Regulation and Policy

Senate witnesses relate early hydro benefits of Energy Policy Act

Parties to the U.S. hydropower licensing process told a Senate committee May 8 that they already are beginning to see benefits from hydropower provisions of the Energy Policy Act of 2005.

The Senate Energy and Natural Resources Committee hearing was the first of several scheduled by Chairman Pete Domenici, R-N.M., to examine implementation of the Energy Policy Act.

Director J. Mark Robinson of the Federal Energy Regulatory Commission’s Office of Energy Projects, said hydro licensing reform language already has reduced conflicts between FERC and the resource agencies that add mandatory conditions to FERC licenses.

Robinson pointed to a provision that requires resource agencies of the departments of Interior, Commerce, and Agriculture to follow criteria that more closely reflect FERC’s mandate to give “equal consideration” to all values of a hydro resource. He said the new agency criteria are reducing conflict between agency mandatory conditions and the conditions that FERC finds would be in the public interest.

Mandatory condition proceedings dovetail with FERC schedules

In response to resource agency mandatory conditions, the Energy Policy Act allows license applicants and other parties to seek trial-type administrative hearings to resolve factual disputes, and to file alternative conditions that are less expensive, but equally protective of the resources in question.

Robinson said FERC is satisfied that new resource agency rules are appropriately integrating those opportunities into FERC’s overall time frame for licensing. If the resource agencies meet timelines they established in an interim final rule, the act will not extend FERC’s licensing schedule, he said.

However, Robinson said FERC is concerned about Interior and Agriculture department schedules for processing 15 “transition” projects that began the licensing process before the Energy Policy Act was enacted. As a result of hearing schedules and delayed filing of modified terms and conditions, final action on nine of the 15 projects could be delayed by six to 14 months, he said.

Due to a scarcity of administrative law judges, Robinson added, the agencies say they are able to schedule only one hearing a month.

Interior: Act spurs agency cooperation, careful deliberation

On behalf of resource agencies with mandatory conditioning power, an Interior Department spokesman said the new law appears beneficial, although no agency has yet had time to conduct a trial-type hearing or to assess alternative mandatory conditions.

“The act has enhanced the level of cooperation among the agencies, as well as resulted in a heightened and more rigorous consideration of alternatives,” said Acting Director Lawrence Finfer of Interior’s Office of Policy Analysis. “Further, it underscored the need for careful deliberation, justification, and documentation with respect to the formulation of conditions and prescriptions.”

NHA: Agencies rethink conditioning; incremental hydro being built

Dan Adamson, vice chairman of the National Hydropower Association’s Legislative Affairs Committee, testified the act’s hydro provisions already are having a positive effect.

“To date, ten companies have availed themselves of the new licensing tools in 18 different hydropower relicensings,” Adamson said. “We anticipate others will take advantage of these opportunities in the coming months. Agencies appear to be rethinking their approach to conditioning projects, and incremental hydroelectric generation is being built.”

However, Adamson, of the law firm Davis Wright Tremaine LLP, said NHA has serious concerns about trial-type hearing procedures in interim rules of the departments of Interior, Commerce, and Agriculture. He added that NHA is concerned about a lack of clarity regarding the requirement that resource agencies give equal consideration to all values of a hydropower resource.

“We strongly believe that the ‘equal consideration’ requirement applies to the development of all mandatory conditions,” he said. “However, the Department of Commerce, in a licensing proceeding concerning a project in Augusta, Ga., has taken the position that ‘equal consideration’ only applies to their mandatory conditions if an alternative condition is submitted. We believe that Commerce’s interpretation is in conflict with the plain language of Section 241 and must be reversed.”

In testimony endorsed by the Edison Electric Institute, American Public Power Association, and Natural Rural Electric Cooperative Association, Adamson said NHA recommends the departments issue revised final hydropower rules by Nov. 1 to ensure that the full benefits of hydroelectric licensing reforms are obtained.

NHA urges extension of production tax credit

Adamson said the Energy Policy Act’s production tax credit for eligible hydro placed in service by Jan. 1, 2008, should be extended through at least 2010 for licensees to make use of the incentive.

He said NHA believes new qualifying hydropower resources should receive the same tax benefit as other renewable resources, such as wind power. Currently, the 0.9 cents per kilowatt-hour for hydro is half of the 1.8 cents per kWh offered to most other renewables.

Adamson also said Congress should extend the act’s Clean Renewable Energy Bond Program immediately and ensure that it is funded at levels sufficient to unlock pent-up demand among not-for-profit utilities to finance new hydropower projects.

American Rivers: Act favors industry over other parties

Environmentalist group American Rivers testified the Energy Policy Act favors industry over states, tribes, landowners, irrigators, conservation groups, and others members of the public. Andrew Fahlund, American Rivers’ vice president for protection and restoration, said the outcome of the hydroelectric rules in the Energy Policy Act has been regulatory complexity, decreased certainty, a lengthened timeline for licensing, increased costs for all parties, and diminished environmental standards.

American Rivers urged the committee to continue to exercise its oversight role to evaluate whether objectives of the Energy Policy Act are being met, or whether the complexity of the new provisions is eliminating critical resource protections.