134 FERC ¶ 61,111 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Chapter I 

[Docket No. RM11-6-000] 

Annual Charges for Use of Government Lands 

 

(Issued February 17, 2011) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Notice of Inquiry (NOI). 

SUMMARY: The Federal Energy Regulatory Commission (Commission) is inviting 

comments on its procedures with respect to the assessment of annual charges for the use 

of government lands. This Notice of Inquiry will assist the Commission in identifying 

options to consider in determining the methodology to be used to calculate rental rates for 

use of government lands under Part 11 of the Commission’s regulations. 

DATES: Comments on this NOI are due on [insert date 60 days after publication in the 

FEDERAL REGISTER]. 

ADDRESSES: You may submit comments on the Notice of Inquiry, identified by 

Docket No. RM11-6-000, by one of the following methods: 

 Electronic Submission: Documents created electronically using word processing 

software should be filed in native applications or print-to-PDF format, and not in 

a scanned format, at http://www.ferc.gov/docs-filing/efiling.asp. 

 Mail/Hand Delivery: Commenters unable to file comments electronically must 

mail or hand deliver an original copy of their comments to: Federal Energy 
Regulatory Commission, Secretary of the Commission, 888 First Street, NE, 

Washington, DC 20426. These requirements can be found on the Commission’s 

website, see, e.g., the “Quick Reference Guide for Paper Submissions,” available 

at http://www.ferc.gov/docs-filing/efiling.asp, or via phone from FERC Online 

Support at 202-502-6652 or toll-free at 1-866-208-3676. 

FOR FURTHER INFORMATION CONTACT: 

Kimberly Ognisty 

(Legal Information) 

Office of General Counsel – Energy Projects 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-8565 

Doug Foster 

(Technical Information) 

Office of the Executive Director 

Federal Energy Regulatory Commission 

888 First Street, NE 

Washington, DC 20426 

(202) 502-6118 

SUPPLEMENTARY INFORMATION:
134 FERC ¶ 61,111 

UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Annual Charges for Use of Government Lands Docket No. RM11-6-000 

NOTICE OF INQUIRY 

(Issued February 17, 2011) 

1. The Federal Energy Regulatory Commission is issuing this Notice of Inquiry to 

seek comments on its procedures with respect to the assessment of annual charges for the 

use of government lands by hydropower projects. In particular, the Commission is 

interested in identifying administratively practical methods for assessing reasonable 

annual charges that compensate the United States for the use of its lands. 

I. Background

2. Section 10(e)(1) of the Federal Power Act (FPA)1

 requires Commission 

hydropower licensees using federal lands to: 

pay to the United States reasonable annual charges in an amount to be fixed 

by the Commission . . . for recompensing [the United States] for the use, 

occupancy, and enjoyment of its lands or other property . . . and in fixing 

such charges the Commission shall seek to avoid increasing the price to the 

consumers of power by such charges, and any such charges may be 

adjusted from time to time by the Commission as conditions may 

require . . . . 

 1

 16 U.S.C. § 803(e)(1) (2006). Section 10(e)(1) also requires licensees to 

reimburse the United States for the costs of the administration of Part I of the FPA. 

Those charges are calculated and billed separately from the land use charges, and are not 

the subject of this Notice of Inquiry. 
Docket No. RM11-6-000 - 2 -

In other words, where hydropower licensees use and occupy federal lands for project 

purposes, they must compensate the United States through payment of an annual fee, to 

be established by the Commission.2

3. The Commission has employed various methodologies to determine the charges. 

The touchstone has been to find an administratively practical methodology which results 

in reasonably accurate land valuations. 

4. Beginning in 1938, annual charges for use of government land were based on 

project-by-project appraisals.3

 That proved uneconomical because the cost of conducting 

individual appraisals was in excess of the value of the land involved.4

 In 1942, the 

Commission’s predecessor, the Federal Power Commission (FPC), developed a national 

average value of $50 per acre, to which it applied a four percent rate of return to derive 

an annual land use charge of $2.00 per acre.5

 The FPC had determined that a national 

average was superior to regional or state land values because use of the national average 

would simplify the administrative task of Commission staff and reduce the costs 

 2

 Pursuant to FPA section 17(a), 16 U.S.C. § 810(a) (2006), the fees collected for 

use of government lands are allocated as follows: 12.5 percent is paid into the treasury of 

the United States, 50 percent is paid into the federal reclamation fund, and 37.5 percent is 

paid into the treasuries of the states in which particular projects are located. No part of 

the fees is used to fund the Commission’s operations. 

3

 See Revision of the Billing Procedures for Annual Charges for Administering 

Part I of the Federal Power Act and to the Methodology for Assessing Federal Land Use 

Charges, Order No. 469, FERC Stats. & Regs. ¶ 30,741, at 30,584 (1987). 

4 Id. 

5 Id. 
Docket No. RM11-6-000 - 3 -

associated with yearly land use charge determinations.6

 The FPC recognized that 

regional or state averages had the advantage of greater localization, but concluded that 

any speculative improvement in land value accuracy would not be significant enough to 

outweigh the obvious administrative economies accruing when a single nationwide figure 

is used as the basis for annual charges.7

5. In 1962, the FPC increased the national average land value to $60 per acre, and in 

1976 to $150 per acre. In 1976, the FPC also adopted a fluctuating interest rate to ensure 

that the rate of return would remain current.8

6. In 1985, the Inspector General of the Department of Energy concluded that the 

Commission’s existing methodology resulted in an under-collection of over $15 million 

per year because it used outdated land values. The Inspector General also found that the 

wide variation in land values made the use of a zone index preferable to a national 

average. The Inspector General recommended that the Commission: (1) base land use 

charges on the current fair market value of the land being used; (2) use current long-term 

interest rates in its calculations; and (3) replace the national average land value with stateby-state averages.9

 6

 Order Prescribing Amendment to Section 11.21 of the Regulations Under the 

Federal Power Act, Order No. 560, 56 F.P.C. 3860 (1976). 

7 Id. 

8 Order No. 469, FERC Stats. & Regs. ¶ 30,741 at 30,584. This rate was based on 

a fluctuating rate used by the United States Water Resources Council, based primarily 

upon the average yield of long-term United States interest-bearing securities. 

9

 See Assessment of Charges under the Hydroelectric Program, DOE/IG Report 

No. 0219 (September 3, 1986); see also More Efforts Needed to Recover Costs and 
Docket No. RM11-6-000 - 4 -

7. In response, the Commission instituted a rulemaking for several purposes, 

including to impose federal land use fees that better approximated the fair market value 

of the use of those lands. In the Notice of Proposed Rulemaking, the Commission noted 

that it had found no existing index of land values that accurately reflected current 

economic conditions and conformed precisely to the context of land used for hydropower 

projects.10 The Commission stated that it was considering several proposals for assessing 

land use charges, including: (1) using, with modifications, the “Agricultural Land Values 

and Market Outlook and Situation Report,” published by the Department of Agriculture, 

which provided state-by-state average farm land and building values; (2) conducting 

individual appraisals; or (3) using fees based on a licensed project’s gross income or on 

its power generation.11 In a subsequent notice requesting supplemental comments, the 

Commission posited another alternative that had recently become available: basing land 

use fees on a rental schedule for linear rights-of-way being developed jointly by the U.S. 

Department of Agriculture’s Forest Service and the U.S. Department of Interior’s Bureau 

of Land Management (BLM).12 The Commission explained that, although the rental 

schedule concerned linear rights-of-way, it might be more representative of the value of 

 

Increase Hydropower Charges, U.S. General Accounting Office Report No. RCED-87-12 

(November 1986). 

10 Billing Procedure Revisions – Annual Charges Methodology for Assessing 

Federal Land Use Charges, Notice of Proposed Rulemaking, FERC Stats. & Regs. 

¶ 32,423, at 33,281 (1985). 

11 Id. 

12 52 Fed. Reg. 82 (Jan. 2, 1987). 
Docket No. RM11-6-000 - 5 -

land used for hydropower projects than valuation of farm lands or any other then 

currently-published information.13

8. In its final rule, the Commission explained that its existing methodology had 

resulted in under-collection of land use charges and was no longer reasonable because it 

used outdated land values, that the wide variation in land values across the country made 

use of a zone index preferable to a national average, and that its previous decision not to 

use such an index because of the burden on the Commission to determine the value of 

Forest Service lands was no longer an issue because the Forest Service and BLM had 

begun promulgating an index setting forth those values.14 The Commission agreed with 

the majority of commenters that the BLM-Forest Service index more accurately reflected 

typical hydropower project lands, and so decided to use that index rather than the farm 

values index.15

9. The Commission explained that the BLM-Forest Service methodology was based 

on a survey of the various types of lands that the Forest Service has allowed to be 

occupied by linear rights-of-way. The schedule was divided into regional zones, and 

provided per acre rental fees listed by state and county.16 The Commission decided to 

continue its past practice of doubling the linear right-of-way fee in order to establish the 

annual fees for the use of federal lands for project works other than transmission lines 

 13 Id. 

14 Order No. 469, FERC Stats. & Regs. at 30,584. 

15 Id. at 30,589. 

16 Id. at 30,588. 
Docket No. RM11-6-000 - 6 -

(e.g., dams, powerhouse, and reservoirs) because lands used for transmission line 

rights-of-way would remain available for multiple uses, while other federal lands 

occupied by hydropower project works would not.17

10. The Commission found no merit to claims that charging fair market value for 

federal lands is prohibited by the FPA: 

All increases in charges will result in some impact on consumers. The 

statutory provision bars the Commission from assessing unreasonable 

charges that would be passed along to consumers. Reasonable annual 

charges are those that are proportionate to the value of the benefit 

conferred. Therefore, a fair market approach is consistent with the dictates 

of the Act. Furthermore, as land values have not been adjusted in over ten 

years, an adjustment upwards is warranted and overdue.[18] 

The Commission stated that “the Forest Service index is the best approximation of 

reasonable land charges” and explained that “the Forest Service index will be adopted 

and published each year by the Commission.”19

11. The Commission rejected the proposal to use the agricultural lands value index 

published by the U.S. Department of Agriculture, which used a state-by-state average 

value per acre of farm land and buildings. The Commission concluded that the 

agricultural index would require such major adjustments that it would not be an efficient 

measure of land value for hydropower projects.20 The Commission also rejected using a 

 17 See id. at 30,588-89. 

18 Id. (footnotes omitted). The Commission also rejected arguments that it should 

intentionally set low land charges based on the public benefits provided by hydropower 

projects. 

19 Id. at 30,591. 

20 Id. at 30,589. 
Docket No. RM11-6-000 - 7 -

fee based on the percentage of gross sales or a rate per kilowatt hour. The Commission 

concluded that a percentage of gross sales fee or flat rate is not a reasonable method 

because it would charge a royalty as though the federal land being used was producing 

power, which overlooks the fact that power output is the result of many factors (e.g., 

water rights, head, project structures), and not just the acreage of the federal land 

involved.21 Finally, the Commission rejected the proposal to use individual project 

appraisals, concluding that the FPC had abandoned the appraisal method in 1942, and 

again after reconsideration in 1976, because the cost of individual project appraisals was 

excessive compared to the value of the federal land at issue. Thus, the Commission 

concluded that individual appraisals would be too costly and result in time-consuming 

litigation.22

12. Based on these findings, the Commission promulgated a regulation stating, inter 

alia, that annual charges for the use of government lands would be set on the basis of the 

schedule of rental fees for linear rights-of-way (the BLM-Forest Service schedule); that 

annual charges for government lands occupied by project transmission lines would be 

based directly on the schedule, while charges for lands used for other project purposes 

would be twice the charges set forth in the schedule; and that the Commission, by its 

designee the Executive Director, would update its fees schedule to reflect changes in land 

values established by the Forest Service.23

 21 Id. at 30,589-90. 

22 Id. at 30,590. 

23 See 18 C.F.R. § 11.2(b) (2010). 
Docket No. RM11-6-000 - 8 -

13. From 1987 until 2008, BLM and the Forest Service did not change the 1987 linear 

right-of-way schedule, other than to make an adjustment to the fees each year to account 

for inflation. Likewise, the only change in the Commission’s implementation of its 

annual charges during this period was an annual fee update schedule to reflect the 

inflation adjustment.24 In 2005, Congress passed the Energy Policy Act of 2005 that 

required BLM “to update [the schedule] to revise the per acre rental fee zone value 

schedule by State, county, and type of linear right-of-way use to reflect current values of 

land in each zone.”25 Congress further ordered that “the Secretary of Agriculture shall 

make the same revision for linear rights-of-way . . . on National Forest System land.” 

14. On April 27, 2006, BLM issued an advance notice of proposed rulemaking 

proposing to update the fee schedule.26 BLM stated that it was considering using 

existing published information or statistical data, such as information published by the 

National Agricultural Statistic Service (NASS), for updating the schedule. On 

December 11, 2007, BLM issued a proposed rule updating the rental fee schedule,27 and 

on October 31, 2008, it issued a final rule.28 The rule based the updated fee on the NASS 

information, as BLM had proposed. BLM noted that the four commenters who had 

 24 See, e.g., Update of the Federal Energy Regulatory Commission’s Fee Schedule 

for Annual Charges for the Use of Government Lands, 73 Fed. Reg. 3626 (January 22, 

2008), FERC Stats. & Regs. ¶ 31,262 (2008) 

25 42 U.S.C. § 15925 (2006). 

26 Update of Linear Right-of-Way Rental Schedule, 71 Fed. Reg. 24,836. 

27 Update of Linear Right-of-Way Rent Schedule, 72 Fed. Reg. 70,376. 

28 Update of Linear Right-of-Way Rent Schedule, 73 Fed. Reg. 65,040. 
Docket No. RM11-6-000 - 9 -

addressed the issue had supported use of the NASS data. The Forest Service 

subsequently adopted the BLM revisions.29

15. In January 2009, the Commission sent letters to all of its licensees, explaining that 

the Forest Service had revised its fee schedule in response to direction from Congress and 

that consequently “for many projects, the [fiscal year] 2009 federal land use charges will 

increase substantially.” The Commission asked licensees to confirm by county the 

federal acres that the Commission believed to be occupied by each project.30

16. On February 17, 2009, the Commission issued notice of the Fee Update Schedule 

and based the schedule, as in previous years, on the BLM’s and Forest Service’s land 

valuations (February 17 Notice).31 Because of the BLM-Forest Service revisions, this 

resulted, in some cases, in significantly higher fees being assessed.32 In calculating the 

2009 fees, the Commission used the same methodology that it has used for the past 21 

years: it took the land values published by Forest Service and BLM, used the information 

in its files showing federal acreage occupied by individual projects, and applied the 

 29 See Fee Schedule for Linear Rights-of-Way Authorized on National Forest 

System Lands, 73 Fed. Reg. 66,591 (November 10, 2008). The Forest Service noted that 

it had given notice, in the preambles to BLM’s proposed and final rules, that it would 

adopt BLM’s revised fee schedule. 

30 See, e.g., letter to Portland General Electric Co. in Project No. 2030 (January 6, 

2009). 

31 Update of the Federal Energy Regulatory Commission’s Fees Schedule for 

Annual Charges for the Use of Government Lands, 74 Fed. Reg. 8184 (February 24, 

2009) FERC Stats. & Regs. ¶ 31,288 (2009). 

32 Other licensees, typically in the eastern part of the country, had their charges 

reduced. 
Docket No. RM11-6-000 - 10 -

values for the counties in which individual projects were located, doubling the values for 

acreage occupied by non-transmission line portions of hydropower projects. 

17. On March 6, 2009, the Federal Lands Group, a group of licensees composed of 

both municipal and private entities, filed a request for rehearing of the February 17 

Notice. The group alleged that the February 17 Notice amounted to a rulemaking, 

improperly issued without notice and an opportunity for comment, and that the 

Commission had improperly delegated its authority to set annual charges to BLM and the 

Forest Service. The group asked the Commission to vacate the February 17 Notice, 

rescind annual charge bills that had been sent out in accordance with it, and reissue bills 

calculated under the prior fees schedule. 

18. On October 30, 2009, the Commission denied rehearing.33 On December 18, 

2009, the Federal Lands Group filed a petition for review with the United States Court of 

Appeals for the District of Columbia Circuit. On January 4, 2011, the Court granted the 

petition for review and vacated the 2009 Update.34 The Court stated that the Commission 

is required by the Administrative Procedure Act to seek notice and comment on the 

methodology used to calculate annual charges because the Commission’s fee schedule is 

based on the Forest Service’s land value index, and the Forest Service has made changes 

to the methodology underlying its index. We begin that process here. 

 33 Update of the Federal Energy Regulatory Commission’s Fee Schedule for 

Annual Changes for the Use of Government Lands, 129 FERC ¶ 61,095 (2009). 

34 City of Idaho Falls, Idaho v. FERC, No. 09-1120, 2011 U.S. App. LEXIS 13 

(D.C. Cir. Jan. 4, 2011). 
Docket No. RM11-6-000 - 11 -

II. Subject of the Notice of Inquiry

19. As recounted above, the Commission has employed various methodologies over 

the course of its history to determine annual charges for the use of government lands by 

hydropower projects. The touchstone has been to find an administratively-practical 

methodology, which results in reasonably accurate land valuations. In seeking this goal, 

the methodology has been modified on occasion in response to concerns such as the cost 

of administering the methodology (e.g., rejecting individual appraisals), the 

administrative burden on the Commission (e.g., rejecting creation of our own index), and 

the accurate collection of fair market value (e.g., implementing updates in response to the 

contention that Commission had been under-collecting). At times, however, a 

previously-rejected approach has been revisited and adopted (e.g., Forest Service-BLM 

index adopted with adjustments because Commission would not be subject to 

administrative burden of creating its own index). The Commission now seeks 

suggestions for creating an administratively-practical methodology for assessing annual 

charges for the use of government lands that will result in reasonably accurate land 

valuations. The Commission specifically seeks comment on existing indices that could 

be used as the basis for establishing annual land use charges, and whether particular 

indices are better suited for that purpose than others. We outline below the major 

objectives in considering a new annual charges methodology, and request that 

commenters address how any methodology they suggest would be consistent with each of 

those objectives. 
Docket No. RM11-6-000 - 12 -

A. Uniform Applicability

20. Any proposed methodology should be uniformly applicable to all hydropower 

licensees. This means that the Executive Director should be able to take the information 

in the Commission’s files showing federal acreage occupied by individual projects, apply 

the adopted methodology, and create an annual charge for the use of government lands 

for each licensed project. This has previously been possible, for instance, from 1987 to 

2008, with the use of an existing index created by the Forest Service and BLM, modified 

as necessary, and updated automatically by the Forest Service for inflation. 

B. Cost of Administering Collection of Annual Charges

21. The administration of any proposed methodology must not impose exorbitant costs 

on the Commission. Collection of annual charges and application of the ultimate 

methodology should be an annual, routine ministerial process that requires reasonable, 

but not overly burdensome, staff effort. 

C. Methodology Not Subject to Review on an Individual Basis

22. Any proposed methodology, once adopted, should not be subject to review on an 

individual case-by-case basis. Licensees will have the opportunity to challenge 

computational errors by the Executive Director in calculating the annual charge or the 

relevant county land acreage, but case-by-case challenges to the methodology would add 

significantly to the administrative cost and burden of collecting annual charges. 

D. Fair Market Value

23. At times in the Commission’s history, it has been determined that the Commission 

had not been collecting fair market value for the use of government lands, which resulted 
Docket No. RM11-6-000 - 13 -

in a substantial under-collection.35 To ensure that the Commission recovers “reasonable 

annual charges,” any proposed methodology must reflect reasonably accurate land 

valuations. 

 E. Avoid Increasing Price to Consumers of Power

24. In fixing annual charges, we must seek to avoid increasing the price to consumers 

of power by such charges. Therefore, any proposed methodology should provide 

reasonable, but not excessive, compensation to the United States for the use of its lands. 

III. Comment Procedures

25. The Commission invites interested persons to submit comments and other 

information on the matters, issues, and specific questions identified in this notice. 

Comments are due [insert date that is 60 days from the date of publication in the 

FEDERAL REGISTER]. Comments must refer to Docket No. RM11-6-000, and must 

include the commenter's name, the organization it represents, if applicable, and its 

address. 

26. To facilitate the Commission’s review of the comments, commenters are requested 

to provide an executive summary of their position. Commenters are requested to identify 

each specific question posed by the Notice of Inquiry that their discussion addresses and 

to use appropriate headings. Additional issues the commenters wish to raise should be 

identified separately. The commenters should double-space their comments. 

 35 See Assessment of Charges under the Hydroelectric Program, DOE/IG Report 

No. 0219 (September 3, 1986); see also More Efforts Needed to Recover Costs and 

Increase Hydropower Charges, U.S. General Accounting Office Report No. RCED-87-12 

(November 1986). 
Docket No. RM11-6-000 - 14 -

27. The Commission encourages comments to be filed electronically via the eFiling 

link on the Commission's web site at http://www.ferc.gov. The Commission accepts 

most standard word processing formats. Documents created electronically using word 

processing software should be filed in native applications or print-to-PDF format and not 

in a scanned format. Commenters filing electronically do not need to make a paper 

filing. 

28. Commenters unable to file comments electronically must mail or hand deliver an 

original copy of their comments to: Federal Energy Regulatory Commission, Secretary 

of the Commission, 888 First Street, NE, Washington, DC, 20426. The current 

requirements are specified on the Commission’s website, see, e.g., the “Quick Reference 

Guide for Paper Submissions,” available at http://www.ferc.gov/docs-filing/efiling.asp, or 

via phone from FERC Online Support at 202-502-6652 or toll-free at 1-866-208-3676. 

29. All comments will be placed in the Commission’s public files and may be viewed, 

printed, or downloaded remotely as described in the Document Availability section 

below. Commenters are not required to serve copies of their comments on other 

commenters.

IV. Document Availability

30. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through the Commission’s Home Page 

(http://www.ferc.gov) and in the Commission’s Public Reference Room during normal 
Docket No. RM11-6-000 - 15 -

business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington, DC, 20426.

31. From the Commission’s Home Page on the Internet, this information is available 

in the Commission’s document management system, eLibrary. The full text of this 

document is available on eLibrary in PDF and Microsoft Word format for viewing, 

printing, and/or downloading. To access this document in eLibrary, type the docket 

number (excluding the last three digits) in the docket number field.

32. User assistance is available for eLibrary and the Commission's website during 

normal business hours. For assistance, please contact the Commission’s Online Support 

at 1-866-208-3676 (toll free) or 202-502-6652 (e-mail at FERCOnlineSupport@ferc.gov) 

or the Public Reference Room at 202-502-8371, TTY 202-502-8659 (e-mail at 

public.referenceroom@ferc.gov).

By direction of the Commission. 

( S E A L ) 

Kimberly D. Bose, 

Secretary.