Jennings Strouss Attorneys, Deborah A. Swanstrom and Andrea I. Sarmentero Garzón, author “New Laws Promote Development of Small Hydropower Projects,” published in the December issue of the American Bar Association’s Energy and Natural Resources Litigation Committee Newsletter
New Laws Promote Development of Small Hydropower Projects
Hydropower supplies about seven percent of the U.S. electricity demand and is currently the nation’s largest source of renewable carbon-free energy. The operational flexibility that pumped storage hydropower projects provide to the grid, by responding rapidly to supply and demand imbalances and maintaining power system stability, is particularly beneficial. Yet, reportedly only three percent of the dams in the United States currently generate hydropower. Congress therefore decided to change existing laws to promote more expeditious development of small hydropower projects.
On August 9, 2013, President Obama signed into law two new Acts passed by Congress: (i) the Hydropower Regulatory Efficiency Act, PL 113-23 (August 9, 2013) 127 Stat 493 (“Hydropower Efficiency Act”); and (ii) the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act, PL 113-24 (August 9, 2013) 127 Stat 498 (“Reclamation Act”). Both Acts streamline and expedite the regulatory approval process to facilitate development of small hydropower projects.
The Hydropower Efficiency Act
The Hydropower Efficiency Act: (1) expands the Federal Energy Regulatory Commission (“FERC” or “Commission”) exemptions for small hydropower projects and conduits; (2) establishes a general exemption from Federal Power Act (“FPA”) license requirements for certain hydropower projects (3) allows the term of preliminary permits to extend beyond three years; (4) directs FERC to investigate the feasibility of an expedited two-year licensing process for certain hydropower projects; and (5) directs the Secretary of the Department of Energy (“DOE”) to conduct certain studies.
- 1. Expansion of Existing Exemptions
- 2. General Exemption from License Requirements
The Hydropower Efficiency Act requires any person, state, or municipality proposing to construct a qualifying conduit hydropower facility to file with FERC a notice of intent. FERC recently posted a template of notice of intent on its website.
The Act also requires FERC to make an initial determination as to whether the facility meets the qualifying criteria within fifteen days after receiving such a notice of intent. If the initial determination finds that the hydropower project meets the criteria for exemption, FERC must publish public notice of the notice of intent. If an entity contests whether the hydropower project meets the criteria for an exemption, FERC must issue a final determination within forty-five days after the date of publication of the public notice. If no entity contests whether the hydropower project meets the criteria for an exemption, then the project will be deemed to meet the criteria for waiver within forty-five days after the date of publication of the public notice without further FERC action.
- 3. Extension of Preliminary Permits
- 4. Expedited Licensing Process
FERC must hold a series of workshops to solicit public comment on how to implement the expedited licensing process and develop the applicable qualification criteria. On October 22, 2013, FERC held its first workshop under Docket No. AD13-9-000. On January 2, 2014 FERC issued a Notice opening a three-month window to file petitions for expedited hydro license under a pilot program starting February 5, 2014 and ending on May 5, 2014. The projects to be filed must comply with the following minimum criteria:
- Must cause little to no change to existing surface and groundwater flows and uses;
- Must not adversely affect federally listed threatened and endangered species;
- If the project is proposed to be located at or use a federal dam, the request to use the two-year process must include a letter from the dam owner saying the plan is feasible;
- If the project would use any public park, recreation area, or wildlife refuge, the request to use the two-year process must include a letter from the managing entity giving its approval to use the site; and
- For a closed-loop pumped storage project, the project must not be continuously connected to a naturally flowing water feature.
- 5. DOE Studies
The Reclamation Act
The Reclamation Act: (1) provides that the Bureau of Reclamation (“Reclamation”) Power Resources Office is the lead office of small conduit hydropower processes; (2) defines “small conduit hydropower” as a facility capable of producing 5 MW or less of electric capacity; (3) excludes small conduit hydropower projects from requirements under the National Environmental Policy Act of 1969 (“NEPA”); and (4) establishes a right of first refusal for the lease of power privilege to irrigation districts or water users associations.
- 1. Lead Office
- 2. NEPA Categorical Exclusion
- 3. Right of First Refusal
If the irrigation district or water users association elects not to accept a lease of power privilege offer, Reclamation must offer the lease of power privilege to other parties.
The use of a categorical NEPA exclusion under the Reclamation Act and the expedited licensing process combined with the new exemption from license requirements under the Hydropower Efficiency Act is expected to reduce costs incurred by small hydropower project developers, including costs associated with long processes and protracted litigation.
These new streamlined processes and reduced bureaucratic and litigation costs should help induce construction of small hydropower projects. However, it remains possible that some environmental groups or third parties attempting to halt construction of specific hydropower projects challenge the implementation of these streamlined processes.
This article was largely published in the ABA Section of Environment, Energy & Natural Resources – Litigation Committee Newsletter, December 2013, Vol. 2, No. 1.