[Senate Report 109-303]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 546
109th Congress                                                   Report
                                 SENATE
 2d Session                                                     109-303

======================================================================



 
FEDERAL ENERGY REGULATORY COMMISSION PROJECT 7307 LICENSE REINSTATEMENT

                                _______
                                

                 July 31, 2006.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 2028]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 2028) to provide for the reinstatement of 
a license for a certain Federal Energy Regulatory Commission 
project, having considered the same, reports favorably theron 
with an amendment and recommends that the bill, as amended, do 
pass.
    The amendment is as follows:
    On page 2, strike lines 11 through 15 and insert the 
following:
    ``(c) Reinstatement of Terminated License.--If a license of 
the Commission for the project has been terminated before the 
date of enactment of this Act, the Commission shall--
    ``(1) reinstate the license effective as of the date of the 
termination of the license; and''.

                         PURPOSE OF THE MEASURE

    The purpose of S. 2028 is to reinstate the license to 
construct and operate the Tygart Dam Project in Taylor County, 
West Virginia and to extend the time required for commencement 
of construction until December 31, 2007.

                          BACKGROUND AND NEED

    Section 13 of the Federal Power Act (FPA) requires that the 
construction of a licensed project commence within two years 
from the date the license is issued. The Federal Energy 
Regulatory Commission (FERC or Commission) is authorized under 
the FPA to extend this deadline once, for a maximum of two 
additional years, upon a finding that such extension is ``not 
incompatible with the public interest.'' Consequently, a 
license is subject to termination if a licensee fails to begin 
construction within four years after the date the license is 
issued, unless legislation authorizing an additional extension 
is enacted.
    On September 27, 1989, FERC granted the City of Grafton, 
West Virginia, an original license to construct and operate the 
Tygart Dam Project No. 7307 (Tygart Project or Project). The 
20-MW Project was to be located on the Tygart River in Taylor 
County, West Virginia at an existing U.S. Army Corps of 
Engineers dam. Project construction includes the installation 
of an intake structure, a 350-foot penstock, a powerhouse, a 
one-mile transmission line, and other project-related 
facilities.
    The Tygart Project's original construction commencement 
deadline of September 26, 1991 was stayed, pending judicial 
review, to April 15, 1993. Lengthy consultations with the Corps 
regarding issues such as site access, project design and 
construction, and power sales contracts led FERC to extend the 
construction commencement deadline an additional two years, to 
April 15, 1995. In 1996, Congress legislatively extended the 
deadline until September 26, 1999 (P.L. 104-246).
    Despite these extensions, project construction did not 
commence by the September 26, 1999 deadline. Consequently, FERC 
terminated the Project No. 7307 license on April 26, 2000.
    On May 8, 2000, Universal Electric Power Corporation filed 
a preliminary permit application (docketed as Project No. 
11840) for the site. FERC has not acted on this permit 
application.
    S. 2028 would reinstate the terminated license and extend 
the time for construction commencement to December 31, 2007.
    The last several Chairmen of the Commission have had a 
policy of opposing legislation extending commencement of 
hydropower project construction deadlines that would allow an 
entity more than 10 years to develop a project. However, that 
policy has been based on the notion that allowing an entity 
that is not showing progress in developing a project to control 
a hydropower site for a greater length of time is not 
consistent with the public interest in developing clean, 
renewable hydroelectric energy.
    During the time the license was valid, the licensees had 
more than 11 years to develop this project. However, the 
Committee received testimony from proponents of the Project 
regarding the reasons for the delays recent progress towards 
construction, and the value of the project to the community. 
FERC has indicated that an updated environmental review of the 
Project will be conducted pursuant to applicable law.

                          LEGISLATIVE HISTORY

    S. 2028 was introduced by Senators Byrd and Rockefeller on 
November 11, 2005, and referred to the Committee on Energy and 
Natural Resources. The Water and Power Subcommittee held a 
hearing on S. 2028 on March 30, 2006. At the business meeting 
on May 24, 2006, the Committee on Energy and Natural Resources 
ordered S. 2028 favorably reported, with an amendment.
    H.R. 4417, the companion measure to this bill, was 
introduced by Representative Mollohan (D-WV) on November 18, 
2005, and referred to the House Energy and Commerce Committee. 
Legislation to extend the project construction commencement 
deadline for Project No. 7307 was also considered during the 
106th (S. 2942) and 107th (S. 639) Congresses.

                        COMMITTEE RECOMMENDATION

    The Committee on Energy and Natural Resources, in open 
business session on May 24, 2006, by voice vote of a quorum 
present, recommends that the Senate pass S. 2028, if amended as 
described herein. Senator Bingaman asked to be recorded as 
voting against the measure.

                          COMMITTEE AMENDMENT

    An amendment was adopted to replace references to an 
``expired'' license with one that ``has been terminated.''

                      SECTION-BY-SECTION ANALYSIS

    Section 1 directs FERC, upon the request of the licensee 
for the project numbered 7307, to extend the time required for 
construction commencement of the project until December 31, 
2007, or, if the license for the project has been terminated, 
the bill would reinstate the license and extend the 
construction commencement period until December 31, 2007.

                   COST AND BUDGETARY CONSIDERATIONS

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

S. 2028--A bill to provide for the reinstatement of a license for a 
        certain Federal Energy Regulatory Commission project

    S. 2028 would authorize the Federal Energy Regulatory 
Commission (FERC) to reinstate the license for a hydroelectric 
project (number 7307) in West Virginia. The bill also would 
extend the deadline for commencing construction of that project 
until December 31, 2007.
    CBO estimates that implementing S. 2028 would have no net 
effect on the federal budget. The bill would 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 fully offset by an equal change in the fees that 
the commission charges. Because FERC's administrative costs are 
limited in annual appropriations, the bill would not affect 
direct spending or revenues.
    S. 2028 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act. The 
bill would benefit the city of Grafton, West Virginia, by 
authorizing the reinstatement and extension of its license for 
construction of a hydroelectric project. Any costs to the city 
would be incurred voluntarily.
    The CBO staff contact for this estimate is Megan Carroll. 
This estimate was approved by Peter H. Fontaine, 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 S. 2028. 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 program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 2028, as ordered reported.

                        EXECUTIVE COMMUNICATIONS

    The testimony provided by FERC at the Subcommittee hearing 
on S. 2028 follows:

  Statement of J. Mark Robinson, Director, Office of Energy Projects, 
                  Federal Energy Regulatory Commission

    Madam Chairman and Members of the Subcommittee:
    My name is J. Mark Robinson, and I am the director of the 
Office of Energy Projects at the Federal Energy Regulatory 
Commission. Our office is responsible for non-federal 
hydroelectric licensing, administration, and safety; 
certification of interstate natural gas pipelines and storage 
facilities; and, authorization and oversight over the 
construction, operation, and safety of Liquefied Natural Gas 
(LNG) terminals.
    I appear today as a Commission staff witness speaking with 
the approval of the Chairman of the Commission. The views I 
express are my own and not necessarily those of the Commission 
or of any individual Commissioner.
    I appreciate the opportunity to comment on S. 2028 and S. 
2035. S. 2028 would reinstate the license and extend until 
December 31, 2007 the deadline for the commencement of project 
construction for the Tygart Dam Project No. 7307, located in 
West Virginia. S. 2035 would provide for reinstatement of the 
license and extend the deadline for the commencement of project 
construction for the Arrowrock Project No. 4656, located in 
Idaho, for a three-year period from the enactment of the 
legislation.
    Under Part I of the Federal Power Act (FPA), the Commission 
issues licenses to non-Federal interests authorizing the 
construction, operation and maintenance of water power projects 
on federal lands, on navigable waters of the United States, 
which utilize the surplus water or water power from a federal 
dam, and on streams over which the Congress has jurisdiction. 
Licenses may be issued under the FPA only if, in the judgment 
of the Commission, the proposed project is best adapted to a 
comprehensive plan for the development and utilization of the 
water resources of the river basin involved for all public 
purposes. The licenses are issued for terms of up to 50 years 
and contain terms and conditions that are designed to ensure 
that the comprehensive development standard is met.
    The FPA requires that the licensee will proceed 
expeditiously with the development and construction of the 
proposed project once a license has been issued. Section 13 of 
the FPA requires that construction of a licensed project be 
commenced within two years of issuance of the license and 
authorizes the Commission to extend this deadline once, for a 
maximum of two additional years. If project construction has 
not commenced by the deadline, the Commission is required to 
terminate the license


                           TYGART DAM PROJECT


    S. 2028 would authorize the Commission to reinstate the 
license and extend the deadline for the commencement of project 
construction for the Tygart Dam Project No. 7307, located in 
West Virginia, until December 31, 2007.
    The Tygart Dam Project was licensed on September 27, 1989, 
to the City of Grafton, West Virginia (Grafton). The license 
gave Grafton the maximum two years permitted by Section 13 to 
start construction--that is, until September 27, 1991.
    On December 17, 1990, the Commission issued an order 
granting partial stays of the licenses for the Tygart Project 
and 11 other projects in the Ohio River Basin, pending 
resolution of judicial appeals of the Commission's licensing 
orders. On April 16, 1992, after the orders were affirmed, the 
Commission issued an order lifting the stays.
    On November 4, 1992, pursuant to a request by Grafton, the 
Commission extended the deadline for commencement of 
construction to April 15, 1995. This represented the maximum 
period for the commencement of construction (two years plus one 
two-year extension) that the Commission could grant under FPA 
Section 13.
    Subsequent legislation enacted as Public Law No. 104-246 
directed the Commission to issue up to three additional two-
year orders granting further extensions of time to commence and 
complete construction. After the Commission did so, September 
26, 1999 became the final deadline to commence project 
construction. On June 23, 1999, Grafton again requested a stay 
of those license conditions that require pre-construction 
filings because it was seeking another legislative extension of 
the commencement of construction deadline. The Commission 
dismissed this request on February 9, 2000.
    Because the licensee did not commence project construction 
by September 26, 1999, the Commission on November 19, 1999 
issued a notice of probable termination of the license for 
failure to meet the commencement of construction deadline. 
Grafton did not respond to the notice. The Commission 
subsequently terminated the license by order issued on March 
27, 2000.
    On July 24, 2000, Grafton subsequently filed an application 
for a preliminary permit for the project, as a predicate for 
filing a new license application. The Commission issued the 
requested preliminary permit on March 16, 2001, for the Tygart 
Dam Project No. 11851 (because the previous license had been 
terminated, the preliminary permit received a new project 
number). Grafton made very little progress towards developing 
the project, and the three-year preliminary permit expired, by 
its terms, on February 28, 2004. The Commission denied a 
request for an extension of the preliminary permit term on 
March 28, 2003.
    On March 1, 2004 Grafton filed another application for a 
preliminary permit for the Tygart Dam Project No. 12490. This 
application was dismissed on March 28, 2005, for failure to 
provide additional information related to Grafton's progress 
towards developing the project. Currently, Grafton has pending 
before the Commission a third application for a subsequent 
preliminary permit for the Tygart Dam Project No. 12640. The 
Commission also has before it a competing application for 
preliminary permit filed on September 23, 2005, by Tygart LLC 
for the Tygart Dam Project No. 12613.

           *       *       *       *       *       *       *



                          S. 2028 AND S. 2035


    I do not support either S. 2028 or S. 2035. Grafton had 
more than 11 years after license issuance to begin construction 
on the Tygart Dam Project, following which it failed to make 
substantial progress during the term of one three-year 
preliminary permit, and had a second permit application 
dismissed for the failure to provide adequate information.
    The Districts have had more than 16 years after license 
issuance to start construction of the Arrowrock Project, and 
have been unable to do so. The licensee has cited numerous 
reasons for their delays, ranging from inability to obtain 
financing or a power sales agreement to several technical 
redesigns of the project.
    As a general matter, enactment of bills authorizing or 
requiring commencement of construction extensions for 
individual projects leaves the development of an important 
energy resource in the hands of an entity that has shown an 
inability to develop a project, and therefore has not been 
recommended. The last several Chairmen of the Commission have 
had a policy of opposing legislation extending commencement of 
construction deadlines that would allow an entity more than 10 
years to develop a project. This policy has been based on the 
notion that allowing an entity that is not showing progress in 
developing a project to control a hydropower site for a greater 
length of time is not consistent with the public interest in 
developing clean, renewable hydroelectric energy.
    Recent Commission orders have also noted that the purposes 
of the provisions of Section 13 of the FPA are to require 
prompt development of a licensed project. These instances 
demonstrate why that policy makes sense.
    In addition, the record on which the projects were 
originally licensed in the 1980s, including the examination of 
environmental and developmental issues, may be out of date in 
various respects. For example, in the case of the Arrowrock 
Project, in 1998, after the license was issued, the U.S. Fish 
and Wildlife Service listed the Columbia River bull trout as a 
threatened species pursuant to the Endangered Species Act, for 
the stream on which the project is located. The Service has 
requested that endangered species consultation be conducted for 
that project. To ensure that the public interest is served 
would require not simply reinstating the license and/or 
extending the license timeframes for commencement of 
construction, but reexamining and, as necessary, updating the 
record.
    I appreciate the opportunity to present my views to the 
Subcommittee. Thank you.

                MINORITY VIEWS OF SENATOR JEFF BINGAMAN

    On September 27, 1989, the Federal Energy Regulatory 
Commission granted the City of Grafton, West Virginia a license 
to build the Tygart Dam Hydroelectric Project. Under section 13 
of the Federal Power Act, Grafton had two years, until 
September 27, 1991, to begin construction of the Project. The 
Commission later granted Grafton two additional years to begin 
construction, as permitted by section 13. In 1996, Congress 
legislatively extended the time Grafton had to begin 
construction by six more years, until September 26, 1999. When 
Grafton still had not begun construction by then, ten years 
after the license was originally issued, the Commission 
terminated the license, as required by section 13.
    Subsequently, in March 2001, the Commission granted Grafton 
a preliminary permit under section 5 of the Federal Power Act. 
The preliminary permit protected Grafton's claim to the site 
for three more years while Grafton developed a new license 
application. Grafton made little progress on the project, and 
its preliminary permit expired on February 28, 2004. The 
Commission is now considering competing applications for 
preliminary permits for the Tygart Dam Project from both the 
Grafton and another applicant.
    S. 2028 would reinstate Grafton's terminated license and 
extend the deadline for commencing construction until December 
31, 2007, notwithstanding section 13 of the Federal Power Act. 
For the reasons more fully explained in my minority views on S. 
2035, which the Committee ordered reported along with S. 2028, 
I do not support either bill.
    Section 13 of the Federal Power Act serves the important 
public interest in the timely development of licensed 
hydroelectric power projects. The time limitations in section 
13 ensure that licensees who are unable to develop a proposed 
hydroelectric project cannot tie up the power site 
indefinitely, preventing others from developing it. Electric 
Plant Board of the City of Augusta, Kentucky, 115 FERC 
para.61,198 (May 18, 2006). In the words of the Commission's 
witness at the Committee's hearing on S. 2028, enactment of 
legislation waiving the time limitations of section 13 ``leaves 
the development of an important energy resource in the hands of 
an entity that has shown an inability to develop a project.''
    Since 1995, the chairmen of the Federal Energy Regulatory 
Commission have taken the view that ten years is more than 
enough time for a licensee to begin construction. They have not 
objected to bills that would extend the deadline for individual 
projects up to ten years from the issuance of the license, but 
have consistently objected to bills that would extend the 
deadline beyond that point. In my view, the Committee should be 
guided by that policy and should have applied it to S. 2028. 
The Committee chose otherwise.
    The Committee should, of course, be willing to consider 
whether special circumstances warrant extending the deadline 
beyond the ten-year benchmark on a case-by-case basis. But any 
extension beyond the benchmark, I believe, should bear a heavy 
burden of persuasion. I can find nothing in the record before 
the Committee to persuade me that another extension is 
warranted in this case, and for that reason, have voted against 
reporting S. 2028.

                                                     Jeff Bingaman.
                        CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by the bill S. 2028, as 
ordered reported.

                                  
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