FERC Accepts ‘Deny Without Prejudice,’ Forces Hydropower Licensees into Regulatory Purgatory

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FERC Accepts ‘Deny Without Prejudice,’ Forces Hydropower Licensees into Regulatory Purgatory

DATE:

February 1, 2021

BY:

Dennis Cakert, Senior Manager of Regulatory Affairs and Market Policy, NHA

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FERC Accepts ‘Deny Without Prejudice,’ Forces Hydropower Licensees into Regulatory Purgatory

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By finding “deny without prejudice” fulfills a state’s obligations under the Clean Water Act, the Federal Energy Regulatory Commission (FERC) granted states a mechanism to delay the hydropower licensing process in perpetuity.

What Happened?

After decades of witnessing its authority usurped by schemes to avoid deadlines, FERC laid down the law the past twelve months and found states waived their rights if they took longer than the statutorily mandated “one year” to “act” on a request for water quality certification. FERC found states waived authority in eight protracted hydropower licensing proceedings (all in California), infusing hope into a hydropower industry long frustrated by extreme delays in permitting.

FERC began finding waiver at the direction of the federal judiciary, through its decision in the Hoopa Valley case. However, while FERC found waiver in some cases, it has adopted a careful reading of this directive and has been reluctant to crack down on all delays: While FERC was finding waiver in California, it denied waiver in other instances without clear evidence of a “coordinated scheme.”

In the most recent case, focused on Turlock and Modesto Irrigation Districts, FERC found that “denial without prejudice” is a sufficient action from a state regarding an application for water quality certification.

Why Does this Matter?

FERC’s decision in the Turlock and Modesto case reaffirms that states can use procedural tactics to hold hydropower licensees in an indefinite state of regulatory purgatory: On day 364 of the one-year timeline afforded by the Clean Water Act, a state can simply deny without prejudice, cite a lack of information, and force the applicant to reapply again next year. Confounding the difficulty, a letter stating “deny without prejudice” from a state is not a final agency action. Therefore, “deny without prejudice” is not reviewable in state court.

Hydropower resources are essential components of a climate solution, especially in California, where their water storage capabilities help mitigate the unpredictable impacts of climate change. Not only does water storage provide a dominant source of flexible carbon-free energy, it also ensures year-round water supply for agriculture. These resources should be prioritized and licensed efficiently and at least cost.

The exact date of license expiration and renewal for all hydropower licenses is known 40 years in advance. When it finally comes time for relicense, stakeholders should be prepared to get the people’s work done on time. In addition, the licensing process itself takes 5.5 years if everything goes perfectly, but averages between 7 to 8 years and sometimes as long as 20 years. Throughout this process, there are several opportunities for stakeholder concerns to be heard. For example: Despite finding California waived authority in eight proceedings, FERC has yet to issue a final license in any of those proceedings that fails to accommodate a single substantive condition requested by the state.

It’s tempting to feel sympathetic for California in the Turlock and Modesto case – California had not yet begun the CEQA process, nor had FERC finished its own NEPA process, thereby leaving the state short on information. However, stakeholders are given decades of lead time to prepare and there are multiple opportunities for input throughout the licensing process.

What’s Next?

While hope abounded among the hydropower industry the past twelve months, the pendulum has swung back in the other direction, and this time it’s even further than it was before.  There are potentially three different venues in which this issue could be addressed.

First, licensing reform is a top priority of the Uncommon Dialogue participants, a group of industry members and environmental non-governmental organizations (NGOs) focused on discerning hydropower’s role in addressing climate change.

Second, Turlock and Modesto Irrigation Districts can appeal FERC’s ruling to the judiciary, much like the Hoopa Valley Tribe did. The judiciary not only produced the Hoopa Valley decision, which sparked obedience to one year means one year, but also recently slapped FERC’s hand for the use of tolling orders to delay permitting. A successful appeal is certainly possible and is one development the hydropower industry, states, and FERC will be watching closely.

Third, if FERC is struggling to navigate a seemingly impossible task of refereeing a broken water quality certification process, strict enforcement of the one-year deadline is one sure-fire way to generate broad support for licensing reform.