In yearly updates on the US hydro power industry the licensing process always seems to become a natural focal point. Looking back over the events of 1999, the same thing is happening again — with good reason.

When talking about licensing non federal hydro power projects last year, Carol Sampson, director of hydro power licensing at the Federal Energy Regulatory Commission (FERC), believed that dramatic changes were already afoot. She said that administrative reform efforts and the alternative licensing process, which strives to shorten the whole procedure, are helping to mitigate the negative and maximise the positive aspects of hydro power.

The US hydro industry is the first to admit that changes are taking place to improve the licensing process. Recent events, however, cast doubt over Sampson’s belief that enough has been done to ensure hydro power’s survival.

Campaigning for legislative changes to the licensing process has been a major preoccupation of the hydro industry for several years. The national-hydropower-association (NHA) explains why:

•A typical hydro project can take ten years to weave its way through the licensing process: in extreme cases some have taken as long as 28 years.

•Federal agencies are allowed to set licence conditions without considering their effects on project economics, energy benefits or values protected by other statutes and regulations.

•There is no referee that can resolve conflicts between agencies or reconcile inconsistent demands.

•Licensees have no recourse to repeal, or even question, the basis of mandatory conditions set by agencies, except through litigation.

•Relicensing consistently results in higher costs, loss of operational flexibility and lost generation (on average 8%) due to constraints imposed on operations.

•The alternative licensing process, as FERC has acknowledged, will not work in all cases. Ongoing efforts between FERC and resource agencies to improve co-ordination may help but, the industry believes, cannot be a substitute for statutory reform.

FERC stumbles badly

The recent court case between the City of Centralia and FERC gives further ammunition to the hydro industry in its fight for legislative improvements. On 9 June 2000 the US Court of Appeals threw out an order requiring a US$300,000 study into alleged fisheries problems at a dam. Although evidence showed that a healthy salmon stock had been migrating successfully around the dam, the National Marine Fisheries Service prompted FERC to order a study of fish passage at the facility. In addition, no attention was paid to the fact that Centralia, the project licensee, had already established an agreement with the Nisqually Indian Tribe to improve habitat conditions in lieu of building a fish barrier downstream of the dam. The court said that FERC had ‘stumbled badly’. It decided that the study was too expensive and would be inconclusive in determining whether another US$1M should be spent to build a tailrace barrier to address a problem that had not been identified. ‘When weighed against the alternative remedies proposed by Centralia and the tribe, the order requiring a study borders on absurd,’ the court added.

After the court case NHA executive director, Linda Church Ciocci, said that it emphasised the importance of balancing competing interests in hydro power relicensing. ‘Our legislative reform effort would require resource agencies to take the broader view,’ she said.

Not all parties, however, support proposed legislation. Alex Matthiessen from the Department of the Interior believes it will be detrimental to the growing relationship between the hydro industry and resource agencies. ‘Legis-lation as it exists will destroy the trust and everything we have worked hard to develop over the past two years,’ he said. ‘We understand the need for legislation but you need to rethink how to do this.’

Matthiessen’s concerns were connected to the introduction of deadlines in the licensing process. ‘We do not have a problem with timelines. The faster we get the project licensed the quicker we get the environmental conditions in place. But I worry about this approach,’ he said. ‘It will not encourage us to work collaboratively. If resource agencies do not meet timelines you will put us up against the law,’ he said to NHA conference delegates. If resource agencies were ‘crippled’ by taking part in the licensing process, Matthiessen said that they ‘will not be happy players’. He believed that administrative reforms to the licensing process are the way forward.

‘A lot of licensees have enjoyed an unfettered use of rivers over the past 50 years or so,’ he added. ‘They’ve had a free ride. Resource agencies must provide a floor of environmental protection before balancing other uses. Hydro power is important but only 1% was lost due to relicensing the Class of ‘93, and not all this was due to the environment. This is not a big price to pay.’

David Tuft from NHA is adamant that the legislative reform the industry is fighting for will help collaboration. ‘We do not oppose collaboration just because we are looking for legislative reform,’ he says. ‘Sometimes collaboration does work beautifully, but then at other times it is not in the best interest. Legislation will enable us to achieve a better balance between power and non power values. It will enhance collaboration.’

Chris Hocker, president of NHA, says the industry admires the fact that resource agencies are willing to discuss administrative remedies. However, administrative efforts are already a well-trodden path for the US hydro industry. ‘NHA fought hard for an administrative approach to relicensing reform several years ago,’ he said. ‘We presented FERC with a very comprehensive and detailed proposal which was essentially dismissed. It wasn’t even given the due consideration it deserved.’

Hocker admits, however, that since then pieces of this proposal have materialised through the FERC process, particularly in the alternative approach to licensing which was introduced in 1997. ‘So it was by no means a wasted effort,’ he added. ‘But it was indicative of the inertia of any government agency to reform its own procedures unless strongly incentivised.’

It was at this point that NHA determined the best chance of obtaining true reform was through legislation: as the problem lies with existing legislation. ‘The Federal Power Act and the mandatory conditions aspect of it need sufficient modifications so that they are no longer an impediment to the licensing process,’ Hocker says. ‘It is very difficult trying to deal with an agency which has veto power over your licence.’

Michael Murphy from E/PRO Engineering and Environmental Consulting says that the industry’s pleas for administrative reform have previously fallen on deaf ears. ‘Historically we have been told that we can’t have administrative reform as the agencies have legislative mandates which prevent them from considering all sides of the story. So we come up with a piece of legislation that will fix just that. It will fix their statutory mandates so they are able to give full consideration and make balanced decisions.’

Murphy adds that the industry has not forgotten that administrative reform can still help in some areas. ‘We’re very encouraged that the agencies are at the discussion table. But it has taken us years of asking,’ he said.

Nils Johnson works with Senator Larry Craig, who has been pushing the licensing reform act through the US legal system. ‘Administrative and policy procedures are great,’ he says, ‘but when it comes down to it and you’re at that court door, you need a piece of legislation in your hand. I honestly believe that without legislation we will soon be facing some serious problems with hydro relicensing.’

At the present time the licensing reform act is still working its way through the US legislative system. It is uncertain whether voting will take place this year or next but Senate interest in the act is reported to be high.

‘All we are asking for is balance in the relicensing process,’ says Congressman John Shadegg, a well-known supporter of hydro power. ‘Without legislation I do not believe that relicensing will move forward. At the end of the day we will not get fair treatment with administrative reform alone.’

Although the hydro power industry is putting a lot of effort behind its fight for legislative reform, the question of administrative versus legislative remedies is less important. As Hocker said: ‘We do not have a preferred solution — other than reform.’

Administrative versus legislative reform

Legislative reform is considered to be necessary as over 50% of all non federal hydroelectric capacity will be relicensed over the next 15 years. The last case of mass relicensing in the US, known as the Class of ’93, proved to be time consuming and costly. The Hydroelectric Relicensing Process Improvement Act of 1999, introduced by Senator Larry Craig and Congressman Edolphus Towns, would amend the Federal Power Act by requiring that FERC only allows one year for inter-agency review. The bill calls for the responsible implementation of environmental laws. It gives resource agencies the responsibility to consider, and be accountable for, the full effects of their actions before imposing mandatory conditions on a hydro licence.
Administrative efforts to create more efficient relicensing have included the Interagency Task Force. This two-year project has been undertaken by federal agencies responsible for key parts of relicensing. They include FERC, Department of the Interior, Department of Commerce, Department of Agriculture and the Environmental Protection Agency. Their work should be completed by 31 December 2000. In mid June FERC and the Department of Commerce, Agriculture and Interior issued a joint statement committing themselves to specific improvements in the licensing process. In their commitments the Departments of Interior and Agriculture specifically addressed the way future study requests would be made, stating that there would be a clear nexus between project operations and the effect on natural resources. However, the Department of Commerce, which includes the National Marine Fisheries Service, did not mention studies in its commitments.

The Clean Energy Coalition

One of the many developments in the fight for licensing reform has been the formation of WaterPower: The Clean Energy Coalition. This diverse group of public and investor owned hydro power producers, consumers, businesses, associations, municipalities, and environmental and recreational organisations was formed in 1999. Its aim is to seek meaningful improvements to the federal hydro power licensing process (as outlined in the improvement act of 1999) in order to safeguard hydro power as a clean energy resource. But the Coalition says that in the end its success will be measured by the strength of improvements to relicensing, irrespective of how the remedies are achieved. To date the Coalition has over 600 members across the US.