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The members of the Federal Energy Regulatory Commission on Sept. 22 decided that the commission has no authority to permit grandfathered small "conduit" hydroelectric projects on the U.S. Bureau of Reclamation's sprawling water management system under a 2013 law that promotes the development of conduit projects.
On March 25, Percheron Power LLC filed a petition for declaratory order that the commission retains jurisdiction to authorize small conduit hydroelectric projects of 5 MW or less in size within Reclamation's Columbia Basin Project, or specifically at five incidental features within the Columbia Basin Project.
Under sections 4(e) and 4(f) of the Federal Power Act (FPA), the commission has the authority to issue preliminary permits and licenses for non-federal hydropower projects located at federal dams and facilities. This jurisdiction is withdrawn if Congress authorizes federal development of hydropower generation at the site, or if Congress otherwise unambiguously withdraws the commission’s jurisdiction over the development of such generation.
In August 2013, President Barack Obama signed into law the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act (Small Conduit Act). The Small Conduit Act amended section 9(c) of the Reclamation Project Act of 1939 to provide Reclamation with authority to issue leases of power privilege for small (defined as 5 MW or less), non-federal hydropower development projects on Reclamation conduits.
The Sept. 22 FERC decision turned on the fact that this 2013 law provided an exception to this authorization by including the following provision: "[n]othing in this subsection shall alter or affect any existing preliminary permit, license, or exemption issued by the Federal Energy Regulatory Commission under Part I of the Federal Power Act (16 U.S.C. 792 et seq.) or any project for which an application has been filed with the Federal Energy Regulatory Commission as of the date of enactment of the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act."
Percheron acknowledged that the stated purpose of the Small Conduit Act was “to authorize all [Reclamation] conduit facilities for hydropower development under Federal Reclamation law,” but argued that the commission retains jurisdiction over non-federal hydropower development in the Columbia Basin Project pursuant to the exception provided for in the 2013 act.
In March 2013, commission staff issued Columbia Basin Hydropower (CBH) six preliminary permits to study the feasibility of proposed hydroelectric projects at six sites on irrigation canals and wasteways in the Columbia Basin Project. All six of CBH’s preliminary permit applications were filed as competing applications, as Percheron had previously filed preliminary permit applications for three of the sites and NortHydro LLC had previously filed preliminary permit applications for the other three sites. Commission staff issued all six of the preliminary permits to CBH based on municipal preference and, accordingly, denied all competing applications. 7. In the orders issuing the permits, Commission staff concluded “there is no indication that the Commission’s jurisdiction over non-federal hydropower development elsewhere [other than at the Grand Coulee Dam and Roosevelt Lake] within the Columbia Basin Project has been withdrawn.”
Staff cited Reclamation’s July 2012 letter in which it stated that it did not object to the commission issuing any of the six permits. In that letter, Reclamation stipulated that “[b]y recognizing FERC’s authority to process and issue preliminary permits in this circumstance, Reclamation does not relinquish any jurisdiction to assert its authority to develop power sites or to lease power privileges in future matters, as may be authorized by applicable law.”
Of these six preliminary permits, CBH surrendered two and in December 2015 requested two-year permit term extensions on the other four. On Jan. 15, 2016, Commission staff denied CBH’s request for extension of the preliminary permit terms, finding that CBH had failed to demonstrate that it carried out the required activities under its permits with reasonable diligence, and that granting an extension of the terms could constitute site banking. In the Jan. 15 order, staff also noted that, because CBH’s preliminary permits were issued before the enactment of the Small Conduit Act, the commission would retain jurisdiction over the projects if CBH chose to file license or exemption applications before the permits expired. However, staff explained that once the permits expired on Feb. 29, 2016, the commission would no longer have jurisdiction over the development of projects of 5 MWs or less at these sites, and a developer would need to seek a lease of power privilege from Reclamation to develop such projects.
On Feb. 16, 2016, CBH sought rehearing of staff’s determination that it had failed to pursue the requirements of its permits with reasonable diligence. On April 21, 2016, the commission denied rehearing. On Feb. 16, 2016, Percheron also filed a request for rehearing of the Jan. 15 order, specifically contesting staff’s interpretation of the Small Conduit Act with respect to the sites; however, as Percheron was not a party to the permit extension proceeding, its rehearing request was rejected.
FERC says it retains no grandfathered jurisidiction on these or other projects
Percheron in this just-concluded case asked that the commission find that it retains jurisdiction to authorize non-federal hydropower projects of 5 MW or less at Reclamation conduits in the Columbia Basin Project, or specifically just at the sites within the Columbia Basin Project for which CBH previously held a preliminary permit. Percheron contended that the term “project” in the Small Conduit Act provision that states that the law does not apply to “any project for which an application has been filed with the Federal Energy Regulatory Commission as of August 9, 2013” refers to any Reclamation project. Accordingly, Percheron argued that the exception provides that the commission retains jurisdiction at all Reclamation projects for which the commission received a development application as of Aug. 9, 2013.
The commissioners said in part in their Sept. 22 rejection of the Percheron arguments: "To apply the Reclamation Project Act of 1939 definition would mean that the Commission retains jurisdiction for small conduit hydropower development over entire Reclamation projects, which often consist of hundreds or thousands of miles of canals and waterways. And because Percheron also argues that an application need not have been pending when the Small Conduit Act was enacted, the Commission would retain jurisdiction over all Reclamation projects for which applications for development within that project were ever filed with the Commission. Thus, just a few of the many Reclamation projects the Commission would retain jurisdiction over under Percheron’s interpretation are: the Boise Project in Idaho, which consists of 721 miles of canals, 1,323 miles of laterals, and 649 miles of drains; the Yakima Project in Washington, which consists of 416 miles of canals, 1,698 miles of laterals, and 144 miles of drains; and the Columbia Basin Project in Washington, which consists of over 300 miles of main canals, approximately 2,000 miles of lateral canals, and 3,500 miles of drains and wasteways. A review of the legislative history makes it clear that such a sweeping exception to the Act was not intended. In the House and Senate reports accompanying the Small Conduit Act, there is no discussion of the Commission retaining jurisdiction over such extensive Reclamation facilities. Rather, the discussion is to the contrary."
The commissioners also wrote: "Percheron also argues that if the Commission does not retain jurisdiction over the Columbia Basin Project, or even at just the five particular sites, it would be fundamentally unfair to Percheron and would be inconsistent with one of the goals of the Small Conduit Act, which was to reduce duplicative administrative costs and bureaucratic obstacles. Percheron contends that it has 'expended significant resources investigating and attempting to develop the Columbia Basin Project sites under the Commission’s processes,' and that it would be unduly burdensome to pursue development under 'an entirely new bureaucratic process.' In its Petition, Percheron lists the various activities, studies, and consultations it has performed to support development of the sites. However, Percheron engaged in all of these activities of its own accord and at its own risk, with no assurance from the Commission that it would be able or likely to proceed with eventual development of its projects with the Commission."