Section 241 Provisions Were Used in 24 Percent of Eligible Relicensing Projects, Resulting in Modified Conditions or Prescriptions for Most Projects and Three Hearings

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 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. 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. Three Trial-Type Hearings Were Completed, and Resource Agencies Have Prevailed on Most of the Issues Decided in These Hearings

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. The requests for hearings in 14 of the 18 projects were  withdrawn when nonfederal stakeholders and resource agencies reached a  settlement agreement before the ALJ made a ruling, and 1 request is  pending as of May 17, 2010,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. Stakeholders Cited a Variety of Effects from Section 241 Provisions on the Relicensing Process and on the License Conditions and Prescriptions and Suggested Improvements

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. 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. Most Licensees Reported That Section 241 Made Settlements Easier, but Some Resource Agency Officials Said It Made Settlements More Difficult

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. Conclusions

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. Recommendations for Executive Action

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.
Why GAO Did This Study

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.

What GAO Found

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.

What GAO Recommends

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.