FERC denies petition re Maine ownership of Forest City dam

A privately owned dam and reservoir spanning the U.S.-Canada border licensed as a hydropower development would continue to require licensing even if owned by a Maine state agency, according to federal regulators -- a ruling which could cast doubt on whether the state will acquire the facilities as has been conditionally authorized.

The Forest City Project on the East Branch of the St. Croix River currently operates under a license issued by the Federal Energy Regulatory Commission to Woodland Pulp LLC on November 23, 2015. While the project does not include electric generation facilities, the Commission has held that its project works are part of a complete unit of development or improvement which includes separate, unlicensed generation facilities.

In 2016, the licensee applied to the Commission to surrender its license and decommission the project because its operating costs as licensed would significantly exceed the downstream hydroelectric generation benefits. State-level interest in maintaining the existence of the impoundment led the Maine legislature to enact a resolve authorizing Maine Department of Inland Fisheries and Wildlife to assume ownership of the Forest City Dam if two conditions are satisfied: (1) the Commission finds that the Forest City Project will not require a license from the Commission if Maine DIFW owns the U.S. portion of the dam; and (2) Maine DIFW executes an agreement with Woodland Pulp that provides that Woodland Pulp and its successors will operate and maintain the Forest City Dam consistent with the manner in which the dam was operated in most recent 12 months, at the direction of the State, and at no cost to the State, for a period of 15 years.

After the Maine legislative resolve became law, the state agency and the licensee executed an operation and management agreement on July 27, 2017, and licensee petitioned the Federal Energy Regulatory Commission for a declaratory order declaring that if Woodland Pulp transfers ownership of the U.S. portion of the project to the Maine DIFW, DIFW will not require a license from the Commission to continue to operate and maintain the Forest City Dam.

But on December 21, 2017, the Commission denied the licensee's petition for a declaratory order to that effect. According to the Commission, this was the licensee's fourth petition seeking a ruling that the Forest City Project does not require licensing, with a fairly lengthy history of litigation. While the Commission noted its power to reexamine findings on jurisdiction where facts such as project ownership have changed, the Commission also noted that "ownership of project works by a state or state agency has no impact on a jurisdictional determination," and that "it is the potential effect on generation of an impoundment – and not its ownership or the operator’s specific intent – that guides our determination of whether a reservoir is necessary or appropriate to a given unit of development under FPA section 3(11) and operates for the purpose of developing electric power under FPA section 23(b)."

The Commission concluded, "we find that the Forest City Project would require licensing even if it was owned by Maine DIFW." In reaching this conclusion, it said, "We understand the concerns regarding Woodland Pulp’s proposed surrender of the Forest City Project and appreciate Woodland Pulp’s and the State of Maine’s effort to avoid adverse effects to local property owners and the local economy." But at the same time, "while we are sensitive to potential effects on local socioeconomics and the environment associated with Woodland Pulp’s proposed license surrender, we cannot consider these effects in determining whether we have jurisdiction over the project."

Given the Commission's ruling that transfering the project to a state agency would not affect its need for licensure, the 2017 state legislative resolve does not authorize the Maine Department of Inland Fisheries and Wildlife to assume ownership of the facility. The project's fate has yet to be determined; the licensee's petition to surrender the license remains pending before the Federal Energy Regulatory Commission.