2020 Mid-Year Hydropower Update

HYDRO LAW

2020 Mid-Year Hydropower Update

By Morgan Gerard, Elizabeth McCormick, and Chuck Sensiba

The Washington, DC, headquarters of the U.S. Environmental Protection Agency.

During the first half of 2020, the hydropower industry has been subject to major regulatory changes that are likely to have far-reaching and significant consequences for licensees, regulators, and other stakeholders. These changes include two major rules altering longstanding regulations pertaining to the Clean Water Act (CWA) and the National Environmental Policy Act (NEPA); proposed changes to the Federal Energy Regulatory Commission’s (FERC) dam safety program following the catastrophic dam failures in Michigan; and several key pieces of proposed legislation working their way through Congress.

Section 401 Rulemaking

On June 1, 2020, the U.S. Environmental Protection Agency (EPA) issued a final rule that revised the nearly-50-year-old water quality certification (WQC) regulations established by section 401 of the CWA. Prior to the issuing of this rule, the EPA’s regulations implementing section 401 were broad, giving states extensive power to impose a wide variety of conditions on proposed projects. Those conditions are often costly to implement and maintain and inject a large degree of uncertainty into hydropower development and licensing. In its final rule, the EPA clarified that “section 401 appropriately focuses on addressing water quality impacts from potential or actual discharges from federally licensed or permitted projects.” In other words, the EPA’s final rule requires states and tribes to focus their review on the water quality of the discharge, not on the overall activity that is the subject of the federal permitting effort.

The final rule also clarified the time period for section 401 state review, providing that 1 year is the “absolute outer bound” for states to act on requests for WQC, and that the 1‐year period begins on the date the state receives a certification request, meaning a signed and dated written communication requesting certification with a description of the project, its discharges, and receiving waters. The rule would also prohibit a state and applicant from engaging in a coordinated effort of withdrawal and resubmittal requests to toll, or restart, the 1‐year period.

The EPA’s final rule also provided that a state will be considered to have waived its certification authority when it “fails or refuses to act” on a section 401 certification application within the “reasonable period” designated by the federal permitting agency. In addition, the final rule is explicit that a state “fails or refuses” to act when it fails to issue a WQC or denial in writing or to follow the procedural requirements of section 401.

NEPA Rulemaking

On July 16, 2020, the Council on Environmental Quality (CEQ) published its long-awaited final rule to amend its regulations implementing NEPA, introducing important changes to the 40‐year-old review process. The CEQ’s revisions codify many streamlined practices aimed at speeding up the infrastructure-approval process, including reduced time frames to complete NEPA reviews; page limits, content guidelines, and recommended a format for NEPA documents; and a process for referrals to the CEQ of actions causing unsatisfactory environmental effects. Most notably, the CEQ’s rule eliminated the definitions of direct, indirect, and cumulative impacts and provided that a cumulative impacts analysis is no longer required as part of a NEPA review, though federal agencies are still free to consider the effects of climate change in certain situations. The final rule also eases public participation requirements, provides additional guidance on when an agency may issue a Finding of No Significant Impact, and clarifies that agencies are only required to consider a “reasonable” number of alternatives to the proposed action “that are technically and economically feasible, meet the purpose and need for the proposed action, and, where applicable, meet the goals of the applicant.” The rule will apply to reviews commencing after September 14, 2020.

Legislative Updates

The first several months of 2020 have also seen a number of legislative proposals that will, if finalized, affect hydropower owners and operators. On June 29, Congresswoman Cathy McMorris Rodgers introduced the Hydropower Clean Energy Future Act, which affirms that hydropower is a “renewable resource” for purposes of all federal programs and designates FERC as the lead agency for the purposes of all federal authorizations and for complying with any required state or local environmental reviews. The bill aims to improve coordination among permitting agencies and provides exemptions from licensing requirements for certain small hydroelectric projects that are unlikely to jeopardize threatened or endangered species or critical habitats. It also provides for the expedited licensing of certain hydropower projects that use technologies that protect, mitigate, or enhance environmental resources and are not in “widespread, utility-scale use in the United States.”

On June 30, Democratic members of the House Select Committee on the Climate Crisis released a Climate Crisis Action Plan that would establish a clean energy standard to attain net-zero electricity sector emissions by 2040 and would include hydropower as a zero-emission technology. It would also recommend that Congress expand the production tax credit for qualified hydropower facilities, provide incentive payments to make efficiency improvements at existing hydropower facilities, and provide additional funding for marine generation research.

Dam Safety

On June 22, Democratic members of the House of Representatives released the Moving Forward Act, which aims to encourage investment in infrastructure and includes several provisions on hydropower and dam safety. In response to the May 2020 breach of Sanford and Edenville Dams in Michigan, the Moving Forward Act would amend the Federal Power Act to provide assurances that FERC’s dam safety requirements have been satisfied and would require FERC to establish procedures to determine the financial ability of a license applicant to meet dam safety requirements. It would also require that FERC hold a dam safety technical conference by April 2021 to provide information to states on dam maintenance and repair, risk-informed decisionmaking, climate and hydrological changes that may affect the safety and structural integrity of dams, and high-hazard dams. A related provision of the House Transportation Committee’s Water Resources Development Act (WRDA) of 2020 would amend the National Dam Safety Program, which is run by the Federal Emergency Management Agency (FEMA). Section 135 of WRDA would bring FERC-licensed projects with a capacity of 1.5 megawatts or less under the jurisdiction of the FEMA program, potentially requiring the owners and operators of those dams to comply with the safety programs of both FERC and FEMA.

Finally, on July 16, 2020, FERC issued a notice of proposed rulemaking to overhaul its part 12 dam safety program regulations. The notice, which is subject to a 60‐day comment period, contains three major changes to FERC’s dam safety regulations. First, it would provide for a two-tiered inspection process that alternates between more in-depth “comprehensive assessments” and “periodic inspections” that would be narrower in scope. Second, it would revise FERC’s process for evaluating independent consultants that perform dam safety inspections. Finally, it would codify existing guidance requiring licensees of highhazard dams to have an owner’s dam safety program.

Morgan Gerard is an associate at Troutman Pepper. She can be contacted at morgan.gerard@troutman.com. Elizabeth McCormick is an associate at Troutman Pepper. She can be contacted at elizabeth.mccormick@troutman.com. Chuck Sensiba is a partner at Troutman Pepper. He can be contacted at charles.sensiba@troutman.com.