Background on Hebgen: part of licensed project. Storage-only facility supporting downstream generation.
Historically FERC has approved some incremental projects at existing dams as de minimis
De minimis standard: based on the sort of variability an investor would expect due to unpredictable water and other conditions. Standard is also described as “substantial” alteration – physical impacts or impacts on operation.

Legal Issues for New & Incremental Hydro, or the Perils of Preliminary Permitting

Liz Thomas
October 23, 2008

Overview

Permitting
Preliminary permitting
Timing problems
Reliance issues
Exemptions
License amendments
Financial incentives & RPS considerations

Preliminary Permits - FPA §§ 4(f), 5

Effect: guaranteed priority for license application
Purpose: Motivate applicants to gather information and to invest time and money in developing proposals
Process:
File permit application (study plan and information on site, facilities, output, costs, financing)
Obtain 3-year permit, conduct studies
File license application upon permit expiration

Preliminary Permitting Peril #1: Impossible Timing

PAD due 2 years before permit expiration/license application
Permit term = 3 years max; no “renewal” – just successive permits
Competitor may file permit application with better design or municipal preference - or simply filed moments earlier
Strategies:
Protect IP rights in studies, etc.
Timing

Preliminary Permitting Peril #2: Reliance - the Ninth Circuit’s Fall River decision

FPA §6: licenses “may be [substantially] altered … only upon mutual agreement between the licensee and the Commission….” FERC alone may authorize de minimis encroachments.
Proposal to add generation at Hebgen Dam
Preliminary permit issued
Negotiations with dam owner not successful
FERC dismissed license application
Impacts were “material”
No implied consent

Permitting via License Exemption

< 5 MW: Install or add capacity at nonfederal, pre-1977 dam, or at natural water feature
Application ~ license but typically EA, not EIS
Includes conditions – from commenting agencies and non-FERC approvals (§401 WQC)
Conduit – typically up to 15 MW
Modification requires application to amend

Permitting via License Amendment

Major amendment
Capacity increase of 15% and 2 MW; or
Significant construction or modifications
Process like license application (consultation)
Minor amendment
Lesser increases or modifications
Less formal consultation – case by case

Financial Incentives & RPS: Follow the Money

Extension of IRS Code §45 production tax credit for incremental hydro – 1/1/2011 in-service deadline
Now also for marine renewables (tidal and wave power, free flowing water, and ocean thermal) – 1/1/2012 in-service deadline
Renewed CREB authorization - $800 million
RPS requirements / definitions of renewable
I-937 now eligible for amendment
Consistency on the horizon???