Nicatous Lodge proposes off-grid micro-hydro project

A Maine sporting camp has proposed developing an off-grid micro-hydropower project to provide it electricity.  Nicatous Lake Lodge and Cabins LLC proposes to develop the micro-hydro project at its remote property near Burlington, Maine.  A filing made by the camp earlier this spring has triggered a federal review process to evaluate whether the project will require a license or exemption under the Federal Power Act.

Under federal law, most hydropower projects cannot be constructed, operated, or maintained without licensing under the Federal Power Act.  But some projects -- typically off-grid or remote ones -- fall outside the Federal Power Act's jurisdiction.  To reduce uncertainty about what regulations might apply, Section 23(b)(1) of the Federal Power Act requires an entity proposing a new project to file with the Federal Energy Regulatory Commission either a hydropower license application, or a Declaration of Intention to determine if the proposed project requires a license.

When a developer files a Declaration of Intention with the Commission, the Federal Power Act requires the Commission to investigate and determine if the project would affect the interests of interstate or foreign commerce. The Commission also determines whether or not the project: (1) would be located on a navigable waterway; (2) would occupy public lands or reservations of the United States; (3) would utilize surplus water or water power from a government dam; or (4) would be located on a non-navigable stream over which Congress has Commerce Clause jurisdiction and would be constructed or enlarged after 1935.  Each of these evaluations supports a key jurisdictional finding under the Federal Power Act; collectively, they can determine whether or not licensing is required.

Other recently proposed micro-hydro projects illustrate how the Commission evaluates whether or not a license or exemption will be required.  For example, the Commission found that licensing or exemption was required for the Patton Colorado Hydropower Project, which would be grid-tied -- but that no license is required for the Egnaczak Net Zero Hydro Project in Massachusetts, which would have no connection to the interstate electric grid.

This jurisdictional determination is now underway for the Nicatous micro-hydro project.  On March 15, 2016, the sporting camp owner submitted a Declaration of Intention to the Federal Energy Regulatory Commission.  That Declaration of Intent describes the project site as about 15 miles away from the nearest electric utility grid, where Nicatous Stream leaves Nicatous Lake.  The project does not rely on a dam, although the remains of a former dam are located nearby.  Instead, an intake in the lake would supply water to a low head (60 inches or less) PowerPal micro-hydroelectric generator, rated at 1,000 watts power.  Power from the generator would be fed into the lodge's electric system, not which is not connected to any utility grid.

On May 10, 2016, the Commission issued its notice of the filing, setting a 30-day deadline for filing comments, protests, and motions to intervene.  Commission action on the filing could follow later this year.

Alta Ski Area conduit micro-hydro project

Alta Ski Area has proposed developing a micro-hydropower project along an existing pipeline, and hopes to benefit from a streamlined regulatory process.  Federal regulators have made a preliminary determination that the proposed Alta Micro-Hydro Project, in Alta, Utah, satisfies the requirements to be treated as a "qualifying conduit hydropower facility," which would not require licensing under the Federal Power Act.

Alta's proposed project would include a new powerhouse to be built along the existing underground 6-inch-diameter snowmaking water supply pipeline delivering water from Cecret Lake to the Wildcat Pump House, a new turbine/generating unit with an installed capacity of 75 kilowatts, intake and discharge pipes, and appurtenant facilities.  The unit is estimated to generate between 115 and 225 megawatt-hours annually.  There is no dam associated with the project.  Alta presented its micro-hydro project as part of a 2012 request to update its master plan, which the U.S. Forest Service accepted.

Ski areas with snowmaking capacity typically have existing pipelines and water infrastructure, coupled with significant vertical relief.  This can create opportunities to generate electricity using energy harvested from water flowing downhill through a pipeline, particularly if reducing system pressure (like a pressure relief valve) is otherwise needed. 

A 2013 law was designed to help small conduit-based hydropower projects by eliminating their need for a license or exemption from licensing issued by the Federal Energy Regulatory Commission.  Section 4 of the Hydropower Regulatory Efficiency Act of 2013 amended Section 30 of the Federal Power Act.  Section 30 now provides that a "qualifying conduit hydropower facility" -- one that is determined or deemed to meet defined criteria -- is not required to be licensed or exempted from licensing under the Federal Power Act.  These criteria include:

• The conduit the facility uses a tunnel, canal, pipeline, aqueduct, flume, ditch, or similar manmade water conveyance that is operated for the distribution of water for agricultural, municipal, or industrial consumption and not primarily for the generation of electricity.
• The facility is constructed, operated, or maintained for the generation of electric power and uses for such generation only the hydroelectric potential of a non-federally owned conduit.
• The facility has an installed capacity that does not exceed 5 megawatts. 
• On or before August 9, 2013, the facility is not licensed, or exempted from the licensing requirements of Part I of the FPA.

The Federal Energy Regulatory Commission administers this statute.  To start the regulatory process, on May 16, 2016, Alta filed a notice of intent to construct a qualifying conduit hydropower facility.  Alta supplemented its notice on May 20 to clarify that the project "will only operate when there is excess capacity available in the pipeline and when water is hydrologically available", generally after the winter snowmaking season, during spring runoff.  Alta also restated that the pipeline's main purpose will continue to be snowmaking.

Yesterday the FERC issued its notice of preliminary determination of a qualifying conduit hydropower facility for Alta's project.  That notice examines the project relative to each of the four statutory criteria, and then provides the Commission's preliminary determination:

The proposed addition of the hydroelectric project along the existing water supply pipeline will not alter its primary consumptive purpose. Therefore, based upon the above criteria, Commission staff preliminarily determines that the proposal satisfies the requirements for a qualifying conduit hydropower facility, which is not required to be licensed or exempted from licensing.

The notice also sets a 30-day deadline for filing motions to intervene, and a 45-day deadline for filing comments contesting whether the facility meets the qualifying criteria and providing an evidentiary basis.

Other recently proposed conduit hydro projects have been determined to be qualifying conduit hydropower facilities, including a Colorado project using an existing "ditch drop," a Castle Valley, Utah water treatment project, a California wholesale water agency conduit project, and a New Hampshire water works.

Hydro relicensing and intervention timing

The Federal Energy Regulatory Commission issues hydropower licenses for terms of up to 50 years.  At least 5 years before license expiration, the licensee is required to notify the Commission and the public whether it intends to apply for a new license for the project, and what licensing process it requests.  Any license application might not come for years after the filing of that notice of intent.  But as a recent Commission order shows, the opportunity for a third party to intervene in the relicensing case is triggered not by the notice of intent, but only after an application for a new license is actually filed and notice is published.

That recent order involved New York State Electric & Gas Corporation (NYSEG), the licensee for the Upper Mechanicville Hydroelectric Project, FERC No. 2934.  The Upper Mechanicville project is located on the Hudson River in upstate New York, and has an authorized capacity of 18.5 megawatts.  Its original license, issued in 1981 for a 40-year term, expires on March 31, 2021.

On March 30, 2016, NYSEG filed a Notice of Intent to relicense the project, under the Commission's Integrated Licensing Process or ILP, along with a Pre-Application Document.

On April 13, 2016, the New York State Council of Trout Unlimited filed a motion to intervene in the docket, citing Rule 214 of the Commission's Rules of Practice and Procedure.  But on May 24, the Commission issued a notice dismissing that motion.

The notice first points to Rule 214(a)(3) of its procedural order, any person may seek to intervene and become a party in a proceeding by filing a motion to intervene that complies with the content requirements of Rule 214(b).  But the notice states that because NYSEG has not yet filed an application for a new license, there is no proceeding in which to intervene.  It therefore dismissed the motion to intervene as premature.

The notice does offer the Trout Unlimited group two other approaches to involvement.  First, it suggests that interested persons can register and eSubscribe to the docket.  Second, it notes that should NYSEG file an application for a new license for its project, notice of the application will be published, and interested entities "will have an opportunity to intervene and present views concerning the project as proposed in the license application."

FERC Summer 2016 energy market and reliability report

Federal energy regulatory staff have presented their 2016 Summer Seasonal Assessment to the Federal Energy Regulatory Commission.  The "Summer 2016 Energy Market and Reliability Assessment" presents an summer outlook by FERC's Office of Electric Reliability and Office of Enforcement on electricity and natural gas markets and reliability issues.

Highlights include:

• "low natural gas prices that have resulted from robust production and near record levels of natural gas in storage"
• electric system reserve margins are expected to be adequate this summer, though tighter in Texas
• total U.S. load forecast, when weather-adjusted, is essentially unchanged in recent years, largely due to little to no load growth in commercial and residential sectors
• the total generating capacity in the U.S. has decreased by approximately 2 percent since last summer, primarily due to coal retirements. According to the report, "The factors that prompted these closures include increased competition from natural gas, environmental regulations and an average fleet age that exceeded 50 years old."
• Over 18 gigawatts of new generating capacity will be installed nationwide through the summer, with a majority of these capacity additions coming from renewables such as wind and solar, plus the first new U.S. nuclear unit in over 20 years.
• Organized markets are attempting to manage the growing impacts of renewable generation.
• FERC staff expects natural gas fired generation to remain robust; natural gas fired generation has surpassed coal plant output since July 2015. Meanwhile coal stockpiles are growing due to a decrease in coal generation.
• Natural gas future prices have fallen since last year, though the Boston region's price drop is not significant.  Basis swaps -- financial instruments that represent the natural gas price differential between a specific point and the Henry Hub -- for Boston are priced higher than last summer, "suggesting expectations for greater congestion due to above-normal temperatures and a reduction in capacity along the Algonquin pipeline because of planned maintenance to tie in the Algonquin Incremental Market (AIM) expansion project this summer."

Maine biomass procurement competitive standards

As the Maine Public Utilities Commission prepares for its upcoming procurement of biomass power resources, the Commission has requested public comment on the standards and criteria to be used in evaluating whether the solicitation is "not competitive."

This spring, the Maine State Legislature enacted An Act To Establish a Process for the Procurement of Biomass Resources.  The law directs the Maine Public Utilities Commission to initiate a competitive solicitation as soon as practicable, seeking proposals for 2-year contracts for up to 80 megawatts of biomass resources.  

But largely due to fairness and cost-containment concerns, the legislature created a "safety valve" in case the solicitation turns out to be "not competitive."  The Act specifies that “If the commission concludes that the solicitation ... is not competitive, no bidders may be selected and the commission is not obligated to enter into a contract.”

On May 17, 2016, the Commission issued a request for comment in its Procurement of Biomass Resources docket.  That request describes the Commission's plans to initiate the procurement process "in the near future" through the issuance of a request for proposals or RFP.  But before issuing the RFP, the Commission has requested comment on the standards and criteria to be used to determine whether the solicitation is “not competitive” pursuant to the Act.

Comments are requested by May 30, 2016.

FERC and microhydro licensing

Federal energy regulators have ruled that a micro-hydroelectric project proposed in New York cannot be constructed or operated without a license.

The proposed Henson Micro Hydroelectric Project would be located on the West Branch of Onondaga Creek, near Onondaga, New York.  It would include an existing 14-foot-high concrete dam, plus new construction including a penstock, a powerhouse, and a 10 kilowatt generating unit.  The dam was rebuilt in 2002, and had previously been used to power a grist mill.  The project developer, an individual, proposed to use the project power to provide electricity to his home and barn.
 
In his declaration of intention, the developer described himself and his approach to project development and compliance:

I would like to point out that I am not a corporation, or a rich man just a simple middle class Joe. I am an hourly employee at AT&T. Although blessed beyond what I actually deserve, I do not have a bunch of money that I could spend. In fact I am using funds recently obtained from a loss of use settlement from the NYS Workers Compensation Board to fund this. I am trying to do the right thing for the environment and save some money on my power bill. I am hoping that we can work this out to everyone’s satisfaction based upon the material and information that I currently have available. Of course, if additional information is required by you folks I will do everything to comply.

Identifying what approvals are necessary is a core step in developing any project.  Under section 23(b)(1) of the Federal Power Act, a non-federal hydroelectric project must be licensed by the Federal Energy Regulatory Commission (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.

To reduce uncertainty over whether a project will require licensing, a developer may file a Declaration of Intention with the FERC describing the project.  Following public notice and an opportunity for protests, comments, and motions to intervene, FERC will rule on the jurisdictional questions raised by the declaration.

In the Henson project's case, the developer filed a Declaration of Intention on December 18, 2015.  That declaration was supplemented; after the second supplement, FERC issued its public notice of the declaration.  No protests, comments, or motions to intervene were filed.

On May 10, FERC issued its ruling on the declaration, finding that licensing is required.  FERC easily found that the project would not occupy any public lands or reservations of the United States or use surplus water or waterpower from a Federal government dam.  It found "insufficient evidence" to determine whether the West Branch of the Onondaga Creek is navigable.

However, FERC found that the West Branch of Onondaga Creek is a headwater or tributary of the Oswego River, a navigable water of the United States.  As a result, FERC concluded the project would be located on a "Commerce Clause stream."  FERC noted the project would be constructed after 1935.

FERC also concluded that the project would affect interstate commerce through its connection to the interstate grid, relying on precedent 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."  Thus even though the Hanson project's developer proposed using project power for the onsite home and barn, the fact that those buildings were grid-tied drove FERC to conclude that licensing was required. 

On this reasoning, FERC concluded that construction, operation, and maintenance would require a license.  As an alternative, FERC suggested the developer consider applying for an exemption from licensing as a small hydroelectric power project.


By contrast, another recent FERC decision concluded that a micro-hydro system proposed in Massachusetts did not require licensing, because (among other reasons) neither the project nor the structures it would serve would be grid-tied.  Thus whether or not the project and the facilities it serves are grid-tied or off-grid can be an important factor in whether a FERC hydropower license is required.

FERC relicensing and annual licenses

What happens when the holder of a hydropower license applies to the Federal Energy Regulatory Commission for a new license, but the original license expires before the relicensing case is resolved?  Depending on which federal laws and regulations apply, possible outcomes can include the Commission issuing an annual license, or continued operation under the license terms, until a new license is issued or other disposition is ordered.

A recent FERC case illustrates this dynamic, involving the Don Pedro Hydroelectric Project, Project No. 2299, located on the Tuolumne River in California.  Turlock Irrigation District and Modesto Irrigation District are the licensees for Project No. 2299, under a license issued for a period ending April 30, 2016.

Just over 2 years before the Don Pedro project's license expired, on April 28, 2014 the licensees filed an Application for a New License pursuant to the Federal Power Act (FPA) and the Commission's regulations thereunder.  That relicensing application remains pending.

Section 15(a)(1) of the FPA, 16 U.S.C. 808(a)(1), requires the Commission, at the expiration of a license term, to issue from year-to-year an annual license to the then licensee under the terms and conditions of the prior license until a new license is issued, or the project is otherwise disposed of as provided in section 15 or any other applicable section of the FPA.  But some projects operate pursuant to licenses which include waivers of the applicability of Section 15 of the FPA.

In the Don Pedro project's case, on May 5, 2016, the Commission issued a Notice of Authorization for Continued Project Operation, including language covering both the scenario under which Section 15 applies, as well as the scenario under which the prior license waived Section 15's applicability.

If the project is subject to section 15 of the FPA, the Commission gave notice that an annual license for Project No. 2299 is issued to the licensee for a period effective May 1, 2016 through April 30, 2017 or until the issuance of a new license for the project or other disposition under the FPA, whichever comes first.  If issuance of a new license (or other disposition) has not occurred by April 30, 2017, the Commission gave notice that, pursuant to 18 CFR 16.18(c), an annual license under section 15(a)(1) of the FPA is renewed automatically without further order or notice by the Commission, unless the Commission orders otherwise.

If Section 15 does not apply, the Commission gave notice that based on section 9(b) of the Administrative Procedure Act, 5 U.S.C. 558(c), and as set forth at 18 CFR 16.21(a), if the licensee of such project has filed an application for a subsequent license, the licensee may continue to operate the project in accordance with the terms and conditions of the license after the minor or minor part license expires, until the Commission acts on its application. If the licensee of such a project has not filed an application for a subsequent license, then it may be required, pursuant to 18 CFR 16.21(b), to continue project operations until the Commission issues someone else a license for the project or otherwise orders disposition of the project.

The irrigation districts' relicensing case remains pending.

FERC rejects BOST1 preliminary permit application

If the holder of a preliminary permit under section 4(f) of the Federal Power Act to study the feasibility of a proposed hydropower project is denied a successive permit to study the same project at the same site, will the Federal Energy Regulatory Commission accept a new application for a preliminary permit for the same applicant and project?

In a recent case, Commission staff said no, dismissing the new permit application.  That case involved a March 7, 2016 application by BOST1 Hydroelectric LLC proposing to study the feasibility of the Coon Rapids Dam Hydroelectric Project No. 13458, to be located at the existing Coon Rapids Dam on the Mississippi River in Minnesota.

Under the Federal Power Act, a developer interested in exploring the feasibility of a proposed hydropower project may apply for a preliminary permit, issued for up to three years.  A preliminary permit is not a development approval; it does not authorize construction.  Rather, it gives the holder the guaranteed right to have first priority to file a timely development application.

But this wasn't the first preliminary permit application FERC had received from BOST1 for this project.  In 2009, BOST1 applied for a preliminary permit for the Coon Rapids Project, which the Commission granted on October 7, 2010.  BOST1 was selected following a random drawing against a competing application filed by the Three Rivers Park District, which had previously held a preliminary permit for the site under Project No. 12618-000.  BOST1 was then granted a two-year extension of the permit term on September 6, 2013.

That permit expired on September 30, 2015.  BOST1 undertook predevelopment activity and made filings with the Commission, but did not file a final license application before the permit expired.

On October 1, 2015, BOST1 filed a successive permit application.  But Commission staff denied that application on January 20, 2016, because BOST1 had "failed to show that extraordinary circumstances or factors outside of its control prevented it from filing a development application."  The Commission requires a developer holding a preliminary permit to demonstrate diligent action under that permit, if the developer wishes to receive a successive permit.

The applicant then took two actions.  On February 19, 2016, it filed a request for rehearing, which remains pending.  Then, weeks later, it filed a new application for a preliminary permit for the project.

In a May 4, 2016 order, Commission staff dismissed that new application.  The order describes the new permit application as "nearly identical to its successive permit application," which the Commission denied this part January.  In the order's words, "To justify a permit in either case, BOST1, which has already had five years to prepare a development application, needed to demonstrate that extraordinary circumstances or factors outside of its control prevented it from filing a license application.  It failed to do so."

Commission staff therefore ordered that the applicant's March 7, 2016 application is denied.  BOST1's request for rehearing, relating to the January successive permit denial, remains pending.