Hydropower Relicensing Set to Triple, Prompting Push for Reform

More than thirty percent of all the nonfederal hydropower licenses in the United States are set to expire by 2030.[i]  The 281 licenses subject to renewal[ii] within that period represent a significant uptick, as the Federal Energy Regulatory Commission (“FERC”) issued only around 80 during the past ten years.[iii]  Hydropower provides more than seven percent of total U.S. electricity generation, making it the fifth-leading source behind natural gas, nuclear, coal, and wind energy.[iv]  It represents more than sixty percent of the electricity generated in the Pacific Northwest, and 37 percent of U.S. renewable electricity generation.[v]

This near-term surge in hydro relicensing raises the stakes for meaningfully addressing the cost and delays associated with the current licensing process.  The urgency is even greater given President Biden’s goal for the United States to move to totally carbon-free electricity production by 2035.[vi]

Concerns About the Current Relicensing Process

The U.S. Energy Department recently reported that hydropower relicensing takes nearly eight years on average and, for larger facilities, can take longer than a decade.[vii]  This time frame for completing relicensing is problematic not only due to its length and the attendant costs, but also because licensees are only required to give notice of their intent to seek relicensing five years prior to expiration of an existing license.[viii]  Thus, the current process can put facilities’ timely relicensing at risk even if they comply with applicable procedures.

The Energy Department report found that relicensing costs regularly exceed $10 million for projects generating more than 10 MW, exclusive of the expense of implementing the structural upgrades typically necessary to secure a renewal.  It further found that the burden of relicensing costs falls disproportionately on smaller projects, and that much of the delay in the process results from disagreements over whether the information an applicant provides is sufficient under the rules.  In large measure due to the substantial time and costs associated with relicensing, 41 hydropower facilities submitted license surrender applications over the last decade, and more than one-third of hydropower asset owners indicated they are considering decommissioning.

Primary reasons for delays in relicensing process are the number of applicable statutes,[ix] the involvement of up to eleven federal agencies as well as state agencies and affected Tribes, and the extent of required public participation processes.

Primary Statutes Associated with Non-Federal Hydropower Relicensing

Federal Power Act

The principal law governing non-federal hydropower projects is the Federal Power Act (“FPA”),[x] which confers exclusive jurisdiction on the Federal Energy Regulatory Commission (“FERC”) over the licensing of such projects located on traditional and improved navigable waters to the full extent of the Congress’s Commerce Clause authority.[xi]

Section 4(e) of the FPA requires FERC to consider the power and developmental purposes of a project for which relicensing is sought while at the same time giving equal consideration to energy conservation; fish and wildlife habitat values; recreational opportunities; and preservation of other aspects of environmental quality.[xii]  For projects on federal lands, this subsection also requires FERC to find that relicensing will not interfere or be inconsistent with the purposes for which the land at issue was reserved to the United States[xiii] and to include mandatory conditions crafted by the applicable federal land management agency.  Any such conditions, however, must be “reasonably related” to protection of the federal lands on which the project is located.[xiv]

Section 10(a) similarly requires FERC to give equal consideration in relicensing decisions to both power and non-power values, and to determine that the project under consideration is best adapted to a “comprehensive plan” for improving or developing waterways for the benefit of multiple public uses.[xv]  In making this determination, FERC must take into account the recommendations of federal and state resource agencies as well as those of affected Tribes.[xvi] 

Sections 10(j) and 18 both direct FERC to include prescriptions or conditions in renewed licenses for the benefit of fish and wildlife, although they operate somewhat differently.  Section 18 functions similarly to Section 4(e) insofar as it requires FERC to include prescriptions in a renewed license that the Departments of the Interior or Commerce deem necessary.[xvii]  As such, this section confers on federal wildlife agencies a berth of discretion to impose conditions under the FPA akin to, and potentially broader than, that which they have available in issuing incidental take permits pursuant to the Endangered Species Act (“ESA”).[xviii]

Section 10(j) similarly requires FERC to include conditions in a renewed license to protect, enhance, and mitigate adverse effects on fish and wildlife based on recommendations of federal and state fish and wildlife agencies, but is also distinct insofar as it affords the Commission some leeway to reject such recommendations.[xix]

The relicensing applicant may effectively appeal both the mandatory conditions and prescriptions under Sections 4(e) and 18 to the respective Secretary with jurisdiction over the challenged item by proposing alternate conditions or prescriptions.[xx]  The applicant also may obtain judicial review of such mandatory conditions and prescriptions by petitioning for review of FERC’s final relicensing order.[xxi]

National Environmental Policy Act

FERC regulations require relicensing applicants to submit environmental information with their applications in large measure for purposes of preparing appropriate documentation to analyze environmental effects consistent with the National Environmental Policy Act (“NEPA”).[xxii]  In general, such NEPA documents are to include a “hard look” analysis of the environmental effects of the proposed relicensing action and reasonable alternatives to it, a recommendation as to whether the project should be relicensed, and appropriate terms and conditions on a new license if relicensing is recommended.[xxiii]  Another critical part of the NEPA process is public involvement, and FERC must follow both the general NEPA implementing regulations applicable to all agencies and its own agency-specific rules in this regard by, among other things, providing draft NEPA documents for public review and comment.[xxiv]

Many NEPA issues in the context of hydropower relicensing revolve around the adequacy of the alternatives to the relicensing proposal that FERC considers and, in particular, how it frames the “No Action” alternative given the policy preference some petitioners for review of relicensing decisions have for wanting dam removal or decommissioning to be considered in detail in any such NEPA analysis.[xxv]  Relicensing requests can also give rise to NEPA challenges to the adequacy of analysis of impacts to affected fish that very often overlap with the requisite consideration of fish protection, enhancement, and mitigation issues under the FPA.[xxvi]

Clean Water Act and State Water Quality Certification under Section 401

Section 401 of the Clean Water Act (“CWA”) requires a relicensing applicant for a hydropower project to obtain certification from the appropriate state agency or Tribe verifying that the project complies with applicable water-quality requirements before FERC may approve the application, at least ever since the Supreme Court confirmed in 2006 that virtually all such projects may result in a discharge covered by the CWA.[xxvii]  33 U.S.C. § 1341(a)(1).  If the certifying entity concludes that conditions on operation of the project are necessary to ensure compliance with water quality standards, those conditions must be set forth in the Section 401 certification and FERC must in turn incorporate the conditions into the renewed license. 33 U.S.C. § 1341(d).

Two issues are at center stage currently as it relates to Section 401 water-quality certification.  The first concerns the time limit prescribed in the CWA for a state or Tribe to act on a request for certification, which provides that the relevant certification authority is deemed waived if the request is not acted on “within a reasonable period of time (which shall not exceed one year).”[xxviii]  Given the lengthy nature of the relicensing process in the current milieu, the entity authorized to provide the certification is often not in position to make a decision within the statutory one-year period, which is increasingly leading to procedural wrangling and litigation over such issues.[xxix]

The other key current issue involving Section 401 water-quality certification relates to the scope of authority the certifying entity can exercise during review of requests for certification.  More specifically, the crux of the issue is whether the certifying authority must limit its review and any conditions it imposes to water quality or whether it can branch out beyond that realm.  It has effectively turned into a game of ping-pong that volleys back and forth depending on which political party is in the White House.  In July 2020, acting pursuant to a Trump Administration Executive Order,[xxx] EPA published updated Section 401 regulations that replaced a version that had been in effect for nearly 50 years.[xxxi]  Among other things, these regulations considerably narrowed the authority of a State or Tribe in acting on a Section 401 certification request.[xxxii]

The Biden Administration issued its own Executive Order upon assuming office, directing agencies to review certain Trump Administration rules, including the Section 401 regulations issued in 2020.  In the meantime, a group of consolidated cases challenging the 2020 version of the regulations continued to wend its way through litigation.  EPA moved in this litigation for remand without vacatur of the 2020 rules, but the district court instead granted plaintiffs’ request that the rules be vacated nationwide upon their remand to the agency.[xxxiii]  Intervening states and industry groups, contending the court could not vacate the rules without rendering a determination on the merits, sought a stay of the district court’s vacatur ruling pending their appeal of that ruling to the Ninth Circuit.  The Supreme Court ultimately granted such a stay, [xxxiv] which had the effect of reinstating the 2020 version of the rules pending further administrative action by EPA.

In that vein, EPA recently published a revised proposed rule in large measure to modify its regulatory guidance pertaining to the two issues referenced above, namely the appropriate scope of certification and what constitutes a “reasonable period” of time for providing it.[xxxv]  The public comment period on the revised proposed rule concluded in August  2022, and the agency states it expects to issue a final rule in Spring 2023[xxxvi]

Recent Legislative Developments & Proposals

Considerable activity is occurring in the legislative arena, reflecting the widely shared recognition of the importance of hydropower to the country’s energy future.  Last year, bills entitled the “Twenty-First Century Dams Act” containing a package of legislative reforms were introduced in both the U.S. Senate and the House of Representatives.[xxxvii]  Committees of jurisdiction in both the Senate and the House have followed up with hearings this year.  The Senate Energy and Natural Resources Committee held a hearing in January 2022 to examine how to maintain even the current level of hydropower capacity in the face of the principal findings of the 2021 DOE Report.[xxxviii]  Much of the testimony and committee members’ statements highlighted the report’s findings and discussed the urgent need for reforming the relicensing process to address them.

In May 2022, the House Energy and Commerce Committee convened a hearing on modernizing the country’s hydropower system[xxxix] focusing on a series of proposed hydropower reforms that a coalition of conservation organizations, hydropower industry groups, and Tribes jointly developed.[xl]  The reforms are designed to accomplish the following major purposes:  (1) improve cooperation among FERC, Tribes, and resource agencies and thereby streamline the licensing and relicensing processes; (2) expand authority for Tribes to protect their lands, waters, other resources, and rights protected under Treaty; and (3) compel FERC and the other agencies involved in relicensing to be more transparent and provide more robust documentation in support of conditions and prescriptions placed on hydropower licenses.[xli]

This past summer a group of some three dozen hydropower companies and organizations wrote to the committees of jurisdiction to urge action on such legislation before the end of the current Congress.[xlii]  We will continue to follow developments in this arena for our readers.