[Senate Report 106-28]
[From the U.S. Government Publishing Office]




                                                        Calendar No. 65

106th Congress                                                   Report
  1st Session                    SENATE                          106-28
                                                                       
=======================================================================



 
                  ALASKA SMALL HYDROELECTRIC PROJECTS

                                _______
                                

                 March 19, 1999.--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. 422]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 422) to provide for Alaska state 
jurisdiction over small hydroelectric projects, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill, as amended, do pass.
    The amendment is as follows:
    On page 4, line 21, insert the word ``not'' between the 
words ``are'' and ``located''.

                         Purpose of the Measure

    S. 422 authorizes the State of Alaska to assume 
responsibility for licensing small hydroelectric projects of 5 
megawatts or smaller. The State of Alaska may assume 
jurisdiction over these projects only after it certifies that 
it has in place a licensing program that protects the public 
interest and the environment to the same extent as does the 
FERC licensing process.

                          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)(1) 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 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.
    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 the 103rd, 104th, and 105th Congresses, the Committee 
included 5 megawatt exemptions for projects in Alaska in 
hydroelectric bills (S. 2384 in the 103rd Congress; S. 737 in 
the 104th Congress; S. 439 in the 105th 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.
    S. 422, like the three 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, four 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 in 1997 that, 
while the Commission would object to a generic 5 MW exemption 
for projects located in the lower 48 States, it would not 
object to an Alaska exemption, based on Alaska's unique 
circumstances, provided an Alaska program would adequately 
evaluate project impacts.

                          Legislative History

    S. 422 was introduced on February 11, 1999. No hearing has 
been held. S. 422 is identical to section 1 of S. 439 in the 
105th Congress. S. 439 was reported by the Committee on October 
15, 1997 (Report 105-111), and passed the Senate on June 25, 
1998. No action was taken by the House.

                       Committee Recommendations

    The Senate Committee on Energy and Natural Resources, in 
open business session on March 4, 1999, by a voice vote with a 
quorum present, recommends that the Senate pass S. 422 with an 
amendment.

                          Committee Amendment

    The Committee inserted the word ``not,'' which had been 
mistakenly omitted when the bill was originally printed.

                      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.

                   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 9, 1999.
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. 422, a bill to 
provide for Alaska state jurisdiction over small hydroelectric 
projects.
    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 Lisa Cash 
Driskill (for the state and local impact).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 422--A bill to provide for Alaska state jurisdiction over small 
        hydroelectric projects

    The bill would direct the Federal Energy Regulatory 
Commission (FERC) to end its licensing and regulatory authority 
over certain hydroelectic projects in Alaska when the state has 
a comparable regulatory program in place for such projects.
    CBO estimates that enacting this bill would have no net 
effect on the federal budget. S. 422 contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act and would have no impact on the 
budgets of state, local, or tribal governments. The state's 
costs associated with establishing and carrying out a 
regulatory program for the hydroelectric projects affected by 
this bill would be voluntary.
    The bill's 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 would have no net budgetary impact.
    Because FERC's administrative costs are limited in annual 
appropriations, enacting S. 422 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 Lisa Cash Driskill (for the state and 
local impact). This estimate was approved by Robert A. 
Sunshine, Deputy 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

    No executive communications were received by the Committee 
on S. 422. Executive communications were received by the 
Committee on identical legislation in the 105th Congress, S. 
439, which appear in Senate Report 105-111.

                        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. 422, 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. 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 thePublic 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.--
          (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).

           *       *       *       *       *       *       *


                                
