Federal dams, nonfederal hydro, and preliminary permits

Tuesday, September 6, 2016

Can a hydropower developer obtain a preliminary permit from the Federal Energy Regulatory Commission for a project to be located at a federal dam, where the federal entity owning the dam says it opposes the project?  In a series of recent decisions, the Commission has denied preliminary permits in these circumstances, saying there is no purpose in issuing a preliminary permit.

U.S. federal law generally encourages the development of hydropower at existing dams.  Under sections 4(e) and 4(f) of the Federal Power Act, the Commission has general authority to issue preliminary permits and licenses for hydropower projects located at federal dams and facilities.  There are limits on this jurisdiction, such as if federal development of hydropower generation at the site is authorized, or if Congress otherwise unambiguously withdraws the Commission’s jurisdiction over its development.

The Commission also has discretion to deny a preliminary permit application, so long as it articulates a rational basis for its decision.  Through recent precedent, one basis the Commission has developed for denying applications is if the project would rely on modifications to federal facilities, but the federal entity says it would not approve those modifications or opposes the project.

For example, on April 25, 2016, Loxbridge Partners, LLC applied to the Commission for a preliminary permit to study the feasibility of the proposed McNary Second Powerhouse Project No. 14777. The project would be located at the U.S. Army Corps of Engineers’ McNary Lock and Dam facility on the Columbia River in Oregon.  On May 16, 2016, Commission staff asked the Corps for its opinion on whether non-federal development is authorized at McNary Dam, and if so, whether Loxbridge’s proposal would interfere with existing dam operations or improvement plans.  The Corps responded that it believed the Commission does not have jurisdiction to issue a preliminary permit or license for the site, and that the Corps opposed Loxbridge's proposed project on the ground that it would interfere with the Corps’ operation of McNary Dam.  The Corps asked the Commission to reject the permit application.

On September 2, 2016, the Commission denied Loxbridge's preliminary permit application.  It cited recent decisions in which "the Commission has denied preliminary permits for projects at federal facilities after the federal entities indicated that no purpose would be served in issuing a permit because the federal entity would not approve modifications to its federal facilities."  One of these decisions cited, Advanced Hydropower, Inc., 155 FERC ¶ 61,007 (2016), even relates to a different proposal for non-federal hydropower development at the McNary Dam.  The Commission also noted that "because the Corps, which owns the McNary Lock and Dam facility and whose permission would be needed for the development of any project at that facility, has stated that it opposes the project, there is no purpose in issuing a preliminary permit."

The Commission has issued similar denials with respect to Rivertec Partners LLC's proposed Clearwater Hydroelectric Project No. 14753 to be located at the Corps' Dworshak Dam in Idaho, Owyhee Hydro, LLC's proposed Anderson Ranch Pumped Storage Hydroelectric Project No. 14648 to be located at a Bureau of Reclamation dam in Idaho, and Symphony Hydro LLC's proposed Project No. 14627 to be located at the Corps' Upper St. Anthony Falls Lock and Dam on the Mississippi River near Minneapolis.

The policy highlights the importance for project developers of cultivating good relations with federal agencies owning dams and other facilities with hydropower development potential.

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