Under the Federal Power Act (FPA), the Federal Energy Regulatory Commission (FERC) has jurisdiction over any project in navigable waters that uses water to generate electricity and is connected to the grid. With this jurisdiction, FERC has authority over the siting and licensing of hydrokinetic facilities, as well as the siting and licensing of transmission line(s) primary to a hydrokinetic facility.
Lead Agency: FERC is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. Within FERC, the Office of Energy Projects (OEP) is responsible for the approval and oversight of hydroelectric projects. OEP focuses on:
- Project siting and development;
- Balancing environmental and other concerns;
- Ensuring compliance; and
- Safeguarding the public.
FERC authorizes the construction and operation of hydroelectric projects that produce, transmit and sell electric power through a Federal Hydroelectric License, which may be issued for a term of up to 50-years. There are three processes that may be used to issue a license: the Integrated Licensing Process (ILP), the Traditional Licensing Process (TLP), and the Alternative Licensing Process (ALP). The default licensing process is the ILP; license applicants must request and receive approval from FERC to use the TLP or ALP.
Licensing processes for commercial-scale hydroelectric development are well established. However, many hydrokinetic technologies are in the testing and demonstration stages, and, in general, authorization processes for commercial projects are not necessarily well-suited to smaller scales of development. In response to the emerging hydrokinetic industry, FERC has and continues to seek innovative regulatory approaches that are more appropriate for these new renewable energy technologies.
Pilot Projects
In 2008, FERC issued Guidance for Pilot Project Licensing to provide an opportunity to prove emerging hydrokinetic technology devices, determine appropriate sites, and gather information on environmental and other effects of the devices.[1] The pilot project process is essentially a modified version of the ILP. It is designed to provide an expedited licensing process for demonstration projects while maintaining oversight and agency input.
Projects eligible to use this pilot process must be small, short-term (less than five years), removable or able to be shut down on short notice, and may not be located in waters with “sensitive designations.”[2] The study and information requirements for a pilot project license are less than those for a standard license, but the licensee must perform rigorous post-deployment monitoring. This pilot process utilizes an adaptive management approach to ensure environmental protection; for example, if post-deployment monitoring reveals negative impacts, the project may be modified or shut down. Essentially, the goal of pilot projects is provide an opportunity for the licensee to perform in-water testing that will provide the information needed to prepare a complete license application for a commercial scale project.
Test Projects
Certain situations may allow hydrokinetic developers to conduct some technology testing prior to receiving a hydroelectric license. The “Verdant Exception” allows deployment and operation of small, test facilities for the purposes of data collection to support license applications. To qualify for this type of exception, the test project must be less than 5MW, short-term (less than 18 months), and power generated from the test facility may not be sold.[3] If a hydrokinetic test project meets the requirements of the Verdant Exception, it may proceed with testing without a license from FERC. (Of course, the project must comply will all other applicable laws.) It should be noted that this type of exception is only valid in limited circumstances.
NOTE: The following “Review Process” section does not describe a particular licensing process; rather, it provides a general description of licensing procedures. Please refer to FERC’s Handbook for Hydroelectric Project Licensing for details about the particular procedures for each licensing process.
Review Process: FERC’s standard procedures for authorizing grid access are fairly simple and the process is relatively short.[4] At present, FERC is reviewing the need for technical requirements for the interconnection of large and small alternative energy technologies, as well as the need for creating specific requirements for their interconnection to the grid.[5] The FERC licensing process is a more complex process that generally consists of three phases: Pre-Filing, Filing, and Post-Filing.
Pre-Filing Developers seeking a standard license must submit a Preliminary Application Document (PAD) with detailed information about the proposed project prior to filing a license application.[6] Pre-Filing is initiated when a developer files a Notice of Intent (NOI) and PAD. After receiving the NOI/PAD documents, FERC will issue a notice to announce the availability of these documents for review. A comment period will follow, during which time agencies, stakeholders and interested parties have the opportunity to provide input on the proposed project. FERC will also solicit tribal consultation after receiving an NOI/PAD. In addition, FERC will hold a public meeting for further review of the PAD. After the comment period and public meeting, FERC will notice the conclusion of the Pre-Filing process and will make a decision on the requested process plan (i.e., TLP, ILP, or ALP). The timeframe for Pre-Filing may range from one to three years.
Filing The applicant will then file a complete license application, which should include a monitoring plan (revised per the Pre-Filing comments and recommendations), a draft Biological Assessment (DBA), and copies of applications for Water Quality Certification and CZM Consistency Determination. In addition, applicants must include certain information about recreation and aesthetic resources, as detailed in the Recreation and Aesthetics Information Requirements for FERC Licensing. License applications must also include a summary of recommended measures from NMFS, FWS, and state fish and wildlife agencies to protect fish and wildlife resources and to mitigate damages to resources that may be affected by the project.[7] Pursuant to § 10(j) of the Federal Power Act (FPA), a FERC license must include conditions for implementing these recommended measures; therefore, license applications must include a summary of the recommendations, a discussion of how the applicant is addressing them, and an explanation of how the proposed project complies with section 10(j) of the FPA.
Post-Filing After receiving the license application, FERC will conduct NEPA Scoping to determine whether (1) the proposed action is categorically excluded from detailed environmental review, or (2) the proposed activity requires detailed environmental review and documentation of likely environmental effects and possible alternative actions.[8] During the NEPA Scoping period, FERC will issue a Ready for Environmental Analysis (REA) Notice, and agencies and stakeholders can file recommendations, conditions, and comments on the application.
FERC then prepares NEPA documentation, which may be either an Environmental Assessment (EA) or an Environmental Impact Statement (EIS), depending on the quantity and complexity of the issues identified during scoping.[9] Further, under § 4(e) of the FPA, FERC must give equal consideration to energy conservation, protection, mitigation and enhancement of fish and wildlife, protection of recreational opportunities, and preservation of other features of environmental quality.
Preparation of the EA/EIS may take 12 – 24 months. Once the NEPA documentation is complete, FERC will issue a Draft EA/EIS for review and agencies and other parties may submit comments on it. After responding to comments and resolving any issues, FERC will issue a Final EA/EIS. Once the Final EA/EIS is complete, FERC may issue a license order.
Ancillary Authorizations: Regardless of the type of licensing process, applicants must provide evidence of compliance with all applicable local, state, tribal and federal requirements before implementing an action authorized by a FERC license. For example, a FERC license authorizes construction and operation of a project, but developers must also obtain use rights for the project site. Projects in state submerged lands generally require usage rights from the state (often in the form of a lease), and projects on the OCS require a Hydrokinetic Lease from the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), which must be secured before a FERC license may be issued for the project.[10]
Preemption: Although FERC generally requires license applicants to comply with all state and local requirements, the FPA gives FERC the authority to preempt state and local laws concerning hydroelectric licensing that directly conflict with FERC's authority. However, FERC must consider state and local concerns in deciding whether to issue a license, and its ability to preempt state law is extremely limited. Further, proprietary water rights and federally mandated state approvals cannot be preempted. For example, when states implement federally mandated authorizations, such as CZMA consistency findings or a Water Quality Certification, FERC cannot preempt the state’s decision.
Consultation: Consultation with various parties is required at certain times during every licensing process. While consultation periods and procedures will vary depending on the type of process used and the size and scope of the project, each licensing process entails a substantial level of consultation.
Process Time: Times vary depending on project size, location, and the type of licensing process, but it is generally expected to take three to five years from the filing of an NOI/PAD to issuance of an original license. Under the ILP, pre-filing consultation and studies are generally conducted over one to three years. Once a license application is deemed complete, it generally takes from one to two years for issuance of an original license, depending upon the complexity of the issues and the potential environmental effects.
For pilot projects, the FERC’s Guidance for Pilot Project Licensing indicates that a license decision may be reached within 6 – 12 months from the filing of a complete application.[11] It is important to note that this time frame does not necessarily apply to other required authorizations, so the overall time frame for authorizing a hydrokinetic pilot project could likely exceed 12 months.
License Fees: License holders are required to pay two types of annual fees: a) administration costs and b) land use charges. Non-municipal license holders begin paying annual administrative and land use charges when project construction begins; municipal entities begin paying when project operations commence.
Administration Costs License holders are required to pay reasonable annual charges for the costs of FERC’s administration of Part I of the Federal Power Act. For all projects over 1.5 MW, FERC calculates the administrative costs by dividing its total fiscal year program costs among all licensees, according to each project’s installed capacity.[12] FERC also collects administration fees for costs incurred by other federal agencies under FPA Part I. These fees are based on an allocated share of the other agencies’ documented fiscal year program costs (incurred under FPA Part I).
Land-Use Fees FERC assesses a per-acre charge for use of onshore tribal and government lands and government structures.[13] The rate for the per-acre fee is set by the USFS on a county-by-county basis.[14] FERC has no method of assessing use fees for offshore government lands.
Legal Authority: Federal Power Act (Title 18 CFR)