Complaint over FERC hydro project property transfers

What happens when the holder of a Federal Energy Regulatory Commission license for a hydropower project buys, sells, or transfers real estate that is part of the project?  A complaint recently filed with the Commission raises this question in relation to a hydropower project located in Montana.

At issue in the complaint is the North Willow Creek project, licensed by the FERC in 1985 as Project No. P-7804.  According to the complaint filed on February 16, 2016, by Pony Ranch, LLC, the run-of-the-river hydroelectric project is located mostly on private lands near the Tobacco Root Mountains in Madison County, Montana.  The complaint describes the project as consisting of a steel intake structure located on North Willow Creek, an 8,180-foot steel penstock, and a powerhouse containing a 400-kW generating unit, and a tailrace discharging project flows back into North Willow Creek.

According to the complainant, Pony Ranch owns much of the land where the project is sited, including the land where the intake structure and upper 2,800 feet of the penstock are located.  But the complaint alleges that the project licensee has "for more than two decades regularly bought and sold real property underlying the Project and within Project boundaries without either informing the Commission or seeking Commission permission for those transactions requiring FERC approval."

The complaint alleges at least six transactions or transfers of the parcel of real estate on which the project powerhouse and tailrace are located.  The complaint alleges that even the licensee's transfer of the Pony Ranch lands to its present owners -- who appear to be substantially the same people as the complainants -- was a license violation because no FERC approval was obtained nor notice given.

According to the complaint, these transfers violate several articles of the project's license which relate to project land rights.  These include Standard Article 5, which provides that "none of such properties shall be voluntarily sold, leased, transferred, abandoned, or otherwise disposed of without the prior written approval of the Commission."

The Commission has required reporting and authorization for outright sales of project lands, but also for divorce-related transfers of joint interests in a project license, other transfers of joint interests in FERC licenses, actions limiting access across property owned by nonlicensees where access is needed to assure access to project works, transfers that occur under the will of a deceased licensee, and involuntary transfers where project property or equipment is foreclosed to satisfy tax or mortgage debt.

The complaint asks the Commission to find that the licensee has abandoned the project and should surrender the license under the doctrine of implied surrender.  Under that doctrine, the Commission can infer a licensee's intent to abandon a project from its action or inaction..

On March 7, 2016, the Commission's Office of Energy Projects sent the licensee a letter describing the complaint as a "non-compliance allegation" and requesting a response.  That letter notes that consistent with Commission practice with respect to allegations of non-compliance by hydropower licensees, the Pony Ranch complaint has been referred to the Commission’s Office of Energy Projects, Division of Hydropower Administration and Compliance.  That division is charged with ensuring compliance.  The letter requests a response from the licensee within 30 days.

Energy projects installed in May 2012

A report released this week by federal energy regulators documents the composition of additions to the U.S.'s portfolio of electricity resources.  The May 2012 Energy Infrastructure Update released by the Federal Energy Regulatory Commission's Office of Energy Projects provides a summary of newly-built and expanded electric generation facilities.  This snapshot of what happened in May 2012 illustrates trends in the electric industry, including a focus on renewable energy and natural gas in project development.

According to the report, 561 megawatts of new or expanded electric generation capacity came online in May 2012.  Of this new installed capacity, the largest share -- 228 MW -- came from wind.  Most of this new capacity comes from a single project, E.ON Climate & Renewables North America, LLC’s Magic Valley Wind Farm I in Texas.  The Magic Valley I project is comprised of 112 Vestas V100 1.8-MW turbines, for a total nameplate capacity of 202 MW.

The second-largest resource class of new generation capacity in May 2012 comes from biomass, with 166 MW of new biomass capacity installed in May.  As with wind, Texas hosts the bulk of this new  capacity.  The largest new biomass project is a 100 MW wood-fired plant built in Nacogdoches County, Texas, by Southern Company, financed in part through a long-term power purchase agreement with Austin Energy to buy the power.

Solar-powered generation provides the third-largest class of capacity newly installed in May 2012.  Eleven new projects came online in May, totaling 149 MW of new capacity.  The largest of these is Enbridge Inc.’s 50 MW Silver State North Solar Project.  This project, located in Clark County, Nevada, is the first utility-scale solar facility built on federal land managed by the Bureau of Land Management.  Its output will be sold to NV Energy under a long-term PPA.

Together, these three renewable resources -- wind, biomass, and solar -- represent 543 out of the 561 MW installed in May 2012. Other fuels like coal and natural gas played a relatively minor role in terms of new capacity installed in May.  Nevertheless, the year-to-date cumulative data shows that natural gas powers the largest share of projects installed in 2012 -- 2,811 MW out of the 6,225 MW installed so far in 2012.