Energy Law Advisory Bulletin
DWT Client Idaho Power Company is First to Take Advantage of New Federal Law Providing for Trial-Type Hearings Related to Hydroelectric Licensing Conditions
By James B. Vasile
[June 2006]
Idaho Power Company has become the first hydroelectric license applicant to complete the new evidentiary hearing process created by Section 241 of the Energy Policy Act of 2005 (EPAct 2005). This new process governs how federal resource agencies fulfill their statutory responsibilities to prescribe mandatory license conditions to protect federal “reservations” and to provide fish passage. Prior to the enactment of the EPAct 2005, there was little opportunity to challenge the factual basis of mandatory conditions. But, EPAct 2005 gives parties the right to request evidentiary hearings before an administrative law judge (ALJ)—which are to last no longer than 90 days—to resolve disputed material facts that underlie the prescribed conditions. Parties may also propose alternative conditions that would be more cost effective and achieve the same objectives.
At the time of enactment of the EPAct 2005, Idaho Power Company had an application for new license pending at the Federal Energy Regulatory Commission (FERC) for its 1166 MW, three-dam Hells Canyon Complex on the Snake River in Idaho and Oregon. As that project occupies lands of the U.S. Forest Service (USFS) and of the Bureau of Land Management (BLM), those agencies, pursuant to FERC’s schedule, prescribed preliminary mandatory conditions for the license on Jan. 26, 2006. As the first license applicant to have conditions prescribed after the promulgation of implementing regulations by the Departments of Commerce, Interior, and Agriculture, Idaho Power became the first applicant subject to the strict timelines and procedures for pursuing evidentiary hearings under the new Act and regulations.
Under the compressed timeframes mandated by the statute and the new regulations, Idaho Power had 30 days after the conditions were prescribed to request evidentiary hearings and propose alternative conditions. The Company requested hearings with respect to 10 of the USFS’ 27 conditions raising 26 disputed facts, and requested hearings with respect to 6 of BLM’s 19 conditions raising 9 disputed facts. Pursuant to the regulations, Idaho Power was required to specify the factual statements in dispute, the basis for the opinion that these statements were unfounded or erroneous, citations to evidence relied upon, and identification of witnesses and exhibits for hearing. Idaho Power also filed proposed alternative conditions at the same time.
In this case, the USFS and BLM decided not to consolidate their hearings, which was an option under the regulations. Accordingly, two separate prehearing conferences, one before a Department of Agriculture ALJ and one before a Department of the Interior ALJ, were held approximately 60 days after the requests for hearing were made. As a result of the conferences, written testimony deadlines were established and the evidentiary hearings were scheduled for June 12, 2006 in Boise (BLM) and June 19, 2006 in Portland (USFS). A flurry of discovery requests, motions, and objections were filed in both proceedings. In a little more than a month, over 30 pleadings and orders were filed in the BLM case; and in the USFS case, there were four intervenors and over 50 pleadings and orders filed between mid-April and the end of May.
As the “guinea pig” under this new statutory procedure, Idaho Power faced novel issues and all of those involved, including the ALJs, felt as if they were sailing uncharted waters. Both BLM and USFS moved that Idaho Power’s requests for hearing be dismissed on the basis that none of the issues Idaho Power wished to raise were factual or material, but were solely legal and policy issues within the agencies’ discretion. This attempt to prevent hearings from occurring was rejected by the ALJs in both proceedings.
In an order issued May 1, 2006, in the BLM proceeding Judge James H. Heffernan stated that “ BLM's motions seem to suggest that the proposed conditions filed with FERC were based either on whimsy or, in the alternative, solely on policy grounds with no factual underpinning." Subsequently, the ALJ in the USFS proceeding, Marc R. Hillson, reached a similar conclusion. In an order issued May 24, 2006, Judge Hillson denied the USFS motion to dismiss, holding that “while Judge Heffernan’s rationale in the parallel Department of Interior proceeding is not binding on me, I too find, that the arguments of the government in this matter would render the very purpose of the amended Federal Power Act as it applies to these proceedings virtually meaningless…Couching every factual issue as potentially involving a legal or policy decision, as the Forest Service and intervenors consistently appear to do, serves to do little but avoid the very task that Congress sought to impose on the administrative judiciary by the 2005 amendments.”
A separate novel issue was raised in both proceedings as to who bore the burden of proof. The agencies’ regulations deliberately sidestepped this thorny issue. Both ALJs decided that Idaho Power was challenging the agencies’ conditions and thus was the proponent that bore the burden of persuasion. Idaho Power had argued that the agencies were the proponents of the conditions and thus under the Administrative Procedure Act should bear the burden. Judge Heffernan disagreed, holding in an order issued May 3, 2006, that Idaho Power “is properly viewed as the proponent seeking a determination that BLM’s factual assertions are incorrect, and IPC, therefore, bears the burden of proof.”
Ultimately, separate settlements were reached with BLM and the USFS on all issues before the evidentiary hearings commenced, and the agencies submitted revised conditions to FERC for the Hells Canyon license. The revised conditions are significantly different from the preliminary conditions initially submitted by BLM and USFS. For example, the amount of land to be acquired to mitigate for impacts to terrestrial habitat was substantially reduced. The revised conditions also provide that FERC, not the BLM or USFS, will have the final say regarding approval of plans and implementation issues.
Although the process of conducting two separate evidentiary hearings simultaneously under compressed time frames was frantic, it forced all parties to focus intensely on what the probable impacts of the project are and how best to mitigate for them in the public interest. As a result, the conditions were clarified, refined and directed more specifically to mitigating for the actual impacts of the project. Overall, this first experience with Section 241 of the EPAct 2005 achieved positive results.
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This Advisory is a publication of the Energy Department of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in energy law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.
Copyright © 2006, Davis Wright Tremaine LLP.
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