Resource Agencies Issue Rules Implementing Hydroelectric Licensing Provisions of Energy Policy Act of 2005

On November 17, the Departments of Agriculture, the Interior, and Commerce (Departments) jointly issued interim final rules establishing procedures that implement the hydroelectric licensing provisions of section 241 of the Energy Policy Act of 2005 (EPAct). The procedures relate to the trial-type hearing permitted by EPAct on disputed issues of material fact relating to the Departments’ mandatory conditions and prescriptions, pursuant to sections 4(e) and 18 of the Federal Power Act (FPA). In addition, the rules address the new section 33 of the FPA, added by section 241 of EPAct, which allows a license applicant or any other party to the license proceeding to propose an energy-saving or cost-saving alternative condition or prescription, and requires the conditioning or prescribing Department to accept the alternative if it meets certain environmental criteria.

The new rules are effective immediately and apply to any license proceeding for which the Federal Energy Regulatory Commission (FERC) has not issued a license as of the effective date of the rules. In addition, the rules apply in post-license reopener proceedings if the Department reserves its authority in the license to submit conditions or prescriptions and subsequently exercises that authority. Although the new rules took effect on November 17, 2005, the Departments have requested comments on how the rules may be improved. The deadline for comments is January 17, 2006. The Departments will consider promulgating revised final rules within 18 months of the effective date of the rules.

Overview

The Departments issued three substantively identical rules – one for each Department – to account for minor differences relating to their organizational components and statutory authority. The rules establish how both the trial-type hearing and alternative conditions and prescriptions established by EPAct fit within FERC’s recently promulgated Integrated Licensing Process (ILP) for hydroelectric license applications. Specifically, the rules provide that:

• Pursuant to FERC’s ILP regulations, the Departments are required to submit any preliminary section 4(e) conditions or section 18 prescriptions within 60 days after FERC issues its Ready for Environmental Analysis notice. Following the submittal of any such condition or prescription, the Departments’ new rules allow any party to the license proceeding, within 30 days, to: (1) request a hearing on any disputed issues of material fact; and (2) submit alternative conditions and prescriptions. A request for hearing must: identify the disputed facts and explain why those facts are unfounded, erroneous, and material; cite any studies or documents relied upon and provide copies of any such documents not already in the record; and list witnesses and exhibits the party intends to rely upon at the hearing.
• The Departments will then have 30 days to determine whether to stipulate to some or all of the facts alleged to be in dispute and to file an answer to the hearing request. During this time, the Departments will consider whether any proposed alternatives could preclude the need for a hearing.
• If there is still a need for hearing, the Departments will refer the case to an administrative law judge (ALJ). The 90-day hearing process will begin when the case is referred to an ALJ, and will include an initial prehearing conference, discovery, an evidentiary hearing for the presentation of evidence and cross-examination, the submission of post-hearing briefs, and issuance of the ALJ’s findings of fact.
• FERC’s draft National Environmental Policy Act (NEPA) document will include for comment the Departments’ preliminary conditions and prescriptions, together with any proposed alternatives. The parties and the Departments will then submit comments on the draft NEPA document, using facts as found by the ALJ.
• After considering and analyzing comments received on their preliminary conditions and prescriptions, the ALJ’s decision, comments on the draft NEPA document, and any proposed alternatives, the Departments will issue modified conditions and prescriptions and file the required analyses of the alternatives within 60 days of the close of the comment period on FERC’s draft NEPA document.
• Under the new section 33 of the FPA, if FERC finds that the modified conditions and prescriptions are inconsistent with the FPA or other applicable law, it may refer the matter to its Dispute Resolution Service (DRS). The DRS will consult with the Departments and FERC and issue a non-binding advisory. The Departments will consider the advisory and issue a final determination on the conditions and prescriptions.
• FERC will then issue its final NEPA document and license order with any final mandatory conditions and prescriptions submitted by the Departments.

The rules provide for a single hearing to be held for all conditions or prescriptions issued by one Department, and if parties request a hearing from more than one Department, the Departments will attempt to consolidate the cases if there are common issues of fact. Even if the Departments consolidate hearings, the rules nonetheless limit the hearing to 90 days, even though the rules recognize the significant challenge posed by completing the hearing process in 90 days. To stay within the statutory 90-day timeframe, the rules require that:

• Discovery motions are due within 7 days after the Department’s issuance of the notice that the hearing request has been referred to an ALJ. Parties are required to confer prior to the initial prehearing conference in an attempt to reach an agreement on discovery.
• At the initial prehearing conference, which will be held approximately 20 days after the Department issues the referral notice, the ALJ will identify, narrow, and clarify disputed issues of material fact and set a schedule for completion of the hearing process.
• Discovery is limited to interrogatories, depositions, and requests for documents, tangible things, or entry on land. Discovery may be agreed to by the parties, or obtained with permission from the ALJ. All discovery must be completed within 25 days after the initial prehearing conference, unless the ALJ sets a different deadline.
• The ALJ will hold the hearing within approximately 15 days after the completion of discovery. The hearing may involve written and oral testimony, presentation of exhibits, and admission of written, oral, documentary, and demonstrative evidence. Although the standard of proof is a preponderance of the evidence, the rules request comments on who bears the burden of proof.
• Post-hearing briefs may be filed within 10 days after the close of the hearing, unless the ALJ sets a different deadline.

The ALJ’s decision must be issued within 30 days after the close of the hearing or 90 days after issuance of the referral notice, whichever is first. The decision must contain findings of fact on all disputed issues of material fact, and incidental conclusions of law necessary to make the findings of fact; it will not contain conclusions as to whether any preliminary conditions or prescriptions, or alternative conditions or prescriptions, should be adopted or rejected. The ALJ’s decision is final and will not be ripe for judicial review until the Departments complete the process of modifying conditions and prescriptions and FERC issues the license order.

Applicability

License applicants and other parties to a proceeding in which FERC has not issued a license may avail themselves of the new procedures. In addition, licensees and other parties to a proceeding may use the new procedures in post-license reopener proceedings if the Department reserves its authority in the license to submit conditions or prescriptions and subsequently exercises that authority. For license proceedings that are currently pending before FERC, the rules provide that the sequence and timing of the new procedures be adjusted to enable the license applicant or another party to take advantage of the procedures. In pending proceedings in which the deadline for filing preliminary conditions or prescriptions has passed, requests for hearing must be filed within 30 days of the issuance of the rules.