4(e) and 23(b), the Commission shall 
discontinue exercising licensing and regulatory authority under 
this Part over qualifying project works in the State of Alaska, 
effective on the date on which the Commission certifies that 
the State of Alaska has in place a regulatory program for 
water-power development that--
          (1) protects the public interest, the purposes listed 
        in paragraph (2), and the environment to the same 
        extent provided by licensing and regulation by the 
        Commission under this Part and other applicable Federal 
        laws, including the Endangered Species Act (16 U.S.C. 
        1531 et seq.) and the Fish and Wildlife Coordination 
        Act (16 U.S.C. 661 et seq.);
          (2) gives equal consideration to the purposes of--
                  (A) energy conservation,
                  (B) the protection, mitigation of damage to, 
                and enhancement of, fish and wildlife 
                (including related spawning grounds and 
                habitat),
                  (C) the protection of recreational 
                opportunities,
                  (D) the preservation of other aspects of 
                environmental quality,
                  (E) the interests of Alaska Natives, and
                  (F) other beneficial public uses, including 
                irrigation, flood control, water supply, and 
                navigation; and
          (3) requires, as a condition of a license for any 
        project works--
                  (A) the construction, maintenance, and 
                operation by a licensee at its own expense of 
                such lights and signals as may be directed by 
                the Secretary of the Department in which the 
                Coast Guard is operating, and such fishways as 
                may be prescribed by the Secretary of the 
                Interior or the Secretary of Commerce, as 
                appropriate,
                  (B) the operation of any navigation 
                facilities which may be constructed as part of 
                any project to be controlled at all times by 
                such reasonable rules and regulations as may be 
                made by the Secretary of the Army, and
                  (C) conditions for the protection, 
                mitigation, and enhancement of fish and 
                wildlife based on recommendations received 
                pursuant to the Fish and Wildlife Coordination 
                Act (16 U.S.C. 661 et seq.) from the National 
                Marine Fisheries Service, the United States 
                Fish and Wildlife Service, and State fish and 
                wildlife agencies.
    (b) Definition of ``Qualifying Project Works''.--For 
purposes of this section, the term ``qualifying project works'' 
means project works--
          (1) that are not part of a project licensed under 
        this Part or exempted from licensing under this Part or 
        section 405 of the Public Utility Regulatory Policies 
        Act of 1978 prior to the date of enactment of this 
        section;
          (2) for which a preliminary permit, a license 
        application, or an application for an exemption from 
        licensing has not been accepted for filing by the 
        Commission prior to the date of enactment of subsection 
        (c) (unless such application is withdrawn at the 
        election of the applicant);
          (3) that are part of a project that has a power 
        production capacity of 5,000 kilowatts or less;
          (4) that are located entirely within the boundaries 
        of the State of Alaska; and
          (5) that are not located in whole or in part on any 
        Indian reservation, conservation system unit (as 
        defined in section 102(4) of the Alaska National 
        Interest Lands Conservation Act (16 U.S.C. 3102(4))), 
        or segment of a river designated for study for addition 
        to the Wild and Scenic Rivers System.
    (c) Election of State Licensing.--In the case of 
nonqualifying project works that would be a qualifying project 
works but for the fact that the project has been licensed (or 
exempted from licensing) by the Commission prior to the 
enactment of this section, the licensee of such project may in 
its discretion elect to make the project subject to licensing 
and regulation by the State of Alaska under this section.
    (d) Project Works on Federal Lands.--With respect to 
projects located in whole or in part on a reservation, a 
conservation system unit, or the public lands, a State license 
or exemption from licensing shall be subject to--
          (1) the approval of the Secretary having jurisdiction 
        over such lands, and
          (2) such conditions as the Secretary may prescribe.
    (e) Consultation With Affected Agencies.--The Commission 
shall consult with the Secretary of the Interior, the Secretary 
of Agriculture, and the Secretary of Commerce before certifying 
the State of Alaska's regulatory program.
    (f) Application of Federal Laws.--Nothing in this section 
shall preempt the application of Federal environmental, natural 
resources, or cultural resources protection laws according to 
their terms.
    (g) Oversight by the Commission.--The State of Alaska shall 
notify the Commission not later than 30 days after making any 
significant modification to its regulatory program. The 
Commission shall periodically review the State's program to 
ensure compliance with the provisions of this section.
    (h) Resumption of Commission Authority.--Notwithstanding 
subsection (a), the Commission shall reassert its licensing and 
regulatory authority under this Part if the Commission finds 
that the State of Alaska has not complied with one or more of 
the requirements of this section.
    (i) Determination by the Commission.--
          (l) Upon application by the Governor of the State of 
        Alaska, the Commission shall within 30 days commence a 
        review of the State of Alaska's regulatory program for 
        water-power development to determine whether it 
        complies with the requirements of subsection (a).
          (2) The Commission's review required by paragraph (1) 
        shall be completed within one year of initiation and 
        the Commission shall within 30 days thereafter issue a 
        final order determining whether or not the State of 
        Alaska's regulatory program for water-power development 
        complies with the requirements of subsection (a).
          (3) If the Commission fails to issue a final order in 
        accordance with paragraph (2), the State of Alaska's 
        regulatory program for water-power development shall be 
        deemed to be in compliance with subsection (a).
          * * * * * * *