Hydropower Relicensing:

Stakeholders' Views on the Energy Policy Act Varied, but More Consistent Information Needed

GAO-10-770: Published: Aug 4, 2010. Publicly Released: Sep 9, 2010.

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Under the Federal Power Act, the Federal Energy Regulatory Commission (FERC) issues licenses for up to 50 years to construct and operate nonfederal hydropower projects. These projects must be relicensed when their licenses expire to continue operating. Relevant federal resource agencies issue license conditions to protect federal lands and prescriptions to assist fish passage on these projects. Under section 241 of the Energy Policy Act of 2005, parties to the licensing process may (1) request a "trial-type hearing" on any disputed issue of material fact related to a condition or prescription and (2) propose alternative conditions or prescriptions. In this context, GAO was asked to (1) determine the extent to which stakeholders have used section 241 provisions in relicensing and their outcomes and (2) describe stakeholders' views on section 241's impact on relicensing and conditions and prescriptions. GAO analyzed relicensing documents filed with FERC and conducted a total of 61 interviews with representatives from relevant federal resource agencies, FERC, licensees, tribal groups, industry groups, and environmental groups.

Since the passage of the Energy Policy Act in 2005, nonfederal stakeholders--licensees, states, environmental groups, and an Indian tribe--used section 241 provisions for 25 of the 103 eligible hydropower projects being relicensed, most of which occurred within the first year. Of these 25 projects, stakeholders proposed a total of 211 alternative conditions and prescriptions. In response, the federal resource agencies (U.S. Department of Agriculture's Forest Service, Department of Commerce's National Marine Fisheries Service, and several bureaus in the Department of the Interior) accepted no alternatives as originally proposed but instead modified a total of 140 and removed a total of 9 of the agencies' preliminary conditions and prescriptions and rejected 42 of the 211 alternatives; the remaining alternatives are pending as of May 17, 2010. Under section 241, resource agencies must submit a statement to FERC explaining the basis for accepting or rejecting a proposed alternative. While agencies generally provided explanations for rejecting alternative conditions and prescriptions, with few exceptions, they did not explain the reasons for not accepting alternatives when they modified conditions and prescriptions. As a result, it is difficult to determine the extent, type, or basis of changes that were made and difficult to determine if and how the proposed alternatives affected the final conditions and prescriptions issued by the agencies. As of May 17, 2010, nonfederal stakeholders requested trial-type hearings for 18 of the 25 projects in which section 241 provisions were used, and three trial-type hearings were completed. Of the remaining 15 projects, requests for hearings were withdrawn for 14 of them when licensees and agencies negotiated a settlement agreement before the administrative law judge made a ruling, and one is pending because the licensee is in negotiations to decommission the project. In the three hearings held to date, the administrative law judge ruled in favor of the agencies on most issues. According to the federal and nonfederal relicensing stakeholders GAO spoke with, the section 241 provisions have had a variety of effects on the relicensing process and on the license conditions and prescriptions. While most licensees and a few agency officials said that section 241 encourages settlement agreements between the licensee and resource agency, some agency officials said that section 241 made agreements more difficult because efforts to negotiate have moved to preparing for potential hearings. Regarding conditions and prescriptions, some stakeholders commented that under section 241, agencies put more effort into reviewing and providing support for their conditions and prescriptions, but environmental groups and some agency officials said that in their opinion, agencies issued fewer or less environmentally protective conditions and prescriptions. Many agency officials also raised concerns about increases in workload and costs as a result of section 241. For example, their estimated costs for the three hearings to date totaled approximately $3.1 million. Furthermore, many of the stakeholders offered suggestions for improving the use of section 241, including adjusting the time frame for a trial-type hearing. GAO recommends that cognizant officials who do not adopt a proposed alternative include reasons why in their statement to FERC. The resource agencies generally agreed, but commented that no explanation is required when an alternative is withdrawn as a result of negotiations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Deparment of Commerce's NMFS provided GAO with a copy of a memorandum from its Director of the Office of Habitat Conservation to its Assistant Regional Administrators for Habitat, instructing them that in the situation in which it has not adopted a proposed altertnative prescription to include in the written statement filed with FERC its reason for not doing so and whether a proposed alternative with withdrawn as a result of negotiations and an explanation of what occurred subsequent to the withdrawal.

    Recommendation: To encourage transparency in the process for relicensing hydropower projects, the Secretaries of Agriculture, Commerce, and the Interior should direct cognizant officials, where the agency has not adopted a proposed alternative condition or prescription, to include in the written statement filed with FERC (1) its reasons for not doing so, in accordance with the interim rules and (2) whether a proposed alternative was withdrawn as a result of negotiations and an explanation of what occurred subsequent to the withdrawal.

    Agency Affected: Department of Commerce

  2. Status: Closed - Implemented

    Comments: The Deputy Chief of the National Forest System issued a letter to the Regional Foresters stating that the Forest Service, in response to GAO's report, will identify proposed alternative conditions that have been voluntarily withdrawn from consideration with its filing of modified final conditions. In addition, Forest Service officials stated in a written response to GAO that it agrees that Forest Service is to provide analyses of and reasons for accepting or rejecting proposed alternatives pending at the time its final conditions are filed with FERC.

    Recommendation: To encourage transparency in the process for relicensing hydropower projects, the Secretaries of Agriculture, Commerce, and the Interior should direct cognizant officials, where the agency has not adopted a proposed alternative condition or prescription, to include in the written statement filed with FERC (1) its reasons for not doing so, in accordance with the interim rules and (2) whether a proposed alternative was withdrawn as a result of negotiations and an explanation of what occurred subsequent to the withdrawal.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: Department of Interior, USDA, and Department of Commerce formed an interagency group that submitted final rules to the Federal Energy Regulatory Commission for review and received approval on February 17, 2012. According to the Department of the Interior (the lead agency), the final rules were submitted to OMB on March 7, 2012 for formal review, and the target date to publish them in the federal register is the end of calendar year 2014.

    Recommendation: To encourage transparency in the process for relicensing hydropower projects, the Secretaries of Agriculture, Commerce, and the Interior should issue final rules governing the use of the section 241 provisions after providing an additional period for notice and an opportunity for public comment and after considering their own lessons learned from their experience with the interim rules.

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: Department of Interior, USDA, and Department of Commerce formed an interagency group that submitted final rules to the Federal Energy Regulatory Commission for review and received approval on February 17, 2012. According to the Department of the Interior (the lead agency), the final rules were submitted to OMB on March 7, 2012 for formal review, and the target date to publish them in the federal register is the end of calendar year 2014.

    Recommendation: To encourage transparency in the process for relicensing hydropower projects, the Secretaries of Agriculture, Commerce, and the Interior should issue final rules governing the use of the section 241 provisions after providing an additional period for notice and an opportunity for public comment and after considering their own lessons learned from their experience with the interim rules.

    Agency Affected: Department of Agriculture

  5. Status: Closed - Implemented

    Comments: The Department of the Interior's Director of the Office of Environmental Policy and Compliance submitted a memorandum to the heads of bureaus and offices, directing any bureau that has not adopted a proposed alternative condition or prescription submitted by any party to a FERC licensing proceeding to ensure that a written statement is filed with FERC that outlines the rationale for not adopting the proposal. The memo also states that if a proposed alternative is modified or withdarawn as a result of negotiations, then the bureau must file a written explanation of that action with FERC. These statements must be included when the Department submits modified conditions or presctiptions for the project.

    Recommendation: To encourage transparency in the process for relicensing hydropower projects, the Secretaries of Agriculture, Commerce, and the Interior should direct cognizant officials, where the agency has not adopted a proposed alternative condition or prescription, to include in the written statement filed with FERC (1) its reasons for not doing so, in accordance with the interim rules and (2) whether a proposed alternative was withdrawn as a result of negotiations and an explanation of what occurred subsequent to the withdrawal.

    Agency Affected: Department of the Interior

  6. Status: Closed - Implemented

    Comments: Department of Interior, USDA, and Department of Commerce formed an interagency group that submitted final rules to the Federal Energy Regulatory Commission for review and received approval on February 17, 2012. According to the Department of the Interior (the lead agency), the final rules were submitted to OMB on March 7, 2012 for formal review, and the target date to publish them in the federal register is the end of calendar year 2014.

    Recommendation: To encourage transparency in the process for relicensing hydropower projects, the Secretaries of Agriculture, Commerce, and the Interior should issue final rules governing the use of the section 241 provisions after providing an additional period for notice and an opportunity for public comment and after considering their own lessons learned from their experience with the interim rules.

    Agency Affected: Department of Commerce

 

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