FERC's abdication of jurisdiction over hydroelectric dams on nonnavigable rivers: a potential setback for comprehensive stream management.

• Author: Mizejewski, Max J.
• Position: Federal Energy Regulatory Commission

1. INTRODUCTION

   Congress established the Federal Energy Regulatory Commission (FERC or Commission), originally known as the Federal Power Commission (FPC), in the Federal Water Power Act of 1920 (FWPA)(1) to provide comprehensive control over nonfederal hydroelectric development on the nation's waters.(2) Notwithstanding this mandate, the Commission recently denied that it had jurisdiction to relicense three hydroelectric dams on nonnavigable rivers.(3) This ruling means that the Commission is likely to excuse thirty-two other similarly situated projects from relicensing in the next few years.(4) If FERC relinquishes jurisdiction over these projects, important public and environmental protections may be lost.(5) FERC's uncertainty about its jurisdiction revolves around amendments made to the FWPA over sixty years ago, in 1935, that renamed the FWPA the Federal Power Act (FPA).(6) These amendments expanded the Commission's authority to require projects on nonnavigable rivers to be licensed. However, the amendments applied only to projects that had undergone construction or major modification after August 26, 1935, the date of the amendments.(7) Therefore, unless FERC determines that a project on a nonnavigable river has undergone major modification since 1935, it must find its relicensing authority in the 1920 FWPA.(8) The projects that are the subject of this paper were all built before August 26, 1935.

   The 1920 FWPA limited the Commission's express licensing authority to projects on navigable rivers.(9) However, the Act required the Commission to license projects on nonnavigable rivers if it determined that they affected the interests of interstate commerce.(10) The Commission interpreted this provision to give it an implied authority to license projects on nonnavigable rivers, and the Commission licensed approximately 125 such projects between 1920 and 1935.(11)

   In 1965, in Federal Power Commission v. Union Electric Company (Taum Sauk), the Supreme Court affirmed the Commission's authority to require projects on nonnavigable waters to be licensed if they were connected to an interstate power grid.(12) This decision prompted the FPC to encourage unlicensed projects that were on nonnavigable waters and connected to an interstate power and to file license applications, including those built before 1935.(13) After receiving applications from those projects that voluntarily filed, the Commission licensed the ones that were connected to an interstate power grid. Section 23 of the FPA makes it clear that these projects, collectively known as the Taum Sauk projects, are barred from operating without a license once the Commission determines that their connection with an interstate power grid affects interstate commerce.(14) This is true regardless of whether the projects have undergone any post-1935 construction.

   In 1972, in Farmington River Power Co. v. Federal Power Commission, Farmington River Power Company, the operator of a 1925 project on a nonnavigable river, appealed an FPG order commanding it to file a license application.(15) The company argued that section 23 of the 1920 FWPA gave it discretion not to file a license application.(16) The Second Circuit agreed, holding that because the original FWPA did not give the Commission authority to investigate a project's effects on interstate commerce unless an operator voluntarily filed a license application, and because the 1935 amendments were not retroactive, the FPC could not require Farmington Power to obtain a license.(17)

   Recently, FERC interpreted Farmington to mean that, absent post-1935 construction, the Commission loses jurisdiction over the Taum Sauk projects after the expiration of their licenses.(18) It is unlikely that Congress intended the Commission to relinquish its jurisdiction after making a determination that these projects affect interstate commerce. The Commission's jurisdiction over projects on nonnavigable rivers is now, and has always been, grounded on a determination that the project affects interstate commerce.(19) Once the Commission makes this determination, the agency has jurisdiction, which it does not lose unless it determines that the project no longer affects interstate commerce.

   FERC's determination that it now lacks jurisdiction over these projects seriously undermines the fundamental purpose of the FPA--to provide comprehensive management of all water-power resources in which the federal government has a legitimate interest.(20) This paper g examines FERC's jurisdiction to relicense pre-1935 hydroelectric projects located on nonnavigable rivers that have not undergone any post-1935 construction, are not located on lands of the United States, and do not use water power from a government dam. Part II discusses the history of the FPA and FERC's jurisdiction under the Act Part III examines the circumstances which led the FPC to license the thirty six Taum Sauk projects. Part IV discusses FERC's authority over the Bend Project, the first Taum Sauk project over which FERC relinquished its jurisdiction. Part V concludes that FERC's failure to assert jurisdiction over the Taum Sauk projects upon the expiration of their current licenses is a violation of the FPA.

2. FERC's JURISDICTION UNDER THE FEDERAL POWER ACT

   1. Historical Overview

      Early federal management of the nation's rivers focused primarily on navigation. The U.S. Army Corps of Engineers (Corps), the first federal agency in charge of river development, regarded rivers as highways for commercial transportation.(21) The Corps viewed all other uses, such as hydropower and irrigation, as secondary to navigation.(22) Consequently, early hydroelectric projects were developed under a hodgepodge of federal and local regulations.(23)

      In the late nineteenth century, the Progressive Conservationists criticized water-power development as being inefficient and based more on local politics than science.(24) The Progressive Conservationists sought to give equal consideration to river uses other than navigation, such as irrigation and energy production, in an effort to maximize the efficient use of river systems.(25) Largely through their efforts, a policy of comprehensive basin-wide planning for multiple uses eventually replaced the earlier navigation-oriented approach to river development.(26) This change in federal water policy laid the foundation for legislation, such as the Federal Water Power Act (FWPA), designed to encourage comprehensive development of the nation's water resources.

      The earliest federal legislation regulating dams was the Rivers and Harbors Act of 1890.(27) That statute required the consent of the Secretary of War for all obstructions in U.S. waters that were not within established harbor lines.(28) The Act, however, did not specify whether Congress's jurisdiction extended to nonnavigable rivers. Conservationists argued that a river system, if navigable in part, was a unit from its forest headwaters to its mouth, and that Congress had jurisdiction over the whole river.(29) The fact that activities in nonnavigable portions of navigable rivers can affect the navigability of the river downstream supported this notion. Private interests, such as power companies attempting to secure favorable water power legislation, argued that Congress had jurisdiction only over waters actually used for navigation.(30)

      In 1899, the Supreme Court settled this debate in favor of the conservationists, holding that the Rivers and Harbors Act gave the Corps jurisdiction to the full extent of the Commerce Clause.(31) Thus, the Corps could prevent construction in nonnavigable rivers that affected the navigable capacities of the river downstream.(32)

      Enactment of the FWPA, now renamed the Federal Power Act (FPA), was inspired in large part by America's participation in World War I. By 1917, certain coal and oil reserves, which then almost exclusively fueled the United States, were becoming increasingly sparse, and legislation to encourage alternative power sources had proved inadequate.(33) In December of 1917, President Wilson presented a draft water power bill to the relevant congressional committees.(34) The bill aimed to encourage development of America's largely untapped hydropower resources. After three years of debate, Congress passed the FWPA in 1920, providing comprehensive water power legislation for the nation's waters.(35)

   2. FERC's Licensing Authority

      The 1920 FWPA gave the Federal Power Commission (FPC) two sources of licensing authority, section 4(d) and section 23. Section 4(d) authorized the Commission to license projects 1) on navigable waters, 2) on public lands, or 3) using surplus water or water power from a government dam.(36) Thus, section 4(d) limited the Commission's licensing authority on private lands to projects on navigable waters. However, the Commission interpreted section 23 of the Act to give it an implied authority to license projects on nonnavigable rivers.(37) Section 23 allowed operators that were uncertain as to whether the Commission had jurisdiction over them to file a "declaration of intention" to build on a nonnavigable watercourse.(38) Filing this document obligated the Commission to determine whether a project would affect the interests of interstate commerce.(39) If the Commission determined that it would, the developer could not proceed with construction until obtaining a license.(40)

      The 1935 amendments, which renamed the FWPA as the FPA, extended the Commission's authority to require projects to obtain a license. Section 4(e) of the amended Act expanded the Commission's express licensing authority to include all projects on "streams or other bodies of water over which Congress has jurisdiction under its authority to regulate commerce with foreign nations and among the several States."(41) The purpose of this amendment was to clarify the Commission's pre-existing implied authority to license projects on nonnavigable waters...