FERC holds CO microhydro needs license

Wednesday, February 24, 2016

In an order issued earlier this month, the Federal Energy Regulatory Commission found that the developer of a micro-hydropower project proposed in Colorado must obtain a license for the Patton Colorado Hydropower Project's construction, maintenance, and operation.  The order illustrates one challenge facing small, distributed hydroelectric projects in the U.S.: a federal regulatory process that at times can treat microhydro projects much like traditional large dams, despite interest in a streamlined permitting process for small projects.

At issue is Section 23(b) of the Federal Power Act.  It provides that any person intending to construct project works on a non-navigable commerce clause water must file a declaration of their intention to do so with the Commission. Section 23(b) further provides that upon the filing of a Declaration of Intent, the Commission will investigate the proposed project, and, if it finds that the “interests of interstate or foreign commerce would be affected” by the proposed project, then the person intending to construct the project must obtain a Commission license before starting construction.

Under section 23(b)(1) of the Federal Power Act, 16 U.S.C. § 817(1), a non-federal hydroelectric project must be licensed (unless it has a still-valid pre-1920 federal permit) if it:
(a) is located on a navigable water of the United States;
(b) occupies lands or reservations of the United States;
(c) utilizes surplus water or waterpower from a government dam; or
(d) is located on a stream over which Congress has Commerce clause jurisdiction, is constructed or modified on or after August 26, 1935, and affects the interests of interstate or foreign commerce.
On May 11, 2015, as supplemented on November 10, 2015, Steve Patton filed a Declaration of Intention with the Commission concerning the proposed Patton Colorado Hydropower Project.  The project would be located on Colombine Creek, a feeder stream to the South Fork of the Rio Grande, near the town of South Fork, Mineral County, Colorado.  It would consist of an intake and pipes feeding a gravitation water vortex-type generating unit rated between 2 and 10 kilowatts with 2.5 feet of head, transmission line, and appurtenant facilities. The proposed project would be connected to the interstate electric grid.

In the case of the Patton Colorado Hydropower Project, the Commission found that licensure is required under the fourth prong of Section 23(b)(1) of the Federal Power Act, which itself has three components.

First, the Commission found that the Patton project would be located on a "Commerce Clause stream."  Specifically, the Commission found that Colombine Creek is a headwater or tributary of the South Fork of the Rio Grande, which is a tributary of the Rio Grande River, a navigable water of the United States.  Under a 1965 Supreme Court precedent, for purposes of FPA section 23(b)(1), the headwaters and tributaries of navigable rivers are Commerce Clause streams.

Second, the project would be constructed after August 26, 1935. 

Third, citing a 1992 opinion from the 11th Circuit Court of Appeals, the Commission noted, "It is well settled that small hydroelectric projects that are connected to the interstate grid affect interstate commerce by displacing power from the grid, and the cumulative effect of the national class of these small projects is significant for purposes of the FPA section 23(b)(1)."  Thus the Commission concluded that the Patton Colorado Hydropower Project would affect interstate commerce through its connection to the interstate grid.

Based on these conclusions, the Commission found that in accordance with section 23(b)(1) of the Federal Power Act, the applicant must obtain a license for the construction, maintenance, and operation of the Patton Colorado Hydropower Project.  The Commission also ruled that no construction or operation of the project may commence until a license has been obtained.

Notably, the Commission was able to reach this conclusion without making a navigability finding for Colombine Creek itself.  In particular, the order notes "insufficient evidence to determine whether Colombine Creek is navigable." But because the Commission found licensing to be required on other grounds -- grounds derived from the ultimate navigability of a downstream river -- it did not make a navigability finding for the river reach where the project would be located.

The Commission's order did suggest that an easier path may be available for the Patton Colorado Hydropower Project.  In particular, the order notes that the project may be eligible for an exemption from licensing.  It suggests that the applicant consider applying for a small hydroelectric power project exemption of 10 megawatts (MW) or less.  This more limited approval could enable project development and operation through a more streamlined regulatory processes than that required for a full project license.

Incentives and policy support for microhydro projects are growing.  But as the Patton Colorado Hydropower Project case before the FERC illustrates, even small hydropower projects may be subject to federal regulation.  For some projects, an exemption may be available, but others may not be able to be developed without a FERC license.  Even an exemption can take time and expense to secure, and it can be hard to preduct the outcome of an application for an exemption.  How does this dynamic affect the rate of development of U.S. micro-hydropower projects?

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