RAPID/Best Practices/Negotiating Terms and Conditions: An Overview of the Federal Energy Regulatory Commission Hydropower Settlement Agreement Process
Negotiating Terms and Conditions: An Overview of the Federal Energy Regulatory Commission Hydropower Settlement Agreement Process
The process for obtaining, transferring, or surrendering a FERC hydropower license or exemption from licensing can involve a series of complex negotiations. The process may include stakeholders with different and competing objectives related to the original license, new license (i.e., relicense), transfer of a license, or surrender of a license (herein FERC authorization or authorization), which may cause licensing disputes. One mechanism to resolve disputes between project participants involving a FERC authorization is informal and formal settlement agreement conferences, which often result in settlement agreements addressing the disputed issues. To provide hydropower stakeholders with a better understanding of the FERC settlement agreement process, this report details:
- How to initiate a settlement agreement
- The procedural steps associated with the settlement agreement process
- The legal standards the Commission must adhere to when determining whether settlement agreement provisions can become lawful and enforceable terms or conditions of a FERC authorization
- Examples of settlement agreement provisions included as license terms and conditions or in off-license agreements from a collection of settlement agreements and Commission orders.
Summary of the Enforceability of Proposed Settlement Agreement License Terms and Conditions
The report provides specific information related to various types of settlement agreement and off license provisions including: dispute resolution, adaptive management, recreational enhancements, site access, cost-sharing, cost caps, mitigation and enhancement funds, water quality, flow level and management, species and habitat protection, preservation of historic properties, damages, and license term length.
This section summarizes the enforceability of various types of settlement agreement provisions and provides examples of how settlement agreement parties have incorporated these provisions as license terms and conditions and off-license terms. Table 1 provides a summary of proposed settlement agreement license terms and conditions that have tested the bounds of the Commission’s jurisdiction, and ultimately the enforceability of those terms and conditions. Table 2 provides a summary of common settlement agreement topics that parties include in settlement agreements as proposed license terms and conditions and/or as off-license terms.
|Type of Settlement Agreement Provision||Applicable Commission Enforceability Policy||Order Stating Commission Enforceability Policy||Example of Proposed or Actual Inclusion as License Term or Condition||Example of Proposed or Actual Inclusion as Off-license Agreement Provision||Considerations/Exceptions|
|Dispute Resolution||Traditionally dispute resolution provisions are outside of the scope of a license. However, the Commission has held that dispute resolution provisions may be included in a license but are only enforceable against the licensee.||Avista Corporation, 93 FERC ¶ 61,116 (2000) (rejection of dispute resolution settlement provision); Erie Boulevard Hydropower, L.P., 100 FERC ¶ 61,321 (2002) (approval of dispute resolution settlement provision, but only as enforceable against the licensees)||PPL Holtwood, LLC, Offer of Settlement and Explanatory Statement, (2009)*||The parties to a settlement agreement may consider negotiating dispute resolution terms in an off-license agreement to effectively bind all parties.|
|Adaptive Management||Adaptive management provisions may be included in a license. However, adaptive management provisions should be closely related to the project purpose and effects, include an upper and lower threshold (parameters) for certain actions, and/or provide an opportunity for Commission review before the licensee implements changes.||PacifiCorp, 105 FERC ¶ 62,207 (2003) (rejection of adaptive management settlement provision not requiring Commission approval for project modifications); Ketchikan Public Utilities, 126 FERC ¶ 62,205 (2009) (modification of adaptive management settlement provision to incorporate lower threshold for instream flow reductions)||Aquatic Settlement Agreement Wells Hydroelectric Project FERC License No. 2149 (2010) for license order Public Utility District No. 1 of Douglas County, Washington, 141 FERC ¶ 62,104 (2012)||If an adaptive management provision falls outside of preapproved parameters in the license, the Commission must have an opportunity to review any of the adaptive management requirements.|
|Recreational Enhancements||Recreational enhancement provisions may be included in a license, but should be necessary for project purposes, within the project boundary, and supported by substantial evidence.||Wisconsin Public Service Corporation, 104 FERC ¶ 61,295 (2003) (partial rejection of recreational enhancement settlement provision seeking removal of boating, camping, and fishing areas from the project boundary); New York Power Authority, 118 FERC ¶ 61,206 (2007) (partial approval of recreational enhancement settlement provision requiring additional parking, walkways, and improvement for the disabled within project boundary)||Relicensing Settlement Agreement for the Upper American River Project and Chili Bar Hydroelectric Project (2007) for license order Sacramento Municipal Utility District, 148 FERC ¶ 62,070 (2014)||The Commission has generally rejected recreation measures occurring outside of the project boundary.|
|Site Access||Site access provisions may be included in a license, but only the roads necessary to a project purpose or to mitigate project effects should be included in the project boundary and incorporated into the license.||PacifiCorp, 104 FERC ¶ 62,059 (2003) (rejection of site access settlement provision to construct roads outside the project boundary)||In Portland General Electric Co., 117 FERC ¶ 61,112 (2006), the Commission included “nonproject” U.S. Forest Service and county-owned roads outside of the license boundary, despite not being considered necessary for project purposes, because the road maintenance and funding provisions were required by the U.S. Forest Service’s 4(e) mandatory conditions pursuant to the Federal Power Act.|
|Cost Sharing||Cost-sharing provisions that require nonlicensees to share the costs associated with completing license requirements are generally beyond the Commission’s authority. Typically, the Commission only has jurisdiction over the licensee, and as such may not enforce cost-sharing measures requiring a nonlicensee to share the costs of performing license terms or conditions.||Alcoa Power Generating Inc., 110 FERC ¶ 61,056 (2005) (rejection of cost-sharing settlement provision because Commission does not have jurisdiction over nonlicensees included in the agreement)||A licensee may consider negotiating cost-sharing provisions in an off-license agreement to bind nonlicensees to any payment arrangements related to funding activities related to a project purpose or effect.|
|Cost Caps||Cost cap provisions are generally discouraged and not enforced by the Commission. The Commission has been consistent in rejecting spending limitations associated with cost caps and only including the provisions in licenses to indicate that the licensee has made a commitment to perform a certain activity associated with the project.||New York Power Authority, 105 FERC ¶ 61,102 (2003) (modification to cost cap settlement provision to eliminate limit for licensee’s costs to implement agreed-upon measures); City of Tacoma, Washington, 132 FERC ¶ 61,037 (2010) (approval of settlement provision for cost amounts not intended to serve as a cap on spending)||Relicensing Settlement Agreement for the Upper American River Project and the Chili Bar Hydroelectric Project (2007)||In City of Tacoma, Washington, 132 FERC ¶ 61,037 (2010), the Commission approved a spending amount settlement agreement provision for the relicense of a 131-MW hydropower project on the Skokomish River in Washington because the Commission held the included costs were not meant to serve as a spending limit or cap.
The parties to an agreement may consider negotiating spending caps in an off-license agreement to bind both licensees and nonlicensees to any payment arrangements associated with funding an activity related to a project purpose or effect.
|Mitigation and Enhancement Funds||Fund provisions establishing a financial account to support license activities may be included in a license. The Commission generally approves fund provisions related to environmental enhancement and mitigation if the licensee maintains control over the fund so that the Commission can ensure compliance.||Portland General Electric, 133 FERC ¶ 62,281 (2010) (approval of funding settlement provision where licensee clearly stated the types of measures to be funded to the satisfaction of the Commission); Alcoa Power Generating, Inc., 156 FERC ¶ 62,210 (2016) (rejection of funding settlement provision due to the Commission’s inability to ensure intended use of the funds)||York Haven Hydroelectric Project Offer of Settlement (2014) for license order York Haven Power Co., LLP, 153 FERC ¶ 62,233 (2014) (funding provision included pursuant to Clean Water Act Section 401, despite lacking a nexus to a specific project effect)||A fund provision should remove any contribution limits and provide licensee with control over the fund so that the Commission can ensure compliance.
Alternatively, a licensee may consider negotiating fund provisions in an off-license agreement to bind nonlicensees to any payment arrangements associated with funding an activity related to a project purpose or effect.
|License Term Length||License term length provisions establishing shorter or longer terms than the 40-year default policy for hydropower projects at non-federal dams may be included in a license. The Commission will approve these terms if they are explicitly agreed upon in a generally-supported comprehensive settlement agreement.||Policy Statement on Establishing License Terms for Hydroelectric Projects, 161 FERC ¶ 61,078 (2017) (adopting a 40-year default license term for original and new licenses for hydropower projects located at non-federal dams).||The Commission will not accept a shorter or longer term than the 40-year default policy if the term length conflicts with coordinating with other projects in a basin.
Settlement agreements that state the settlement parties would not oppose a certain term length or would support a term length within a range of years (e.g., 40-50 years) are not considered “an explicitly agreed upon license term.”
* FERC has not issued a final order on this licensing settlement agreement.
|Type of Settlement Agreement Provision||License Term and Condition||Off-License Provision|
|Flow Level and Management||X|
|Species and Habitat Protection||X|
|Mitigation and Enhancement Funds||X||X|
|Preservation of Historic Properties||X|
|License Term Length||X|
Settlement agreements are an accepted method to resolve disputes for any proceeding before the Commission. 18 C.F.R. § 385.601(a). Any hydropower project seeking a FERC authorization may enter into a settlement agreement to resolve a disputed issue. Further, the Commission encourages parties to enter into settlement agreements to resolve disputes. FERC Policy Statement on Hydropower Licensing Settlements (2006). This report summarized common settlement agreement provisions and the enforceability of these provisions by the Commission as license terms and conditions. The report provides a greater understanding of the bounds of the Commission’s jurisdiction as well as highlights other mechanisms (i.e., off-license agreements) for enforcing provisions negotiated by settlement agreement parties.