[Federal Register Volume 81, Number 227 (Friday, November 25, 2016)]
[Proposed Rules]
[Pages 85173-85176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28193]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 11

[Docket No. RM16-19-000]


Annual Charges for Use of Government Lands in Alaska

AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Notice of Inquiry.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
inviting comments on a narrow question related to its current 
methodology for calculating annual charges for the use of government 
lands under Part 11 of the Commission's regulations--whether regional 
per-acre land values based on data published in the National 
Agricultural Statistics Service (NASS) Census result in reasonably 
accurate land valuations for hydropower lands in Alaska. This Notice of 
Inquiry (NOI) will assist the Commission in evaluating an alternative 
proposal raised in a petition for rulemaking, which requests that the 
Commission use a statewide average per-acre land value for the purposes 
of calculating annual charges for use of government lands for 
hydropower projects in Alaska.

DATES: Comments on this NOI are due January 24, 2017.

ADDRESSES: Comments, identified by Docket No. RM16-19-000 may be filed 
in the following ways:
     Electronic Filing through http://www.ferc.gov. Documents 
created electronically using word processing software should be filed 
in native applications or print-to-PDF format and not in a scanned 
format.
     Mail/Hand Delivery: Those unable to file electronically 
may mail or hand-deliver comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE., 
Washington, DC 20426.
    Instructions: For detailed instructions on submitting comments see 
the Comment Procedures section of this document.

FOR FURTHER INFORMATION CONTACT: 

Tara DiJohn (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street NE., Washington, DC 
20426, (202) 502-8671, [email protected].
Norman Richardson (Technical Information), Office of the Executive 
Director, Federal Energy Regulatory Commission, 888 First Street NE., 
Washington, DC 20426, (202) 502-6219, [email protected].

SUPPLEMENTARY INFORMATION: 
    1. The Federal Power Act (FPA) requires hydropower licensees that 
use federal lands to compensate the United States for the use, 
occupancy, and enjoyment of its lands.\1\ Since 2013, the Federal 
Energy Regulatory Commission (Commission) has used a fee schedule, 
based on the U.S. Bureau of Land Management's (BLM) methodology for 
calculating rental rates for linear rights of way, to calculate annual 
charges for use of federal lands. The Commission's fee schedule 
identifies a fee for each county or geographic area, which is the 
product of four components: A per-acre land value, an encumbrance 
factor, a rate of return, and an annual adjustment factor. The per-acre 
land value for a particular county or geographic area is determined 
using the average per-acre land values published in the National 
Agricultural Statistics Service (NASS) Census.
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    \1\ 16 U.S.C. 803(e)(1) (2012).
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    2. The Commission is issuing this Notice of Inquiry (NOI) to seek 
public and agency comment on a narrow question--whether regional per-
acre land values based on data published in the NASS Census result in 
reasonably accurate land valuations for hydropower lands in Alaska. In 
particular, the Commission is interested in receiving input on whether, 
for the state of Alaska, the use of a statewide average per-acre land 
value or the use of regional per-acre land values (as is currently 
used) would be preferable to the use of county or geographic area land 
values.

I. Background

    3. Section 10(e)(1) of the Federal Power Act (FPA) requires 
Commission hydropower licensees using federal lands to:

pay to the United States reasonable annual charges in an amount to 
be fixed by the Commission . . . for recompensing [the United 
States] for the use, occupancy, and enjoyment of its lands or other 
property . . . and in fixing such charges the Commission shall seek 
to avoid increasing the price to the consumers of power by such 
charges, and any such charges may be adjusted from time to time by 
the Commission as conditions may require . . . .\2\
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    \2\ 16 U.S.C. 803(e)(1) (2012) (emphasis added). Section 
10(e)(1) also requires licensees to reimburse the United States for 
the costs of administering Part I of the FPA. Those charges are 
calculated and billed separately from the land use charges, and are 
not the subject of this NOI.

    In other words, licensees that use and occupy federal lands for 
project purposes must compensate the United States through payment of 
an annual fee, to be established by the Commission.\3\
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    \3\ Pursuant to FPA section 17(a), 16 U.S.C. 810(a) (2012), the 
fees collected for use of government lands are allocated as follows: 
12.5 percent is paid into the Treasury of the United States, 50 
percent is paid into the federal reclamation fund, and 37.5 percent 
is paid into the treasuries of the states in which particular 
projects are located. No part of the fees discussed in this NOI is 
used to fund the Commission's operations.
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    4. The Commission has adopted various methods over the years to 
accomplish this statutory directive.\4\ Currently, the Commission uses 
a fee schedule method to calculate annual charges for use of government 
lands. The Commission adopted this approach

[[Page 85174]]

in a final rule issued on January 12, 2013.\5\
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    \4\ See Annual Charges for Use of Government Lands, Order No. 
774, FERC Stats. & Regs. ] 31,341, at PP 3-20 (2013) (cross-
referenced at 142 FERC ] 61,045) (examining the myriad methodologies 
the Commission has used or considered for assessing annual charges 
for the use of government lands since 1937) (Order No. 774).
    \5\ See generally, Order No. 774.
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A. Order No. 774

    5. In Order No. 774, the Commission adopted a new fee schedule 
method for calculating annual charges for use of government lands, 
based on BLM's methodology for calculating rental rates for linear 
rights of way. Pursuant to section 11.2 of our regulations, the 
Commission publishes a fee schedule annually, which identifies per-acre 
rental fees by county or geographic area.\6\ To calculate a licensee's 
annual charge for use of government lands, the Commission multiplies 
the applicable county or geographic area fee identified in the fee 
schedule by the number of federal acres reported by that licensee.
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    \6\ 18 CFR 11.2 (2016). The fee schedule is published annually 
as part of Appendix A to Part 11 of the Commission's regulations.
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    6. The fee schedule identifies a per-acre rental fee broken down by 
county or geographic area. The per-acre rental fee for a particular 
county or geographic area is calculated by multiplying four components: 
(1) An adjusted per-acre land value; (2) an encumbrance factor; (3) a 
rate of return; and (4) an annual adjustment factor.
1. Per-Acre Land Value
    7. The first component--the adjusted per-acre land value--is based 
on average per-acre land values published in the NASS Census. 
Specifically, the per-acre land value is determined by the applicable 
county or geographic area ``land and buildings'' category \7\ from the 
NASS Census. This per-acre value is then adjusted downward using a 
state-specific reduction to remove the value of irrigated lands, plus a 
seven percent reduction to remove the value of buildings or other 
improvements. The end result being the adjusted per-acre land value.
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    \7\ The ``land and buildings'' category is a combination of all 
land use categories in the NASS Census, including croplands 
(irrigated and non-irrigated), pastureland/rangeland, woodland, and 
``other'' (roads, ponds, wasteland, and land encumbered by non-
commercial/non-residential buildings).
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    8. The NASS Census is conducted every five years, with an 18-month 
delay before NASS publishes the Census data. The Commission 
incorporates another 18-month delay to account for revisions, 
consistent with BLM's implementation of its 2008 rule. The Commission's 
2011-2015 fee schedules were based on data from the 2007 NASS Census. 
The Commission's 2016-2020 fee schedules will be based on data from the 
2012 NASS Census, the 2021-2025 fee schedules will be based on data 
from the 2017 NASS Census, the 2026-2030 fee schedules will be based on 
data from the 2022 NASS Census, and so on. State-specific adjustments 
to the per-acre land value are performed in the first year that data 
from a new NASS Census are used, and will remain the same until the 
subsequent NASS Census data.
2. Per-Acre Land Values for Alaska
    9. Order No. 774 explained that the final rule would adopt BLM's 
approach to Alaska per-acre land values by designating lands in Alaska 
as part of one of the five NASS Census geographic area identifiers: the 
Aleutian Islands Area, the Anchorage Area, the Fairbanks Area, the 
Juneau Area, and the Kenai Peninsula Area. Several commenters asserted 
that a per-acre statewide value, a category also reported by the NASS 
Census, should be assessed for Alaska lands.
    10. Order No. 774 considered the arguments raised in support of a 
statewide per-acre value. In particular, several commenters asserted 
that regional values for Alaska are inappropriate because Alaska does 
not use county designations, the number of farms surveyed for the NASS 
Census in the entire state of Alaska is less than the number of farms 
surveyed in most counties in the lower-48 states, and certain per-acre 
land values near Anchorage and Juneau are very high, resulting in a 
substantial increase in annual charges for the use of government lands 
by hydropower licensees in these areas. However, the Commission 
ultimately concluded that the commenters had not advanced sufficient 
explanation for why it was more appropriate to use a statewide value 
for Alaska, rather than the smallest NASS Census defined area for 
Alaska--the geographic area identifier. Although the Commission 
rejected the use of a statewide per-acre land value for Alaska in Order 
No. 774, the Commission clarified that it would not use the Anchorage 
Area and the Juneau Area to assess annual charges for the use of 
government lands ``because these high, urban-based rates would not 
reasonably reflect the value of government lands on which hydropower 
projects are located.'' \8\ Instead, for purposes of determining a per-
acre land value, the Commission decided to assess the Kenai Peninsula 
Area per-acre land value for projects located in the Anchorage Area or 
the Juneau Area.
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    \8\ Order No. 774 at P 45.
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B. Fiscal Year 2016 Fee Schedule

    11. The Commission used the 2012 NASS Census data to calculate its 
fee schedule for the first time in Fiscal Year (FY) 2016. Due to per-
acre land value increases in the 2012 NASS Census data, land rates for 
hydropower projects located in certain geographic areas in Alaska 
experienced a significant increase when compared to the rates assessed 
in FY 2015.

C. Petition for Rulemaking

    12. On June 6, 2016, the Alaska Federal Land Fees Group, comprised 
of six hydroelectric licensees with projects in Alaska (Alaska 
Group),\9\ petitioned the Commission to conduct a rulemaking to revise 
the Commission's method of calculating federal land use charges for 
hydropower projects in Alaska.\10\ The Alaska Group's petition focuses 
solely on the first component of the Commission's fee schedule--the 
adjusted per-acre land value--and requests that the Commission: (1) 
Calculate an adjusted statewide average per-acre land value for Alaska; 
and (2) apply this adjusted statewide fee to all projects in Alaska, 
except those located in the Aleutian Islands area.\11\
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    \9\ Alaska Electric Light and Power, Bradley Lake Project 
Management Committee (on behalf of licensee Alaska Energy 
Authority), Chugach Electric Association, the Ketchikan Public 
Utilities, Copper Valley Electric Association, and Southeast Alaska 
Power Agency.
    \10\ The Commission issued its 2016 federal land use bills on 
April 21, 2016. In accordance with section 11.20 of the Commission's 
regulations, 18 CFR 11.20 (2016), the members of the Alaska Group 
paid their bills under protest, and filed a timely appeal. On June 
9, 2016, Commission staff denied the appeal. The Alaska Group 
requested rehearing of the denial. Concurrent with the issuance of 
this NOI, the Commission is issuing a separate order denying the 
Alaska Group's rehearing request.
    \11\ The Alaska Group requests that any project located in the 
Aleutian Islands Area would continue to be assessed annual charges 
for use of government lands based on a regional per-acre land value.
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    13. In support of this proposal, the Alaska Group states that due 
to the small number of farms (and associated acreage) that contribute 
to the data compiled in the NASS Census, there is insufficient data in 
any individual Alaska area (with the exception of the Aleutian Islands) 
\12\ to produce a fair estimate of land values within that area. 
Because there are so few farms outside

[[Page 85175]]

of the Aleutian Islands area, the per-acre land values in the other 
four areas of Alaska are extremely sensitive to any changes in the 
voluntary, self-reported farm data compiled by the NASS Census.
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    \12\ The Alaska Group contends that because the Aleutian Islands 
area contains the greatest amount of farmland in the state (668,016 
acres), the NASS Census data for the Aleutian Islands area is 
``robust, reliable, and an accurate estimate of fair market value.'' 
Alaska Group June 6, 2016 Petition for Rulemaking at 18. Therefore, 
the Alaska Group requests that the proposed adjusted statewide 
average be applied to all hydropower projects in Alaska, except 
those projects located in the Aleutian Islands Area.
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    14. For these reasons, the Alaska Group recommends that an adjusted 
statewide average would better reflect the diverse topography of the 
state and insulate against land value fluctuations caused by individual 
changes in farm data, resulting in a more accurate estimate of fair 
market value of federal lands in Alaska.

II. Subject of the Notice of Inquiry

    15. The Commission has employed various methodologies over the 
course of its history to determine annual charges for the use of 
government lands by hydropower projects. As we previously explained, 
the touchstone has been to find an administratively practical 
methodology, which results in reasonably accurate land valuations. In 
seeking this goal, the methodology has been modified on occasion in 
response to concerns such as the cost of administering the methodology 
(e.g., rejecting individual appraisals), the administrative burden on 
the Commission (e.g., rejecting creation of our own index), and the 
accurate collection of fair market value (e.g., implementing updates in 
response to the contention that Commission had been under-collecting). 
As noted, the Commission currently calculates annual federal land use 
charges based on a fee schedule that uses per-acre land values 
published in the NASS Census. By doing so, the Commission avoids the 
extreme administrative burden of creating its own index of county and 
geographic area per-acre land values.
    16. In response to the petition for rulemaking, the Commission is 
seeking input on a narrow question related to its current methodology 
for calculating annual charges for the use of government lands--whether 
regional per-acre land values based on data published in the NASS 
Census ``land and buildings category'' result in reasonably accurate 
land valuations for hydropower lands in Alaska. Specifically, the 
Commission seeks comments on the alternative proposal advanced in the 
Alaska Group's petition for rulemaking by posing the following 
questions: (1) For the purposes of calculating an adjusted per-acre 
value for lands in Alaska, should the Commission use a statewide 
average per-acre land value rather than a regional per-acre land value; 
(2) if a statewide average per-acre value is preferred, should the 
statewide value be applied to (i) all projects in Alaska, or (ii) all 
projects in Alaska except those located in the Aleutian Islands Area; 
and (3) based on the response to question (2), which of the five 
geographic regions of Alaska (the Aleutian Islands Area, the Anchorage 
Area, the Fairbanks Area, the Juneau Area, and the Kenai Peninsula 
Area) should be included in the calculation of the adjusted statewide 
average. Finally, commenters may also submit alternative proposals for 
determining a reasonably accurate per-acre value for hydropower lands 
in Alaska for our consideration, as long as the proposed calculation is 
based on data published in the NASS Census.
    17. In addition to the views of entities subject to annual charge 
assessments, and other interested stakeholders, the Commission invites 
comments by the federal agencies that manage the lands at issue as to 
how they would view reductions in annual charges for lands that they 
administer.
    18. During the notice and comment rulemaking that culminated in 
Order No. 774, the Commission outlined several major objectives that 
guided our consideration of a new annual charges methodology. These 
objectives, albeit narrowed in scope to only those hydropower projects 
in Alaska, continue to guide our consideration during this process.

A. Uniform Applicability

    19. Any proposed methodology should be uniformly applicable to all 
hydropower licensees. This means that the Executive Director should be 
able to take the information in the Commission's files showing federal 
acreage occupied by individual projects, apply the adopted methodology, 
and create an annual charge for the use of government lands for each 
licensed project.

B. Cost of Administering Collection of Annual Charges

    20. The administration of any proposed methodology must not impose 
exorbitant costs on the Commission. Collection of annual charges and 
application of the ultimate methodology should be an annual, routine 
ministerial process that requires reasonable, but not overly 
burdensome, staff effort.

C. Methodology Not Subject to Review on an Individual Basis

    21. Any proposed methodology, once adopted, should not be subject 
to review on an individual case-by-case basis. Licensees will have the 
opportunity to challenge computational errors by the Executive Director 
in calculating the annual charge or the relevant county land acreage, 
but case-by-case challenges to the methodology would add significantly 
to the administrative cost and burden of collecting annual charges.

D. Fair Market Value

    22. At times in the Commission's history, it has been determined 
that the Commission had not been collecting fair market value for the 
use of government lands, which resulted in a substantial under-
collection.\13\ To ensure that the Commission recovers ``reasonable 
annual charges,'' any proposed methodology must reflect reasonably 
accurate land valuations.
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    \13\ See Assessment of Charges under the Hydroelectric Program, 
DOE/IG Report No. 0219 (September 3, 1986); see also More Efforts 
Needed to Recover Costs and Increase Hydropower Charges, U.S. 
General Accounting Office Report No. RCED-87-12 (November 1986).
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E. Avoid Increasing Price to Consumers of Power

    23. In fixing annual charges, we must seek to avoid increasing the 
price to consumers of power by such charges. Therefore, any proposed 
methodology should provide reasonable, but not excessive, compensation 
to the United States for the use of its lands.

III. Comment Procedures

    24. The Commission invites interested persons to submit comments 
and other information on the matters, issues, and specific questions 
identified in this notice, including any related matters or alternative 
proposals that commenters may wish to discuss. Comments are due January 
24, 2017. Comments must refer to Docket No. RM16-19-000, and must 
include the commenter's name, the organization it represents, if 
applicable, and its address.
    25. To facilitate the Commission's review of the comments, 
commenters are requested to provide an executive summary of their 
position. Commenters are requested to identify each specific question 
posed by the Notice of Inquiry that their discussion addresses and to 
use appropriate headings. Additional issues the commenters wish to 
raise should be identified separately. The commenters should double-
space their comments.
    26. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's Web site at http://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software should be filed in native applications or print-to-PDF

[[Page 85176]]

format and not in a scanned format. Commenters filing electronically do 
not need to make a paper filing.
    27. Commenters that are not able to file comments electronically 
must send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE., 
Washington, DC 20426.
    28. 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.

IV. Document Availability

    29. 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 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 5:00 p.m. Eastern time) at 888 First Street NE., Room 2A, 
Washington, DC 20426.
    30. From the Commission's Home Page on the Internet, this 
information is available on 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.
    31. User assistance is available for eLibrary and the Commission's 
Web site during normal business hours from the Commission's Online 
Support at 202-502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202)502-8659. Email the Public Reference Room at 
[email protected].

    By direction of the Commission.

    Issued: November 17, 2016.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2016-28193 Filed 11-23-16; 8:45 am]
 BILLING CODE 6717-01-P