Uncertainty? for sure

16 November 2001

Since 1997, when the US' Federal Energy Regulatory Commission (FERC) introduced alternative licensing procedures, hydro project licensees and prospective developers have had a choice between the new or the traditional process. But how do hydro interests decide between the two approaches to public involvement in licensing projects? Fred Ayer, an unabashed fan of FERC's new process, convenes a round table discussion with four licensing experts to canvass opinion and advice on where to go from here

You have been involved in both FERC's traditional and alternative licensing procedures (ALP). What are the key factors that licensees should evaluate when determining which to use?

Julie Keil: Licensees should make a comprehensive review before deciding how to structure their approach to relicensing. The terms 'traditional' and 'ALP' only scratch the surface of the possible permutations. In particular, I would recommend:

• An honest assessment of internal staff, their skills and predilections. An ALP may be somewhat labour intensive and require negotiation and communication skills that are not always developed in technical utility staff. Some of the functions simply must be undertaken by employees of the licensee, rather than by consultants. So knowing what you have to work with is important.

• Working out the level of agency commitment available and the experience of the staff. Are there a lot of licensings going on at once? Are agency staff experienced with the process? Do they know your projects and the rivers that are affected?

• Looking at the issues surrounding the project and the likely level of contention. Are there issues that have proven to be intractable in the past? Are there high profile issues?

Andrew Sims: The simplest evaluation technique is to ask: Where do you want to be when it's all over? To get to this answer, the licensee needs to sort out its own priorities and consider a range of factors that will contribute to what is essentially a risk analysis. I think it is pretty well accepted that a traditional process will minimise public interaction and the pre-filing cost of meetings, negotiations and consultants. On the other hand, the traditional process, almost by definition, leaves the resolution of issues to FERC after the application has been filed, and there may be post-filing costs associated with providing additional information to FERC for its analysis, as well as an extensive delay in getting a new licence. When viewed from a cost perspective, the choice of a process will determine whether the licensee's investment in obtaining a new licence is spent earlier or later in the process.

Jerry Sabattis: One key consideration that would lead a licensee to avoid ALP is licence competition. If a licence competitor is known (or suspected) up front, a licensee needs to consider that the ALP process creates much more up front exposure to public entities. The licensee's proprietary project information and study details could be literally stolen by a competitor. In the more closed traditional process this can be avoided to some degree.

In cases where the stakeholders and their resource management goals are well known by the licensee, environmental resource issues are readily identified and reasonable protection, mitigation and enhancement measures can be derived with a modest amount of study. The traditional process can be done at less cost than the ALP process. If these three factors are not evident up front and it appears that a traditional process would be fraught with controversy, and the National Environmental Policy Act (NEPA) process could go overboard with study demands on the licensee, then it might be better to pursue the ALP approach.


Thomas Sullivan: Generally, I think there are three factors a licensee should evaluate when deciding which process to use. The first is whether or not settlement of the issues that are likely to come up in the licensing is a possibility. If it is, the ALP may be useful in negotiating a lower level of effort in the issue identification and study phase.

The second factor to consider is what the desires of the stakeholders are. Many times stakeholders come to the table with the idea of a co-operative or collaborative process. Although collaboration is not required in FERC's ALP process it is a cornerstone of many of them. If the stakeholders have a high expectation for a collaborative and a track record of accomplishing settlements I tend to recommend the ALP. If they do not have a track record for settlements or are known to have a clear intent to bring up issues not related to licensing, we tend to favour the traditional process.

Finally, the licensee has to decide what level of resources they can realistically commit to licensing. We think communication is the key to successful licensing. However, many licensees do not have the resources for meeting intensive ALP processes. If that is the case I may recommend the traditional or an enhanced traditional process.

Although evidence points to more positive and less costly outcomes for ALP, there also appears to be many licensees who aren't ready to take the plunge yet. If ALP is such a good thing, why the hesitancy on the part of so many licensees?

Keil: I think there is some sentiment that all the evidence isn't in yet. Maybe the early ones got an advantage from being early, maybe they were the easy projects. Also, the traditional process does offer some advantages, at least at first blush. The traditional process would appear to give a licence applicant more opportunity to shape the process and tell its story. It also may cost less in the short term. This is not unimportant to licensees who are pressed to meet quarterly earnings targets.

Sullivan: I agree. The cost of the ALP process is likely to be the same, or higher, than the cost of a traditional process.There are opportunities for cost savings in the final enhancement package and the avoidance of litigation to get there.

Sims: Unfortunately, there simply is no hard information to support the intuitive conclusion that alternative processes are less costly or more successful. Since each licensee does its own accounting and since no universal standard exists for measuring success, we have to acknowledge that 'beauty is in the eye of the beholder'.

Ironically, the biggest reason behind hesitancy to tale up the ALP process, may be the uncertainty about the process itself than about the outcome. Even with an understanding of the potential advantages of the alternative process, a licensee may decide that an unstructured process, which the alternative approach could easily appear to be, offers more chance for mischief and the pressure to address extraneous political issues than the traditional process. Whether this is an uncertainty that's worth the trouble is a matter that each licensee will need to evaluate, based on their understanding of the issues, institutions and personalities involved.

The alternative process also involves a great deal of staff time and resources, as well as people skills, and may be seen as unnecessarily costly, especially by a licensee with only one or two hydro projects among other business responsibilities. Some licensees may be uncomfortable about being seriously outnumbered in negotiations with multiple parties.

Sabattis: My view is that the early NEPA objective of ALP can overwhelm the objective of focusing on project impacts and pursuing reasonable protection, mitigation and enhancement (PM&E) measures to address those impacts. The fear of ALP is that because NEPA is in the forefront, agencies and stakeholders will be inclined to run the gauntlet in NEPA study scoping to leave no stone unturned, and to account for all the flora and fauna regardless of any relationship to project impacts. We have proven with a couple of our projects that a modest amount of study can be applied with the goal of achieving a settlement agreement on PM&E measures.

Many licensees talk about not being ready to go 'all the way' to the ALP and are more comfortable with a hybrid process that does not include early NEPA and completing a draft environmental assessment. Doesn't the hybrid version create additional opportunities for rogue stakeholders to create mischief and extend the process through the late NEPA scoping?

Sabattis: There is risk that a hybrid process could create opportunities for a rogue stakeholder to create mischief later. We have experience of this happening, but I'm not sure if an ALP would have flushed them out early in the process either. The key to success of a hybrid process is to demonstrate with a comprehensive settlement agreement that the package of resource measures captured in the agreement is best adapted to address competing resource goals and is in the public interest. A rogue stakeholder coming in later then has the burden of proof.

Sullivan: The decision to go hybrid is often down to the rogue stakeholders you mention, but sometimes can be due to a lack of manpower to accomplish the ALP. It is important to remember that FERC licensing is an evidentiary proceeding. Rogue stakeholders can sometimes bring in issues that are unrelated to licensing or simply are a way of attempting to set regulatory or legal precedent. This makes negotiation in an ALP very difficult and creates a situation where the parties may need to rely on the more evidentiary traditional process. The hybrid allows the licensee and the other stakeholders to keep the door open to reasonable compromises.

Sims: If a hybrid process is understood to be a traditional, three-stage process with some sort of enhanced stakeholder consultation - but neither NEPA scoping nor a NEPA document - the licensee would presumably rely on more open and more frequent dialogue with stakeholders to help balance an outcome that the licensee could live with. If that turns out to be the case, the concern over post-filing mischief ought to be minimal.

Hybrids can open the door to enhanced consultation without taxing the licensee and stakeholders to the same degree as a collaborative. In some cases, agency personnel have spoken in favour of hybrid or even traditional relicensings because they expend less time on them. Licensees may be more comfortable with a hybrid because it is familiar territory. The secret to success with a hybrid process would be to effectively seek out, engage and meaningfully address the concerns of any stakeholder who could later file disruptive comments with the FERC during a FERC-conducted NEPA process. As with an alternative process that goes sour, a hybrid process would have to rely on the consultation record and on its ability to develop thorough and credible scientific data to file with its application.

Keil: I think licensees are not convinced that the labour and cost involved in an ALP is worth the measure of certainty gained. There is concern, although I am not aware of this having actually happened, that agencies will use the procedural step at which FERC adopts the preliminary draft environmental assessment as its draft environmental assessment to reopen issues or renege on agreements.

Do licensees favour the hybrid process because it means they may be able to look 'collaborative' by including stakeholders in their consultation process? At the same time they operate under existing conditions through the issuance of annual licenses in a contested proceeding occasioned by NEPA scoping which does not beginning until after the licence application is filed?

Keil: I wouldn't phrase it so negatively. Licensees have concerns and I think these are legitimate, about whether true collaboration or negotiation among equals is possible under the current set of rules. Not all parties to a relicensing have equal power. Indeed, the licensee may have less power than any other party at the table. In that circumstance, it is natural for licensees to hang on to what power they do have, since they see little or no evidence that others are willing to cede any of their power and authority.

Sims: I don't know of any case where a licensee has chosen a hybrid process in the expectation that it would somehow give them collaborative advantages, while preserving their chances to run on annual licences if FERC's NEPA process gets bogged down. It seems counter-intuitive that a licensee would expend considerable resources and invest its credibility in a hybrid approach without making a serious effort to complete a licence application that balances all stakeholder issues as equitably as possible in order to facilitate FERC's eventual NEPA analysis. I know of nothing that prevents a licensee in a hybrid process from designing into the process some level of issue scoping and alternative analysis that would effectively - if unofficially - anticipate the eventual FERC NEPA review.

Sabattis: A hybrid traditional process done merely to 'look collaborative' is liable to leave important stakeholders less than satisfied. A comprehensive settlement agreement might not be achieved resulting in the risk that FERC will require more studies to address the issues and render their decision. A licensee manipulating this process to prolong annual licences will be seen through by the other stakeholders. A licensee might be just as bad off running a hybrid process that is not sincerely inclusive than he would be running a pure traditional process.

Sullivan: I haven't seen this to be the case. Generally, I believe the licensees that choose the hybrid believe it is the best way for them to interact with their stakeholders.

Much is made of the uncertainty of the current relicensing process. Is uncertainty just a fact of life in hydro licensing?

Keil: Uncertainty is a fact of life in this process. Neither process will produce a certain outcome or necessarily long term stability through the licence term.

Sims: Yes uncertainty is unquestionably a fact of life in hydro licensing because we're talking about highly variable biological issues and subjective interpretations in many cases. The degree to which the licensee - or any stakeholder, for that matter - understands the potential extent of uncertainty is a factor of how well they do their homework before beginning the relicensing process. This applies equally to traditional and alternative approaches. The way to get to a peaceful and reasonable resolution of relicensing issues is to combine the practicality of the licensee and the energy of the local interest groups with the institutional needs of the agencies.

Sabattis: The choice of which process to follow involves a big risk assessment. However, uncertainty can be reduced by pursuing a process that ensures collaborative input up front either through the ALP or a tailored hybrid process as the relicensing situation warrants.

Sullivan: I really don't think the specific process matters. FERC licensing is basically a negotiation in an evidentiary proceeding. Communications are important for stakeholders to understand each other's interests and their best alternative to a negotiated agreement. It is also important for all stakeholders to understand when a negotiation isn't possible.

In those small percentage of cases it is better to understand this and it is better to be prepared to make your best case before FERC.


The alternative licensing procedures (ALP) can trace their roots to 1992, when the US Congress passed the National Energy Policy Act, which provided Federal Energy Regulatory Commission (FERC) licensees with alternatives in the method and timing of preparing environmental assessments (EA) and environmental impact statements (EIS). On 29 October 1997, FERC approved a Final Rule which created the ALP and allowed licensees, in co-operation with stakeholders, to use alternative approaches to combine pre-filing consultation,water quality certification (a state issued permit), licence preparation and environmental review into one process. ALP has given FERC licensees a wider range of options in the way they approach licensing and relicensing their hydro projects. The ALP encourages a more collaborative approach than FERC’s traditional licensing process and requires the licensee to file with FERC to get permission to use the new procedures. In making its decision to grant permission, FERC must conclude that a reasonable effort has been made by the licensee to contact all resource agencies, Indian tribes, citizens' groups, and others affected by the licensing or relicensing, and that a consensus exists that the use of alternative procedures is appropriate under the circumstances. Since the institution of ALP, only one licensee has been denied the use of the new procedures. While many licensees have seen the value of ALP, concern over what is perceived as an open-ended process has prompted some licensees concerned about losing control to create a variety of their own processes, which in turn are more open than FERC’s traditional licensing method, but not as open as the ALP – christening this new breed as hybrid-traditional or modified traditional etc.

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