Alaska tidal permit surrendered

Five years after applying for and receiving a preliminary permit to study a proposed Alaska tidal energy project, the project developer has surrendered that permit.

At issue is ORPC Alaska 2, LLC's proposed East Foreland Tidal Energy Project.  The developer first applied to the Federal Energy Regulatory Commission for a preliminary permit under Section 4(f) of the Federal Power Act on August 2, 2010. 

That application described a project site in middle Cook Inlet, a marine waterway of the northern Pacific Ocean. The proposed hydrokinetic project would lie offshore of the East Foreland, near the west coast of the Kenai Peninsula by Nikiski, Alaska.  The application described the site in middle Cook Inlet as offering a maximum tidal range of up to 9.20 meters, with geomorphology favorable to strong currents.  The application described the developer's intent to install a pilot or commercial project in a phased approach.

The FERC issued a first preliminary permit for the East Foreland project by order dated March 11, 2011.  As permitted, the East Foreland project would include a series of 150-kilowatt TideGen and/or 150-kW OCGen turbine-generator modules developed by ORPC, with a combined capacity between 5 megawatts (MW) and 100 MW, with an average annual generation between 13 and 340 gigawatt-hours.

Over the ensuing years, the permittee studied the site and the project and filed periodic reports to the Commission. The preliminary permit required the permittee to file a notice of intent and draft pilot license application within two years of the permit date, but ORPC requested and received a six-month extension. 

On March 3, 2013, the permittee filed a request for a successive preliminary permit for the East Foreland Tidal Energy Project.  The Commission granted a successive preliminary permit on June 16, 2014, describing a project with a combined capacity of no more than 5 megawatts.  Study and reporting activities continued.

But on December 11, 2015, the permittee filed a request for acceptance of its surrender of the East Foreland Tidal Energy Project's preliminary permit.  In that request, the permittee described its "significant progress in evaluating the feasibility of a tidal energy project at East Foreland, Alaska, over the past several years."

Yet the surrender request also described the headwinds that stalled the project:

Nonetheless, the strength of the conventional energy market in Alaska precludes timely integration of new technology, like tidal energy systems, and advancement of the Project at the pace established by the original Schedule of Activities. As a result, public and private funding sources have sought nearer-term market impact from their investments. This in turn has negatively affected ORPC’s ability to expeditiously gather site data during Alaska’s limited field season window and maintain pace with FERC milestones.

As a result, the request describes the permittee's decision to surrender the East Foreland tidal project's preliminary permit and "to continue our focus and dedication of resources towards technology optimization and development of near term market opportunities that are available to ORPC and its power system technology."

Successive preliminary permit for Cave Run hydro project

Federal energy regulators have issued an order issuing a successive preliminary permit to Cave Run Energy, LLC for a proposed hydroelectric project to be located at a dam in Kentucky owned by the U.S. Army Corps of Engineers.

The Federal Power Act provides for federal regulation of most hydropower projects in the U.S. Under Section 4(f) of the Federal Power Act, 16 U.S.C. § 797(f), the Federal Energy Regulatory Commission is authorized to issue preliminary permits for the purpose of enabling prospective applicants for a hydropower license to secure data and prepare material supporting a license application as required by section 9 of the Federal Power Act.  As the Commission has said, "The purpose of a preliminary permit is to preserve the right of the permit holder to have the first priority in applying for a license for the project that is being studied."

In the Cave Run case, on March 23, 2012, Cave Run Energy, LLC filed an application to the Commission for a preliminary permit to study the Cave Run Dam Hydroelectric Project.  The project would be located at the U.S. Army Corps of Engineers’ Cave Run Dam on the Licking River in Rowan and Bath Counties, Kentucky.  As described in that application, it would include a bifurcation structure to be constructed at the end of the dam’s outlet conduit, a powerhouse containing two turbine/generating units with a total capacity of 6.0 megawatts, a penstock and a 12.7-kilovolt transmission line.  The proposed project would use surplus water released from the Cave Run dam by the Corps.

The Commission granted Cave Run Energy a preliminary permit by order dated July 13, 2012.  That order provided that the preliminary permit was effective "for a period effective the first day of the month in which this permit is issued, and ending either 36 months from the effective date or on the date that a development application submitted by the permittee has been accepted for filing, whichever occurs first."   In the ensuing months, the applicant conducted studies and outreach, and filed a pre-application document and notice of intent to file a license application for the project.

On August 13, 2015, Cave Run Energy filed an application for a successive preliminary permit for the project.  While many aspects of the project described in the 2015 application were similar to those described in 2012, the generators' total capacity was revised to 4.95 megawatts.

After a public notice period, on February 11, 2016, the Commission issued a successive preliminary permit to Cave Run Energy for two more years.  The order granting the successive preliminary permit notes the Commission's policy to "grant successive permits if it concludes that the applicant has diligently pursued the requirements of its prior permits."  The order cites information provided by the applicant demonstrating progress with the analysis of the project’s feasibility, and towards the development of its proposed project, including the filing of a notice of intent and preapplication document.

As in some previous orders, the order granting Cave Run Energy a successive preliminary permit explains the Commission's reasoning in setting a two-year term for the successive permit.  It notes that the Hydropower Regulatory Efficiency Act of 2013 authorizes the Commission to extend preliminary permit terms for not more than two additional years if the Commission finds that the permittee has carried out activities under the permit and with reasonable diligence.  The order observes that this legislation suggests that "five years is a sufficient maximum period to prepare a development application."  Accordingly, it granted Cave Run Energy a successive preliminary permit for a 24-month term.

FERC hydropower and successive preliminary permits

U.S. federal regulators can give a preliminary permit to the developer of a proposed hydropower projects -- but won't give out a successive permit unless the developer demonstrates it acted diligently under its prior permit.

Developers of proposed hydropower projects in the U.S. can apply for a preliminary permit from the Federal Energy Regulatory Commission.  During its term -- up to three years, according to the Federal Power Act -- a preliminary permit for a hydropower project does not authorize construction, but gives the permittee first priority to apply for a license for the project.  This exclusivity allows the permittee to study the site, communicate with stakeholders, and develop the information necessary to support a license application.  It also gives the permittee something of a "reservation" for the site during its term.  In exchange, the permittee must submit periodic reports on the status of its outreach efforts and studies.

Sections 4(f) and 5 of the Federal Power Act authorize the Commission to issue preliminary permits to potential license applicants for a period of up to three years.  While the statute does not specify how many preliminary permits an applicant may receive for the same site, the Commission's policy is to grant a successive preliminary permit only if it concludes that the applicant has pursued the requirements of its prior preliminary permit in good faith and with due diligence.   The Commission has noted that each application for a successive preliminary permit is considered on a case-by-case basis, but has described "a minimum bar that a permittee must achieve to be diligent."

A recent FERC delegated staff order in Coralville Energy, LLC, Project No. 14431-001, illustrates this policy.  On November 2, 2015, Coralville Energy applied to the FERC for a preliminary permit for the Burlington Street Dam Hydroelectric Project, to be located at the existing Burlington Street Dam on the Iowa River, near Iowa City in Johnson County, Iowa. 

But this was not Coralville Energy's first application relating to the Burlington Street; it had received a preliminary permit three years earlier, on October 18, 2012.  According to the 2015 order, the record under that prior permit "shows that Coralville Energy did not pursue the requirements of its prior permit with due diligence for purposes of receiving a successive permit because it fails to demonstrate progress toward preparing a development application."

In particular, the 2015 order notes that semi-annual reporting under the 2012 preliminary permit noted a series of items: late reports filed subsequent to Commission staff’s letters warning Coralville Energy of probable cancellation for failure to file progress reports; reports that were too brief, vague, and "nearly identical"; no change to the study plan from that proposed in 2012, suggesting no progress made toward the preparation of a development application; and no information about conducting, reviewing, or coordinating environmental studies or the status of the permittee’s efforts to obtain permission to access and use land not owned by the permittee.

By contrast, the order describes Commission staff's view that the requisite diligence requires completion of certain steps towards preparing a development application, including "developing study plans, conducting studies in a timely fashion, consulting with  resource agencies, and developing the application in accordance with the Commission’s regulations."  Additionally, Commission staff have said that it "must be able to discern a pattern of progress toward the preparation of a development application from the content of a permittee’s filings."

On this basis, the 2015 order denied Coralville Energy’s application for a successive preliminary permit.  The order illustrates FERC hydropower staff's perspective on the level of diligence expected of the holder of a preliminary permit.  It also highlights the importance of substantive action in pursuit of a license or development application as well as timely and adequate semi-annual reporting by preliminary permittees.