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 November 30, 2011
FERC Proposes Annual Charge for Federal Land Hydropower Licensees

 The Federal Energy Regulatory Commission (FERC) earlier this month issued a proposal to revise the methodology for calculating rental rates for the use of government lands by hydropower projects. Under the proposal, FERC-regulated hydropower licensees must compensate the federal government for the use of federal lands, significantly increasing annual charges for many hydropower projects occupying federal lands.

The Notice of Proposed Rulemaking proposes to adopt the Bureau of Land Management's (BLM's) formula for calculating an annual charge. However, FERC proposes to create its own fee schedule of per-acre rental rates using the BLM formula, subject to one change in the land value component.

FERC said in a statement that the commission would use actual county land values from a national census, rather than assign counties to zones. The fee schedule will be updated every five years with new land values, and adjusted annually for inflation. The commission also proposed to stop doubling the per-acre rental rate for non-transmission line lands.

The proposal responds to a Jan. 4 decision by the U.S. Court of Appeals for the D.C. Circuit, which vacated FERC's 2009 final rule---an earlier attempt to establish annual charges for hydropower projects operating on federal lands. In the case City of Idaho Falls, Idaho, et al. v. FERC, the court ruled that the Administrative Procedure Act required FERC to seek notice and comment on the methodology used to calculate annual charges because the fee schedule was based on the 1987 BLM formula, and BLM had since made changes to the formula.

FERC issued a Notice of Inquiry this February seeking public comment on indices to calculate rental rates for use of government lands. Hydropower licensees have until Jan. 6, 2012 to provide written comments to FERC on the new proposal.

According to energy law firm VanNess Feldman, "FERC's proposed approach would significantly increase annual charges for many hydropower projects occupying federal lands." The firm also said that the proposed rule could significantly increase the land values used in calculating annual fees. It also "makes no adjustment for the difference in land values between agricultural lands and federal lands typically associated with hydropower projects," it concluded.

Sources: POWERnews, FERC