Calculation of Annual Rental for FERC Hydropower Projects
In Reply Refer To:
2800 (933) P
June 2, 2017
EMS TRANSMISSION: 6/6/2017
Instruction Memorandum No. ID-2017-009
Expires: 09/30/2020
To: Idaho District and Field Managers, and Realty Staff
From: State Director
Subject: Calculation of Annual Rental for FERC Hydropower Projects
Program Area: Rights-of-Way (ROW), Lands and Realty
Purpose: This Instruction Memorandum (IM) provides policy for assessing annual rental for ROWs associated with hydroelectric power (hydropower) projects on public land in Idaho. The policy addresses hydropower facilities that are licensed by the Federal Energy Regulatory Commission (FERC), as well as those that FERC has exempted from licensing requirements. The policy pertains to ROWs issued for facilities associated with non-Federal hydropower projects (Attachment 1), including but not limited to dams, penstocks, turbines, power plants, electrical lines, ditches/canals, pipelines, access roads, etc.
Policy/Action: The Bureau of Land Management (BLM) Idaho Realty staff will no longer request project-specific appraisals from the Office of Valuation Services (OVS) to determine annual rental for hydropower projects. In accordance with 43 CFR 2806 regulations and the BLM policy direction, the BLM Idaho Realty staff will take the following actions:
FERC-licensed hydropower projects where FERC currently collects a Land Use Fee: The BLM will not charge annual rental for FERC-licensed projects. Prior to the next billing cycle (DD: on or before December 31, 2017), if offices have been charging rent for licensed projects that affect public land, they will issue a notice to the affected holder that the BLM will no longer charge them rental. Please note, however, that the Authorized Officer may charge ROW rental for some facilities that are associated with licensed projects, as described in the “Purpose” section above. Questions pertaining to associated ROWs should be discussed with State Office Realty staff.
Hydropower projects that FERC exempts from licensing: When calculating annual rental, staff will either use the current BLM Linear Rent Schedule (WO IM 2016-008; October 16, 2015) or the FERC Fee Schedule (Attachment 3 or more recent update), depending on the type of ROW and/or the public land acreage covered by the project and its associated components, as documented in the ROW file.
Staff will use the BLM Linear Rent Schedule to calculate annual rental for ROWs that contain only linear features on public land (i.e., power lines, pipelines, access roads, etc.), including ROWs that were historically billed using an appraisal method.
For projects on public land that include both linear and non-linear features, or for projects where only non-linear facilities are located on public land, staff will utilize FERC’s Fee Schedule to calculate annual rent based on the public land acreage covered by the project and its associated components, as documented in the ROW file.
The ROW holders whose grants will be going through a rental change will be notified either through a Notice or a Decision depending on the date of authorization. According to 43 CFR 2806.10(b), holders of pre-Federal Land Policy and Management Act (FLPMA) grants will be sent a Decision with an opportunity for appeal and a hearing. Holders of post-FLPMA grants will only be sent a Notice. A Decision Letter template is enclosed as Attachment 2.
Timeframe: This IM is Effective upon Receipt
Background: The FLPMA Sec. 501(a)(4) and Federal regulations at 43 CFR 2801.9(b) require hydropower project developers to obtain a BLM ROW for the use of public land, and to also comply with requirements of the Federal Power Act (FPA) of 1935 (16 USC 791; 49 Stat.847) by obtaining a FERC license. Title 43, Section 1761 of the Energy Policy Act of October 24, 1992 (42 USC 13201; 106 Stat. 2776) amended the FPA by exempting from BLM ROW requirements certain hydropower projects that were developed within a FPA Sec. 24 reservation prior to October 24, 1992. Pursuant to 43 CFR 2804.28(a), however, this ROW exemption does not cover additional lands developed outside of the original FPA Sec. 24 reservation area after October 24, 1992.
The FERC is an independent commission responsible for regulating, reviewing, and approving non-Federal energy-related projects. In compliance with the FPA, FERC acts as the lead agency for National Environmental Policy Act compliance and license orders, and for determining consistency of projects with FPA requirements. The FERC issues three types of authorizations: licenses, conduit exemptions, and 10-megawatt (MW) exemptions. Section 10(e)(1) of the FPA requires FERC to establish “reasonable” annual charges for hydropower licensees’ use and occupancy of Federal land. On January 17, 2013, FERC issued a Final Rule revising regulations found at 18 CFR 11.2, and establishing a fee schedule for determining reasonable annual rental for use of Federal land by major (greater than 1.5 MW) hydropower project licensees. The attached FERC fee schedule, updated on February 28, 2017 (Attachment 3), shows hydropower project per-acre rental rates for each Idaho county.
Regulations at 43 CFR 2806.10 require holders of BLM ROWs to pay in advance a rent the BLM establishes based on sound business management principles and, as far as practical and feasible, using comparable commercial practices.
Much has been discussed recently regarding the application of rental rates for hydropower projects that affect public land. There are currently 33 BLM ROWs in Idaho that involve some portion(s) of a hydropower project or associated facility. Six hydropower projects are FERC-licensed and the rest are exempt from FERC licensing, although they still retain a FERC reference number by virtue of their application and receipt of exemption. Two of the FERC-licensed projects each have three associated BLM ROWs, while the remaining four licensed projects each have only one associated BLM ROW. See Attachment 1.
In the past, Idaho BLM offices have used various methods for calculating annual rent for ROWs associated with both FERC-licensed and exempted hydropower projects. Pursuant to 43 CFR 2806.15(b)(3), the BLM may waive or reduce rent for an authorization when the holder has another valid Federal authorization in connection with their grant and the United States is already receiving compensation for the authorization. In addition, the BLM Idaho State Director waived the rental requirement for one exempted project (Dworshak Fish Hatchery).
Some Idaho BLM offices have historically used appraisals performed by the OVS or its predecessors to determine annual rental. According to staff in the OVS Portland, Oregon office, however, the determination of rent for exempted hydropower projects by appraisal is possible, but no longer practical, given: 1) the lack of truly comparable rentals, 2) the confounding aspect of public purposes, and 3) the monopolistic relationship between the renter and the government. Also, costs for performing appraisals usually far exceed the resulting estimated annual rental rates. Based on these facts, and the 2013 Final Rule that revised FERC’s rental regulations, there is a need for a statewide consistent, sound, and cost-effective method for calculating rental for ROWs associated with hydropower projects.
The FERC’s 2013 Final Rule adopted a methodology promulgated by the BLM to determine the annual charge for the use of Federal land (projects greater than 1.5 MW). The Final Rule is based on the National Agricultural Statistics Service (NASS) Census data. Like the methodology set forth in the 2008 BLM Rule for Linear Rents, the formula in FERC’s Final Rule used four components: 1) an average per-acre land value by county, based on the “land and buildings” category from the NASS Census; 2) an encumbrance factor of 50 percent; 3) a rate of return; and 4) an annual adjustment factor. Beginning in FY 2016, FERC also began assessing annual rent for the use of Federal land by licensees of minor projects (i.e., projects with an authorized installed capacity of 1.5 MW or less), using the same methods used for larger projects.
Soon after the BLM issued its 2008 Rule for Linear Rents, the US Forest Service (USFS) adopted the rule to calculate annual fees associated with their special use permits, which is the document the USFS uses to authorize hydropower facilities on National Forest Lands. The current BLM per-acre rental schedule covers the period from CY2016 to CY2025. Based on the above information, the use of a rental rate schedule(s) appears to be the simplest solution for obtaining more consistent rental calculations state-wide.
Because both the BLM’s Linear Rental Schedule and FERC’s Fee Schedule are based on the NASS Census data, adopting a policy to use one or the other of the fee schedules to assess annual rent (based on the types(s) of facilities being addressed) provides for reliable, less costly, and more timely and efficient rental calculations. These methods were developed using sound business management principles, and provide for state-wide consistency between the Forest Service and the BLM fee determinations.
Manual/Handbook Sections Affected: Bureau Manual 2806 (Rents).
Coordination: This IM was coordinated with the Field Solicitor, Office of Valuation Services, and Realty staff from the BLM Idaho State Office and Field Offices.
Contact: If you have questions or need additional information, please contact Carol Montgomery, Realty Specialist, at 208-373-3896 or cmontgom@blm.gov.
Boise District with Union: Management is reminded to notify and satisfy any bargaining requirements prior to implementation.
Signed by:
Timothy M. Murphy
Authenticated by:
Terrian Wells
Program Analyst - Litigation
Attachments:
Attachment 1: Hydropower Projects Affecting BLM-Administered Land in Idaho (1 p)
Attachment 2: Decision Letter Template (2 pp)
Attachment 3: Annual FERC Update to Per-Acre Fee Schedule for the Use of Government
Lands in Idaho (by County), Dated February 28, 2017 (1 p)