FERC's Abdication of Jurisdiction over Hydroelectric Dams on Nonnavigable Rivers: A Potential Setback for Comprehensive Stream Management

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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. …