```

[Senate Report 109-304]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 547
109th Congress                                                   Report
                                 SENATE
 2d Session                                                     109-304

======================================================================

 
       EXTENSION FOR HYDROELECTRIC PROJECT IN THE STATE OF IDAHO

                                _______
                                

                 July 31, 2006.--Ordered to be printed

                                _______
                                

   Mr. Domenici, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 2035]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 2035) to extend the time required for 
construction of a hydroelectric project in the State of Idaho, 
and for other purposes, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill, as amended, do pass.
    The amendment is as follows:
    On page 2, line 6, strike ``expired'' and insert ``has been 
terminated''.

                         PURPOSE OF THE MEASURE

    The purpose of S. 2035 is to extend the time required for 
commencement of construction of the Arrowrock Dam Project in 
the State of Idaho, and for other purposes.

                          BACKGROUND AND NEED

    Section 13 of the Federal Power Act (FPA) requires that the 
construction of a licensed project commence within two years 
from the date the license is issued. The Federal Energy 
Regulatory Commission (FERC or Commission) is authorized under 
the FPA to extend this deadline once, for a maximum of two 
additional years, upon a finding that such extension is ``not 
incompatible with the public interest.'' Consequently, a 
license is subject to termination if a licensee fails to begin 
construction within four years after the date the license is 
issued, unless legislation authorizing an additional extension 
is enacted.

 On March 27, 1989, FERC granted five Idaho irrigation districts (the 
    Boise-Kuna Irrigation District; the Nampa & Meridian Irrigation 
   District; the New York Irrigation District; the Wilder Irrigation 
   District; and the Big Bend Irrigation District, hereinafter, the 
Districts) a license to construct and operate the Arrowrock Dam Project 
 No. 4656 (Arrowrock Project or Project). The Project is to be located 
at the U.S. Bureau of Reclamation's Arrowrock Dam and Reservoir on the 
Boise River, in Elmore and Ada Counties, Idaho. As originally licensed, 
  the 60-MW Project was to include two 30-MW generating units and two 
 180-foot-long penstocks, which would pass through tunnels constructed 
                            through the dam.

    The Project's original construction commencement deadline 
of March 26, 1991 was extended by FERC to March 26, 1993. In 
1992, Congress further extended the deadline to March 26, 1999 
(P.L. 102-486). In 2000, Congress again extended the deadline 
to March 26, 2005 (P.L. 106-343).
    On March 25, 2005, the Districts requested FERC to stay the 
license and backdate the stay for 120 days to allow additional 
time for compliance. On May 27, 2005, the Commission denied the 
request and notified the Districts of the probable termination 
of the license. The Districts timely filed a request for 
rehearing. On September 1, 2005, FERC denied the rehearing 
request. However, the license for Project No. 4656 has not yet 
been terminated.
    According to the Districts, the March 26, 2005 deadline was 
not met because the U.S. Fish and Wildlife Service would not 
begin Endangered Species Act consultation on the Arrowrock 
Project for Columbia River bull trout and bald eagles until 
after the agency completed consultation on the U.S. Bureau of 
Reclamation Projects in the Upper Snake River Basin. This Upper 
Snake River consultation was prioritized due to the 
requirements of the Snake River Water Rights Act of 2004 and 
the Nez Perce Agreements of 2004.
    Moreover, the Districts now contemplate a 15-MW project, 
consisting of two 7.5 MW generating units. With this smaller 
project, there would be no penstock or tunneling through the 
dam. Instead, the generating units would receive water through 
existing valves downstream of the dam. The Districts argue that 
the new design will significantly reduce any environmental 
impacts from the Arrowrock Project.
    S. 2035 would extend the time for construction commencement 
for an additional three year period beginning on the date of 
enactment, or, if the license for the project has been 
terminated, the bill would reinstate the license and extend the 
construction commencement period for an additional three years.
    The last several Chairmen of the Commission have had a 
policy of opposing legislation extending commencement of 
hydropower project construction deadlines that would allow an 
entity more than 10 years to develop a project. However, that 
policy has been based on the notion that allowing an entity 
that is not showing progress in developing a project to control 
a hydropower site for a greater length of time is not 
consistent with the public interest in developing clean, 
renewable hydroelectric energy.
    It has taken more than 16 years for the licensees to 
develop this project. However, the Committee received testimony 
and voluminous exhibits from proponents of the Arrowrock 
Project indicating their readiness to begin construction within 
the near future, and outlining the reasons for the delays, some 
of which were either directly or indirectly caused by other 
Federal Government actions. The licensees have also finalized a 
power sales agreement with the Clatskanie Public Utility 
District in Oregon to take power from the plant. In addition, 
FERC has indicated that an updated environmental review of the 
Project will be conducted pursuant to applicable law.

                          LEGISLATIVE HISTORY

    S. 2035 was introduced by Senators Craig and Crapo on 
November 17, 2005, and referred to the Committee on Energy and 
Natural Resources. The Water and Power Subcommittee held a 
hearing on S. 2035 on March 30, 2006. At the business meeting 
on May 24, 2006, the Committee on Energy and Natural Resources 
ordered S. 2035 favorably reported, with an amendment.
    H.R. 4377, the companion measure to this bill, was 
introduced by Representative Otter (R-ID) on November 17, 2005, 
and referred to the House Energy and Commerce Committee.

                        COMMITTEE RECOMMENDATION

    The Committee on Energy and Natural Resources, in open 
business session on May 24, 2006, by voice vote of a quorum 
present, recommends that the Senate pass S. 2035, if amended as 
described herein. Senator Bingaman asked to be recorded as 
voting against the measure.

                          COMMITTEE AMENDMENT

    An amendment was adopted to strike the term ``expired'' on 
page 2, line 6, and insert ``has been terminated.''

                      SECTION-BY-SECTION ANALYSIS

    Section 1 directs FERC, upon the request of the licensee 
for the project numbered 4656, to extend the time required for 
construction commencement of the project for an additional 
three year period beginning on the date of enactment. If the 
license for the project has been terminated prior to 
Congressional action, FERC is directed to reinstate the license 
and extend the period for construction commencement for an 
additional three years after the date of enactment.

                   COST AND BUDGETARY CONSIDERATIONS

    The following estimate of costs of this measure has been 
provided by the Congressional Budget Office.

S. 2035--A bill to extend the time required for construction of a 
        hydroelectric project in the state of Idaho, and for other 
        purposes

    S. 2035 would authorize the Federal Energy Regulatory 
Commission (FERC) to extend the deadline for commencing 
construction of a hydroelectric project (number 4656) in Idaho 
by up to three years. CBO estimates that implementing S. 2035 
would have no net effect on the federal budget. The bill would 
have a minor impact on FERC's workload. Because FERC recovers 
100 percent of its costs through user fees, any change in its 
administrative costs would be fully offset by an equal change 
in the fees that the commission charges. Because FERC's 
administrative costs are limited in annual appropriations, the 
bill would not affect direct spending or revenues.
    S. 2035 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act. The 
bill would benefit water districts in Idaho by authorizing the 
reinstatement and extension of their license for construction 
of a hydroelectric project. Any costs they might incur would 
result from complying with conditions for receiving federal 
assistance.
    The CBO staff contact for this estimate is Megan Carroll. 
This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                      REGULATORY IMPACT EVALUATION

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 2035. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 2035, as ordered reported.

                        EXECUTIVE COMMUNICATIONS

    The testimony provided by FERC at the Subcommittee hearing 
on S. 2035 follows:

  Statement of J. Mark Robinson, Director, Office of Energy Projects, 
                  Federal Energy Regulatory Commission

    Madam Chairman and Members of the Subcommittee:
    My name is J. Mark Robinson, and I am the director of the 
Office of Energy Projects at the Federal Energy Regulatory 
Commission. Our office is responsible for non-federal 
hydroelectric licensing, administration, and safety; 
certification of interstate natural gas pipelines and storage 
facilities; and, authorization and oversight over the 
construction, operation, and safety of Liquefied Natural Gas 
(LNG) terminals.
    I appear today as a Commission staff witness speaking with 
the approval of the Chairman of the Commission. The views I 
express are my own and not necessarily those of the Commission 
or of any individual Commissioner.
    I appreciate the opportunity to comment on S. 2028 and S. 
2035. S. 2028 would reinstate the license and extend until 
December 31, 2007 the deadline for the commencement of project 
construction for the Tygart Dam Project No. 7307, located in 
West Virginia. S. 2035 would provide for reinstatement of the 
license and extend the deadline for the commencement of project 
construction for the Arrowrock Project No. 4656, located in 
Idaho, for a three-year period from the enactment of the 
legislation.
    Under Part I of the Federal Power Act (FPA), the Commission 
issues licenses to non-Federal interests authorizing the 
construction, operation and maintenance of water power projects 
on federal lands, on navigable waters of the United States, 
which utilize the surplus water or water power from a federal 
dam, and on streams over which the Congress has jurisdiction. 
Licenses may be issued under the FPA only if, in the judgment 
of the Commission, the proposed project is best adapted to a 
comprehensive plan for the development and utilization of the 
water resources of the river basin involved for all public 
purposes. The licenses are issued for terms of up to 50 years 
and contain terms and conditions that are designed to ensure 
that the comprehensive development standard is met.
    The FPA requires that the licensee will proceed 
expeditiously with the development and construction of the 
proposed project once a license has been issued. Section 13 of 
the FPA requires that construction of a licensed project be 
commenced within two years of issuance of the license and 
authorizes the Commission to extend this deadline once, for a 
maximum of two additional years. If project construction has 
not commenced by the deadline, the Commission is required to 
terminate the license.

                           arrowrock project

    S. 2035 would provide for license reinstatement and extend 
the deadline for the commencement of project construction for 
the Arrowrock Project No. 4656, located in Idaho, for a three-
year period from the date of enactment of the legislation. The 
Arrowrock Project was licensed on March 27, 1989, to the Boise-
Kuna Irrigation District, the Nampa & Meridian Irrigation 
District, the New York Irrigation District, the Wilder 
Irrigation District, and the Big Bend Irrigation District 
(Districts). The license gave the Districts the maximum two-
year time permitted by Section 13 to start construction--that 
is, until March 26, 1991. On January 9, 1991, pursuant to 
Section 13, the Commission granted the Districts' request for 
the one additional two-year extension to commence construction 
permitted by the statute, thereby extending the deadline for 
commencement of construction to March 26, 1993.
    Section 1701(c) of the Energy Policy Act of 1992 
subsequently authorized the Commission to extend the deadline 
for commencement of construction of the project for an 
additional six years, until March 26, 1999. The Commission 
granted this extension.
    On March 23, 1999, three days prior to the expiration of 
the extended deadline, the Districts requested a stay of the 
commencement of construction and compliance deadlines, while 
they sought Congressional legislation permitting further 
extensions of the construction deadline. The Commission denied 
that request, and on May 19, 1999, issued an order noticing 
probable termination of the license for failure to meet the 
commencement of construction deadline.
    In June, 1999 legislation was introduced in the Senate (S. 
1236) authorizing a further extension of the Section 13 
deadline for the project until March 26, 2005. Former 
Commission Chairman James Hoecker submitted written testimony 
to the Senate Energy and Natural Resources Committee on July 
28, 1999 stating that because this bill would extend the 
construction commencement date beyond 10 years from the 
issuance date of the project license, he did not support its 
enactment.
    This legislation, which was subsequently enacted and signed 
into law in October, 2000 as Public Law No. 106-343, authorized 
the Commission, upon the Districts' request, to reinstate the 
license, if necessary, and to further extend the deadline for 
commencement of construction for three consecutive two-year 
periods, to take effect on the date of the expiration of the 
last extension issued by the Commission (i.e., as of March 26, 
1999).
    As requested by the Districts, the Commission thereafter 
granted three extensions, making the new final deadline for 
starting construction March 26, 2005.
    On March 25, 2005, the Districts filed a request for a stay 
of the license, and to backdate the stay for 120 days to allow 
them time to comply with license articles containing 
requirements that must be completed before start of 
construction.
    On May 27, 2005, the Commission denied the request for stay 
of license and, in the same order, issued notice of the 
probable termination of the project license. The Commission 
denied rehearing by order issued September 1, 2005.

                          s. 2028 and s. 2035

    I do not support either S. 2028 or S. 2035. Grafton had 
more than 11 years after license issuance to begin construction 
on the Tygart Dam Project, following which it failed to make 
substantial progress during the term of one three-year 
preliminary permit, and had a second permit application 
dismissed for the failure to provide adequate information.
    The Districts have had more than 16 years after license 
issuance to start construction of the Arrowrock Project, and 
have been unable to do so. The licensee has cited numerous 
reasons for their delays, ranging from inability to obtain 
financing or a power sales agreement to several technical 
redesigns of the project.
    As a general matter, enactment of bills authorizing or 
requiring commencement of construction extensions for 
individual projects leaves the development of an important 
energy resource in the hands of an entity that has shown an 
inability to develop a project, and therefore has not been 
recommended. The last several Chairmen of the Commission have 
had a policy of opposing legislation extending commencement of 
construction deadlines that would allow an entity more than 10 
years to develop a project. This policy has been based on the 
notion that allowing an entity that is not showing progress in 
developing a project to control a hydropower site for a greater 
length of time is not consistent with the public interest in 
developing clean, renewable hydroelectric energy.
    Recent Commission orders have also noted that the purposes 
of the provisions of Section 13 of the FPA are to require 
prompt development of a licensed project. These instances 
demonstrate why that policy makes sense.
    In addition, the record on which the projects were 
originally licensed in the 1980s, including the examination of 
environmental and developmental issues, may be out of date in 
various respects. For example, in the case of the Arrowrock 
Project, in 1998, after the license was issued, the U.S. Fish 
and Wildlife Service listed the Columbia River bull trout as a 
threatened species pursuant to the Endangered Species Act, for 
the stream on which the project is located. The Service has 
requested that endangered species consultation be conducted for 
that project. To ensure that the public interest is served 
would require not simply reinstating the license and/or 
extending the license timeframes for commencement of 
construction, but reexamining and, as necessary, updating the 
record.
    I appreciate the opportunity to present my views to the 
Subcommittee. Thank you.

                MINORITY VIEWS OF SENATOR JEFF BINGAMAN

    The Federal Power Act authorizes the Federal Energy 
Regulatory Commission to grant licenses for the construction 
and operation of hydroelectric projects on navigable waters. 
Section 13 of the Act requires the licensee to begin 
construction of a project within two years from the date of the 
license. The Commission may extend the deadline for beginning 
construction, but only once, and for no more than two 
additional years. If the licensee fails to begin construction 
within the statutory period, section 13 requires the Commission 
to terminate the license. 16 U.S.C. 806.
    The purpose of the time limitations in section 13 is to 
ensure the prompt development of the licensed project. As the 
Commission has correctly observed, ``Congress has . . . 
expressed, in language too clear for misinterpretation, its 
will that . . . the maximum combined periods which may be 
allowed for the commencement of construction is 4 years.'' 
Empire District Electric Co., 1 FPC 15, 19 (1932). Nonetheless, 
Congress has routinely enacted bills to extend the deadline for 
individual projects to begin construction on a case-by-case 
basis.
    In commenting on several such bills in 1995, the Chairman 
of the Commission objected, ``as a matter of policy . . . to 
granting a licensee more than ten years from the issuance date 
of the license to commence construction.'' She testified that 
``ten years is a more than reasonable period,'' and thought 
that if a licensee could not begin construction within ten 
years, ``the license should be terminated pursuant to section 
13 of the Federal Power Act. S. Hrg. 104-65 at 3. Although the 
Commission has never formally adopted the ten-year benchmark as 
an official Commission policy, subsequent chairmen have 
continued to apply it when commenting on license extension 
bills pending before the Committee.
    Similarly, while the Committee has never formally adopted 
the ten-year benchmark as a binding Committee policy, it has 
continued to inform the Committee's consideration of license 
extension bills since it was first proposed eleven years ago. 
Indeed, to the best of my knowledge, since 1995, Congress has 
enacted only two laws (Public Law 104-241 and Public Law 106-
343) extending the deadline for commencement of construction 
for more than ten years.
    S. 2035 would extend the deadline for commencement of 
construction of the Arrowrock Project in Idaho. The Commission 
first licensed the Arrowrock Project on March 27, 1989. In 
accordance with section 13 of the Federal Power Act, the 
license required the licensee to commence construction within 
two years, namely by March 26, 1991. Shortly before the 
deadline, the Commission granted the licensee an additional two 
years, extending the deadline to March 26, 1993.
    Congress has statutorily extended the deadline for the 
Arrowrock Project twice before. Section 1701(c) of the Energy 
Policy Act of 1992 authorized the Commission to extend the 
deadline for an additional six years, until March 26, 1999, a 
total of ten years from the issuance of the license. When the 
licensee failed to meet the new deadline, the Commission 
terminated the license on May 19, 1999. Congress subsequently 
ordered the Commission to reinstate the terminated license and 
to extend the commencement of construction deadline for six 
more years, until March 26, 2005, a total of 16 years from the 
original issuance of the license. The latest deadline expired 
more than a year ago.
    Enactment of S. 2035 will extend the deadline for three 
additional years, until the latter half of 2009, more than 20 
years after the original issuance of the license, more than ten 
times the original two-year period, more than five times the 
extended statutory limit, and more than twice the customary 
ten-year benchmark.
    During the Committee's consideration of S. 2035, the 
Chairman stated that he was ``not unsympathetic to the notion 
that there should be a finite amount of time for construction 
of these projects to begin.'' Even then, he added, the 
Committee ought to ``allow for consideration of circumstances 
that might argue for a longer period when one of our colleagues 
presents us with a situation in their State that they believe 
merits additional consideration.''
    In this case, the licensee represents that the earlier 
deadlines were missed because the Fish and Wildlife Service had 
failed to consult under the Endangered Species Act in a timely 
fashion, but that everything is now in place, and it is ready 
to commence construction.
    The Commission tells a different story. A year ago, the 
Commission found that construction had not commenced, not 
because of the fault of the Fish and Wildlife Service, but 
``because of the licensee's own actions or inactions.'' It 
found that the licensee had materially redesigned the project, 
necessitating a license amendment application, which had yet to 
be filed. It also said that the need for the endangered species 
consultation ``is driven in large part'' by the licensee's 
decision to ``materially redesign the project.'' Boise-Kuna 
Irrigation District, 111 FERC para.61, 271 (May 27, 2005) 
(order denying request for stay of license); 112 FERC para.61, 
240 (Sept. 1, 2005) (order denying rehearing). In addition, the 
Commission's witness testified on March 30, 2006 that the 
record on which the project was originally licensed ``may be 
out of date in various respects,'' and that it may be necessary 
to reexamine and update the record.
    In ordering S. 2035 reported, the Committee repudiates the 
ten-year benchmark that has guided the Committee over the past 
eleven years and sets an uncertain precedent. It is unclear 
what standard the Committee used in this case or expects to use 
in future cases to determine whether an extension is warranted. 
The Committee asked for no showing of special circumstances 
beyond the mere representations of the licensee that the delay 
was not its fault and that it is now ready, or soon will be, to 
begin construction. It gave no weight to the Commission's 
expert judgment that the licensee was at fault and is still not 
ready.
    In my view, the time limitations in section 13 of the 
Federal Power Act serve the important public interest in the 
timely development of licensed hydroelectric power projects. As 
the Federal Power Commission long ago said, ``the time 
limitations in section 13, prohibiting delays by licensees in 
constructing projects, and other provisions of the Act indicate 
a Congressional intent that water power resources be utilized 
in the best possible manner and at the earliest possible 
time.'' Idaho Power Co., 14 FPC para.55, 68 (1955), aff'd sub 
nom., National Hells Canyon Ass'n v. FPC, 237 F.2d 777 (D.C. 
Cir. 1956), cert. denied, 353 U.S. 924 (1956). Those time 
limitations should not be laid aside lightly, for to do so 
``leaves the development of an important energy resource in the 
hands of an entity that has shown an inability to develop a 
project,'' which ``is not consistent with the public interest 
in developing clean, renewable hydroelectric energy.''
    In deciding whether to exercise its discretion to grant the 
one-time two-year permitted under section 13, the Commission 
applies a very liberal standard. It will exercise its 
``discretion to grant the requested extension so long as it is 
not clearly unreasonable and capricious to do so.'' Maine 
Hydroelectric Development Corp., 15 FERC para.61, 107 (1981). 
The ten-year benchmark previously recognized by the Committee 
afforded a similarly generous standard. It provided what 
amounted to a rebuttable presumption that extending the 
deadline for commencing construction by six more years (for a 
total of ten years from the issuance of the license) would not 
be unreasonable or capricious, but that any extension beyond 
that point would be.
    I agree with Senator Domenici's observation that the 
Committee ought to consider, on a case-by-case basis, whether 
special circumstances warrant giving a licensee more time. When 
special circumstances warrant relief, Congress ought to grant 
an extension. But when the licensee has already exhausted the 
Commission's two-year extension and a statutory six-year 
extension (or, in this case, two statutory six-year 
extensions), the standard for granting further extensions ought 
to be a demanding one. Licensees should not be entitled to 
another extension on the mere representation that it is at long 
last ready to begin construction, especially where, as here, 
the Commission has testified otherwise.
    To extend the deadline for the Arrowrock Project yet again, 
for three more years, after two prior statutory extensions of 
six years apiece proved unavailing, can only undermine the 
important statutory purpose of ensuring timely development of 
hydroelectric projects underlying section 13 of the Federal 
Power Act. I can find nothing in the record before the 
Committee to warrant another extension, and for that reason, I 
have voted against reporting S. 2035.
                                                   Jeff Bingaman.  
                        CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by the bill S. 2035, as 
ordered reported.

                                  

```