Hydropower Relicensing: Stakeholders' Views on the Energy Policy Act Varied, but More Consistent Information Needed
Published: 2010-08-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Under the Federal Power Act, the Federal Energy Regulatory Commission (FERC) issues licenses for up to 50 years to construct and operate nonfederal hydropower projects. These projects must be relicensed when their licenses expire to continue operating. Relevant federal resource agencies issue license conditions to protect federal lands and prescriptions to assist fish passage on these projects. Under section 241 of the Energy Policy Act of 2005, parties to the licensing process may (1) request a "trial-type hearing" on any disputed issue of material fact related to a condition or prescription and (2) propose alternative conditions or prescriptions. In this context, GAO was asked to (1) determine the extent to which stakeholders have used section 241 provisions in relicensing and their outcomes and (2) describe stakeholders' views on section 241's impact on relicensing and conditions and prescriptions. GAO analyzed relicensing documents filed with FERC and conducted a total of 61 interviews with representatives from relevant federal resource agencies, FERC, licensees, tribal groups, industry groups, and environmental groups.
section_title: What GAO Found
paragraphs: Since the passage of the Energy Policy Act in 2005, nonfederal stakeholders--licensees, states, environmental groups, and an Indian tribe--used section 241 provisions for 25 of the 103 eligible hydropower projects being relicensed, most of which occurred within the first year. Of these 25 projects, stakeholders proposed a total of 211 alternative conditions and prescriptions. In response, the federal resource agencies (U.S. Department of Agriculture's Forest Service, Department of Commerce's National Marine Fisheries Service, and several bureaus in the Department of the Interior) accepted no alternatives as originally proposed but instead modified a total of 140 and removed a total of 9 of the agencies' preliminary conditions and prescriptions and rejected 42 of the 211 alternatives; the remaining alternatives are pending as of May 17, 2010. Under section 241, resource agencies must submit a statement to FERC explaining the basis for accepting or rejecting a proposed alternative. While agencies generally provided explanations for rejecting alternative conditions and prescriptions, with few exceptions, they did not explain the reasons for not accepting alternatives when they modified conditions and prescriptions. As a result, it is difficult to determine the extent, type, or basis of changes that were made and difficult to determine if and how the proposed alternatives affected the final conditions and prescriptions issued by the agencies. As of May 17, 2010, nonfederal stakeholders requested trial-type hearings for 18 of the 25 projects in which section 241 provisions were used, and three trial-type hearings were completed. Of the remaining 15 projects, requests for hearings were withdrawn for 14 of them when licensees and agencies negotiated a settlement agreement before the administrative law judge made a ruling, and one is pending because the licensee is in negotiations to decommission the project. In the three hearings held to date, the administrative law judge ruled in favor of the agencies on most issues. According to the federal and nonfederal relicensing stakeholders GAO spoke with, the section 241 provisions have had a variety of effects on the relicensing process and on the license conditions and prescriptions. While most licensees and a few agency officials said that section 241 encourages settlement agreements between the licensee and resource agency, some agency officials said that section 241 made agreements more difficult because efforts to negotiate have moved to preparing for potential hearings. Regarding conditions and prescriptions, some stakeholders commented that under section 241, agencies put more effort into reviewing and providing support for their conditions and prescriptions, but environmental groups and some agency officials said that in their opinion, agencies issued fewer or less environmentally protective conditions and prescriptions. Many agency officials also raised concerns about increases in workload and costs as a result of section 241. For example, their estimated costs for the three hearings to date totaled approximately $3.1 million. Furthermore, many of the stakeholders offered suggestions for improving the use of section 241, including adjusting the time frame for a trial-type hearing.
section_title: What GAO Recommends
paragraphs: GAO recommends that cognizant officials who do not adopt a proposed alternative include reasons why in their statement to FERC. The resource agencies generally agreed, but commented that no explanation is required when an alternative is withdrawn as a result of negotiations.

section_title: Letter
paragraphs: U.S. hydroelectric power (hydropower) projects generated over 272  gigawatt hours of power in 2009, or about 7 percent of all electricity  generated in the United States. Hydropower projects—which include  dams, reservoirs, stream diversion structures, powerhouses containing  turbines driven by falling water, and transmission lines—have several  advantages over other energy sources. Hydropower generation from  existing facilities produces little, if any, air pollution and greenhouse gas  emissions and can be adjusted quickly to match real-time changes in the  demand for electricity. In addition, hydropower projects can provide other  benefits, including flood control, irrigation, and recreation. However,  hydropower also has some disadvantages. For example, hydropower  projects may prevent fish from moving upstream or downstream,  disrupting the spawning cycle, and the projects’ turbines can kill or injure  fish passing through them. Hydropower projects can also alter stream  flows in ways that impair wildlife habitats and water quality.
Under the Federal Power Act (FPA), as amended, the Federal Energy  Regulatory Commission (FERC) issues licenses to construct and operate  nonfederal hydropower projects, such as those owned by public utilities or  private industry, including those located on federal lands. As of May 17,  2010, FERC has issued licenses for 1,016 hydropower projects. FERC can  issue licenses for up to 50 years, and when these licenses expire, projects  must be relicensed in order to continue operating.
While resource agencies and licensees may begin the relicensing process  up to 10 years before its expiration, the current FERC relicensing  process—the Integrated Licensing Process—begins 5 to 5-1/2 years before  a license is due to expire according to FERC’s timeline. After initial  meetings with FERC and other stakeholders, the licensee proposes a study  plan to review project operations and potential impacts of the hydropower  project, including environmental, recreational, and cultural impacts. FERC  reviews this plan and comments from other stakeholders, such as federal  resource agencies; makes revisions; and finalizes this plan. The licensee  conducts the studies identified in the plan and submits a license  application with proposed mitigations for impacts. After FERC receives  the application, federal resource agencies may submit preliminary  conditions, prescriptions, and recommendations. Section 4(e) of FPA  makes licenses for projects on federal lands reserved by Congress for  other purposes—such as national forests—or that use surplus water from  federal dams subject to mandatory conditions imposed by the head of the  federal agency responsible for managing the lands or facilities. These  conditions may be used to protect federal lands and their environmental,  recreational, and cultural resources; for this report, these are referred to  as conditions. Similarly, section 18 of FPA requires FERC to include  license prescriptions for fish passage issued by federal fish and wildlife  agencies; for this report, these are referred to as prescriptions. In  addition, the Electric Consumers Protection Act of 1986 added section  10(j) to FPA. This section authorizes federal and state fish and wildlife  agencies to recommend license conditions to benefit fish and wildlife that  FERC must include in the license unless it (1) finds them to be  inconsistent with law and (2) has already established license conditions  that adequately protect fish and wildlife.
For many years the hydropower industry had expressed concerns that  agency conditions and prescriptions added unnecessary costs to their  hydropower operations. Licensees contend that prior to the  implementation of section 241 of the Energy Policy Act of 2005, if they  disagreed with the preliminary conditions and prescriptions their only  option was to ask the resource agencies to hold further discussions and to  review the license terms. The agencies could decide on further review or  issue final conditions and prescriptions. Section 241 of the Energy Policy  Act of 2005 authorizes parties to the licensing process to (1) request a  “trial-type hearing” of not more than 90 days on any disputed issue of  material fact related to a condition or prescription and (2) propose  alternative conditions or prescriptions. Section 241 also requires the U.S.  Department of Agriculture (USDA), U.S. Department of the Interior  (Interior), and U.S. Department of Commerce (Commerce)—in  consultation with FERC—to jointly establish by rule, procedures  governing the processes for trial-type hearings and alternative conditions  and prescriptions. The agencies issued three substantively identical  interim rules on November 17, 2005, addressing trial-type hearings and  procedures for the consideration of alternative conditions and  prescriptions submitted by any party to a license proceeding. These  interim rules allow licensees and other nonfederal stakeholders to request  a hearing or submit alternatives within 30 days after the deadline for the  agencies’ filing of preliminary conditions and prescriptions with FERC.  When the interim rules were issued, some projects had already passed the  phase of the relicensing process where the section 241 provisions could be  used under the normal procedures defined by the interim rules, but were  allowed to use the provisions because they had not had new licenses  issued as of November 17, 2005. These projects are referred to as  “transition projects” in this report. In 2005, the resource agencies stated  they would consider revising the interim rules based on the comments  received and the initial results of implementation, and issue revised final  rules within 18 months of the effective date of the interim rules. However,  the 2005 interim rules remain in effect because the agencies have not yet  issued final rules.
In this context, you asked us to (1) determine the extent to which  licensees and other nonfederal stakeholders have used the section 241  provisions in relicensing projects and the outcomes associated with their  use and (2) describe federal and nonfederal stakeholders’ views on section  241’s impact on the relicensing process and on the conditions and  prescriptions in relicensing.
To determine the extent to which licensees and other nonfederal  stakeholders have used section 241’s provisions for trial-type hearings and  alternative conditions and prescriptions, we analyzed FERC summary  documents. To determine the outcomes of the use of section 241  provisions, we analyzed the relicensing documents filed with FERC for all  25 projects in which nonfederal stakeholders used section 241 between  November 17, 2005, and May 17, 2010. Our review included an analysis of  whether each alternative condition or prescription was accepted or  rejected and whether the preliminary condition or prescription associated  with this alternative was modified or removed. We have included criteria  for our categorization in tables 3 and 4 in this report. We also met with  FERC officials for further information about the use and results of the  section 241 provisions. To determine stakeholders’ views on section 241’s  impact on the relicensing process and the license conditions and  prescriptions, we conducted 32 interviews with officials from FERC;  Interior’s Bureau of Indian Affairs, Bureau of Land Management, Bureau of  Reclamation, National Park Service, Office of the Solicitor, Office of  Environmental Policy and Compliance, Office of Hearings and Appeals,  Fish and Wildlife Service (FWS), and U.S. Geological Survey; USDA’s  Forest Service; Commerce’s National Marine Fisheries Service (NMFS);  and the U.S. Department of Energy’s Bonneville Power Authority. We also  conducted 29 interviews with nonfederal stakeholders involved in the  relicensing process about their views of section 241. These stakeholders  included all of the licensees who used the section 241 provisions for the 25  relicensing projects, as well as a nonprobability sample of three other  licensees that have been engaged or recently engaged in the relicensing  process during the period of our review; environmental organizations  involved in hydropower issues; hydropower industry groups; and tribal  groups that have been affected by hydropower. We visited stakeholders  and hydropower projects in California, Oregon, North Carolina, and  Washington State. We selected these projects because their licensees were  either undergoing relicensing or had recently been relicensed and these  projects offered a variety of different characteristics including public and  private ownerships and eastern and western U.S. locations. While we  collected a variety of views on the effects of section 241, each hydropower  project is unique, and the effects of section 241 on one project may not  apply or may apply differently to another project. Thus, the results of our  interviews cannot be projected to the entire universe of all hydropower  projects in relicensing.
We conducted this performance audit from May 2009 to August 2010 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: FPA includes several provisions designed to protect fish, wildlife, and the  environment from the potentially damaging effects of a hydropower  project’s operations. Specifically:    Section 4(e) states that licenses for projects on federal lands reserved by  Congress for other purposes—such as national forests—are subject to the  mandatory conditions set by federal resource agencies, including the  Forest Service and the Bureau of Indian Affairs, Bureau of Land  Management, Bureau of Reclamation, and FWS.
Section 10(a) requires FERC to solicit recommendations from federal and  state resource agencies and Indian tribes affected by a hydropower  project’s operation on the terms and conditions to be proposed for  inclusion in a license.
Section 10(j) authorizes federal and state fish and wildlife agencies to  recommend license conditions to benefit fish and wildlife. FERC must  include section 10(j) recommendations in the hydropower licenses unless  it (1) finds them to be inconsistent with law and (2) has already  established license conditions that adequately protect fish and wildlife.
Section 18 requires FERC to include license prescriptions for fish passage  prescribed by resource agencies, such as FWS and NMFS.
Under section 241 and the interim rules, licensees and other nonfederal  stakeholders may request a trial-type hearing with duration of up to 90  days on any disputed issue of material fact with respect to a preliminary  condition or prescription. An administrative law judge (ALJ), referred by  the relevant resource agency, must resolve all disputed issues of material  fact related to an agency’s preliminary conditions or prescriptions in a  single hearing. The interim rules contain procedures for consolidating  multiple hearing requests involving the same project.
Under section 241 and the interim rules, licensees and other nonfederal  stakeholders may also propose alternatives to the preliminary conditions  or prescriptions proposed by the resource agencies. Under section 241,  resource agencies are required to adopt the alternatives if the agency  determines that they adequately protect the federal land and either cost  significantly less to implement or result in improved electricity  production. If the alternatives do not meet these criteria, the agencies  may reject them. In either case, under section 241, resource agencies must  formally submit a statement to FERC explaining the basis for any  condition or prescription the agency adopts and reason for not accepting  any alternative under this section. The statement must demonstrate that  the Secretary of the department gave equal consideration to the effects of  the alternatives on energy supply, distribution, cost, and use; flood control;  navigation; water supply; and air quality (in addition to the preservation of  other aspects of environmental quality). In addition, the resource agencies  often negotiate with the stakeholders who submitted the alternatives and  settle on modifications of the agencies’ preliminary conditions and  prescriptions.
FPA requires licensees to pay reasonable annual charges in amounts fixed  by FERC to reimburse the United States for, among other things, the costs  of FERC’s and other federal agencies’ administration of the act’s  hydropower provisions. To identify these costs—virtually all of which are  related to the relicensing process—FERC annually requests federal  agencies to report their costs related to the hydropower program for the  prior fiscal year. FERC then bills individual licensees for their share of  FERC’s and the other federal agencies’ administrative costs, basing these  shares largely on the generating capacity and amount of electricity  generated by the licensees’ projects. FERC deposits the licensees’  reimbursements—together with other annual charges and filing fees that it  collects—into the U.S. Treasury as a direct offset to its annual  appropriation. Receipts that exceed FERC’s annual appropriation are  deposited in the General Fund of the U.S. Treasury.
section_title: Section 241 Provisions Were Used in 24 Percent of Eligible Relicensing Projects, Resulting in Modified Conditions or Prescriptions for Most Projects and Three Hearings
paragraphs: Nonfederal stakeholders—licensees, states, environmental groups, and an  Indian tribe—used the section 241 provisions for 25 of the 103 (24 percent)  eligible hydropower projects being relicensed, although the use of these  provisions has decreased since its first year. In response to the use of  these provisions, resource agencies modified most of the conditions and  prescriptions that they had originally proposed. In addition, trial-type  hearings were completed for three projects, with the resource agencies  prevailing in most of the issues in these hearings.
subsections: section_title: Nonfederal Stakeholders for 25 Projects Have Used Section 241 Provisions, but Use Has Decreased Since Fiscal Year 2006
paragraphs: From November 17, 2005, through May 17, 2010, 103 hydropower projects  being relicensed, including 49 transition projects, were eligible for  nonfederal stakeholders to use the section 241 provisions to submit  alternative conditions or prescriptions or request a trial-type hearing.  Nonfederal stakeholders have used the provisions for 25 of these 103  projects, including 15 of the 49 transition projects. Table 1 shows the 25  projects, the nonfederal stakeholder proposing alternatives, the affected  federal resource agency, and whether the stakeholder requested a trial- type hearing. In each of these projects, the licensee submitted one or more  alternatives. In addition, in the DeSabla-Centerville, Klamath, and  McCloud-Pit projects, stakeholders other than the licensee also submitted  alternatives.
The use of section 241 provisions has decreased since the first year. In  fiscal year 2006, nonfederal stakeholders used section 241 provisions for  19 projects undergoing relicensing. By comparison, after fiscal year 2006,  nonfederal stakeholders used the provisions for only 6 projects. Fifteen of  the 19 projects in which stakeholders used the provisions in fiscal year  2006 were transition projects. These transition projects included 11  projects that had expired original licenses and were operating on annual  licenses at the time that the interim rules were implemented, which helped  create the initial surge of projects eligible to use section 241.
As table 2 shows, the number of eligible nontransition projects—projects  that had received preliminary conditions and prescriptions from federal  resource agencies after section 241 was enacted—for which nonfederal  stakeholders have sought to use section 241 provisions has declined since  the first year. However, the number of nontransition projects becoming  subject to these provisions has not widely varied.
section_title: Proposed Alternatives Often Resulted in Modified Conditions and Prescriptions
paragraphs: Licensees and other nonfederal stakeholders had proposed a total of 211  alternatives—194 alternative conditions and 17 alternative prescriptions—for  the 25 projects where section 241 provisions were used. However, these  numbers do not necessarily reflect the number of issues considered because  section 4(e) conditions and section 18 fishway prescriptions are counted  differently. For example, a resource agency may issue a section 4(e) condition  for each part of a particular topic. However, NMFS or FWS will typically issue  single section 18 fishway prescriptions with multiple sections. Of the 25  projects, stakeholders proposed alternative conditions for 19 and alternative  prescriptions for 9. Table 3 provides the number of alternative conditions  proposed, accepted, rejected, and pending, and the number of preliminary  conditions modified or removed for 19 of the 25 projects.
Table 4 provides the number of alternative prescriptions proposed,  accepted, rejected, and pending and the number of preliminary  prescriptions modified or removed in settlement for 9 of the 25 projects.
As the tables show, instead of accepting or rejecting alternative conditions  and prescriptions, resource agencies most frequently modified the original  conditions and prescriptions in settlement negotiations with the  nonfederal stakeholders. In all, resource agencies did not formally accept  any alternatives as originally proposed and instead    modified a total of 140 preliminary conditions and prescriptions for 22 of  rejected a total of 42 alternative conditions and prescriptions in 5 projects,  and  removed a total of 9 preliminary conditions and prescriptions in 4 projects.
Licensees submitted 204 of the 211 alternative conditions and  prescriptions. State agencies or nongovernmental organizations submitted  the remaining 7 alternative conditions, 4 of which were rejected by the  resource agencies, and 3 were being considered as of May 17, 2010.
Section 241 directs the Secretary of the relevant resource agency to  explain the basis for any condition or prescription the agency adopts,  provide a reason for not accepting any alternative condition under this  section, and demonstrate that it gave equal consideration to the effects of  the alternatives on energy supply, distribution, cost, and use; flood control;  navigation; water supply; and air quality (in addition to the preservation of  other aspects of environmental quality). Similarly, the agencies’ interim  rules provide, “The written statement must explain the basis for the  modified conditions or prescriptions and, if the Department did not accept  an alternative condition or prescription, its reasons for not doing so.”  While the agencies provided an explanation for rejecting all 42 alternative  conditions and prescriptions, they did not explain the reasons for not  accepting a proposed alternative for 127 of the 140 modified conditions  and prescriptions. Without an explanation, it is difficult to determine the  extent, type, or basis of changes that were made and difficult to determine  if and how the proposed alternatives affected the final conditions and  prescriptions issued by the agencies.
section_title: Three Trial-Type Hearings Were Completed, and Resource Agencies Have Prevailed on Most of the Issues Decided in These Hearings
paragraphs: As of May 17, 2010, nonfederal stakeholders requested trial-type hearings  for 18 of the 25 projects in which the section 241 provisions were used,  and 3 trial-type hearings were completed. Most of these requests were  made by licensees. The requests for hearings in 14 of the 18 projects were  withdrawn when nonfederal stakeholders and resource agencies reached a  settlement agreement before the ALJ made a ruling, and 1 request is  pending as of May 17, 2010, because the licensee is in negotiations to  decommission the project.
Prior to a trial-type hearing, an ALJ holds a prehearing conference to  identify, narrow, and clarify the disputed issues of material fact. The ALJ  must issue an order that recites any agreements reached at the conference  and any rulings made by the ALJ during or as a result of the prehearing  conference, which can include dismissing issues the ALJ determines are  not disputed issues of material fact. For the three projects that have  completed trial-type hearings, the number of issues in these projects was  reduced from 96 to 37 after prehearing conferences. In addition, in a  fourth project in which the federal resource agencies and the licensee  eventually reached a settlement before going to a hearing, the number of  issues was reduced from 13 to 1 after the prehearing conference.
As table 5 shows, the three trial-type hearings were held for the Klamath  project, in California and Oregon; the Spokane River project, in Idaho and  Washington; and the Tacoma project, in Colorado, all of which are  nontransition projects. In addition to the licensees requesting hearings,  one nongovernmental organization and one tribe requested a hearing for  the Klamath project. The Spokane River and Tacoma hearings were  completed in 90 days, the time allotted by the interim rule, while Klamath  required 97 days. As table 5 shows, of the 37 issues presented, the ALJ  ruled in favor of the federal resource agency on 25 issues, ruled in favor of  the licensee on 6 issues, and offered a split decision on 6 issues.
section_title: Stakeholders Cited a Variety of Effects from Section 241 Provisions on the Relicensing Process and on the License Conditions and Prescriptions and Suggested Improvements
paragraphs: According to the relicensing stakeholders we spoke with, section 241  provisions have had a variety of effects on relicensing in three areas: (1)  settlement agreements between licensees and resource agencies, (2)  conditions and prescriptions that the resource agencies set, and (3)  agencies’ workload and cost. Most licensees and a few resource agency  officials that we spoke with said that section 241 encourages settlement  agreements between the licensee and resource agency. In contrast, other  agency officials we spoke with said that section 241 made the relicensing  process more difficult to reach a settlement agreement with the licensee.  Regarding conditions and prescriptions, some stakeholders commented  that under section 241, resource agencies generally researched their  conditions and prescriptions more thoroughly, while all seven of the  environmental groups’ representatives and some resource agency officials  we spoke with said that resource agencies issued fewer or less  environmentally protective conditions and prescriptions. Resource agency  officials also raised concerns about increases in workload and costs as a  result of section 241. Finally, many of the stakeholders offered suggestions  for improving the use of section 241.
subsections: section_title: Most Licensees Reported That Section 241 Made Settlements Easier, but Some Resource Agency Officials Said It Made Settlements More Difficult
paragraphs: Most of the licensees and a few resource agency officials we spoke with  said that section 241 encourages settlement agreements between the  licensee and resource agency. Several licensees commented that before  section 241 was enacted, they had little influence on the mandatory  conditions and prescriptions and that the resource agencies had made  decisions on which conditions and prescriptions to issue without the  potential oversight of a third-party review. One licensee commented that  resource agencies had little incentive to work collaboratively with the  licensee during relicensing prior to section 241. Several licensees and a  few resource agency officials said that under section 241, some resource  agencies have been more willing to negotiate their conditions and  prescriptions to avoid receiving alternatives and requests for trial-type  hearings.
Some resource agency officials, however, said that in some cases, reaching  a settlement with the licensee has been more difficult under section 241  than in previous negotiations. Specifically, they noted the following:  If licensees request a trial-type hearing, resource agencies and licensees  have to devote time and resources to preparing for the potential upcoming  trial-type hearing instead of negotiating a settlement.
Section 241 made the relicensing process less cooperative and more  antagonistic when, for example, a licensee did not conduct the agencies’  requested studies, the agencies had less information to support their  conditions and prescriptions. As a case in point, one NMFS regional  supervisor told us that a licensee declined to conduct a study about the  effects of its dams’ turbines on fish mortality. However, the licensee  subsequently requested a trial-type hearing because, it argued, the agency  had no factual evidence to support the agency’s assertion that the turbines  injured or killed fish.
Some licensees used their ability to request a trial-type hearing as a threat  against the agencies’ issuance of certain conditions, prescriptions, or  recommendations. For example, two NMFS biologists and their division  chief told us that a licensee had threatened to issue a trial-type hearing  request on fish passage prescriptions if NMFS made flow rate  recommendations that it did not agree with.
The Hydropower Reform Coalition, a coalition of conservation and  recreational organizations, commented that from its experience,  participation in settlement negotiations under section 241 is “almost  exclusively limited to licensees.” It also commented that agreements  reached by the license applicant and resource agency are not  comprehensive settlement agreements in which licensees, state and  federal resource agencies, tribes, nongovernmental organizations, and  other interested parties are involved in the agreement.
section_title: Stakeholders Differed on the Effects of Section 241 on the Resource Agencies’ Conditions and Prescriptions
paragraphs: Some licensees said agencies now put more effort into reviewing and  providing support for their conditions and prescriptions because licensees  or other nonfederal stakeholders could challenge the terms in a trial-type  hearing. Several agency officials commented that they generally conduct  more thorough research and provide a more extensive explanation about  mandatory conditions and prescriptions than they had for projects prior to  section 241. A few agency officials also commented they are requesting  licensees to conduct more extensive studies about the effects of their  hydropower projects to ensure that the agencies have sufficient  information for writing conditions and prescriptions.
Views differed on whether conditions and prescriptions were as protective  or less protective since section 241 was enacted. All seven environmental  group representatives that we spoke with expressed concerns that  resource agencies were excluding and writing less protective conditions,  prescriptions, and recommendations to avoid trial-type hearings. For  example, one group commented that in one hydropower project, under  section 241, agency officials settled for stream flow rates that were lower  than necessary for protecting and restoring the spawning habitat for fish  that swam in the project area. Some agency officials said the conditions  and prescriptions they have issued are as protective as those issued prior  to the enactment of section 241. Others said that they now issue fewer or  less environmentally protective conditions or prescriptions to avoid a  costly trial-type hearing. In addition, some other officials commented that  instead of issuing conditions and prescriptions that could result in a trial- type hearing, agencies have either issued recommendations or reserved  authority to issue conditions and prescriptions at a later time. While a  reservation of authority allows the resource agency to issue conditions  and prescriptions after the issuance of the license, one regional agency  official told us that in his experience, this rarely occurs. At one regional  office, two staff biologists and their division chief told us that while they  still issue prescriptions that meet the requirements of resource protection,  these prescriptions are less protective than they would have been without  the possibility of a trial-type hearing.
section_title: Many Agency Officials Said That Section 241 Has Increased Their Workload, Added Costs, and Adversely Affected Their Ability to Complete Other Work
paragraphs: Many agency officials said that the added efforts they put into each license  application since the passage of section 241 has greatly increased their  workloads for relicensing. Several agency officials also told us that even  greater efforts are needed when a trial-type hearing is requested. To  complete the work needed for a trial-type hearing, agencies often need to  pull staff from other projects. According to these officials, at the local  level, pulling staff from other projects can result in the agency’s neglect of  its other responsibilities. Officials commented that whether they win or  lose a trial-type hearing, agencies must provide the funding for an ALJ,  expert witnesses, and their attorneys at a trial-type hearing. Although they  did not track all costs, the Bureau of Indian Affairs, Bureau of Land  Management, Interior’s Office of the Solicitor, FWS, Forest Service, and  NMFS provided individual estimates that totaled to approximately $3.1  million in trial-type hearings for the following three projects:    Approximately $300,000 for the Tacoma project.
Approximately $800,000 for the Spokane River project.
Approximately $2 million for the Klamath project.
Among all the resource agencies, only NMFS has dedicated funding for  section 241 activities. However, this funding only covers administrative  costs related to a trial-type hearing and does not fund NMFS’s program  staff or General Counsel staff for a hearing.
section_title: Stakeholders Have Suggestions to Improve Section 241
paragraphs: Many of the agency officials, licensees, and other stakeholders we spoke  with had suggestions on how to improve section 241 and the relicensing  process. For example, several licensees and agency officials raised  concerns that the 90-day period for a trial-type hearing, including a  decision, was too short and resulted in the need to complete an enormous  amount of work in a compressed time frame. Some said that an ALJ who  did not have a background in hydropower issues needed more time to  review the information presented following the hearing. Some  stakeholders suggested allowing the ALJ to make his or her decision  outside of the 90-day period. Other stakeholders, however, commented  that an extension of the 90-day period could result in greater costs for all  parties. One regional hydrologist suggested using a scientific peer review  panel rather than an ALJ to hear arguments. Some stakeholders also  suggested providing an opportunity to delay the start date of a trial-type  hearing if all parties were close to reaching a settlement.
The stakeholders we spoke with also had several suggestions that were  specific to their interests, which included the following:    A couple of licensees noted that while the provisions of section 241 may  be used after preliminary conditions and prescriptions are issued, they  would like to be able to use these provisions after the issuance of final  conditions and prescriptions because of concerns that the final conditions  and prescriptions could differ from the agreed-upon terms that were  arrived at through negotiations. These licensees assert that if they do not  have this option, their only recourse is to sue in an appeals court, after the  license has been issued. These licensees were not aware of any instance in  which the terms had drastically changed between negotiations and the  issuance of the final license.
Several environmental group representatives commented that while  section 241 allows stakeholders to propose alternative conditions and  prescriptions, they would like to be allowed to propose additional  conditions and prescriptions to address issues that the resource agencies  have not addressed in their preliminary conditions and prescriptions.  Three of these representatives also commented that the section 241  criteria for the acceptance of an alternative—adequately or no less  protective and costs less to implement—favored licensees, not  conservation groups. Instead, one representative suggested that the  criterion for an alternative should be that it is more appropriately  protective and not that it costs less to implement. In addition, another  representative suggested that all interested parties should be allowed to  participate in negotiations to modify the preliminary conditions and  prescriptions after the submission of an alternative. In his experience,  these negotiations have been limited to the stakeholder who uses the  provisions of section 241 and the resource agency.
A few resource agency officials suggested that licensees who lose the trial- type hearing should pay court costs, such as the costs of the ALJ. They  also suggested that licensee reimbursements for the relicensing costs go  directly to the resource agencies rather than the General Fund of the U.S.  Treasury.
Almost 5 years have passed since the interim rules were issued, and  several stakeholders that we spoke with expressed interest in having an  opportunity to comment on a draft of the revised rules when they become  available and before these rules become final. In addition, on June 2, 2009,  the National Hydropower Association—an industry trade group—and the  Hydropower Reform Coalition submitted a joint letter addressed to  Interior, NMFS, and USDA expressing interest in an opportunity to  comment on the revised rules before they become final.
section_title: Conclusions
paragraphs: Section 241 of the Energy Policy Act of 2005 changed the hydropower  relicensing process, including permitting licensees and other nonfederal  stakeholders to propose alternative conditions and prescriptions. All  parties involved in relicensing a hydropower project have an interest in  understanding how the conditions and prescriptions for a license were  modified, if at all, in response to proposed alternatives. Indeed, the interim  rules require agencies to provide, for any condition or prescription, a  written statement explaining the basis for the adopted condition and the  reasons for not accepting any alternative condition or prescription. While  we found that the agencies have provided a written explanation for all 42  rejected conditions and prescriptions, they provided a written explanation  of the reasons for not accepting a proposed alternative for only 13 of the  140 modified conditions and prescriptions. The absence of an explanation  makes it difficult to determine the extent or type of changes that were  made.
Furthermore, when the interim rules that implemented section 241 were  issued on November 17, 2005, the federal resource agencies stated that  they would consider issuing final rules 18 months later. Instead, nearly 5  years later, final rules have not yet been issued. Given this delay and the  amount of experience with section 241’s interim rules, many stakeholders  we spoke with had ideas on how to improve section 241 and several  expressed interest in providing comments when a draft of the final rules  becomes available.
section_title: Recommendations for Executive Action
paragraphs: To encourage transparency in the process for relicensing hydropower  projects, we are recommending that the Secretaries of Agriculture,  Commerce, and the Interior take the following two actions:    Direct cognizant officials, where the agency has not adopted a proposed  alternative condition or prescription, to include in the written statement  filed with FERC (1) its reasons for not doing so, in accordance with the  interim rules and (2) whether a proposed alternative was withdrawn as a  result of negotiations and an explanation of what occurred subsequent to  the withdrawal; and  Issue final rules governing the use of the section 241 provisions after  providing an additional period for notice and an opportunity for public  comment and after considering their own lessons learned from their  experience with the interim rules.
section_title: Agency Comments, Third-Party Views, and Our Evaluation
paragraphs: We provided the departments of Agriculture, Commerce, and the Interior;  FERC; the Hydropower Reform Coalition; and the National Hydropower  Association with a draft of this report for their review and comment.  FERC had no comments on the report. Commerce’s National Oceanic and  Atmospheric Administration (NOAA), Interior, USDA’s Forest Service, the  Hydropower Reform Coalition, and the National Hydropower Association  provided comments on the report and generally agreed with the report’s  recommendations.
While Forest Service, Interior, and NOAA generally agreed with our  recommendation that they file a written statement with FERC on their  reasons for not accepting a proposed alternative, they all cited a  circumstance in which they believed that they were not required to do so.  Specifically, the three agencies commented that under the interim rules,  they do believe that they are required to explain their reasons for not  accepting a proposed alternative when the alternatives were withdrawn as  a result of negotiations. Two of the agencies, Interior and NOAA, agreed to  indicate when a proposed alternative was voluntarily withdrawn, and  NOAA acknowledged that providing an explanation on what occurred  after the withdrawal of an alternative may be appropriate in some  circumstances. We continue to believe that providing an explanation for  not accepting a proposed alternative is warranted, even when the  proposed alternative is voluntarily withdrawn as a result of negotiations,  and we have modified our recommendation to address this situation. The  agencies could add transparency to the settlement process by laying out  the basis for the modifications made to the preliminary conditions and  prescriptions; the reasons the agencies had for not accepting the proposed  alternative, including those alternatives withdrawn as a result of  negotiations; and an explanation of what occurred subsequent to the  withdrawal. Further, no provision of the interim rules discusses  withdrawal of proposed alternatives or provides an exemption from the  requirement to explain why a proposed alternative was not accepted.  The agencies have an opportunity to clarify their approach to withdrawn  conditions and prescriptions as they consider revisions to the interim  rules.
Interior and NOAA commented that they agreed with our recommendation  regarding the issuance of final rules and are considering providing an  additional public comment opportunity. According to Interior and NOAA,  the resource agencies are currently working on possible revisions to the  interim rules.
NOAA also commented that resource agencies use the term “modified  prescription” as a “term of art” to refer to the agencies’ final prescription,  regardless of whether the final prescription actually differs from the  preliminary one. As we noted in table 4 of this report, we counted a  preliminary prescription as modified if the resource agency does not  explicitly accept or reject the proposed alternative. In response to this  comment, we added an additional clarifying footnote in the report.
Interior suggested that we clarify in our report that agencies have no  reason to write less protective recommendations because  recommendations cannot be the basis for trial-type hearing requests. We  did not change the language in our report because we believe that  Interior’s assertion that agencies have no reason to write less protective  recommendations may not always be the case. For example, as stated in  our report, NMFS officials told us that a licensee had threatened to issue a  trial-type hearing request on fish passage prescriptions if NMFS made flow  rate recommendations that it did not agree with.
The Hydropower Reform Coalition suggested that we collect additional  information and conduct further analysis on the use of the section 241  provisions. We did not gather the suggested additional information or  conduct additional analysis because in our view, they fell outside of the  scope and methodology of our report.
Appendixes I, II, III, IV, and V present the agencies’, the Hydropower  Reform Coalition’s, and the National Hydropower Association’s comments  respectively. Interior, NOAA, and the Hydropower Reform Coalition also  provided technical comments, which we incorporated into the report as  appropriate.
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If you or your staff have any questions about this report, please contact me  at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed are listed in appendix VI.
section_title: Appendix I: Comments from the U.S. Department of Agriculture
section_title: Appendix II: Comments from the U.S. Department of Commerce
section_title: Appendix III: Comments from the U.S. Department of the Interior
section_title: Appendix IV: Comments from the Hydropower Reform Coalition
section_title: Appendix V: Comments from the National Hydropower Association
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Ned Woodward, Assistant  Director; Allen Chan; Jeremy Conley; Richard Johnson; Carol Herrnstadt  Shulman; Jay Smale; and Kiki Theodoropoulos made key contributions to  this report.