FERC seeks comments on new land use fee formula for hydro

The Federal Energy Regulatory Commission seeks comments on development of a new government land use fee formula for hydroelectric projects that would replace a formula that was overturned by a federal appeals court.

The U.S. Court of Appeals for the District of Columbia Circuit 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. The ruling vacated FERC’s 2009 update of its land use fees.

In response, the commission issued a Notice of Inquiry (RM11-6) on Feb. 17, 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.

“The commission specifically seeks comment on existing indices that could be used as the basis for establishing annual land use charges, and whether particular indices are better suited for that purpose than others,” the notice said.

FERC said a new fee methodology should: apply uniformly to all hydro licensees; avoid exorbitant administrative costs; not be subject to case-by-case review; reflect reasonably accurate land valuations; and avoid excessive compensation to the government that would increase power prices to consumers.

Court voids FERC use of new Forest Service-BLM formula

Prior to issuing its updated fee order in 2009, FERC had followed a 1987 regulation that, after hearings and comment, utilized a U.S. Forest Service-Bureau of Land Management schedule that set fees for linear rights-of-way (for roads, pipelines, and transmission lines) across National Forest System lands. Based on eight zones, “raw” land values ranged from $50 to $1,000 per acre. At that time, FERC concluded the formula was the “best approximation available” and rejected a U.S. Department of Agriculture index in which farm land values were much higher.

In 2008, the Forest Service and BLM modified their fee calculation significantly, utilizing a National Agricultural Statistics Service census of agriculture, which incorporated values of farm lands and buildings. The new schedule established 12 zones with values ranging from $250 to $100,000 per acre. FERC notified hydro operators in 2009 that it would use the new formula, which would cause land use charges “to increase substantially” for many projects.

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.

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.

The Notice of Inquiry may be obtained from the commission Internet site, www.ferc.gov, under www.ferc.gov/whats-new/comm-meet/2011/021711/H-1.pdf. FERC said comments would be due 60 days after publication of the notice in the Federal Register.

The commission prefers submissions to be filed electronically via the eFiling link on its Internet site. 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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