U.S. House of Representatives: Committee on Energy and Commerce, Republicans Prepared Witness Testimony: Masonis, Rob

Subcommittee on Energy and Air Quality
March 12, 2003
2:30 PM
2123 Rayburn House Office Building

Mr. Rob Masonis
Director, Northwest Regional Office
American Rivers
1025 Vermont Avenue, NW
Suite 720
Washington, DC, 20005

Good afternoon, Mr. Chairman, Congressman Boucher and members of the Subcommittee.I appreciate the opportunity to appear before you here today.My name is Rob Masonis, and I am the director of the Northwest Regional Office of American Rivers, a national conservation organization dedicated to protecting and restoring the nation's rivers.American Rivers has more than 33,000 members across the country, and works in partnership with more than 4,000 river and conservation organizations.American Rivers also chairs the Hydropower Reform Coalition, a coalition of 117 national and local organizations dedicated to improving the licensing of hydropower projects by the Federal Energy Regulatory Commission.

Hydropower represents an important part of the nation's energy mix, producing about 10% of total generation nationally, depending on the water year.It is more important regionally in the Pacific Northwest where I live, supplying about 70% of our electricity capacity.Nationally, about 9% of our electricity comes from hydropower and about half is generated by non-federal producers and regulated by the Commission.The licensees pay nothing for an essentially free and renewable fuel - river water - and well below market value for the use of federal lands.(Hydrowire, May 20, 2002)

Although hydropower can generate flexible, emission-free electricity, it is not an environmentally benign power source.Hydropower projects include dams that can block fish, sediment and water flow; drown rivers and riverside wildlife habitat; and radically change water temperatures.They include bypass canals that may completely dewater rivers for miles at a stretch.They may be operated to meet daily peak demand for electricity, increasing river flow from nearly nothing to thousands of cubic feet per second, then reducing it again to a trickle at night.And they depend on turbines that destroy aquatic life entrained in their spinning blades.

For example, the Hells Canyon complex on the Snake River along the Idaho-Oregon border blocked access of Snake River salmon and steelhead to their spawning grounds, including blocking approximately 85% of the spawning habitat for fall Chinook salmon.Idaho Power's original license required them to construct fish passage as a condition of the dams' construction, but sadly this construction was never carried out.The loss of these fish and their decaying carcasses at the end of their spawning cycle has had a ripple effect throughout the ecosystem, robbing headwater streams and forests of a valuable source of nutrients.The project also alters flows and water quality for hundreds of miles downstream and occupies and affects significant tracts of public lands managed by Forest Service and Bureau of Land Management.This hydropower complex further drowned critical wildlife habitat and greatly diminished animal populations.

The President's 2001 Energy Plan plan acknowledged and catalogued the impacts of hydropower dams on natural resources."Hydropower, although a clean energy source, does present environmental challenges.Unless properly designed and operated, hydropower dams can injure or kill fish, such as salmon, by blocking their passage to upstream spawning pools. Innovations in fish ladders, screens, and hatcheries are helping to mitigate these adverse impacts.Ongoing dam relicensing efforts are resulting in community involvement and the industry's application of the latest technologies to ensure the maintenance of downstream flows and the upstream passage of fish. These efforts also have been successful in identifying and removing older, nonfunctioning dams and other impediments to fish movements."(President's Plan, 3-8)

The harmful effects of hydropower projects can be reduced or mitigated, but this requires careful review and oversight by federal and state agencies that are responsible for protecting the affected natural resources.The Federal Power Act's licensing process is designed to ensure that the impacts of hydro projects are fully evaluated, that lands, fish and wildlife are protected, and that each project is suited to the river where it is installed.The license for each project expires every 30 to 50 years - once a generation - so that we can evaluate again the impacts of the project and the terms under which it should operate for the next generation.In the Hells Canyon example, the project license is currently under review and is scheduled to expire in 2005.

Unfortunately, the scores of hydroelectric licenses scheduled to expire over the next decade were licensed so long ago that modern environmental standards had not yet come into play and our understanding of complex ecological systems was in its infancy.For decades, these projects have been operating with minimal environmental controls.Current relicensing represents our first opportunity to review these dams, canals and turbines, and to place conditions on them for the next 30 to 50 years that will improve our rivers and protect fish and wildlife for our children and grandchildren.

Relicensing hydropower projects has already produced some spectacular successes.My own electric utility, Seattle City Light, finished relicensing their Skagit River project in 1996.The resulting changes to the flows from these three dams have produced significant and tangible improvements to the Skagit River salmon runs - in fact, Seattle City Light was so proud of the results that just last month it published an Op Ed piece in the Seattle Times touting its success."(R)esearch indicates these salmon also owe their comeback to changes in the way City Light operates its hydroelectric dams." (A copy of that Op Ed is appended to my testimony.) Importantly, these changes, among the most expensive required of any hydropower licensee in the past several years, have proven to be affordable.As the article noted, "These measures cost money. The Skagit system provides about 25 percent of Seattle's electricity. Managing flows for fish sometimes means water must be released in ways that may result in less electricity generation. That means the utility must find more power elsewhere that is likely to be more expensive. However, when the cost of salmon restoration finally gets to the City Light customer's bill, it seems reasonable: about 20 cents per customer each month." This and other examples of improved river health are the real story of hydropower relicensing.

Over the past ten years, settlements have been commonplace and resulted in both ecological restoration and profitable power generation.New England Power Company signed two major settlement agreements with resource agencies, conservation groups, and other stakeholders on the Deerfield and Connecticut Rivers, leading to tremendous growth in rural economies.The Menominee River in Wisconsin and Michigan is another river where collaborative relicensing yielded significant benefits and was accomplished prior to license expiration.In New York State, Niagara Mohawk Power Company, resource agencies, and other stakeholders have worked river basin by river basin to settle Niagara Mohawk's numerous dam relicensings.In the past ten years, several significant settlement agreements have been signed, affecting a total of 35 dams on six major river basins across the state.And in Maine, settlements have not only resulted in fish passage and restored flows, but parties agreed to support expansion of the hydropower facilities to enable increases in power generation.Each of these was accomplished under existing law.

II.Relicensing - An Important Balancing Act

The relicensing process is necessarily complex.Because rivers are public resources with many competing interests and significant environmental issues, the licensing process for hydropower dams involves multiple stakeholders.Unlike most electricity generating technologies, hydropower does not have "end of pipe" standards to ensure that the dam's operations do not unduly damage the environment.This is because every dam and every river is different, and generic standards cannot be applied to each project.Individual conditions suited to each project must be established.

The Federal Power Act (FPA), although commonly considered an energy statute, also occupies an important role in environmental protection.The statute was amended in 1986 to require the Commission to give "equal consideration" to power (electricity generation) and non-power (fish and wildlife protection, recreation, etc.) benefits of the river.The FPA contemplates that the economics of the hydropower facility will be taken into account by the Commission in this process.

However, this balancing requirement is not the sole environmental constraint placed on of hydro projects. Congress determined - and rightly so - that some basic environmental protections must be afforded at every dam, and should not be balanced away to promote cheap hydropower.Under these statutory requirements, expert federal and state resource managers establish conditions, based on substantial evidence to protect public trust resources.These basic protections form a floor above which FERC then establishes license conditions in the public interest.

Sometimes referred to as mandatory conditions, the statutory requirements assure that:

(2) If a nonfederal dam is located on federally owned land, the purposes of the federal land are protected (FPA Section 4(e)); and

(3) The dam complies with state-developed water quality standards (CWA Section 401).

Both fish passage and federal lands protection have been part of the relicensing process since enactment of the Federal Power Act in 1920.

Section 18's mandate, setting fishways apart as a special consideration, is in keeping with the law and practice that came to us from Europe at the time of settlement.Millers - dam owners - have provided fishways at their own expense for many hundreds of years, reflecting the understanding that fish are important to commerce and have substantial non-commercial value.

Section 4(e)'s grant of authority to land management agencies to ensure that projects on their lands meet current management goals and objectives is simple and is based on common sense.Projects located on federal or tribal lands are already getting the benefit of cheap rent.In order to adequately manage the lands entrusted to them and ensure that hydro projects do not interfere with other uses of the land, federal land management agencies must be able to constrain how these projects are operated.

The protection of water quality is a responsibility that has been delegated to the states since the Clean Water Act was adopted 30 years ago.Section 401 ensures that private hydro projects will not interfere with state standards, by requiring that each federally licensed project obtain a state certification that the project is consistent with state standards, including the designated uses for each water body.The Supreme Court confirmed in PUD No. 1 of Jefferson County v. Washington Dep't of Ecology, 511 U.S. 700 (1994), that these standards may be numeric or narrative and include chemical, physical, and biological parameters.

These laws establish the simple rule that a project must meet basic environmental standards before we allow it to operate on our rivers - just as we would not allow a coal-fired plant or a nuclear plant to operate without basic protections for the environment, so too we must not license hydro plants without this basic level of protection.

III.Improvements to the Relicensing Process Can Work

On the other hand, American Rivers would be the first to acknowledge that the current licensing process is far from perfect.Agency environmental reviews are not well coordinated and agencies frequently experience significant delay in getting the necessary information to establish environmental conditions.In many cases, the process takes too long.Unfortunately, it is the environment that truly suffers from delays in relicensing.When a license expires the dam owner receives "annual licenses" that maintain status quo conditions at the project until a final license is issued.The longer the process takes, the longer it takes to set modern environmental conditions for the project.

In May 2001, FERC issued a report to Congress reviewing "policies, procedures, and regulations for the licensing of hydroelectric projects to determine how to reduce the cost and time of obtaining a license."[1] The report shows that Section 4(e) and 18 requirements by federal resource agencies are not a major cause for relicensing delays. (Report at pg. 38)In cases where agencies have been late with conditions it is often because licensees have not provided adequate information and the Commission has not required it.

For the last five years, American Rivers and members of the Hydropower Reform Coalition have been working with industry, federal and state agencies, and the Commission to make administrative improvements to the hydropower licensing process.We have made steady progress in a number of areas including federal agency actions and procedures to ensure consistency, timeliness, and coordination.The past year those efforts have culminated in the development of a proposed rule, issued by the Commission just last month.The proposed rule draws heavily from proposals developed by two very different groups - the National Review Group, a coalition of hydropower interests and environmental groups, and the Interagency Hydropower Committee, a federal interagency working group - and reflects a remarkable degree of consensus.

The Commission estimates that the proposed rule would reduce the average time it takes to complete the licensing process by 30 months, cutting down 47 months of preparation and processing time to 17 months. Further, it estimates that the proposed process would reduce the cost of licensing for a project under 5 megawatts by $150,000 and for a project greater than 5 megawatts by $690,000. (Testimony by Commissioner Brownell before the House Energy and Commerce Committee).

According to the Notice of Proposed Rulemaking the proposal, referred to as the "integrated" process, would become the Commission's primary licensing process.The highlights of the proposed rule are:

In addition, the traditional licensing process would be modified by increasing public participation, and by establishing mandatory, binding dispute resolution for necessary studies.

The Commission will obtain public input through written comments and regional workshops around the country in March and April 2003 to discuss stakeholder reaction to the proposed rule. A four-day collaborative drafting session is scheduled in April in Washington to draft language for the final rule.While we continue to advocate improvements to the proposed rule, American Rivers and the members of the Hydropower Reform Coalition believe that the Commission is on the right track toward making lasting improvements to the hydropower relicensing process without jeopardizing public participation or environmental quality.

IV.Current Proposals Would Hurt the Process and the Environment

The legislative proposal contained in H.R. 1013 and Title III of the Chairman's discussion draft would increase delays in the relicensing process, abandon the basic Federal Power Act principle of public participation, unduly burden the natural resource agencies, and harm the environment.It should be rejected in favor of support for the Commission's ongoing rulemaking process.

The current draft is based on language that was negotiated last Congress and agreed to in writing both by representatives of the conservation community and by representatives of the hydropower industry.Unfortunately, the current proposal bears only a passing resemblance to that agreed-upon language.Rather than providing a simple fix to the industry's complaint that the resources agencies sometimes fail to give adequate consideration to lower-cost alternatives for resource protection, this language would blow a hole in the entire resource agency process by: 1) giving hydropower interests preferred treatment in the management of a public resource over states, tribes and the interested public; 2) reducing standards for environmental protection; and 3) creating a new referral to middle-tier Commission staff to review the agencies' conditions.

The legislative proposal before the Committee contains detailed revisions to an aspect of federal hydro licensing that is foreign to most.Rather than walk through the bill step by step, my testimony will describe several of its most obvious problems.For a complete critique of the bill, see the attachment to this testimony.

A.Title III will make a complex process more so.

Efficiency in the hydropower relicensing process is a constant challenge because of the complexity of the issues and the number of stakeholders involved.The Commission's rulemaking proposal makes a good first effort at addressing this challenge.Unfortunately, Title III would make a complex process more so.It adds four new administrative processes at a time when FERC and the same agencies are struggling to streamline licensing.It further requires federal resource agencies to consider eleven new factors in developing their environmental conditions, and establishes a new standard that invites litigation and both staff and judicial second-guessing of resource agency decisions.

Many of the new procedures and considerations placed on resource agencies are redundant with the Commission's role in relicensing.Title III would require the agencies to consider several factors beyond the scope of their resource protection responsibilities and well beyond their expertise.Evaluation of these factors currently falls to the Commission under the FPA and NEPA with the cooperation and input of federal agencies on issues where they add expertise - in this case fisheries and land management.Having the agencies undertake this additional evaluation would be redundant, but it would also fundamentally realign the agencies' role in the licensing process, which is currently to establish necessary and appropriate environmental protections - a floor of environmental protection - and to leave the balancing of power development versus other factors beyond those basic protections to the Commission.

Title III's requirement that the natural resource agencies consider eleven additional factors also places a virtually impossible burden on the resource agencies. At present, many of the relevant state and federal agencies do not have sufficient staff dedicated to relicensing.As a result, a range of individuals (few of whom are trained in the relicensing process) may participate in different parts of a relicensing proceeding as time allows, or the appropriate staff is overburdened and cannot spend the time to conduct an adequate review of the environmental needs at the site or participate constructively in the relicensing.Because of the complex nature of the proceedings, and because of the new, more productive trend toward collaborative relicensing efforts, a consistent presence of qualified staff with an appropriate workload would make agency efforts more efficient and productive.

The staffing problem in the state of Alabama, where licenses for 12 dams on three major rivers will expire by 2007, is instructive.Relicensing these projects will involve regular meetings, extensive studies, and detailed negotiation.Currently, the U.S. Fish and Wildlife Service, which must make recommendations under section 10(j) as well as prescribing fishways under section 18 of the FPA, has only one staff person to cover this area.His situation is not unique.Without additional resources, there is a risk of inefficient or incomplete participation on the part of the Fish and Wildlife Service and potential disruption or delay in the process.This can be avoided with additional resources.

One potential solution is Section 1701(a) of the Energy Policy Act of 1992, which provides authority for FERC to reimburse resource agencies for their costs associated with licensing FERC projects.The provision calls for FERC to pass these costs on to licensees through annual fees.Since 1992, FERC has been collecting fees from licensees for some of the federal resource agency relicensing expenses, but this money has not found its way back to these agencies.Instead, it has gone to the Treasury where these reimbursements to federal and state resource agencies have not been made available through annual appropriations from Congress.This system is not working.To provide adequate resources to these agencies and facilitate more efficient relicensings, section 1701(a) should be implemented so that monies collected on behalf of state and federal natural resource agencies are reimbursed directly to those agencies.

Title III offers even further complexity to the process via the curious step of establishing an appeal to Commission staff if the license applicant continues to disagree with the agencies following their detailed internal alternatives analysis.While this process is non-binding, it asks the Commission's Dispute Resolution Service, currently a facilitation group, to make a finding regarding this appeal.Such an action would be a significant departure for the Dispute Resolution Service, given their traditional role as simply a facilitator.Staff in this part of the agency are neither equipped nor positioned with adequate seniority to make such determinations.This office is accustomed to creating process, not issuing opinions.In addition, this appeal would add 90 days to the licensing process - over all, Title III can be expect to add more than four months to the time necessary for adoption of resource agency conditions.

Currently, the Federal Power Act's hydropower licensing provisions create an open, equitable process in which the applicant starts the proceedings, but other interested stakeholders have full rights to participate and have their comments weighed equally by the Commission and other relevant agencies.Title III would drastically alter this process, by giving only the applicants the right to compel the resource agencies to adopt different conditions under sections 4(e) and 18.

In offering this new authority only to license applicants, this legislation would cut a host of other interested parties out of the process - not just conservationists, but also state agencies, tribal interests, irrigators, neighboring landowners and recreationists.The agency would be required to adopt the applicant's proposal if it met the statutory criteria, regardless of whether another alternative was more efficient or more beneficial to the environment.And although the bill says other parties may also offer alternative conditions, there is not requirement that they be considered by the Secretary.It is obvious that nothing would prohibit others from proposing alternatives but the clause is meaningless unless there is equal footing on which those alternatives may be heard.The preferential treatment of hydropower interests is patently inconsistent with every other element of the Federal Power Act and runs counter to the right of the public to maintain control over the nation's rivers.[2]

The compromise language agreed to last Congress would have ensured that the alternative license conditions established under this new procedure would provide equivalent protection to those originally proposed by the agencies.The language of Title III eliminates that basic guarantee, establishing a new standard that invites administrative and judicial second-guessing of the protections for fisheries and federal lands.In addition, it forces the resource agencies to give private costs the same level of consideration as the protection of public resources.

The new standard for section 4(e) conditions requires simply that the new condition "provides for adequate protection and utilization" of the federal lands.While this is the standard used in the underlying section of the Federal Power Act, its inclusion here has the perverse consequence of inviting the courts to second-guess the land management agencies' assessment of what is necessary for the protection and utilization of their lands.The language adopted by this Committee last year, requiring that the alternative "provides no less protection" than the condition proposed by the resource agency, properly defers to the agencies' expertise with regard to their own lands.Judicial review of that standard would start with the condition initially developed by the agency.Under Title III a court would be invited to make a de novo interpretation of what conditions are "adequate."

The standard for section 18 alternative conditions is even more harmful.Rather than requiring the installation of a fishway, this proposal would establish a standard that the alternative be "no less protective of the fish resources" than the fishway originally proposed by the fishery agency.This language appears to be directly intended to allow the substitution of hatcheries, habitat restoration, or even mitigation funds, which will not serve the purpose of a fishway - to move fish past the dam.Loss of spawning habitat cannot be mitigated by hatcheries or downstream habitat improvements.There are many interests in moving fish past dams that go beyond the "protection of fish resources," such as fishing access and treaty obligations.

Being a good environmental steward is a legitimate cost of doing business.Should the federal government guarantee profitability of hydropower?If a project is already unprofitable because of market forces or because it is run poorly, should it be exempted from any environmental conditions?The answer to these questions is clearly no.According to the courts, "There can be no guarantee of profitability of water power projects under the Federal Power Act; profitability is at risk from a number of variable factors, and values other than profitability require appropriate consideration."[3]We urge the Committee not to make environmental protections the scapegoat for licensing marginal projects nor to allow utilities that have never mitigated for their environmental impacts to continue to benefit from a sweetheart deal at the public's expense.

No regulatory process is perfect and this one is no exception.Many in the environmental community believe that there should be stricter environmental conditions at hydropower projects, while many in the industry believe that there should be fewer.Perhaps that is a signal that things are working.Whichever position one believes, Title III would only make the relicensing process more complex and litigious and would threaten public trust resources that already bear the brunt of relicensing delays.

We urge the Committee to defer to the Commission's ongoing rulemaking to truly improve the hydro licensing process.If the Committee wishes to adopt a section on alternatives to resource agency conditions, we urge it to agree to the negotiated compromise from last Congress.Anything undercutting environmental protections or placing the voice of license applicants over that of other parties invites wholesale opposition from the broad range of interests affected by hydropower licensing.

Those of us in the environmental community and especially in the Pacific Northwest, understand and appreciate the value of hydroelectric power.It is a valuable source of emissions free energy and provides numerous other benefits including being the cheapest source available.Unfortunately, its legacy of impacts to our region's and nation's rivers has been neglected too long.Now is the time to bring these dams up to modern environmental standards, not to continue the status quo.

[1] Report on Hydroelectric Licenseing: Policies, Procedures, and Regulations.Comprehensive Review and Recommendations Pursuant to Section 603 of the Energy Act of 2000." FERC Staff, May 2001.

[2] "The public must retain control of the great waterways.It is essential that any permit to obstruct them for reasons and on conditions that seem good at the moment should be subject to revision when changed conditions demand."President Teddy Roosevelt, 1908

^[3] Wisconsin Public Service Corp. v. FERC, 32 F.3d 1165, 1168 (7th Cir. 1994)

Comprehensive National Energy Policy

II.Relicensing - An Important Balancing Act

III.Improvements to the Relicensing Process Can Work

IV.Current Proposals Would Hurt the Process and the Environment

A.Title III will make a complex process more so.