Fate of U.S.-Canada dam license in question

The holder of the U.S. federal hydropower license for a dam spanning the international border with Canada border has petitioned for approval to surrender that license, citing economic considerations.

At issue is the Forest City Project, located on the East Branch of the St. Croix River which forms the international boundary between the United States and Canada.  The Project operates under conditions set by the International Joint Commission (IJC) in accordance with the Boundary Waters Treaty of 1909, as well as a license issued by the U.S. Federal Energy Regulatory Commission.  The project currently operates under a license issued on November 23, 2015.  That 30-year license expires on October 31, 2045.

Licensed by the Commission as Project No. 2660, the project includes the U.S. portions of a 540-foot-long, 12-foot-high earth dam, an impoundment spanning several lakes, and appurtenant facilities. There are no generating facilities located at the project; rather, the Forest City Project operates as part of a headwater storage system along with two other projects licensed to Woodland Pulp -- West Branch Project No. 2618 and Vanceboro Project No. 2492.  Two hydroelectric generation projects are located downstream on the St. Croix River from these storage facilities, the unlicensed Grand Falls and Woodland hydroelectric projects.

On December 23, 2016, Forest City Project licensee Woodland Pulp LLC applied to the Commission to surrender its license.  A cover letter attached to that application states, "Woodland Pulp has determined that the high cost of operating the Project pursuant to the new FERC license renders the Project uneconomical." In the surrender application itself, the company cited license provisions including new operating restrictions on reservoir pool elevation, a reservation of the Commission’s authority to require additional fishways if so prescribed by the Secretary of the Interior, and a requirement to develop a Historic Properties Management Plan (HPMP), as adding risk or cost.  As noted in the surrender application, "After a comprehensive review of the conditions in the License, the minimal contribution to downstream power generation, and the significant added cost and increased complexity of the License, coupled with the loss of flexibility required to comply with the License, Woodland Pulp has concluded that it is not economic for the company to continue to operate the project.

As described by the Commission in an April 6, 2017 public notice of the surrender application, the licensee proposes to remove the gates on the west side of the spillway.  According to the licensee, removing these gates will return water flow to natural flow conditions, and the Forest City Dam will no longer act as the water control structure for East Grand Lake, nor will it use, obstruct, or divert international boundary waters.

The Commission has docketed the surrender application as P-2660-028, and set deadlines for comments, protests, and interventions in the case.

FERC hydro dam relicensing, timing and options

Under U.S. law, the Federal Energy Regulatory Commission has jurisdiction over most hydropower dams and projects.  The Federal Power Act directs the Commission to issue licenses for hydropower projects for a defined term of years, and provides the basis for the FERC hydro relicensing process.  The relicensing process can take years, and often must be started before a licensee has made final long-term plans for the project's fate.  For example, what if a FERC licensee is considering surrendering the license and removing the dam, at the same time that its existing license approaches expiration and a relicensing application is due?

A recent order by FERC staff under its delegated authority in City of River Falls, Wisconsin, P-10489-014, illustrates this dynamic.  The City of River Falls, Wisconsin, holds the license for the River Falls Project on the Kinnickinnic River, in Pierce County, Wisconsin.  When the license for the River Falls Project was issued, the Commission determined that a 30-year term was appropriate and in the public interest.  That current license expires on August 31, 2018.

Because the FERC hydropower relicensing process can take years -- or longer -- licensees who wish to retain licensure are required to start the planning, stakeholder, and application filing processes early.  In the River Falls case, a relicense application will be due by August 31, 2016.  To get the ball rolling, in 2013 the City filed a Notice of Intent (NOI) to relicense the project and Pre-Application Document (PAD) and elected the Commission’s Traditional Licensing Process (TLP).

Meanwhile, the City of River Falls is trying to evaluate the project's future.  The City is considering surrendering the license instead of continuing with relicensing, and to draft and adopt a Kinnickinnic River Corridor Planning Strategy to "reflect a single community vision for the river, with or without the hydroelectric project."

But the studies and deliberation required to evaluate dam relicensing, surrender, or alternatives take time.  Meanwhile, the clock ticks toward license expiration.  The City tried to buy 5 more years, by asking FERC to extend the termination date of its existing license, so that it expires on August 31, 2023.  As described by FERC:

The City states the additional time is needed so that it does not spend time and money relicensing the project only to determine through its Corridor Plan that the license should be surrendered and the project decommissioned. The City believes that a lengthy and expensive licensing process is the wrong process for making such a determination. The City explains that a decision about the future of the project would be made by the fall of 2017, and a notice of intent to relicense the project or a surrender application would be filed no later than August 31, 2018.

The City's request was supported by public commenters, mostly on the theory that an extension would allow time to explore license surrender and dam removal.

But as expressed in the order, the Commission saw "no reason why the City cannot evaluate both license surrender and relicensing in the remaining time it has to file a relicense application (due August 31, 2016). In fact, analysis of studies and feedback from agencies would help inform its decision of whether or not to continue to pursue the project."  In particular, the Commission did not view the simultaneous City's Corridor Plan process as "unique circumstances or circumstances beyond the City’s control that prevent it from making a determination by August 31, 2016... as to whether to relicense or to surrender the project."

The Commission also distinguished the River Falls case from precedent where it has extended other license terms, either to enable a licensee to amortize the cost of substantial improvements to project facilities or substantial new environmental measures, or to coordinate the license expiration date with the expiration dates of other licenses in the same river basin.

Ultimately, the Commission denied the City of River Falls, Wisconsin’s application to extend the license term for the River Falls Project from August 31, 2018, to August 31, 2023.  As noted in the Commission's order, the "City remains able to work on both a relicensing option and a surrender option while it develops its Corridor Plan should the City wish to do so."

The City has filed its Notice of Intent and Pre-Application Document, and has received Commission approval to use the Traditional Licensing Process.  Any relicense application will be due 2 years before the current license expires, or on August 31, 2016.  In the meantime, the City will presumably continue to explore its options, including license surrender and dam removal, or relicensing the project.