FERC issues proposed rules hiking land use fees for hydro

WASHINGTON 11/23/11 (PennWell) — The Federal Energy Regulatory Commission has issued a notice of proposed rulemaking that would revise its formula for calculating government land use fees, resulting in significant increases in land fees paid by FERC-licensed hydroelectric projects.

The U.S. Court of Appeals for the District of Columbia Circuit overturned FERC’s 2009 update of its land use fees. The court ruled Jan. 4 that FERC imposed updated — and significantly higher — land use fees without allowing notice and comments as required by the Administrative Procedures Act. The court said the commission also improperly delegated the establishment of reasonable fees to other agencies, the U.S. Forest Service and the Bureau of Land Management.

In response, the commission issued a Notice of Inquiry (RM11-6) in February, calling for suggestions how to create an administratively practical formula that applies uniformly to all hydropower licensees, does not impose exorbitant costs on the commission, and reflects reasonably accurate land values.

After comments from eight entities representing licensees, industry trade groups, and federal agencies, FERC issued the notice of proposed rulemaking Nov. 17 and called for comments by Jan. 6, 2012.

FERC again returned to a formula drafted by the Bureau of Land Management for calculating the annual fees, based on a National Agricultural Statistics Service census of agriculture, which incorporates values of farm lands and buildings. However, FERC said it would utilize actual per-county land values, rather than grouping the counties in 12 BLM zones that tended to inflate the values.

“For some … regional land values have increased dramatically”

“The commission recognizes that for some licensees regional land values have increased dramatically, resulting in a significant increase in the rental rate for the use of federal lands by hydropower licensees,” the FERC notice said. “This is primarily the result of a shift from a methodology that used land values from 1987 to a methodology that uses current market land values. Because the 2008 BLM methodology incorporates five-year updates to the per-acre county land values, it is not anticipated that such a large increase in annual charges for the use of federal lands will occur again.”

It was a significant increase in fees that spurred the court challenge to FERC’s 2009 fee formula. The increases were challenged in court by licensees including Idaho Falls, Idaho; Tacoma, Wash.; El Dorado (Calif.) Irrigation District; PacifiCorp; Portland General Electric Co.; Chelan County (Wash.) Public Utility District; Puget Sound Energy; Sacramento Municipal Utility District; and Turlock (Calif.) Irrigation District.

At that time, the nine licensees said their new annual land use charges exceeded $8 million, nearly $5.5 million more than their bills the previous year and an increase of more than 200 percent. They noted there are another 300 licensees, who did not file an appeal, who were subject to increases.

Washington law firm Van Ness Feldman, which represented the nine licensees, said the latest proposal, if adopted, again would result in significantly higher annual fees for hydro projects occupying federal lands.

“The proposed rule would significantly increase the land values used in calculating annual fees,” Van Ness Feldman said. “Moreover, the proposed rule makes no adjustment for the difference in land values between agricultural lands and federal lands typically associated with hydropower projects.”

The Notice of Proposed Rulemaking (RM11-6) may be obtained from the commission Internet site, www.ferc.gov, under www.ferc.gov/whats-new/comm-meet/2011/111711/H-1.pdf. FERC said comments are due Jan. 6.

The commission prefers submissions to be filed electronically via the eFiling link on its Internet site, www.ferc.gov. They also may be hand delivered or mailed to the agency at Federal Energy Regulatory Commission, Secretary of the Commission, 888 First St., N.E., Washington, DC 20426.

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