Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 03:00 PM

Mr. Larry Finfer

Acting Director, Office of Policy Analysis, Department of the Interior

Statement of Lawrence Finfer

Acting Director, Office of Policy Analysis

U. S. Department of the Interior

Implementation of Section 241 – Energy Policy Act of 2005

Committee on Energy and Natural Resources

United States Senate

May 8, 2006


Mr. Chairman and Members of the Committee, thank you for the opportunity to testify on the implementation of Section 241 of the Energy Policy Act, which addresses the process by which Federal agencies develop conditions and prescriptions for hydroelectric licenses issued by the Federal Energy Regulatory Commission (FERC) pursuant to sections 4(e) and 18 of the Federal Power Act. 


Hydropower is an important part of our nation’s energy infrastructure, providing about 7% of our electricity.  By 2018, projects that include almost half of our non-Federal hydropower capacity and cover every region must receive new operating licenses.  In issuing new licenses, it is important to ensure that significant natural resource and Indian tribal asset safeguards are put in place.  These concerns are addressed in conditions and prescriptions that are developed by resource agencies, namely the Departments of Agriculture, Commerce and the Interior and submitted to FERC for inclusion in the license. 


Historically, agencies have determined it necessary to develop mandatory conditions or prescriptions only in a distinct minority of license proceedings.  While mandatory conditions or prescriptions are intended to protect fish, wildlife, and other important resources, we recognize these protections often entail additional costs for utilities and consumers, and that it is important to consider all relevant facts and issues in the decision making process.  Since licenses may be granted for periods covering 30 to 50 years, it is important to assure that the full range of issues associated with conditions and prescriptions, and potential alternatives by which to achieve their intended goals, are appropriately assessed.


At the outset, it should be noted that several Congresses examined the conditioning process prior to the enactment of section 241.  The new statute reflects Congress’s desire to ensure that resource agency conditions and prescriptions which are included in hydroelectric licenses are carefully formulated.  Further, key provisions of section 241 provide stakeholders with the opportunity to raise concerns about the basis of proposed conditions and prescriptions and to propose alternative approaches.


The implementation of Section 241 presented the three departments that have authority to file conditions and prescriptions, the Departments of Agriculture, Commerce, and the Interior, with significant challenges.  I am pleased to report that we are meeting them, in large measure through the enhanced interagency coordination that Congress intended.  Although we are still in the early stages of implementation and pre-hearing processes have just begun in the first two cases, the agencies have developed a process that meets Congress’s expectations.  We further believe that the Act highlights the importance of enhanced interagency cooperation and a high level of integrity in the agencies’ conditions and prescriptions.  


The first major challenge we faced was the promulgation of rules to set forth the trial-type hearing process outlined in sections 241 (a) and (b).  The Act required the three Departments to establish rules jointly within 90 days, in consultation with the Federal Energy Regulatory Commission (FERC) and to include specific provisions for the opportunity to undertake discovery and cross-examine witnesses.  It further limited the length of hearings to 90 days and limited their scope to disputed issues of material fact. 


The Departments formed an interagency rulemaking team immediately upon the Act’s approval by the President on August 8, 2005, in order to develop an adjudicatory process that met the Act’s requirements.  In so doing, the agencies consulted with FERC, whose staff was accessible and helpful, and approved the final product.  The most substantive challenge was the need to create an adjudicatory process that assumed a notably more rigorous time frame than normally occurs for administrative appeals.  This is essential to ensure that hearings comport with the time frame under which FERC must complete the licensing process.  FERC sets forth licensing schedules under its rules to meet Congress’s expectations for prompt completion of licensing actions. 


The three Departments published their rules in the Federal Register on November 17, 2005, as interim final rules with a request for comments.  The rules, which are substantively identical, set forth an efficient process for the hearings.  In addition, the rules also establish procedures for considering alternative conditions and prescriptions submitted by any party to the licensing proceeding. Under the rules, any party to a license proceeding may request a hearing on contested material facts and/or submit alternative conditions and prescriptions for assessment by the agencies.  Hearings will be conducted by Administrative Law Judges (ALJs).  The rules provide the respective Departments with the option to consolidate hearing requests for a particular license into a single proceeding that is conducted by one agency.   Further, the rules allow hearing requests and alternatives to be filed for ongoing license proceedings where FERC had not issued a license as of November 17, 2005, as well as for those initiated after its publication.   In publishing the rules, the agencies indicated that they would consider the comments received and their initial experience in implementing the new processes, and consider issuing revised final rules within approximately 18 months.


The rules outline a rigorous process, beginning with the submission requirements for hearing requests and proposed alternatives.  Once a hearing request is received, license parties may file responses and/or notices of intervention within 15 days, and agencies may file answers to the hearing request within the next 30 days.  In formulating its answer, an agency may stipulate to some or all of the facts at issue, which may preclude the need for a hearing on some or all issues.  In addition, it may consider whether an alternative condition or prescription should be accepted, and whether doing so might preclude the need for a hearing.  If more than one agency receives a hearing request in a given case, the agencies will jointly determine whether to consolidate any hearings and, if so, determine whose ALJ will hear the case.  This pre-docketing phase takes about 80 days to complete, after which the case is formally referred to an agency’s hearings office for docketing, at which point the 90 day hearing “clock” begins.


The 90 day hearing phase provides for discovery, pre-hearing conferences, pre-hearing  motions, confirming witness lists, preparing exhibits and testimony, and the actual hearing, which is followed by the filing of post-hearing briefs and ultimately the decision by the ALJ.  The ALJ’s decision is binding with respect to the facts at issue.  The hearing is timed to occur prior to FERC’s issuance of a draft NEPA document, in order to assure that the results are considered in a manner that reduces the probability of delay in the overall license proceeding.  The Departments will strive to ensure the deadlines are met.


After the agencies promulgated the rules, parties to proceedings that already had proposed or modified conditions or prescriptions had until December 17, 2005, to request hearings and/or propose alternatives.  The agencies received 19 requests (covering 17 projects), and all of these were submitted by license applicants:

Agriculture (Forest Service) – 11;

Commerce (NMFS) -- 2;

Interior -- 6


Agencies have consulted among themselves and with FERC to develop schedules for addressing these requests.  In addition, new requests have been received within the past few months for the Hells Canyon and Klamath projects.  The latter project is the first for which requests for hearings and the consideration of alternative conditions or prescriptions have been received from parties in addition to license applicants.

Based on the schedules that have been established, the first hearings will address the Hells Canyon and Klamath projects.  The current schedule calls for individual hearings on the Hells Canyon Project to be conducted by Agriculture and Interior in June and decisions by the respective ALJs in July.  The Klamath Project schedule is expected to result in hearings by Commerce and Interior (unless a determination is made to consolidate the proceedings) in August with a decision in September.  Several other proceedings have been scheduled for later this year and in 2007.  It is important to note that in several cases the Departments and involved parties are considering settlements that may preclude the need to pursue the requested proceedings.   In two cases, settlements have already been achieved, resulting in the withdrawal of the hearing requests by the project applicants.


As noted above, the three agencies made completion of the joint rules a high priority.  This high level of attention continues as we implement section 241.  Each agency has identified ALJs for potential availability to conduct hearings.  In Interior’s case, the Office of Hearings and Appeals has four ALJs, and in the Fiscal Year 2007 President’s Budget requested an additional $400,000 to support an additional ALJ and a staff attorney.  Agriculture’s Office of Administrative Law Judges has designated three ALJs who may be available.  Commerce does not have an ALJ office, but the agency has augmented an existing Memorandum of Understanding with the Coast Guard, whose ALJs now conduct hearings for NMFS in other types of cases, to cover section 241 requests.  In addition, a number of training sessions have been conducted for agency program specialists, attorneys and ALJs, and additional training is anticipated.


These initial steps in implementing section 241 are encouraging.  The agencies have put in place an expedited process to meet Congress’s expectations. The cooperation among the agencies that occurred to complete the rulemaking has continued as we address hearing requests and proposed alternative conditions and prescriptions.  It is important to note that interagency coordination and the consideration of alternatives are not new features.  The Departments of Agriculture, Commerce, and the Interior have always coordinated among themselves and with other parties in exercising their authorities under the Federal Power Act, and in so doing considered alternatives by which to meet their objectives.  Nevertheless, the Act has enhanced the level of cooperation among the agencies, as well as a resulted in a heightened and more rigorous consideration of alternatives.  Further, it underscored the need for careful deliberation, justification, and documentation with respect to the formulation of conditions and prescriptions.


In summary, the agencies believe we have an expedited process in place, and have developed strategies to comply with the Act’s requirements.  Since we are still in the early phase of implementation, and have yet to conduct a hearing or undertake an assessment of proposed alternatives, it is obviously too early to claim success.  Indeed, our experience will indicate whether changes to the rules or to our management of the new process are required.  Rest assured, however, that the agencies, having already demonstrated the commitment to implement section 241, will persevere to achieve positive results.  Thank you for your consideration.  I will be pleased to answer your questions.