The draft comprehensive energy bill released by Senator Murkowski, Chair of the Senate Committee on Energy and Natural Resources, and reflecting her collaboration with Senator Cantwell, the Ranking Member on the Committee, contains a number of provisions relating to hydro. If enacted in anything close to their present form, these provisions would represent the most ambitious reform of the hydroelectric licensing process since the Electric Consumers Protection Act of 1986 (“ECPA”).  However,  ECPA essentially represented a bargain between owners of existing hydro who were concerned about the possibility of municipal take overs upon relicensing, and the environmental community who wanted to essentially retrofit the National Environmental Policy Act concepts into projects that were developed under the Federal Power Act (“FPA”) and constructed in the early and mid-twentieth century.  The most recent draft hydro reform amendments, by contrast, are largely procedural and appear to be designed to make the hydro process ushered in by ECPA actually work more effectively, without the delays, environmental squabbling, litigation and expense engendered by the existing regime.  

Several themes run through the draft hydro provisions:

• The present statutory licensing regime with Section 4(e), Section 18 and CWA Section 401 conditioning is chaotic and unruly, lengthening the time and expense of the licensing process, with minimal or no accountability for conditioning resource agencies through judicial review or the political process;

• The statutory time limits for preliminary permits and project construction are unrealistically short;

• The trial-type hearings on issues of material fact created when Section 33 of the FPA was enacted in 2005 essentially do not work as envisioned because of process deficiencies, infighting and lack of cooperation among FERC and the resource agencies with conditioning authority;

• The lack of transparency of the process to non-participants leads to inefficiencies and unnecessary duplication of expensive scientific studies; and

• Development of hydro as a renewable resource has been substantially hindered by all of the above.

The statutory amendments, including several new provisions, are designed to fix these perceived flaws in how hydro projects are licensed or exempted, or relicensed.  Essentially, the fixes proposed would do the following:

• Hydro would be specifically designated as a renewable resource and FERC would be designated the lead agency for hydro licensing.  In order to encourage investment and financing, the time limits for Preliminary Permits and commencement of construction would be significantly expanded. FERC also would be given specific responsibility to coordinate the efforts of the conditioning resource agencies, both federal and state.  This would include coordinating scheduling of decisions of the resource agencies, with a goal of no licensing process extending beyond three years from the filing of a completed license application.  Disputes as to schedules would be referred to the Chair of the Council on Environmental Quality (“CEQ”), although that individual’s legal authority to actually enforce a particular outcome appears open to question.

• The scope of conditioning authority exercisable under Sections 4 (e) and 18 would be more precisely defined and would require determinations by the resource agencies that would be subject to review, including ultimately judicial review.

• The FPA Section 33 trial-type hearing process regarding disputes as to material issues of fact would be improved with more realistic time limits, as well as use of FERC ALJs to manage the process and to render decisions that would not be subject to further administrative review in the licensing process.  In the event of dispute as to whether a resource agency’s decision is within the scope of its conditioning authority, such dispute is to be referred to the Chair of CEQ.  FERC also would be directed to keep and manage a public database of scientific and environmental studies used in licensing, with the intent that such studies might be re-used in other licensing proceedings if valid and appropriate.

• FERC would be given additional responsibility to create a comprehensive licensing record that would include the records created by resource agencies for their exercise of conditioning authority reflected in the final license order.  This comprehensive record appears to be intended to permit a Court of Appeals review of the entire license in the event of an appeal by any party to the process.

• A new system of public records of licensing outcomes would be created and managed by FERC.  These public records would include specific determinations and milestones of the licensing process, including actions by federal and state resource agencies as inputs to that process.   There would also be concomitant reporting requirements for the resource agencies.  The apparent intent would be to create transparency as to the many working parts of the process to create accountability and so that later procedural improvements might be designed as necessary.

Whether all or any of these proposed statutory changes will ultimately become law is uncertain, particularly since they are a relatively small part of a much larger comprehensive energy bill.  However, it is significant that the proposals do reflect the input of the Ranking Member on the Committee as well as the Chair, which suggests some amount of negotiation and vetting in the drafting process.  It may be further significant that the amendments to the legislation proposed to date would not significantly modify the provisions described above. However, whether the political process will produce a comprehensive energy bill that President Obama will sign remains to be seen.