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[Senate Report 115-297]
[From the U.S. Government Publishing Office]

                                                      Calendar No. 511
115th Congress      }                                    {      Report
                                 SENATE
 2d Session         }                                    {     115-297

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                 QUALIFYING CONDUIT HYDROPOWER FACILITY

                                _______
                                

                 July 11, 2018.--Ordered to be printed

                                _______
                                

  Ms. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2786]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (H.R. 2786) to amend the Federal Power Act 
with respect to the criteria and process to qualify as a 
qualifying conduit hydropower facility, having considered the 
same, reports favorably thereon with an amendment, and 
recommends that the bill, as amended, do pass.

                               Amendment

    The amendment is as follows:
    On page 2, strike lines 7 through 12 and insert the 
following:

        (2) in paragraph (3)(C)(ii), by striking ``5'' and 
        inserting ``40''.

                                Purpose

    The purpose of H.R. 2786 is to amend the Federal Power Act 
(FPA) with respect to the criteria and process to qualify as a 
qualifying conduit hydropower facility.

                          Background and Need

    The Hydropower Regulatory Efficiency Act of 2013 (Public 
Law 113-23) amended the FPA to allow FERC to issue 
``exemptions'' (which are licenses granted in perpetuity) for 
hydroelectric projects of five megawatts or less utilizing 
manmade conduits that are operated primarily for purposes other 
than electricity generation. Under current law, the Federal 
Energy Regulatory Commission (FERC) must make an initial 
determination on project eligibility within 15 days of a filing 
and publish a public notice of intent. Following the notice, a 
period of 45 days is provided for public comment on FERC's 
initial determination as to whether a facility meets the 
qualifying criteria. If no entity contests whether the facility 
meets the qualifying criteria within 45 days, the facility is 
deemed to meet the criteria and its license is approved.
    Since its 2013 enactment, the process outlined above has 
resulted in 83 qualifying projects that have received the one-
time license known as an ``exemption,'' with an average total 
processing timeline of just over two months (45-day public 
notice period). According to FERC, it has rarely received 
comments on a project's qualifications, and supports Congress 
shortening the 45-day notice period and lifting the five 
megawatt cap in order to benefit a broader range of projects.

                          Legislative History

    H.R. 2786 was introduced in the House of Representatives by 
Representative Hudson and Degette, on June 6, 2017, and 
referred to the Committee on Energy and Commerce. The Energy 
and Commerce Committee favorably reported the bill, as amended, 
by voice vote on July 12, 2017. H.R. 2786 passed the House of 
Representatives by a vote of 420-2 on July 18, 2017, and the 
bill was received by the Senate and referred to the Committee 
on Energy and Natural Resources on July 19, 2017.
    The Subcommittee on Water and Power held a legislative 
hearing on H.R. 2786 on February 28, 2018.
    The Committee on Energy and Natural Resources met in an 
open business session on May 17, 2018 and ordered H.R. 2786 
favorably reported as amended.

                        Committee Recommendation

    The Senate Committee on Energy and Natural Resources, in 
open business session on May 17, 2018, by a majority voice vote 
of a quorum present, recommends that the Senate pass H.R. 2786, 
if amended as described herein.

                          Committee Amendment

    During its consideration of H.R. 2786, the Committee 
adopted an amendment to increase the installed capacity for a 
qualifying conduit facility from five to 40 megawatts, instead 
of eliminating the cap altogether.

                      Section-by-Section Analysis

Section 1. Qualifying conduit hydropower facilities

    Section 1 amends Section 30(a)(2)(C) of the FPA to reduce 
the time period to contest whether the conduit facility meets 
the qualifying criteria from 45 to 30 days. This section 
further amends section 30(a)(3)(C)(ii) of the FPA to raise the 
maximum installed capacity from five to 40 megawatts.

                   Cost and Budgetary Considerations

    The following estimate of the costs of this measure has 
been provided by the Congressional Budget Office:
    Under the Federal Power Act, the Federal Energy Regulatory 
Commission (FERC) licenses and regulates most nonfederal 
hydroelectric facilities. Under current law, hydroelectric 
projects with a capacity of less than 5 megawatts that generate 
power using water flowing through agricultural, municipal, or 
industrial conduits are exempt from FERC's licensing 
requirements. H.R. 2786 would expand that exemption to include 
facilities with capacities of up to 40 megawatts and would 
modify procedures for determining whether proposed facilities 
qualify for that exemption.
    CBO estimates that implementing H.R. 2786 would have no 
significant net effect on the federal budget. Expanding the 
size of projects that would be exempt from FERC's licencing 
requirements could reduce the agency's workload and costs to 
review and approve applications for licenses. However, because 
FERC recovers 100 percent of its costs through user fees, any 
change in that agency's costs (which are controlled through 
annual appropriation acts) would be offset by an equal change 
in fees that the commission charges, resulting in no net change 
in federal spending.
    Enacting H.R. 2786 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 2786 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 2786 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    On July 18, 2017, CBO transmitted a cost estimate for H.R. 
2786 as reported by the House Committee on Energy and Commerce 
on July 12, 2017. Although the two versions of the legislation 
differ with regard to the capacity of projects that would be 
exempt from licensing requirements, neither would have a 
significant net effect on the federal budget. Thus, the 
estimated costs are the same for both pieces of legislation.
    The CBO staff contact for this estimate is Megan Carroll. 
The estimate was reviewed by H. Samuel Papenfuss, 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 H.R. 2786. 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 H.R. 2786, as ordered reported.

                   Congressionally Directed Spending

    H.R. 2786, as ordered reported, does not contain any 
congressionally directed spending items, limited tax benefits, 
or limited tariff benefits as defined in rule XLIV of the 
Standing Rules of the Senate.

                        Executive Communications

    The testimony provided by the Federal Energy Regulatory 
Commission at the February 28, 2018, hearing on H.R. 2786 
follows:

                  Federal Energy Regulatory Commission

Re S. 1142, H.R. 2457 and H.R. 2786.

Hon. Lisa Murkowski,
Chairman, Committee on Energy and Natural Resources, Washington, DC.
    Dear Chairman Murkowski: This letter is in response to a 
request by the Senate Committee on Energy and Natural Resources 
for my views on S. 1142 and H.R. 2457, two bills to authorize 
the extension of the time to begin construction of the original 
licenses for the Red River Lock and Dam No 3. (FERC Project No. 
12756), Red River Lock and Dam No. 4 (FERC Project No. 12757), 
and Red River Lock and Dam No. 5 (FERC Project No. 12758), and 
H.R. 2786, a bill to amend the Federal Power Act (FPA) with 
respect to criteria and process for a proposed project to 
qualify as qualifying conduit hydropower facility.

                               h.r. 2786

    Section 30(a) of the FPA exempts certain conduit hydropower 
facilities from the licensing requirements of the FPA. The 
provision requires an entity proposing to construct a 
qualifying conduit hydropower facility to file with the 
Commission a notice of intent to construct the facility, 
including sufficient information to demonstrate the facility 
meets the qualifying criteria. Once the notice of intent is 
filed with the Commission, section 30(a)(2)(B) requires the 
Commission to make an initial determination as to whether the 
facility meets the qualifying criteria within 15 days of 
receiving the notice of intent. The qualifying criteria, as 
defined in Hydropower Regulatory Efficiency Act (HREA) of 2013, 
include:
          i. the facility is constructed, operated, or 
        maintained for generation of electric power and uses 
        for such generation only the hydroelectric potential of 
        a non-federally owned conduit;
          ii. the facility has an installed capacity that does 
        not exceed 5 megawatts (MW);
          iii. on or before the date of the enactment of HREA 
        of 2013 (August 9, 2013), the facility is not licensed 
        under, or exempted from the license requirements.
    If the Commission makes an initial determination that the 
facility meets the qualifying criteria, section 30(a)(2)(B) 
requires the Commission to publish a public notice of the 
notice of intent to construct a qualifying conduit facility, 
giving the public the opportunity to comment on whether the 
facility meets the qualifying criteria. The FPA further states 
that if, not later than 45 days after the date of the 
publication of public notice, no entity contests whether the 
facility meets the qualifying criteria, the facility shall be 
deemed to meet the criteria. Although an uncontested facility 
is automatically deemed to qualify at the end of the notice 
period, as a matter of general practice the Commission issues a 
letter confirming that the facility qualifies. If an entity 
contests whether the facility meets the qualifying criteria, 
section 30(a)(2)(C) requires the Commission to promptly issue a 
determination as to whether the facility meets the criteria.
    H.R. 2786 would modify the qualifying conduit hydropower 
facility process in two ways. First, the proposed bill would 
shorten the comment period for the public, including state and 
federal resource agencies, from 45 to 30 days. For your 
information, FERC staff, on average, completes review of 
qualifying conduit facility applications shortly after the 45-
day notice period closes. In fiscal year 2017, Staff processed 
22 notices of intent to construct qualifying conduits in an 
average of 58 days, and has processed four such notices, in an 
average of 56 days, thus far in fiscal year 2018. The shortened 
public notice period established by H.R. 2786 could slightly 
reduce the processing time.
    The second modification to section 30 of the FPA would 
eliminate the existing 5-MW limit on qualifying facilities, 
thus allowing projects of unlimited capacity to meet the 
criteria for a qualifying conduit facility. This change could 
potentially establish a larger subset of hydropower projects 
that would not be required to be licensed or exempted by the 
Commission. Section 30, giving the Commission the authority to 
exempt certain small hydroelectric facilities from the 
requirements of Part I of the FPA, was added to the FPA in 
1978, and since that time, the Commission has issued only a 
handful of conduit exemptions over 5 MW. Accordingly, I am 
uncertain how many projects will be affected by this revision.
    Should Congress choose to remove the 5-MW ceiling on 
qualifying conduit hydropower facilities, such that these 
projects could be of any size, it might also consider removing 
the ceiling for conduit exemptions. Currently the maximum size 
of projects for which the Commission may issue conduit 
exemptions under its existing authority is 40 MW. It is not 
clear why there should be no limit on the size of qualifying 
conduit hydropower facilities and yet a 40-MW limit on conduit 
exemptions.
    If I can be of further assistance to you on this or any 
other Commission matter, please let me know.
            Sincerely,
                                         Kevin J. McIntyre,
                                                          Chairman.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
H.R. 2786 as ordered reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

THE FEDERAL POWER ACT

           *       *       *       *       *       *       *

    Sec. 29. That all Acts or parts of Acts inconsistent with 
this Act are hereby repealed: Provided, That nothing herein 
contained be held or construed to modify or repeal any of the 
provisions of the Act of Congress approved December 19, 1913, 
granting certain rights-of-way to the city and county of San 
Francisco, in the State of California: Provided further, That 
section 18 of an Act making appropriations for the 
construction, repair, and preservation of certain public works 
on rivers and harbors, and for other purposes, approved August 
8, 1917, is hereby repealed.
    Sec. 30. (a)(1) A qualifying conduit hydropower facility 
shall not be required to be licensed under this part.
    (2)(A) Any person, State, or municipality proposing to 
construct a qualifying conduit hydropower facility shall file 
with the Commission a notice of intent to construct such 
facility. The notice shall include sufficient information to 
demonstrate that the facility meets the qualifying criteria.
    (B) Not later than 15 days after receipt of a notice of 
intent filed under subparagraph (A), the Commission shall--
          (i) make an initial determination as to whether the 
        facility meets the qualifying criteria; and
          (ii) if the Commission makes an initial 
        determination, pursuant to clause (i), that the 
        facility meets the qualifying criteria, publish public 
        notice of the notice of intent filed under subparagraph 
        (A).
    (C) If, not later than [45] 30 days after the date of 
publication of the public notice described in subparagraph 
(B)(ii)--
          (i) an entity contests whether the facility meets the 
        qualifying criteria, the Commission shall promptly 
        issue a written determination as to whether the 
        facility meets such criteria; or
          (ii) no entity contests whether the facility meets 
        the qualifying criteria, the facility shall be deemed 
        to meet such criteria.
    (3) For purposes of this section:
          (A) The term ``conduit'' means any tunnel, canal, 
        pipeline, aqueduct, flume, ditch, or similar manmade 
        water conveyance that is operated for the distribution 
        of water for agricultural, municipal, or industrial 
        consumption and not primarily for the generation of 
        electricity.
          (B) The term ``qualifying conduit hydropower 
        facility'' means a facility (not including any dam or 
        other impoundment) that is determined or deemed under 
        paragraph (2)(C) to meet the qualifying criteria.
          (C) The term ``qualifying criteria'' means, with 
        respect to a facility--
                  (i) the facility is constructed, operated, or 
                maintained for the generation of electric power 
                and uses for such generation only the 
                hydroelectric potential of a non-federally 
                owned conduit;
                  (ii) the facility has an installed capacity 
                that does not exceed [5] 40 megawatts; and
                  (iii) on or before the date of enactment of 
                the Hydropower Regulatory Efficiency Act of 
                2013, the facility is not licensed under, or 
                exempted from the license requirements 
                contained in, this part.

           *       *       *       *       *       *       *

                                  [all]
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