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Hydro Relicensing Redux: Will Dams Be Saved?

Fortnightly Magazine - April 1 2000

Congressmen, industry experts, and environmentalists square off over efforts to streamline relicensing.

April 1, 2000

The current relicensing scheme for regulated hydroelectric projects is too costly, invites too many bitter court battles, and involves too many government agencies, critics say.

That criticism - not new in the hydro industry - in the past has tended to fall on deaf ears. Many from time to time have challenged the hydro relicensing process, which stems largely from federal legislation amended by Congress, but their efforts have met without real success. Lately however, some in Congress have begun to show concern. They worry that the current process may crack under the monstrous volume of hydro capacity due for relicensing in coming years. Congress may be ready this year to amend the legislative scheme.

According to the Edison Electric Institute, more than 40 percent of the hydro projects licensed to parties other than federal agencies - spread among 34 states - in the next decade will come up for relicensing before the U.S. Federal Energy Regulatory Commission. Extend the timeline through 2015, and some 39 states are involved. In each case, a myriad of federal and state agencies may seek to impose their own conditions on any licensing approval.

In an effort to streamline the process, Sen. Larry Craig (R-Idaho), this year will reintroduce the Hydroelectric Licensing Process Improvement Act of 1999 [S.740]. In early February, Sen. Craig told the he believes that support for his bill is stronger than ever, but admitted that it will meet with opposition from some "extremist" environmental groups.

Sen. Craig's bill would allow other federal agencies to consider project impacts on air quality, but would require the agencies to file conditions within one year of the application, and to submit such conditions for scientific peer review based on empirical or field-tested data. Moreover, Craig's bill would allow the FERC to review each condition to determine whether it would render the project uneconomic. Also, the FERC would study the feasibility of setting up a separate licensing procedure for small hydro projects of 5 megawatts or less.

Craig's legislation, which imposes tighter deadlines on resource agencies, is intended to remedy the effect of "mandatory conditioning" authority, held by several separate federal and state agencies, which tends to draw out the timeline and costs of hydro project relicensing, according to the senator.

Another problem the legislation hopes to resolve is that relicensing agencies can directly constrain the use of water flows for generating electricity and impose expensive operating conditions on hydropower projects, without considering project economics, energy benefits, and other benefits.

A recent report by the Department of Energy finds that, on average, it takes more than five years and costs between $1 million and $5 million to license or relicense all but the smallest hydropower projects, even if the owner proposes no changes in the project.

Presently, the FERC, which administers the relicensing process, cannot modify or reject mandatory conditions imposed by resource agencies even if they make a project uneconomic. And that's assuming that regulators know when a project is economic.