[Federal Register Volume 72, Number 40 (Thursday, March 1, 2007)]
[Proposed Rules]
[Pages 9281-9284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3549]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Chapter I

[Docket No. RM07-08-000]


Preliminary Permits for Wave, Current, and Instream New 
Technology Hydropower Projects

February 15, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of Inquiry (NOI) and Interim Statement of Policy.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
inviting comments on its procedures with respect to the treatment of 
preliminary permits under Part I of the Federal Power Act for wave, 
current, and instream new technology hydropower projects.

DATES: Comments on this NOI are due on April 30, 2007.

ADDRESSES: You may submit comments identified by Docket No. RM07-8-000, 
by one of the following methods:
     Agency Web Site: http://ferc.gov. Follow the instructions 
for submitting comments via the eFiling link found in the Comment 
Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to the Federal Energy Regulatory Commission, Office of the Secretary, 
888 First Street, NE., Washington, DC 20426. Please refer to the 
Comment Procedures Section of the preamble for additional information 
on how to file paper comments.

FOR FURTHER INFORMATION CONTACT:

William Guey-Lee, Office of Energy Projects, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
6064.
Merrill Hathaway, (Legal Information), Office of General Counsel--
Energy Projects, Federal Energy Regulatory Commission, 888 First 
Street, NE., Washington, DC 20426, (202) 502-8825.

SUPPLEMENTARY INFORMATION:

Introduction

    1. The Federal Energy Regulatory Commission (Commission) is issuing 
this Notice of Inquiry to seek comments on how it should treat 
applications for preliminary permits to study hydropower projects 
involving proposals to utilize wave, current, and instream new 
technology methods to develop hydropower.\1\ The Commission is also 
seeking comments on how it should oversee any such permits during their 
terms. Finally, the Commission also sets an interim policy pending the 
outcome of this proceeding.
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    \1\ There are a variety of technologies in various stages of 
development to produce electric power using ocean currents, tides, 
and wave action, rather than the traditional hydropower model 
involving hydraulic head developed by use of a dam or other 
diversion structure. For purposes of this notice of inquiry, the 
Commission refers to these newer forms of technology as ``wave, 
current, and instream new technology'' or simply ``new technology.'' 
However, the Commission is using the terms as shorthand, and is not 
attempting to define or limit the scope of these technologies.
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    2. The Commission has seen increasing interest in new hydroelectric 
technologies that would utilize ocean waves, tides, and currents from 
free-flowing rivers, as evidenced by a surge in applications for 
preliminary permits to study such projects. Commission staff has issued 
11 preliminary permits for projects of this type; three are for 
proposed tidal energy projects (in New York, Washington, and 
California), and eight are for proposed ocean current energy projects 
(off the coast of Florida). Over 40 preliminary permit applications for 
ocean projects are currently pending before the Commission, all of 
which have been filed since March 2006.
    3. These new technologies have significant potential: it has been 
estimated that the potential for wave and current power could be over 
350-terawatt hours per year, which would more than double current 
hydropower production.\2\ The Commission anticipates further 
exploration of how these technologies can fit within the national 
energy infrastructure in terms of the amount of potential energy that 
can be developed, its reliability, environmental and safety 
implications, and its commercial viability. The Commission wants to 
reduce regulatory barriers to the development of new technologies, 
where possible, and has exhibited the maximum flexibility permitted by 
law in regulating these projects.\3\
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    \2\ See Hydroelectric Infrastructure Technical Conference, 
Docket No. AD06-13-000 (December 6, 2006), transcript at 12; 22 
(testimony of George Hagerman).
    \3\ For example, in Verdant, Power, LLC, 111 FERC ]61,024, on 
reh'g, 112 FERC ]61,143 (2005), the Commission concluded that, under 
specified circumstances, the short-term testing of new hydropower 
technology would not require a Commission licensse.

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[[Page 9282]]

Background

    4. Under Part I of the Federal Power Act (FPA),\4\ the Commission 
regulates non-federal hydropower projects that are: located on 
navigable waters; located on nonnavigable waters over which Congress 
has Commerce Clause jurisdiction, were constructed after 1935, and 
affect the interests of interstate or foreign commerce; located on 
public lands or reservations of the United States; or use surplus water 
or water power from a federal dam. The Commission has construed the 
term ``navigable water'' to include waters off the U.S. coast.\5\
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    \4\ 16 U.S.C. 791a, et seq. (2000).
    \5\ See AquaEnergy Group, LTD., 102 FERC ]61,242 (2003).
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    5. Section 4(f) of the FPA \6\ authorizes the Commission to issue 
preliminary permits for the purpose of enabling prospective applicants 
for a hydropower license to secure the data and perform the acts 
required by FPA section 9,\7\ which in turn sets forth the material 
that must accompany an application for license. FPA section 5 \8\ 
states:
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    \6\ 16 U.S.C. 797(f) (2000).
    \7\ 16 U.S.C. 802 (2000).
    \8\ 16 U.S.C. 798 (2000).

    Each preliminary permit issued under this part shall be for the 
sole purpose of maintaining priority of application for a license 
under the terms of this Act for such period or periods, not 
exceeding a total of three years, as in the discretion of the 
Commission may be necessary for making examinations and surveys, for 
preparing maps, plans, specifications, and estimates, and for making 
financial arrangements. Each permit shall set forth the conditions 
under which priority shall be maintained. Such permits shall not be 
transferable, and may be canceled by order of the Commission upon 
failure of permittees to comply with the conditions thereof or for 
other good cause shown after notice and opportunity for 
hearing.[\9\]
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    \9\ Nothing in the FPA requires the Commission to issue a 
preliminary permit; whether to do so is a matter solely within the 
Commission's discretion.

    Thus, the purpose of a preliminary permit is to preserve the right 
of the permit holder to have the first priority in applying for a 
license for the project that is being studied.\10\ Because a permit is 
issued only to allow the permit holder to investigate the feasibility 
of a project, and grants no land-disturbing or other property 
rights,\11\ the Commission historically has generally liberally granted 
such permits without requiring an extensive showing by the 
applicant.\12\
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    \10\ See, e.g., Mt. Hope Waterpower Project LLP, 116 FERC ] 
61,232 at P 4 (2006) (``The purpose of a preliminary permit is to 
encourage hydroelectric development by affording its holder priority 
of application (i.e., guaranteed first-to-file status) with respect 
to the filing of development applications for the affected site'').
    \11\ Thus, a permit holder can only enter lands it does not own 
with the permission of the landholder, and is required to obtain 
whatever environmental permits federal, state, and local authorities 
may require before conducting any studies.
    \12\ See, e.g., Three Mile Falls Hydro, LLC, 102 FERC ] 61,301 
at P 6 (2003); see also Town of Summersville, W.Va. v. FERC, 780 
F.2d 1034 (D.C. Cir. 1986) (discussing nature of preliminary 
permits).
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    6. In contrast, a license issued by the Commission gives the 
licensee the authority to construct and operate a project. Standard 
license Article 5 require licensees to acquire title in fee or the 
right to use in perpetuity all lands, other than lands of the United 
States, necessary or appropriate for the construction, maintenance, and 
operation of a project. Where licensees cannot obtain such rights 
through contract, they may use eminent domain to do so.\13\ In 
consequence, before issuing any license, the Commission conducts a 
full, searching public interest inquiry, and the licensing process is 
completely distinct from the permit process.
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    \13\ See FPA section 21, 16 U.S.C. Sec.  814 (2000).
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    7. A permit holder is not required to file a license application. 
Likewise, a developer may study a project without holding a preliminary 
permit. However, the holding of a permit does give a developer first-
in-time preference over any competitors who file applications for 
projects at the same site, during the permit term. As noted above, it 
is only if and when a project license is issued that the licensee can, 
under the conditions imposed in the license, engage in ground-
disturbing activities, and if necessary use eminent domain to acquire 
lands for the project.
    8. The Commission has begun to receive preliminary permit 
applications for proposed projects that would produce electric power 
through innovative technologies that would take advantage of various 
types of water movement, including ocean wave action and tides and 
currents both offshore and in rivers. In the last two years, the 
Commission has granted permits to study projects off the coast of 
Florida,\14\ in San Francisco Bay,\15\ in the East River of New 
York,\16\ and in Puget Sound, Washington.\17\ Approximately 45 
additional applications of this type are pending.
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    \14\ Red Circle Systems Corporation, 110 FERC ] 62,113 (2005); 
Red Circle Systems Corporation, 110 FERC ] 62,114 (2005); Red Circle 
Systems Corporation, 110 FERC ] 62,115 (2005); Red Circle Systems 
Corporation, 110 FERC ] 62,116 (2005); Red Circle Systems 
Corporation, 110 FERC ] 62,117 (2005); Florida Hydro, Inc., 110 FERC 
] 62,270 (2005); Red Circle Systems Corporation, 110 FERC ] 62,271 
(2005); Red Circle Systems Corporation, 110 FERC ] 62,272 (2005).
    \15\ Golden Gate Energy Company, 113 FERC ] 62,028 (2005).
    \16\ Verdant Power, LLC, 113 FERC ] 62,193 (2005).
    \17\ Tacoma Power, 114 FERC ] 62,174 (2006).
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    9. On December 6, 2006, the Commission held a technical conference 
with respect to the new technologies.\18\ At the conference, and in 
comments subsequently filed by interested entities, the Commission 
heard a wide variety of ideas regarding the preliminary permit program, 
ranging from statements that the current program works well for new 
technologies,\19\ to suggestions that the Commission shorten the 
typical three-year preliminary permit period to 18 months,\20\ to 
comments that the Commission should adopt a much stricter policy with 
respect to the issuance of preliminary permits for new technology 
projects, in order to prevent site-banking (the reservation of 
potential sites without the current intent to develop a project).\21\ 
This diversity of opinion suggested that it would be useful for us to 
conduct a public inquiry into this subject, to determine if the 
Commission should in any way change the manner in which it treats 
preliminary permits for new technology projects.
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    \18\ Hydroelectric Infrastructure Technical Conference, Docket 
No. AD06-13-000.
    \19\ See Comments of Oceania Energy Company (filed December 20, 
2006).
    \20\ See Comments of Ocean Renewable Energy Coalition (filed 
December 20, 2006).
    \21\ See Comments of Gil Sperling, Verdant Power, LLC (technical 
conference transcript at 106-07).
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The Subject of the Notice of Inquiry

    10. The Commission seeks comment on the standard of review it 
should apply to applications for preliminary permits for ocean wave, 
tidal, and other non-traditional hydropower projects, and how it should 
regulate those permits during their terms. We outline below three 
alternatives, and encourage comments on these approaches, as well as 
the suggestion of any other methods that commenters believe would be 
fruitful in encouraging and appropriately regulating the initial 
exploration of new technology projects.
    11. We received comments at and following the technical conference 
concerning the possibility of creating new or modified procedures for 
the licensing process for new technology projects. We recognize that 
this issue is complex, given that there are many requirements governing 
hydropower licensing that are established by law and

[[Page 9283]]

that an examination of this issue has implications extending to small 
traditional hydropower projects, as well as those involving new 
technology. Moreover, we are aware that our staff, with a view towards 
simplifying and shortening the licensing process where possible, has 
been able to recommend waiver of certain aspects of the process and to 
expeditiously process license applications where the applicant has: (a) 
Chosen a site that minimizes environmental impacts, (b) built consensus 
among stakeholders (including the local community and state and federal 
resource agencies) regarding project issues and appropriate 
environmental measures, and (c) provided the Commission with all 
necessary information.\22\ Such streamlined procedures may be 
applicable to some new technology projects. Given that we recently 
received the first license application for this type of project, we are 
not prepared at this time to decide if these or other procedures can be 
applied generally to new technology projects in a manner consistent 
with law and sound policy. However, we will be monitoring new 
technology proceedings, and as these proceedings evolve, we may 
consider whether alterations to our process may be appropriate 
generically or in individual cases. In addition, the Commission will 
hold a technical conference on this issue at a future date.
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    \22\ See F & B Wood Corporation, 117 FERC ] 62,059 (2006); Birch 
Power Company, 116 FERC ] 62,075 (2006); Birch Power Company, 116 
FERC ] 61,074 (2006); Wade Jacobson, 116 FERC ] 62,073 (2006).
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A. Maintain Standard Preliminary Permit Approach

    12. As noted, traditionally, the Commission has not subjected most 
preliminary permit applications to extensive scrutiny. Further, the 
Commission has not often exercised the right it reserves in all 
preliminary permits to cancel the permit.
    13. Continuing to follow this approach could provide some 
regulatory protection for developing and testing new technology, could 
prevent ``claim jumping,'' that is, interference with a prospective 
applicant's ability to investigate the feasibility of a project, and 
may provide some modest facilitation for financing new projects. On the 
other hand, this approach would do nothing to resolve the concern we 
have seen expressed that an entity could site-bank by filing for a 
number of new technology projects that it has no real intent of 
developing. It also would not resolve the question, raised in some 
pending permit proceedings, of how to properly set the boundaries of 
the area reserved for study by a preliminary permit holder. While it is 
typically easy to determine the boundaries of a traditional, riverine 
hydropower project, we have heard contrasting suggestions that 
establishing strict boundaries for a new technology project would 
artificially restrict the potential scope of such a project and that 
allowing too wide boundaries in such cases would encourage site-
banking, to the possible detriment of competition in project 
development.

B. Stricter Scrutiny Approach

    14. In the alternative, the Commission could process new technology 
preliminary permit applications with a view toward limiting the 
boundaries of the permits, to prevent site-banking and to promote 
competition. Further, to ensure that permit holders are actively 
pursuing project exploration, the Commission would carefully scrutinize 
the reports that permit holders are required to file on a semi-annual 
basis,\23\ and would, where sufficient progress was not shown, consider 
canceling the permit. Stricter scrutiny could entail requirements such 
as reports on public outreach and agency consultation, development of 
study plans, and deadlines for filing a notice of intent to file a 
license application and a preliminary application document. This 
approach could reduce site-banking, providing a disincentive for 
developers to seek permits for projects that they are not ready to 
pursue. By limiting the geographic scope of permits, we may encourage 
more thoughtful development of permit applications, as well as 
competition. On the negative side, this approach could, if not 
carefully administered, make it more difficult for even well-
intentioned and prepared applicants to obtain multiple permits. It also 
could require additional Commission resources to be devoted to the 
permit program, both in more carefully examining applications, and in 
giving stricter scrutiny to progress reports.
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    \23\ As a standard condition in all preliminary permits, the 
Commission requires the permit holder to file progress reports every 
six months.
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C. Decline To Issue Preliminary Permits for New Technology Projects

    15. As a third alternative, the Commission could decide, as a 
matter of policy, not to issue preliminary permits for new technology 
hydropower projects. In this case, all potential license applicants 
would have equal opportunities to explore the development of new 
technology projects, and the Commission would resolve any resultant 
competition during the licensing phase. This procedure would resolve 
concerns about site banking during the permit stage, because no entity 
would have priority with respect to a project site until an application 
was actually filed. Moreover, the Commission's regulatory authority 
would not be invoked, and its resources not utilized, until an entity 
had demonstrated the seriousness of its interest in a project by filing 
an application. This would leave the market free to explore potential 
projects, without the possibly artificial constraints imposed by the 
existence of a preliminary permit held by an entity that lacks the 
capacity, or does not have a serious intent, to develop a project. On 
the negative side, potential applicants would not have the guarantee of 
first-to-file priority while they explored potential projects. To the 
extent that a preliminary permit provides some assistance in obtaining 
financing, this aid would no longer be available.

Interim Statement of Policy

    16. On balance, the Commission has decided to follow the ``strict 
scrutiny'' approach during the pendency of this proceeding, because 
this appears to respond to a significant number of the issues that have 
been raised at the technical conference and in individual proceedings, 
particularly with respect to site-banking and the scope of proposed 
projects. However, we have not in any way decided whether we will 
ultimately select one of the three alternatives set forth in this 
notice of inquiry, and perhaps may choose some other approach. We will 
determine how to proceed only after the Commission has had the 
opportunity to review and consider the comments filed in response to 
this notice.

Procedure for Comments

    17. The Commission invites interested persons to submit comments, 
and other information on the matters, issues and specific questions 
identified in this notice. Comments are due on or before April 30, 
2007. Comments must refer to Docket No. RM07-8-000, and must include 
the commenters' name, the organization they represent, if applicable, 
and their address.
    18. Commenters are requested to use appropriate headings and to 
double space their comments.
    19. Comments may be filed on paper or electronically via the 
eFiling link on the Commission's Web site at http://www.ferc.gov. The 
Commission accepts most standard word processing formats and commenters 
may attach additional

[[Page 9284]]

files with supporting information in certain other file formats. 
Commenters filing electronically do not need to make a paper filing. 
Commenters that are not able to file comments electronically must send 
an original and 14 copies of their comments to: Federal Energy 
Regulatory Commission, Office of the Secretary, 888 First Street, NE., 
Washington, DC 20426.
    20. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters are not required to 
serve copies of their comments on other commenters.

Document Availability

    21. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
Internet through the Commission's Home Page (http://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, 
Washington, DC 20426.
    22. From the Commission's Home Page on the Internet, this 
information is available in the Commission's document management 
system, eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or 
downloading. To access this document in eLibrary, type the docket 
number (excluding the last three digits) in the docket number field.
    23. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours. For assistance, please contact 
the Commission's Online Support at 1-866-208-3676 (toll free) or 202-
502-6652 (e-mail at [email protected]) or the Public Reference 
Room at 202-502-8371, TTY 202-502-8659 (e-mail at 
[email protected]).

    By direction of the Commission.
Magalie R. Salas,
Secretary.
[FR Doc. E7-3549 Filed 2-28-07; 8:45 am]
BILLING CODE 6717-01-P