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Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff; Settlements in Hydropower Licensing Proceedings Under Part I of the Federal Power Act; Policy Statement on Hydropower Licensing Settlements
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: September 27, 2006 (Volume 71, Number 187)]
[Notices]
[Page 56520-56527]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27se06-88]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. PL06-5-000]
Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G.
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff;
Settlements in Hydropower Licensing Proceedings Under Part I of the
Federal Power Act; Policy Statement on Hydropower Licensing Settlements
Issued September 21, 2006.
1. Hydroelectric licensing proceedings under Part I of the Federal
Power Act (FPA) are ulti-faceted and complex. These proceedings involve
the balancing of many public interest factors, as well as consideration
of the views of all interested groups and individuals. Moreover, since
the physical design, environmental impact, and history of every project
is different, each licensing proceeding is, to at least some extent,
unique.
2. Given this backdrop, the Commission looks with great favor on
settlements in licensing cases. When parties are able to reach
settlements, it can save time and money, avoid the need for protracted
litigation, promote the development of positive relationships among
entities who may be working together during the course of a license
term, and give the Commission, as it acts on license and exemption
applications, a clear sense as to the parties' views on the issues
presented in each settled case.
3. At the same time, the Commission cannot automatically accept all
settlements, or all provisions of settlements. Section 10(a)(1) of the
FPA requires that the Commission determine that any licensed project is
best adapted
[[Page 56521]]
to a comprehensive plan for improving or developing a waterway or
waterways for the use or benefit of interstate or foreign commerce, for
the improvement and utilization of waterpower development, for the
adequate protection, mitigation, and enhancement of fish and wildlife
(including related spawning grounds and habitat), and for other
beneficial public uses, including irrigation, flood control, water
supply, and recreational and other purposes referred to in section 4(e).\1\
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\1\ See 16 U.S.C. 803(a)(1) (2000). FPA section 4(e), 16 U.S.C.
797(e), provides, in pertinent part, that 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 damages 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.
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4. Consequently, in reviewing settlements, the Commission looks not
only to the wishes of the settling parties, but also at the greater
public interest, and whether settlement proposals meet the
comprehensive development/equal consideration standard. Because of the
requirements of Part I of the FPA, the Commission's review of
hydropower licensing settlements is often different from that accorded
to other settlements presented to us, such as those in rate cases. In
the latter type of cases, the Commission may accept settlements as a
whole, given that it has authority under section 5 of the Natural Gas
Act and section 206 of the FPA to examine at any time whether rates,
charges, rules, regulations, practices, or contracts are unjust,
unreasonable, unduly discriminatory, or preferential. Because section 6
of the FPA precludes revision of hydropower licenses without the
licensee's consent, it is necessary that the Commission examine
proposed license conditions in detail before approving them. The
Commission does include reopener provisions in hydropower licenses, but
these are only exercised where environmental conditions have
significantly changed. Were the Commission to assert a broad, general
authority to reopen any part of a license during its term, equivalent
to the authority provided by sections 5 and 206, this would sharply
undercut the certainty sought by parties to licensing proceedings. As a
separate matter, the Commission's role in overseeing license compliance
makes it important that license conditions be clear and enforceable.
5. The Commission must also ensure that its decisions on
settlements, like all decisions under the FPA, are supported by
substantial evidence.\2\ To support a proposed license condition, then,
it is necessary for the parties to develop a factual record that
provides substantial evidence to support the proposed condition, and
demonstrates how the condition is related to project purposes or to
project effects. The settling parties should provide the Commission
with record support showing a nexus between the proposal and the
impacts of the project, as well as to project purposes, and also
explain how the proposal will accomplish its stated purpose.
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\2\ See FPA section 313(b), 16 U.S.C. 825l (2000) (``[t]he
finding of the Commission as to the facts, if supported by
substantial evidence, shall be conclusive'') (emphasis added).
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6. In addition, proposed license conditions must be enforceable. By
way of example, the Commission is precluded by law from assessing
damages, so any condition that would do so would be unenforceable. To
the extent that the Commission does not adopt proposed conditions that
it has no jurisdiction to enforce, this does not evidence general
opposition to settlements or to the settlement at hand, but rather
recognition that the Commission can only exercise that authority given
it by Congress. Also, the Commission has jurisdiction over only its
licensees, and therefore cannot enforce any condition to the extent
that it purports to place responsibility on a non-licensee. In
addition, conditions that do not clearly outline the licensee's
responsibilities and establish the parameters governing required
actions may be difficult or impossible to enforce. However, as
discussed below, contracts that the Commission cannot enforce may well
be made enforceable by other means, such as binding arbitration, or
resort to State or Federal court.
7. It should be noted that the fact that the Commission does not,
whether as a matter of law or policy, include certain provisions in
licenses does not mean that they are precluded from being included in a
settlement. Settling parties are free to enter into ``off-license'' or
``side'' agreements with respect to matters that will not be included
in a license. However, the Commission has no jurisdiction over such
agreements and their existence will carry no weight in the Commission's
consideration of a license application under the FPA.
8. Based on the foregoing, the logical process for arriving at an
acceptable settlement is for the parties to undertake the following steps:
? Use existing information and pre-license studies to
determine the environmental effects of the proposed project.
? Based on this record, develop appropriate environmental
measures to address those effects.
? Craft settlement provisions based on the record and the
proposed measures, taking into account recent Commission precedent.
? Prepare an explanation of the settlement that will enable
the Commission to understand the parties' intent and what in the record
they believe supports their proposals.\3\
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\3\ In its regulations, the Commission has set forth details
concerning the content of settlements, and the procedures relating
to their filing. See 18 CFR 385.602 (2006).
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9. We are aware that settling parties have a strong interest in
knowing in advance which provisions of proposed settlements are likely
to be acceptable to the Commission. Precedent can serve as a very
useful guide in this regard. If parties engaged in settlement
discussions wish to obtain additional guidance as to particular
concepts or proposed provisions, it may be useful to seek the advice of
Commission staff, by requesting that staff either participate in an
advisory role in settlement discussions or review proposed settlements
before they are filed with the Commission. While Commission staff
cannot speak for the Commission itself, staff will be able to give
parties the benefit of its experience, as well as advice regarding
recent Commission actions. Advice from experienced staff, coupled with
careful reading of recent Commission precedent, is the best way to
predict the Commission's likely reaction to particular provisions
proposed in settlement agreements.
10. At the same time, we recognize the value of more general
guidance. Therefore, we have prepared this document, in an attempt to
elucidate certain principles regarding settlements. Some of the matters
discussed below have been dealt with in Commission orders; others
represent application of the principles enunciated in those orders.
While we hope that this document will be useful to parties engaged in
settlement negotiations, we caution that the Commission will review
every case on its facts and make in each instance the public interest
determination required by the FPA. Thus, the statements in this
document represent guidance, but not a guarantee. It may be that the
facts of a particular case dictate a different result from that in a
previous proceeding where a similar issue arose, or that policy changes
over time.
11. Certain general types of issues have arisen with some frequency
over
[[Page 56522]]
the last several years. The following discussion outlines some
principles with respect to these issues, in the hope of providing
general principles that may assist settling parties. In the last
section of this guidance, we list more specific settlement provisions
that have been of concern. While individual cases are cited throughout
this document, this guidance is not intended to be an encyclopedic
reference to all cases involving settlements.
12. The following basic principles, which are discussed in more
detail below, apply to the consideration of measures proposed to be
included as conditions in project licenses:
? Measures must be based on substantial evidence in the
record of the licensing proceeding.
? Measures must be consistent with the law and enforceable.
In particular, measures must be within the Commission's jurisdiction.
? A relationship must be established between a proposed
measure and project effects or purposes.
? Measures should be as narrow as possible, with specific
measures (e.g., installing riprap to prevent erosion) preferred over
general measures, such as creation of an aquatic resource fund.
? Actions required under measures should occur physically/
geographically as close as possible to the project.
? Measures must reserve the Commission's compliance
authority, as well as its authority to review and modify as necessary
proposed resource or activity plans (for example, a provision that a
stakeholder committee can determine new measures during the license
term should also provide that the proposed measures be filed with the
Commission for its review, modification, and approval).
Substantial Evidence
13. As noted above, the FPA provides that the Commission's
determinations will be upheld if they are supported by substantial
evidence. In consequence, the Commission must have substantial evidence
to support its licensing decisions. If parties want the Commission to
accept the terms of a settlement, they must provide substantial
evidence to support the measures they ask the Commission to impose.
Thus, for example, it would not be sufficient to ask the Commission to
set a particular minimum instream flow solely because the parties have
compromised on that number. Rather, the parties would need to provide a
scientific explanation, supported by facts in the record, of how that
level of flows meets the needs of affected resources and how it is
consistent with the comprehensive development of the waterway.
Similarly, if there is no showing of harm of a fishery, the record will
not support a measure requiring the mitigation of harm to fish species.
See Allegheny Energy Supply Company, LLC, 109 FERC ] 61,028 at P 6 (2004);
see also City of Centralia, WA v. FERC, 213 F.3d 742 (D.C. Cir. 2000).
Lawful And Enforceable
14. A settlement provision that extends beyond the Commission's
jurisdiction to require or to enforce cannot become a lawful term in a
Commission license. It would seem axiomatic that proposed settlement
provisions and license conditions must be consistent with law. Yet, in
some instances, settlements include provisions that purport to extend
the Commission's jurisdiction. It is important for parties to bear in
mind that the bounds of the Commission's jurisdiction are established
by law and cannot be expanded through an order implementing a
settlement. Thus, the Commission has jurisdiction only over its
licensees and cannot enforce the provisions of a settlement against
other parties, such as Federal and State agencies, or private parties.
See, e.g., Avista Corporation, 93 FERC ] 61,116 at 61,329 (2000).
Matters that are beyond the Commission's jurisdiction can be resolved
by parties in ``off-license'' agreements that will not be included in a
license, see, e.g., City of Seattle, WA, 75 FERC ] 61,319 at 62,014,
n.6 (1996). As another example, because the FPA does not allow the
Commission to impose damages, a damages provision may not properly be
included in a license. See, e.g. Consumers Power Company, 68 FERC ]
61,077 at 61,378-80 (1994). In addition, the Commission cannot expand
its own jurisdiction. Thus, even if parties agree that a license should
include measures that are outside of the Commission's jurisdiction--for
example, a requirement that a State agency manage a wildlife refuge--
the Commission could not enforce the measures.
Dispute Resolution/Enforceability
15. Parties to settlements often agree as to the form of dispute
resolution they will use during the license term. Initially, the
Commission declined to include in licenses dispute resolution
provisions that purported to bind parties other than the licensee, on
the ground that those provisions were unenforceable, given that the
Commission had jurisdiction only over its licensees. See, e.g., Avista
Corporation, 93 FERC ] 61,116 (2000). The Commission later modified its
policy, to the extent of deciding that it would require licensees to
comply with settlement provisions of this kind, even though it could
only enforce them against licensees. See Erie Boulevard Hydropower, LP,
100 FERC ] 61,321 at 62,502 (2002). Parties who want such provisions in
licenses should bear in mind, however, the limited nature of the
Commission's enforcement authority in such matters. Thus, for example,
the Commission could require a licensee to comply with notice
provisions or to attend meetings required by a dispute resolution
provision. It could not require a Federal or State resource agency or a
non-governmental entity to do so.
Relationship to the Project
Comprehensive Development
16. As noted above, pursuant to Part I of the FPA, the Commission
is required to license projects that best result in the comprehensive
development of a waterway. In order to determine whether proposed
settlement provisions or license conditions meet this standard, it is
necessary for the Commission to determine to what extent these
proposals relate to project effects or project purposes. This is easier
to do if the provisions in question call for specific measures (rather
than a general expenditure of funds), if the measures call for actions
in the project vicinity, and if the settling parties document how the
measures are tied to project effects or purposes. Thus, it may be easy
to understand and explain how construction of a campground or a boat
put-in at a project reservoir is tied to the project purpose of
recreation. It is harder to draw that connection if, for example, a
settlement measure calls for recreation facilities many miles above or
below the project, or for facilities, such as a snowmobile trail, that
may not have an obvious connection to the project. Similarly, it is
more difficult to explain how paying a dollar amount for future,
unspecified enhancements is tied to a project purpose. As the
Commission explained in Virginia Electric Power Company, 110 FERC ]
61,241 at P 11 (2005):
We * * * note with approval the fact that the many measures
required by the settlement and the corresponding license articles
appear to call for activities related to project impacts and
purposes. It is our strong preference that measures required in a
license be clearly tied to the project at issue. We are sometimes
troubled by settlements which require measures, such as general
funds to be used for unspecified measures, that are not tied to
either project impacts or purposes. In addition, we prefer measures
requiring specific actions (i.e., the licensee
[[Page 56523]]
shall construct a fish hatchery) to those mandating general actions
whose effects are unclear (i.e., the licensee shall contribute
$100,000 to support fisheries enhancements). It is much easier for
us to conclude that a project proposal based on specific measures is
in the public interest, as opposed to one made up in large part of
measures whose impacts we cannot truly assess. We also note that we
have a preference for mitigation or enhancement measures that are
located in the vicinity of the project unless this is impractical or
unless substantially increased overall project benefits can be
realized from adopting off-site measures.
Project Purposes
17. Instances of orders concluding that settlement measures were
not sufficiently tied to project purposes or project effects include:
Portland General Electric Company, 107 FERC ] 61,158 at P 21, n.21
(2004) (disposition of non-project lands and of water rights);
PacificCorp, 105 FERC ] 61,237 at P 113, n.27 (2003) (portions of
settlement not relating to project operations or environmental effects
not included in license); Pacific Gas and Electric Company, 97 FERC ]
61,084 at 61,409-10 (2001) (monitoring of water temperature, flows, and
meteorological conditions in reservoirs and river reaches within
boundaries of upstream project; investigating feasibility of, and
possibly making, modifications to upstream project); Northern States
Power Company, 111 FERC ] 62,212 at P 31 (2005) (recreation enhancement
measures outside project boundary that did not provide access to
project lands or waters, where adequate access already provided at
project); PacifiCorp, 104 FERC ] 62,059 at P 28 (2003) (provisions
providing for recreation enhancements outside project boundary, and for
sale of non-project lands); USGen New England, 99 FERC ] 62,025 at
64,060-61 (2002) (partially rejecting proposal for enhancement fund, to
extent fund would cover activities outside project boundary, with no
nexus to project, or, in case of mitigation for tax revenue impacts,
beyond Commission's jurisdiction).
Recreation
18. Many settlements contain provisions regarding recreation. As
with other settlement provisions, it is important that parties base
proposed recreation provisions on record evidence supporting the need
for the proposed facilities and that they link the measures in question
to the project. Thus, if a settlement proposes enhancements to
campgrounds in the project area, parties should explain how those
facilities are used in connection with the project and demonstrate the
need for the facilities. For example, if data show that existing
campgrounds are not greatly used, it may be hard to justify expanding
them or adding new campgrounds.
19. Given that a project is primarily a water-based facility, it
may not be hard to conclude that construction of a boat ramp, a fishing
pier, or a hiking trail along the reservoir perimeter could be an
appropriate environmental measure that serves a project purpose, if the
need for that facility is established. These facilities would enable
the public to better use the project lands and waters. It may be more
difficult to justify recreation that is more remote from the project
site (as in a campground located 20 miles away from any project works).
Similarly, it may be hard to draw a public interest connection between
a project and a recreation feature that does not appear to be tied to
the nature of the project. For example, a community near a project
might consider itself to be in need of a public auditorium. It would be
difficult to justify inclusion of such a requirement in a license,
unless the parties could demonstrate, not just why the proposed measure
is generally worthwhile, but, more specifically, how it is linked to
the effects and purposes of the project. See Wisconsin Public Service
Corporation, 104 FERC ] 61,295 at P 32-33 (2003) (noting, with respect
to decision not to require retention of certain recreation facilities
within project boundary that environmental assessment had found ``these
facilities are not directly associated with public recreational access
to project waters or facilities,'' and concluding that facilities not
included ``have [insufficient] nexus to reservoir-based recreation and
[similar facilities] are found elsewhere in the area.''); Northern
States Power Company, 111 FERC ] 62,212 at P 31 (2005) (declining to
include proposed recreation measures in license where it is unclear how
measures address access to project lands or waters and when adequate
recreational access provided by existing facilities).
20. Two other matters that can arise in connection with recreation
facilities are inclusion within the project boundary and cost-sharing,
both discussed below. If the licensee is expected to undertake measures
throughout the license term, such as ongoing maintenance with respect
to a recreation facility that the Commission has determined is
necessary for project purposes,--and the Commission consequently will
have ongoing responsibility to ensure compliance--the licensee may be
required to include the facility within the project boundary. As noted,
this means that the licensee will have to obtain sufficient rights with
respect to the facility to ensure that it can comply with Commission
requirements, but it does not mean that the licensee must obtain fee
ownership. With respect to cost-sharing, settlements occasionally
provide that the licensee will share the costs of maintaining a
facility with a State or Federal agency (often the entity that owns the
facility, such as a campground owned by the U.S. Forest Service). Again
as noted below, if the Commission requires that a facility be
maintained, it can look only to the licensee to do so. Thus, a license
condition must place responsibility for completion of a measure on the
licensee. As noted above, any cost-sharing agreement may have to be a
matter of contract between the licensee and the third party, but will
not be something that Commission staff will recommend including in a
license. See Alcoa Power Generating, Inc., 110 FERC ] 61,056 at P 31
(2005) (finding that, although licensee agreed with U.S. Forest Service
and State agencies to share costs of recreation areas and facilities,
ultimate responsibility for performance of license obligations must be
borne by licensee).
Specific Measures
Cost Caps
21. In some settlements, parties place financial limits on the
licensee's obligation to perform certain tasks (for example, ``the
licensee shall build a campsite at a cost of $10,000'') or limit the
licensee's obligation to the payment of funds to a third party (for
example, ``the licensee shall pay $10,000 to the State to construct a
fishing pier), rather than the performance of a particular measure. As
the Commission has made clear, a licensee cannot satisfy the obligation
to perform certain tasks by a simple payment to another party, nor can
the obligation be limited by a particular dollar figure. The Commission
will take an independent look at proposed measures and their costs, to
determine if the proposals are reasonable. If a measure is required,
however, it will be because the Commission has determined that the
measure is required to meet the FPA's comprehensive development
standard. In consequence, although the Commission sometimes includes in
license articles spending caps that parties have agreed to, it does so
to memorialize the intent of the parties, but not to approve the limit.
The Commission expects the required measure to be performed by the
licensee, even if the cost exceeds the
[[Page 56524]]
agreed-upon cap. As the Commission stated in Virginia Electric Power
Company,
[s]ettlements filed with us often include specific dollar
limitations (i.e., the licensee shall build a fishing pier, at a
cost of up to $15,000), and we sometimes include those limitations
in license articles at the parties' request, in an effort to revise
proposed articles as little as possible. It is important for all
entities involved in settlements to know, however, that we consider
the licensee's obligation to be to complete the measures required by
license articles, in the absence of authorization from the
Commission to the contrary. Dollar figures agreed to by the parties
are not absolute limitations.
110 FERC ] 61,241 at P 10 (2005). See also New York Power Authority,
105 FERC ] 61,102 at P 66 (2003) (reserving Commission's right to amend
agreed-upon funding requirements to ensure that project is operated in
public interest); Allete, Inc., 107 FERC ] 62,036 at P 26 (2004); City
of Sturgis, Michigan, 105 FERC ] 62,132 at P 37 (2003); Charter
Township of Ypsilanti, Michigan, 105 FERC ] 62,019 at P 39 (2003);
PacifiCorp, 105 FERC ] 62,207 at P 27 (2005).
Cost Sharing
22. As noted, the Commission has no jurisdiction over any party to
a hydroelectric licensing settlement other than the licensee. Some
settlements include agreement that the licensee and some other party
will share the costs of performing certain measures, such as an
agreement that the licensee and a State and Federal agency will jointly
manage a recreation area. The Commission cannot enforce such an
agreement against a non-licensee. Another problem can arise if the
agreement is premised on the receipt of matching funds; that is, the
licensee won't be expected to make a payment unless another entity also
does so. As discussed in regard to cost caps, if the Commission
requires the licensee to undertake a particular measure, it will look
to the licensee alone for the performance of that measure. See, e.g.,
Virginia Electric Power Company, 106 FERC ] 62,245 at P 44 (2004)
(finding that, while settlement provisions require licensee to provide
funds to agency for construction and maintenance of facilities,
licensee is ultimately responsible for compliance with license
conditions); PacifiCorp, 105 FERC ] 62,207 at P 28 (2005) (noting, with
respect to settlement provision requiring licensee to designate
environmental coordinator, that, while licensee may hire others to
perform required measures, burden of compliance rests with licensee).
While licensees and other parties are free to enter into cost-sharing
side agreements, including such provisions in a license is problematic
because the Commission has no ability to enforce them.
23. Similarly, the parties may agree that a third party will
undertake a certain task, and perhaps be paid by the licensee to do so.
For example, it might be agreed that the licensee will pay a State
agency or a tribe to operate a fish hatchery. If the Commission finds
that operation of the fish hatchery is required for the comprehensive
development of the affected waterway, it will not include in the
license a provision requiring the licensee to pay another entity to
operate the hatchery, but rather will require the licensee to operate
the hatchery and leave to it how to fulfill that obligation. See
Portland General Electric Company, 114 FERC ] 61,137 at P 11, 15
(2006). This is because the Commission has jurisdiction only over its
licensee, and thus cannot ensure that a measure will be carried out
unless ultimate responsibility for doing so rests with the licensee.
24. Settlement provisions requiring licensees to pay for the
salaries of personnel who work for other entities, such as a State
wildlife biologist or a law enforcement officer, also raise several
issues. First, as noted, the Commission prefers concrete measures with
measurable requirements and impacts such as ``construct and operate a
fish hatchery'' to more indefinite ones such as ``pay the salary of a
State fisheries biologist.'' In addition, the Commission has no way of
assuring that the hiring of personnel paid for by the licensee will
actually accomplish a project purpose or ameliorate a project effect.
Again, this is why measures that require specific, direct, on-the-
ground actions are preferable to more general ones. It makes most sense
for the license to establish what measures a licensee must perform, and
for any settlement between the licensee and third parties regarding the
performance of those measures to be addressed in off-license agreements.
Funds
25. As noted above, in order to include a specific environmental
measure in a license, the Commission needs to be able to conclude that
the measure relates to project impacts or project purposes. This is why
the Commission has expressed a preference for specific measures and
that, where possible, such measures be implemented within the project
boundary or close to the project and the area that it affects. An
increasing number of settlements include funds intended to cover the
costs of measures to be undertaken during the course of the license
term. The principles enunciated above apply to consideration of such funds.
26. For example, where the record shows that a project has an
impact on certain aquatic species or could enhance such species, it may
be possible to obtain Commission approval of a fund that is designated
for the purpose of enhancing and mitigating impacts on those species
within the project vicinity, such as a fund to pay for a set of
specified fishery habitat enhancements within the project boundary,
provided that the licensee retains sufficient control over the fund
that the Commission can ensure compliance with the related license
article and ensure satisfaction of the underlying project purposes
supporting the fund. As the ties between the proposed fund and record
evidence and project effects and purposes become more tenuous, as with
a fund to undertake unspecified fishery measures within the basin where
the project is located, the propriety of the fund may increasingly come
into question. Thus, if the record does not show that the project has
an adverse effect on fishery resources or does not demonstrate that
effective enhancement measures can be undertaken in the project
vicinity, it may be more difficult to justify inclusion of a fishery
fund in a license. Similarly, a fund that may be used anywhere in a
State or in a broad geographic area may be less likely to be
recommended than one more closely tied to the project. To the extent
that parties feel measures should be undertaken beyond the project
vicinity, they should explain in detail why those measures are related
to project purposes, why they cannot be carried out at the project
site, and why their proposals would satisfy the comprehensive
development standard.
Physical Proximity
Project Boundaries
27. In the course of Commission action on settlements, issues often
arise with respect to project boundaries. Specifically, parties may be
concerned about what facilities need to be within project boundaries,
and what the impact of such inclusion will be. Therefore, a brief
discussion of this issue may be helpful.
28. Part I of the FPA directs the Commission, when issuing a
license for a hydroelectric project, to require the licensee to
undertake appropriate measures on behalf of both developmental and non-
developmental public interest uses of the waterway,
[[Page 56525]]
including fish, wildlife, and recreation.\4\ These requirements, as set
forth in a license, constitute the ``project purposes.''
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\4\ As discussed earlier, FPA section 10(a)(1) sets forth the
standard by which the Commission acts on hydropower license
applications, and incorporates by reference those public purposes
set forth in FPA section 4(e).
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29. The Commission has regulatory authority only over the licensee,
and thus can administer and enforce the terms of the license only
through the licensee and the licensee's property rights. Standard
license Article 5 requires the licensee to acquire and retain all
interests in non-Federal lands and other property necessary or
appropriate to carry out project purposes.\5\ The licensee may obtain
these property interests by contract or, if necessary, by means of
Federal eminent domain pursuant to FPA section 21.\6\
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\5\ Standard Article 5 appears in what are called ``L-Forms,''
which are published at 54 FPC 1792-1928 (1975) and are incorporated
into project licenses by an ordering paragraph. See 18 CFR 2.9
(2006). Article 5 states in pertinent part: ``The Licensee, within
five years from the date of issuance of the license, shall 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 the project. The
Licensee or its successors and assigns shall, during the period of
the license, retain the possession of all project property covered
by the license as issued or as later amended, including the project
area, the project works, and all franchises, easements, water
rights, and rights of occupancy and use; and none of such properties
shall be voluntarily sold, leased, transferred, abandoned, or
otherwise disposed of without the prior written approval of the
Commission, except that the Licensee may lease or otherwise dispose
of interests in project lands or property without specific written
approval of the Commission pursuant to the then current regulations
of the Commission * * *.''
\6\ 16 U.S.C. 814 (2000).
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30. A licensee's property interests can range from fee simple to
perpetual or renewable leases, easements, and rights-of-way. Thus,
title to lands within the boundary can be owned by someone other than
the licensee, so long as the licensee holds the necessary property
interests (e.g., flowage easements) and permits (e.g., a Forest Service
special use permit) to carry out licensed project purposes. The license
covers only those property interests held by the licensee; each license
with a project boundary states (in an ordering paragraph) that ``the
project consists [inter alia] of (1) All lands, to the extent of the
licensee's interests in those lands, enclosed by the project boundary
shown by [a designated exhibit] * * *.''
31. If the Commission requires additional control in order to
accomplish a project purpose, or amends the license to expand or add a
project purpose, it can direct its licensee to obtain any necessary
additional property rights, whether inside or outside the existing
project boundary, and amend the boundary as appropriate. See, e.g.,
Upper Peninsula Power Company, 104 FERC ] 62,135 at P 72 (2003)
(finding that, notwithstanding settlement provision that licensee's
obligation to develop buffer zone and wildlife and land management plan
applied only to license-owned lands within project boundary, obligation
in fact extended to all lands within boundary). Conversely, if the
Commission determines that less land is needed to meet project
purposes, or if it redefines project purposes, it can remove land from
the boundary. If the Commission deletes a parcel of land from the
project and its boundary, the Commission is placing that land outside
of its jurisdiction and regulatory reach. See, e.g., Pacific Gas &
Electric Company, 102 FERC ] 61,309 at P 21; 56-61 (2003) (rejecting
portion of land management plan agreement that would have removed from
project boundaries lands needed for project purposes). Compare
Wisconsin Public Service Corporation, 104 FERC ] 61,295 at P 29-38
(2003) (approving in part application to amend project boundaries).
32. Project boundaries are used to designate the geographic extent
of the lands, waters, works, and facilities that the license identifies
as comprising the licensed project and for which the licensee must hold
the rights necessary to carry out project purposes. The establishment
of a project boundary makes it easier for the Commission, the licensee,
and other interested parties to understand the geographic scope of a
project. All facilities, lands, and waters needed to carry out project
purposes should be within the project boundary. A project boundary does
not change property rights, nor does the conveyance of a property right
change a project boundary.
33. To an extent, the Commission has allowed an exception for lands
and waters on which a licensee is to carry out one-time measures. For
example, if a licensee is required once to place material in a stream
in order to create fish habitat, but is not required to undertake other
measures in that area during the license term, the Commission may not
include that reach within the project boundary. If, however, the
licensee is obligated to undertake measures throughout the license
term, such as implementing an ongoing habitat restoration plan, the
Commission may require that the affected lands be included in the
project boundary. See, e.g., PacifiCorp, 105 FERC ] 61,237 at P 114
(2003) (noting that licensee would have to amend project boundary to
include lands previously outside of project boundaries, on which
activities required by license).
34. Thus, if settling parties have a desire to include or exclude
certain lands, waters, or facilities within project boundaries, they
should examine carefully the licensee's obligations and how the lands
or facilities in question relate to project purposes. If lands or
facilities are to be included within the project boundary, there must
be a showing of how they are needed for project purposes; if they are
to be excluded there must be a showing of why they are not needed for
those purposes, or that the measures affecting project lands or
facilities are one-time measures that will not require Commission
oversight throughout the life of the license.
Roads
35. One specific instance in which project boundary issues arise is
roads. Some settlements require licensees to pay for the upkeep of
roads leading to the project or to specific project works, such as
recreation areas. Several issues can arise with respect to such
measures. First, in order to decide whether a license should include a
requirement that road activities be funded, the Commission must
determine that the road is necessary for project purposes, as with a
road that is needed in order to reach the powerhouse or a road that is
the only way to reach a project recreation site. If the road merely
passes near the project and is used only incidentally for project
purposes, it may not be appropriate to require the licensee to maintain
it. The Commission must also be able to determine what part of the road
is needed for project purposes. Thus, it will be appropriate to develop
license conditions covering only the relevant portion of a long road
that at some point provides necessary access to a project, rather than
the entire road.
36. Finally, if a road is deemed necessary for project purposes
such that the licensee is required to undertake ongoing activities with
respect to the road throughout the license term, the Commission may
require that the road be included within the project boundary, so that
the Commission can exercise its compliance jurisdiction to ensure that
the required activities take place. As indicated above, inclusion of a
road or a portion of a road within a project does not mean that the
licensee must obtain fee title to the road, only that it must obtain
sufficient rights, such as an easement, a lease, or a right-of-
[[Page 56526]]
way, to ensure that it can implement the required measures. There are
instances in which road owners, such as towns, counties, or the U.S.
Forest Service, have been reluctant to have roads included within
project boundaries. Parties should consider this issue carefully when
deciding to what extent they want the Commission to impose ongoing
obligations on licensees with respect to roads.
Reserve Commission Authority
Commission Approval
37. As the agency charged with the administration of hydropower
licenses, the Commission must approve licensees' post-licensing plans.
That authority cannot be ceded to other entities. Thus, settlement
conditions that provide that the licensee must file specified plans
after obtaining the approval of other parties, such as resource
agencies, tribes, or non-governmental organizations, are acceptable if
they provide that the plans will be filed with the Commission for its
approval, and that the Commission will have the right to revise the
plans as it deems necessary. Provisions that envision plans (or
operational changes outside of the parameters approved in the license)
being approved by other entities but not the Commission are not
acceptable. In Virginia Electric Power Company, the Commission stated that:
* * * we are pleased that the settling parties were able to develop
means for carrying out the goals of the settlement in a manner
consistent with the Commission's responsibilities under the Federal
Power Act. For example, Article 411, which calls for a bypassed
reach flow release plan, requires the licensee to develop the plan
in consultation with State and Federal resource agencies, and then
to file the plan for Commission approval, with the explicit
understanding that the Commission may require changes in the plan.
110 FERC ] 61,241 at P 35.
38. Where, on the other hand, the parties establish a mechanism
that purports to give the licensee and other parties the ability to
alter license terms or obligations without first obtaining the
Commission's approval, the Commission has revised proposed license
articles to include its approval authority. See New York Power
Authority, 105 FERC ] 61,102 at P 65 (2003) (modifying proposed license
articles to require Commission approval of fishway plans).
Adaptive Management
39. Settlement provisions often contemplate that adjustments to
measures required during the license term will be based on information
gleaned from ongoing monitoring or other post-license studies. This is
sometimes called adaptive management. Settling parties may agree, for
example, that a committee will meet and decide on an annual level of
spring flows for fishery purposes. To the extent that the proposed
flows are within parameters considered in the licensing proceeding and
determined to be appropriate, this does not pose a problem. A license
might provide that a licensee be required to release increased flows of
between 100 and 200 cfs for a period, to be determined on an annual
basis, between March 15 and June 15. It would be appropriate for the
committee to decide each year what flows within these parameters should
be released, with notification to the Commission. However, it would not
be appropriate to give the committee authority to require flows beyond
the limits set forth in the license, because the Commission would not
have had a prior opportunity to determine whether those flows were in
the public interest. In order for this to occur, the licensee would
have to file an amendment application with the Commission, seeking
authority to alter the terms of the license. For the same reason, it
would not be appropriate to propose that the license not contain flow
parameters at all, and simply leave flow decisions up to an adaptive
management group. As the Commission explained in Virginia Electric
Power Company:
We receive many settlements in which parties agree to adaptive
management measures, calling for future studies and possible changes
in project operations based on experience. For the Commission to
exercise its oversight authority, it is necessary that license
conditions embodying these measures provide for Commission review
and, where required, modification of proposed actions that go beyond
the limits imposed by the license.
110 FERC ] 61,241 at P 23. See also PacificCorp, 103 FERC ] 62,183 at P
35 (2003)
(``The Agreement provides for possible modifications to project
structures and operations during the license term. For example, the
proposed articles contain provisions to alter whitewater flow releases
in the event that monitoring attributes to these releases deleterious
impacts to biological resources. While such adaptive management
provisions are not uncommon in licenses issued in recent years, the
proposed articles would put project modifications under the direction
of [a committee]. It is, however, the Commission's role and
responsibility to give prior approval, through appropriate license
amendments, for all material amendments to the project and the license'').
Other Issues
40. In addition to the matters discussed above, there have been a
number of other instances over the last few years in which proposed
provisions that do not fit precisely into the more general categories
discussed above were not included in licenses. These provisions are
briefly summarized below, in order to provide additional guidance:
(1) Provisions that would require amending the license for another
project. Section 6 of the FPA precludes the Commission from altering a
license without the licensee's consent. See Pacific Gas & Electric
Company, 97 FERC ] 61,084 (2001); Arizona Public Service Company, 109
FERC ] 62,241 (2004); FPL Energy Maine Hydro, LLC, 106 FERC ] 62,021
(2004).
(2) Financial restrictions with respect to future surrender of a
project. See Northern States Power Company, 111 FERC ] 62,212 at P 33
(2005) (Commission has previously declined to impose generic project
retirement plans and licensee is anticipated to have sufficient
financial resources to satisfy any conditions on surrender); Northern
States Power Company, 111 FERC ] 62,123 at P 34 (2005) (same).
(3) A provision purporting to restrict parties' statutory right to
seek rehearing. FPL Energy Maine Hydro, LLC, 106 FERC ] 62,021 at P 23
(2004).
(4) A proposed license condition stating that the Commission would
not object to ``reasonable'' fees charged by licensees and operators of
recreational facilities within the project boundaries. See FPL Energy
Maine Hydro, LLC, 106 FERC ] 62,021 at P 24 (2004) (Commission
generally does not review reasonableness of such fees).
(5) Provision tying future actions to the date that the licensee
accepts the license, contrary to general Commission practice of using
the more certain date of license issuance. See Virginia Electric Power
Company, 106 FERC ] 62,245 at P 46 (2004).
(6) Settlement provision requiring that requesting party pay
licensee for whitewater releases above those set forth in settlement
not accepted, because licensee must bear cost of any releases required
by Commission. See Alcoa Power Generating, Inc., 110 FERC ] 61,056 at P
23, n.14 (2005).
Comment Procedures
41. We invite interested persons to submit written comments on the
Commission's policy with regard to settlements in hydropower licensing
[[Page 56527]]
proceedings. Comments are due 45 days from the date of publication of
the policy statement in the Federal Register. Comments must refer to
Docket No. PL06-5-000, and must include the commenter's name, the
organization they represent, if applicable, and their address in their
comments. Comments may be filed either in electronic or paper format.
42. Comments may 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 and requests commenters
to submit comments in a text-searchable format rather than a scanned
image format. 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, Secretary of the Commission,
888 First Street, NE., Washington, DC 20426.
43. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described below.
Commenters on this policy statement are not required to serve copies of
their comments on other commenters.
44. 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 FERC's Home Page (http://www.ferc.gov) and in FERC
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.
By the Commission.
Magalie R. Salas,
Secretary.
[FR Doc. E6-15800 Filed 9-26-06; 8:45 am]
BILLING CODE 6717-01-P