Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 03:00 PM

Mr. Andrew Fahlund

Vice President of Protection and Restoration, American Rivers

 

 

 

Testimony before the

Committee on Energy and Natural Resources

U.S. Senate

 

 

 

 

 

 

 

on the Implementation of the Hydroelectric Section

of the Energy Policy Act of 2005

 

May 8, 2006

 

 

 

 

 

 

 

 

 

by Andrew Fahlund

Vice President for Conservation, American Rivers

Steering Committee Member, Hydropower Reform Coalition

 


I.  Introduction

Good afternoon, Mr. Chairman, and members of the Senate Energy and Natural Resources Committee.  I appreciate the opportunity to appear before you today and am grateful that the Committee is exercising its oversight role in ensuring the effective implementation of the hydroelectric provisions of Energy Policy Act of 2005 (EPAct, P.L. 109-58).  My name is Andrew Fahlund and I am the Vice President for Conservation at American Rivers, the leader of a national river movement, dedicated to protecting and restoring the nation’s rivers some of our greatest community assets.  American Rivers has more than 45,000 members, from every state across the country and has more than fifty staff members in ten different offices.  As a steering committee member of the Hydropower Reform Coalition, I also speak for 130 national and local organizations dedicated to improving rivers through the licensing of hydropower projects by the Federal Energy Regulatory Commission (FERC).  Coalition members are active in more than 75 percent of the relicensing cases currently pending before FERC and have constructively contributed to numerous policy discussions concerning FERC regulated hydropower.

 

More specifically, I am before you today to share the opinions of American Rivers and the Hydropower Reform Coalition on the implementation of the EPAct.  My testimony addresses three basic points:

 

1.                  Hydropower relicensing significantly improves environmental quality at a negligible cost to power supply. 

 

2.                  The EPAct rules tilt the scales of justice in the favor of industry and disadvantages states, tribes, local landowners, irrigators, conservation groups, and other interested members of the public who all have interests in how dams are operated. 

 

3.                  The outcome of the hydroelectric EPAct rules is regulatory complexity, decreased certainty, a lengthened timeline for licensing, increased costs for all parties, and diminished environmental standards. 

 

 

I would like to stress that hydropower relicensing is a natural resources issue and not simply an energy issue, due to the enormous impacts dam operations have on hundreds of species, thousands of river miles, and millions of dollars in recreational opportunities for decades to come.  Changes to dam operations that better conserve natural resources have a negligible impact on energy generation, electric rates, and industry viability.

 

While hydropower has provided significant benefits to society over the past 100 years, this has not come without a cost to our rivers and the communities they flow through.  Dams harm the physical, chemical, and biological function of rivers by disrupting flows, degrading water quality, and blocking passage of fish and other species.  Simple changes in the operating procedures for these projects can significantly reduce these impacts without significantly reducing generation.

 

When the scores of hydroelectric licenses scheduled to expire over the next decade were originally licensed decades ago, meeting environmental standards was not required and our understanding of complex ecological systems was in its infancy.  For decades, these projects have operated with minimal environmental controls leading to significant and sometimes irreversible damage.  Current relicensing represents our first opportunity to review these dams, reservoirs, and turbines, and to place environmental safeguards on them for the next 30 to 50 years that will improve our rivers and protect fish and wildlife for our children and grandchildren.

 

American Rivers and members of the Hydropower Reform Coalition wish to ensure that dams are operated to protect and restore river resources using best available technologies and best management practices.  Coalition members including American Rivers have been involved in the relicensing of more than 300 dams over the past ten years, supporting the continued operation of more than 9,000 megawatts of electricity capacity.  According to FERC, the relicensing of more than 140 hydropower projects resulted in an average per project generation loss of only 1.6%.  

 

The Federal Power Act (FPA), although commonly considered an energy statute, also occupies an important role in environmental protection.  The statute was amended in 1986 to require FERC to give “equal consideration” to power (electricity generation) and non-power (fish and wildlife protection, recreation, etc.) benefits of the river.  However, Congress did reserve specific authorities to expert federal and state resource managers to establish basic conditions that form a floor above which FERC then establishes license conditions in the public interest.  Sometimes referred to as mandatory conditions, the statutory requirements assure that:

(1)   Fish can be passed upstream and downstream of a dam (FPA Section 18); [1]

(2)   If a nonfederal dam is located on federally owned land, the purposes of the federal land are protected (FPA Section 4(e));[2] and

(3)   The dam complies with state-developed water quality standards (Clean Water Act, Section 401).[3]

 

These laws establish the simple rule that hydroelectric projects must meet basic environmental standards before operating on our rivers.  Just as we should not allow coal-fired plants to operate without modern emissions control devices, hydro plants should not operate without use of best available technologies and practices.

 

III.  Some Improvements to the Relicensing Process Are Working

For the last ten years, American Rivers and members of the Hydropower Reform Coalition have been working with industry, federal and state agencies, and FERC to make administrative improvements to the hydropower licensing process.  We have made steady progress in a number of areas, including federal agency actions and procedures to ensure consistency, timeliness, and coordination.  We are concerned that EPAct and its implementing rules threaten and undermine that progress and we ask that the Committee utilize its oversight role to prevent this from happening.

 

Since 1997, FERC has undertaken two rulemaking efforts to streamline hydropower licensing.  The first effort was the Alternative Licensing Process (ALP), established on October 29, 1997, designed to promote collaboration and settlement in hydropower licensing.  From 2001 through 2004, of the total 135 licenses issued by FERC, 51 licenses or 38% were settlement agreements.  Interestingly, settlements accounted for 71% of the total electrical capacity of licenses issued during that time, or 3,208 megawatts. 

 

Effective October 23, 2003, FERC established a positive new licensing process called the Integrated Licensing Process (ILP), designed to establish a single “integrated” environmental analysis.  The proposal was the culmination of work by FERC staff and federal agencies as well as a parallel process initiated by hydropower licensees, conservation groups, state agencies, and Indian tribes.  FERC estimates that the ILP will reduce the average time it takes to complete the licensing process by 60%.  Further, it estimates that the proposed process will reduce the cost of licensing for a project below 5 megawatts by $150,000 and for a project greater than 5 megawatts by $690,000.[4]  American Rivers supports the Integrated Licensing Process.

 

IV.              The Agencies’ EPAct Rules Bias the Licensing Process and Harm the Environment

 

American Rivers and the Hydropower Reform Coalition opposed EPAct because we feared that it would increase regulatory complexity, decrease certainty, lengthen the timeline of license issuance, provide unjust advantages to hydropower dam owners, establish hurdles to the full participation of states, tribes, homeowners, businesses, and other members of the interested public, and diminish environmental quality.  Moreover, we expressed repeated concerns that the new provisions of EPAct would undermine the increasingly common practice of local solutions developed through settlement.  Rather than spending their time trying to reach resolution, we warned that parties would be forced to take sides, and spend scarce resources and time on drafting legal documents and participating in adversarial hearings.  The publication of the new rules, as well as their initial implementation, suggests that our earlier fears were justified.

 

  1.  EPAct rules skew the processes to favor licensees

 

The EPAct rules are skewed to favor those parties with substantial financial resources.  To request a trial-type hearing and propose alternative conditions, one must act on deadlines as short as 15 days to hire expensive legal counsel and technically skilled witnesses, and gather new data.  Only licensees have the financial resources to undertake that process over and over again and at the level of sophistication required for success.  Because the agencies must conduct these trials upon request, any party with an interest in the conditions and prescriptions appealed must expend its limited resources to intervene and participate in the trial-type hearing, because the decision of the Administrative Law Judge is final with respect to the disputed issues of material fact (7 C.F.R. § 1.660).

 

Likewise, the process for requesting alternative conditions favors the license applicant. The entity most likely to file for an alternative condition is the license applicant because the law grants preferential status to alternative conditions that cost significantly less and generate more electricity.   The rules however, magnify that inequity by failing to give other interested parties any clear venue in which to comment on the proposed alternatives.  For proceedings in which the preliminary conditions or prescriptions were filed after November 17, 2005, the rules imply that comments on alternatives should be filed through comments on FERC’s National Environmental Policy Act (NEPA) document.  The appropriate venue for comment should be the resource agency, not FERC, since it’s the resource agency’s alternative conditions.[5]  In retroactive cases, those with conditions filed before November 17, 2005 and for which the NEPA documents have already been published, the rules unfairly do not offer a clear avenue for public comment at all.  Likewise, in cases in which the resource agency accepts the alternative condition or prescription as its own, the rules provide no clear opportunity for comments or appeals. 

 

In addition to imposing severe hardships on nongovernmental, tribal, and state and local agency license parties, the rules are extremely burdensome for the federal agencies, which have been granted no additional funding authorization to participate in or administer trial-type hearings or to conduct the complex analyses envisioned in the alternative conditions process.  According to the rules, the “Departments expect 47 requests for hearings per year under the rules, each requiring about 800 hours of additional work by the requesters and 600 hours for other parties in the hearing process.  The Departments expect about 351 alternative conditions and prescriptions to be proposed per year under the rules, each requiring 200 hours of additional work by the proponent and 120 hours for other parties to the alternatives process.  Staff costs for 47 hearing requests and 351 alternatives per year are estimated at $5 million.”  (70 Fed. Reg. at 69815).  A worst case scenario is double those amounts.  It is clear that the hearings and alternatives processes could easily overrun the licensing process.  This Committee should aggressively push for ample funding for agencies to engage in trial-type hearings and conduct the evaluations required in the alternative conditions process.

 

B.     The EPAct rules invite frivolous filings

 

During the debate over EPAct, we warned that the proposed trial-type hearings would invite abuse and a new culture of litigation not seen in the relicensing process for the past decade.  Again, the new rules and their initial implementation appear to confirm our concerns.   The law requires hearings only on issues of material fact (Section 241(a) of the Federal Power Act), yet the rules require agencies to move forward with initial preparations without even a threshold determination of whether a request for a trial-type hearing raises any such issues (7 C.F.R. § 1.625).   Further, the rules fail to grant the resource agencies the authority to determine which issues were appropriate for a trial-type hearing, which could be resolved through paper filings, and which fail to qualify at all as issues of material fact.  It is the epitome of government waste to reflexively provide for trial-type hearings without determining whether one is warranted.  The costs associated with convening an Administrative Law Judge hearing every time a party files a request will add up and will either result in needless taxpayer expense or surrender by agencies that don’t have the resources to respond.

 

This approach is also unreasonably burdensome for other parties who are forced to respond or live with the results.  The mere request for a trial-type hearing, no matter how trivial, will impose a significant financial burden on all stakeholders with an interest in the condition or prescription to gather evidence, obtain witnesses, file interventions, meet onerous and complex service requirements, secure costly representation, and begin pre-trial discussions, all within short deadlines to prepare for a formal adjudicatory hearing that is not allowed and may not be necessary at all.

 

FERC has the authority to hold hearings on disputed issues, but has largely abandoned the process in lieu of paper filings, except in rare cases, at significant savings of time and resources for all parties.  Agencies should exercise similar authority in the rules.

 

Several requests for trial-type hearings under EPAct already demonstrate the flaws in this automatic-hearing provision.  One utility filed a petition for a hearing challenging assertions that were never even made by the agency.[6]  In response to another petition for a hearing, the U.S. Forest Service found that 24 of 26 alleged disputed issues of material fact do not qualify as such factual, disputed, and material.[7]  Worst of all, some companies have requested trial-type hearings for matters that could be resolved by a simple phone call or meeting.  Instead, the implementation of the rules has fostered a culture of litigation.[8]

 

C.     The EPAct rules make a complex process more so.

 

At a time when everyone is working to streamline hydropower licensing, the EPAct rules add complexity and confusion to the process.  The 47 pages of rules establish a set of steps, timelines, and requirements so complex that license applicants, agencies, and non-governmental organizations alike are struggling to understand and comply with them.  For example, the service requirements, which differ among the three relevant agencies establish different rules for serving documents to one group of stakeholders versus another. (7 C.F.R. § 1.612 and 1.613)  Agency staff can only be served with paper copies, ignoring the fact that we live in an electronic age.  There is no central database or website to track filings or decisions made in the various trial-type hearings. 

 

The regulations are curiously silent on which side has the burden of proof in trial-type hearings or how such hearings will even be run. Although the rules are deemed “final” by the agencies, they still seek public comments on this question, ignoring the fact that perhaps dozens of trial-type hearings will take place before the rules may be re-issued in a year and a half and any clarifications or changes may be made. (70 Fed.Reg. at 69813, col. 3)  Common sense and now experience show that this and many other provisions in the rules need such clarification.  The agencies could have avoided this ambiguity if they had simply taken the time for a meaningful notice and comment process prior to issuance and implementation of an interim final rule.

 

The alternatives process mandated by EPAct in Section 241 adds complexity through the mandate that federal resource agencies consider eleven new factors in developing their environmental conditions.  Consideration of these factors places an enormous burden on the resource agencies.  At present, the relevant state and federal agencies do not have sufficient staff or funding to meet these proposed requirements for new, complex analyses which are beyond historic scope of their resource protection responsibilities.  Again, it is critical that Congress provide these agencies with the resources necessary to carry out these new unfunded mandates.

           

D. The EPAct rules lengthen the licensing timeline

 

EPAct requires that the regulations must ensure compliance for the trial-type hearing “within the timeframe established by the Commission for each license proceeding.” (Section 241 of the FPA)  However, the EPAct rules allow a waiver for all proceedings with preliminary conditions filed as of November 17, 2005, enabling them to apply the new rules and substantially altering the licensing schedule for these projects.  (7 C.F.R. §1.601 and 1.604 and 70 Fed.Reg. at 69815, col. 2)  The rules unfairly allow the Departments to modify the sequence and timing of the new processes to accommodate these requests.  The Departments, in clear violation of their own rules which precluded any further extensions, also granted an even longer extension of EPAct timelines for one project.[9]

 

E.  The EPAct provisions decreases environmental protection.

Our fundamental fear concerning EPAct was that the net result of the new provisions would result in less protection for environment.  The addition of numerous procedural hurdles opens an array of new avenues for challenge and litigation of protections for fisheries and federal lands.  The threat of a costly trial-type hearing, which agencies have not been given additional resources to hold, is a powerful incentive for agencies to not propose conditions to protect natural resources in the first place.  It remains to be seen whether these fears will come to fruition but it is important Congress to monitor whether there is a decline in environmental conditions. 

 

VI.  Conclusion

American Rivers, along with our colleagues in the conservation community, dozens of States and American Indian Tribes, and other stakeholders warned that the hydropower licensing provisions in EPAct would make the relicensing process more complex, litigious and threaten public trust resources that already bear the brunt of relicensing delays.   The complexity of the implementing rules and our initial experience with implementation appear to confirm these fears.  We strongly urge the Committee to continue to exercise its oversight role to evaluate whether the objectives of EPAct – a timely check and balance on resource agencies – are being met, or whether the complexity of the new provisions is effectively eliminating these critical resource protections.  In particular, this Committee should pay close attention to whether the agencies are swamped by frivolous requests for hearings that do not raise disputes of material fact or matters that don’t require the expense and formality of a “trial-type” hearing.   Congress should also ensure that EPAct is not an unfunded mandate for the resource agencies and that they are able to meet their responsibility to participate in the licensing process, timely issue conditions and prescriptions, participate in trial-type hearings, evaluate alternative conditions, and undertake newly required analyses. 

 



[1] Section 18 of the Federal Power Act grants authority to the Secretaries of Commerce and the Interior to mandate the construction and operation of fish passage.  Section 4(e) grants authority to land management agencies to ensure that projects on their lands meet current management goals and objectives.  These authorities have been upheld by the courts on a regular basis. Escondido Mutual Water Company et al. v. La Jolla Band of Mission Indians, et al., 466 U.S. 765, 777 (9th Cir. 1984) (citations omitted); Bangor Hydro v. FERC, 78 F.3d 659 (1st Cir. 1996) ; American Rivers v. Federal Energy Regulatory Commission, 187 F.3d 1007, 1030 (9th Cir. 1999).

[2] More than 400 FERC regulated projects are located on Forest Service, Bureau of Land Management, and tribal lands.  These projects have impacts on water resources, recreation, fish and wildlife, and cultural resources and also receive the benefit of below market rent. U.S. General Accounting Office, Federal Energy Regulatory Commission: Charges for Hydropower Projects’ Use of Federal Lands Need to Be Reassessed, Washington, D.C., May 2003, GAO-03-383, p. 5.

[3] The protection of water quality is a responsibility that has been delegated to the states since the Clean Water Act was adopted 30 years ago.  Section 401 ensures that private hydro projects will not conflict with state standards and requires each federally licensed project to obtain a state certification.  The Supreme Court confirmed in PUD No. 1 of Jefferson County v. Washington Dep't of Ecology, 511 U.S. 700 (1994), that these standards include chemical, physical, and biological parameters.

[4] Commissioner Nora Brownell, Federal Energy Regulatory Commission, Testimony before the Subcommittee on Energy and Air Quality, Committee on Energy and Commerce, House of Representatives, Washington, D.C., March 5, 12, and 13, 2003.

[5] FERC has a different mandate, balancing interests, schedule, and requirements. (70 Fed.Reg. 69,807, cols. 1 and 2.  Also, see: 7 C.F.R. § 1.673)

[6] Examples include “factual issues” as to whether sandbars are below the ordinary high water mark (this determination would not affect the agency condition) and whether Hells Canyon Complex is the sole cause of erosion (an assertion never made by the Forest Service).  U.S. Forest Service, USDA Forest Service Answer to Idaho Power Company, Hells Canyon Complex (FERC Project No. 1971) Request for Hearing, April 13, 2006.

[7] U.S. Forest Service, USDA Forest Service Answer to Idaho Power Company, Hells Canyon Complex (FERC Project No. 1971) Request for Hearing, April 13, 2006.

[8] PG&E requested a trial-type hearing on the “reasonableness” of the eradication of noxious weeds.  In its request for alternative conditions, the company recommends that noxious weeds be “controlled” rather then “eradicated.”  Pacific Gas and Electric Company, Pacific Gas and Electric Company’s Request for Administrative Hearing on Material Issues of Disputed Fact on Certain Final Section 4(e) Conditions Submitted by the United States Forest Service for the Poe Hydroelectric Project, FERC Project No. 2107, December 16, 2005,p. 19; and Pacific Gas and Electric Company, Pacific Gas and Electric Company’s Submittal to the USFS of Alternative Conditions for Certain preliminary Section 4(e) Conditions Submitted by the USFS for the Poe Hydroelectric Project, FERC Project No. 2107, December 16, 2005, p. 54.

[9] Letter to Magalie R. Salas, Federal Energy Regulatory Commission from Andrew L. Raddant, Regional Environmental Officer, U.S. Department of the Interior, re: Modified Fishway Prescription, Bar Mills Hydroelectric Project, P-2194, December 12, 2005; and letter to Magalie Salas, Secretary, Federal Energy Regulatory Commission from Patricia A. Kurkul, Regional Administrator, National Marine Fisheries Service, Northeast Region, National Oceanic and Atmospheric Administration, United States Department of Commerce, re: Bar Mills Hydroelectric Project (FERC No. 2194), December 12, 2005.