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19 Nat. Resources & Env't. 45 (2004-2005)
Ferc and Dam Decommissioning

handle is hein.journals/nre19 and id is 213 raw text is: FERC and Dam Decommissioning By Matthew D. Manahan and Sarah A. Verville S even years ago, the Federal Energy Regulatory Commission (FERC) denied, for the first time, an owner's application to obtain a new license for an operating hydroelectric project. Instead, FERC re- quired that the dam-the Edwards Dam, a small hydroelec- tric project in Augusta, Maine-be removed. In early 2004, American Rivers, a nongovernmental organization whose mission is to preserve and restore the ecological in- tegrity of the nation's rivers, reported on its website that since the removal of the Edwards Dam in 1999 more than 114 dams have been removed and dozens more removals are anticipated. While the majority of those dams did not generate hydroelectricity, an increasing number of dams slated for removal are operating hydroelectric projects. And, in many cases, it is the project owner who is propos- ing to take the project out of service. Hydroelectric power is clean, renewable energy, yet the costs of obtaining new licenses from FERC have become prohibitive, particularly for small projects. Project owners are increasingly considering decommissioning their projects as an alternative to relicensing and cotitinued operation. The increasing trend toward dam decommissioning is par- ticularly ironic given efforts by the federal government to decrease U.S. dependence on imported oil and efforts to in- crease funding for renewable energy technologies. There are a number of reasons driving this decommis- sioning trend: project owners face increased maintenance costs for older dams; under a deregulated market, the cost of power and the revenues to be derived are not as predictable or stable; and the costs of relicensing and license conditions often are prohibitively expensive. These trends also reflect the pressures of a regulatory environment in which non- governmental organizations and some state and federal agencies view dam removal as the best or only option for ecosystem restoration, including fisheries restoration and enhancement of water quality. Decommissioning a hydropower project, however, can be as expensive and as controversial as relicensing. It may make more sense to relicense the project even if the proj- ect will operate at a loss. To conduct a realistic cost-bene- fit analysis of whether to relicense or decommission a project, project owners should understand that decommis- sioning will, in most cases, be more expensive than one would expect. This article presents an overview of how Mr Manahan is a partner and Ms. Verville is counsel at Pierce Atwood in Portland, Maine. They can be reached at mmanahan@pierceatwood.com and sverville@ pierceatwood.com. NR&E Winter 2005 those costs multiply, and discusses potential alternatives to control those costs. First, an examination of the hydroelectric project reli- censing provisions of the Federal Power Act (FPA) demon- strates how dam owners may be dammed if they don't surrender their licenses. Under the FPA, FERC has exclu- sive authority to license nonfederal hydropower projects lo- cated on navigable waterways. There are about 2,500 FERC-licensed hydropower projects in the United States. These projects comprise about half of the nation's developed hydroelectric capacity. The other half are federally owned projects that do not require FERC licensing. The FPA mandates that FERC licenses must be for a pe- riod of thirty to fifty years. Hydro relicensing is a complex, expensive, and lengthy regulatory process. At a minimum it takes five years to relicense a project. On average it takes ten years, and can take up to twenty years. Although FERC has introduced several initiatives over the past few years in- tended to reduce that average relicensing time, including adoption in 2003 of new hydroelectric licensing regula- tions, the statutory framework sets up a complicated reli- censing process. Not earlier than five and one-half years or later than five years prior to license expiration a licensee must notify FERC if it will seek a new license to continue operating a project. After giving notice, the licensee must consult with federal, state, and local resource agencies, Indian tribes, national and regional nongovernmental organizations, and the pub- lic. The licensee must file its relicense application at least two years prior to expiration of the existing license. It is not uncommon for the licensee to meet with con- sulted entities as often as two days per month over a five- year period to identify issues, plan studies, analyze study results, and identify alternatives for how the project should be operated. Often there will be as many as thirty entities at a consultation meeting, and distribution of the many study plans, study reports, and other licensing mate- rials can include more than one hundred organizations and individuals. As a result of this consultation, the licensee must con- duct scores of costly studies regarding the project's impacts on water quality and quantity, fisheries and aquatic habitat, terrestrial and botanical resources, archaeological and his- toric resources, recreation, land management, and aesthet- ics. Once the studies are complete, or while they are underway, the licensee must prepare a draft application for review by the consulted entities. The licensee then must file its final application containing the results of the studies;

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