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Licensing Challenges Limit Hydropower’s Potential

By Kimberly Dean

Thursday, July 16, 2015

With the 10th anniversary of the 2005 Energy Policy Act (EPACT) approaching, the Bipartisan Policy Center (BPC) is producing a series of briefs examining policies put in place in 2005 and whether more must be done as Congress examines passage of an energy bill in 2015. The second in this series examines hydropower licensing. Read the first post on reforming the Department of Energy’s loan guarantee program.

Hydropower is the most affordable, reliable and cost-effective source of renewable energy today. A proven source of energy for more than 100 years, hydropower accounts for 52 percent of all renewable energy generation in the United States and with the right policies in place, has significant room to grow.

More than 250 projects, representing roughly 16,000 megawatts of capacity, are estimated to require relicensing by 2025. Working in consultation with multiple state and federal agencies, it takes on average eight years to relicense an existing project. The review required to assess the environmental impacts of the projects, identify issues of importance, and develop plans to protect fish and wildlife habitat and enhance recreational uses, however, can extend the relicensing process to an onerous ten years or more. Relicensing, including the costs associated with implementing certain conditions for the license costs tens of millions of dollars—costs which are ultimately passed on to the energy consumer. Enabling hydroelectric power generators to move through the relicensing process more efficiently could allow for increased environmental protections and quicker community improvements, all at lower cost to the energy consumer.

In the Energy Policy Act of 2005, Congress sought to reform the hydropower relicensing procedures and address the regulatory backlog by providing for trial-type hearings and consideration of alternative conditions and prescriptions. At a recent hearing in the Senate Energy Committee, a witness from the electric power industry made it clear that the reforms enacted ten years ago have not worked as intended and actions must be taken to overcome the existing licensing challenges to maximize hydropower’s potential.

Among the options suggested for improving the current licensing procedures are empowering the Federal Energy Regulatory Commission (FERC) to be in a position to act as a “backstop” or “final arbiter” of license conditions if conditions imposed by various state or federal agencies are found to be in conflict, do not appear to have a clear nexus with the project being licensed, or do not have an impact on federal reserved land. Legislation introduced by Senator Lisa Murkowski (R-AK), S. 1236, the Hydropower Improvement Act, accomplishes this by amending section 4(e) of the Federal Power Act (FPA) to state that the mandatory conditions must pertain “to reservation land on which project works are located and have a clear and direct nexus to the project being licensed, as determined by the Commission.” The bill also amends the FPA to make it clear that prescribed fishways must be “necessary to mitigate effects of the project on fish populations” and “have a clear and direct nexus to the presence or operations of the project being licensed.”

The House has also examined hydropower licensing in its discussion draft on Hydropower Regulatory Modernization, which may be included in a House Energy and Commerce energy bill. The draft seeks to reinforce that FERC, which is the only entity deemed with responsibility to balance competing interests and is the entity that currently issues and enforces the licenses, has the “exclusive authority to enforce and administer all license requirements”, while also ensuring all necessary studies are completed and minimizing the imposition of duplicative studies during the license proceedings.

These commonsense and much-needed improvements to the hydropower licensing process can be accomplished in a manner that protects our natural resources, minimizes unnecessary and costly delays in licensing, and maintains the collaborative process in place today. Improving the efficiency of the federal regulatory process surrounding hydropower licensing is an issue ripe for bipartisan reform and BPC applauds the House and Senate for examining this issue this Congress.

KEYWORDS: 114TH CONGRESS, ENERGY POLICY ACT OF 2005, FEDERAL ENERGY REGULATORY COMMISSION, HOUSE ENERGY AND COMMERCE COMMITTEE, HYDROPOWER, LISA MURKOWSKI, SENATE ENERGY AND NATURAL RESOURCES COMMITTEE