law offices of GKRSE GKRSE1

Federal Regulatory Issues Affecting the Development of Hydro in the Northeast

Nancy J. SkanckeLaw Offices of GKRSE

Washington, D.C. 20005202/408-5400

njskancke@gkrse-law.com

June 25, 2009Waltham, MA

law offices of GKRSE GKRSE2

Primary Federal Statutes and FERC Regulations Relating to

Hydro Projects

• Federal Power Act, Sections 4, 10, 14, 15, 18 16 U.S.C. §§ 797, 803, 807, 808 and 811

• Clean Water Act, Section 401 (potentially applicable)33 U.S.C. § 1341

• Endangered Species Act, Section 716 U.S.C. § 1536

• Coastal Zone Management Act16 U.S.C. § 1451-65

• National Historic Preservation Act16 U.S.C. § 470-470w-6

• FERC Regulations – 18 CFR Parts 4, 5 and 16

law offices of GKRSE GKRSE3

FERC Preliminary Permit Process

• Preliminary Permit – FPA §5; FERC Regs. §4.80 et seq. Priority in licensing process Maximum 3-year term; not transferable. Need to coordinate with the ILP timeframes. No operations permitted; testing permitted (no grid generation).

• “Strict Scrutiny” Policy – FERC Docket No. RM07-8 (2007) Limiting boundaries of permits to prevent site banking. Careful scrutiny of periodic reports under preliminary permit. Requirement in permit order of additional 45-day filing: schedule of

activities for three-year term (including within 1 year of permit – filing of NOI, PAD and request to use TLP/ALP if applicable).

law offices of GKRSE GKRSE4

FERC’s Hydro Licensing Processes

• Integrated Licensing Process (“ILP”) – FERC Regs. Part 5 Default process as of July 2005. Pre-application: Extensive issue identification with resource agencies,

tribes, all stakeholders and FERC. Early study identification and study dispute resolution.

• Traditional Licensing Process (“TLP”) – FERC Regs. Parts 4 and 16 Requires prior approval by FERC; FERC Staff not involved until

application filed. Pre-application: Three-stage consultation process.

• Alternative Licensing Process (“ALP”) – FERC Regs. §4.34(i) Requires prior approval by FERC; FERC Staff participates in

pre-application process. Pre-application: Collaborative process with agencies, tribes, stakeholders.

• New Hydrokinetic Pilot Project process (Guidance document 2008).

law offices of GKRSE GKRSE5

FERC’s ExemptionProcesses

• Small Hydro Exemption – FERC Regs. § 4.101, et seq. Per PURPA §§ 405 and 408 (1980, per Energy Security Act, §408) Pre-1977 existing dams or natural water features. No new construction or enlargement (only repair/reconstruction).

• Conduit Exemption – FERC Regs. § 4.90, et seq. FPA §30 (added by PURPA §210, 1978) Not more than 15 MW; or not more than 40 MW for municipal-operated solely

for municipal water supply. Using water not operated primarily for hydro development.

• Conditions on Both types of exemptions – Conditions from Federal/State fish/wildlife agencies. No eminent domain authority. No term limit.

• Authority of FERC to waive its requirements.

law offices of GKRSE GKRSE6

FERC Jurisdictional Criteria

• Per FPA 23(b)(1), non-Federal hydro project must be licensed ( unless has valid pre-1920 permit), if: is located on navigable water of the U.S.; Occupies lands of the U.S.; Utilizes surplus water or waterpower from government dam; or Is located on “Commerce Clause” body of water, project construction has

occurred on or after August 26, 1935, and project affects the interests of interstate/foreign commerce.

• Declaration/Jurisdictional Finding – FERC Regs. §24.1

• Considerations – Public lands/reservations involved? Use of water from Federal dam? Navigability at site or near? Connection of power to grid?

law offices of GKRSE GKRSE7

OCS Development

• Energy Policy Act of 2005 – MMS to regulate renewable energy development on OCS.

• MOU between MMS and FERC, April 9, 2009 MMS – exclusive jurisdiction on production from non-hydrokinetic renewable

projects and to issue leases/easements/rights-of-way on OCS.

FERC – exclusive jurisdiction for licenses/exemptions for projects on OCS; not issue until lease/easements/ROW obtained.

Need for coordination between MMS and OCS. Further guidance on MOU expected.

• MMS OCS Regulations – 30 CFR Parts 250, 285 and 290 (April 29, 2009) [Fed. Reg. 19637]

law offices of GKRSE GKRSE8

Small Hydro

• Potential for small hydro development – 2004 DOE Report: 21,000 MW available at low head/low power;

26,000 MW at high head/low power. Update analysis of hydro potential. Existing dams without generation; upgrades to existing power

generation facilities.

• Issues/Barriers to development – Regulatory Environmental Cost/Financing Operational/Engineering

• NHA’s new Small Hydro Council

law offices of GKRSE GKRSE9

Current “Hot” Issues under FERC Licenses

• Capacity/non-capacity amendments• Endangered species• Fish resources/fish passage• Land use• Shoreline management• Recreation/permitting programs• Security• Annual charges (OFA/FERC)

law offices of GKRSE GKRSE10

Other Hydro Issues

• Financing Projects – Production Tax Credits or Investment Tax Credit; FERC certification process;

convertible to grant. Clean Renewable Energy Bonds; IRS allocation.

• DOE Funding – R&D Funds – “Stimulus Funds”; Annual funding. National Hydropower Asset Assessment Project – to be issued December

2009.

• Potential Federal Legislation – Status of hydro under RPS/RES Standard Potential need for certification

law offices of GKRSE GKRSE11

Case Study: Holyoke, Mass.

law offices of GKRSE GKRSE12

Case Study (cont.)

• Background – Three-level canal system on Connecticut River. Hydro installed at Hadley Falls originally in 1849; expanded in 1950’s.

• Holyoke Project, FERC Project No. 2004 Originally licensed in 1949 to Holyoke Water Power Company. Competitive license proceeding – New License issued in August 1999. BO on SNS – jeopardy finding in 2000. HG&E acquisition in 2001; license transferred. Six hydropower stations and Canal System; approx. 43 MW.

• Comprehensive Settlement – Filed in 2004; approved by FERC in 2005. Adaptive management on Downstream Fish Passage (SNS) Resolved all pending rehearing applications; mandatory conditions withdrawn. New BO on SNS, based on Settlement, with no jeopardy finding.

law offices of GKRSE GKRSE13

Case Study (cont.)

• Implementation of Settlement – Downstream fish passage: Studies/Analyses 2001-2009 Ongoing agency/stakeholder consultation Schedule for implementing solution.

• Canal Projects Holyoke City 1, 2, 3, 4 (constructed in 1922, 1938 and 1940, respectively);

licensed in late 1980’s. Holyoke City 4 (constructed in 1900, relicensed in 2006). Valley Hydro/Holyoke City 5 (constructed 1994, licensed in 1990). Eight Harris Projects acquired by HG&E in 2004.

• CREB for Boatlock Station (Project No. 2004) based on

IRS Allocation of $2.5 million.

law offices of GKRSE GKRSE14

Potential New Technologies for Hydro