Hydropower - Reclamation Lease of Power Privilege Process

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1 Hydropower - Reclamation Lease of Power Privilege Process

2 What is Lease of Power Privilege Lease of Power Privilege - A contractual right given to a non-federal entity to use a Reclamation facility for electric power generation consistent with Reclamation project purposes. Reclamation s Main Concern - The integrity of Reclamation facilities or Federal projects must not be impaired. Powerplant must not interfere with existing operations, jeopardize existing water rights, or create any safety problems.

3 Jurisdiction FERC or Reclamation? Requests to develop hydropower at Reclamation dams must be processed under the 1992 MOU between Reclamation and the FERC. Leasing cannot proceed until licensing authority has been determined to be under Reclamation law. Under the revised D&S, Reclamation has jurisdiction on all conduit hydropower development on Reclamation owned facilities

4 FERC Jurisdiction on Reclamation Project Prior to leasing, existing congressional authorizations and contracts pertaining to the Reclamation project should be reviewed to determine if there are any conditions that might preclude power development or affect the feasibility of a proposed hydropower project. Requires contract between lessee, Reclamation, and project managing entity to establish responsibilities for O&M and liabilities on Reclamation Facilities

5 Reclamation Manual - Directives and Standards Revised September 2012 Anticipated New Legislation Provides more detailed guidance Sets lease rates What Reclamation charges for the use of our facilities Rate negotiation was formerly most complex issue 2 to 3 mils depending on status of applicant

6 Public Law Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act Introduced as HR 678 on February 13, 2013 Signed by President on August 9, 2013

7 Public Law continued Amends Section 9(c) of the Reclamation Project Act of 1939 to authorize the Secretary to contract for the development of small conduit hydropower ( 5 MW) at Bureau facilities through a Lease of Power Privilege (LOPP) Withdraws FERC s authority to license small conduit hydropower at Reclamation facilities Small conduit projects that currently have a FERC preliminary permit, license, exemption, or pending license application shall remain FERC projects

8 Public Law Requires LOPPs be offered first to an irrigation district or water users association operating or receiving water from the applicable transferred or reserved conduit Requires Reclamation apply its NEPA categorical exclusion process to small conduit hydropower except with respect to siting of associated transmission Codifies existing NEPA categorical exclusion process established in LOPP D&S

9 D&S Being Further Modified as a Result of New Legislation No Significant Changes on Dams On Conduits - Gives First LOPP Opportunity to entity managing project or receiving project water from Reclamation conduits Changes Timeframes If outside interest in LOPP is indicated, Reclamation will first offer LOPP to managing entity. Reclamation will allow 60 days for entity to accept or reject LOPP process. Managing entities have 150 days after indicating an interest in an LOPP to submit a proposal During the 150 days, no other entity is eligible to receive the LOPP After 150 days Reclamation can initiate a public process to gather other proposals

10 Process in a Nutshell Potential Lessee Initiates Process Have a Specific Project in mind Work with Managing Entity Contact Reclamation Submit letter to Reclamation requesting initiation of lease of power privilege process Reclamation Establishes Jurisdiction Offers Lease Opportunity to Managing Entity First Otherwise Requests Proposals through Public Process Reclamation Evaluates Proposals - Selects Lessee Develop Preliminary Lease - Cost Recovery Agreement Develops/Negotiates Lease of Power Privilege

11 Development Lessee responsible for: NEPA, ESA, NHPA compliance Design & Construction Economic and Technical Feasibility Operation & Maintenance Transmission Facilities Reclamation: Lease Negotiation and Development Ensure Project Purposes are Protected Review and approve: Designs, plans and specs NEPA Documentation

12 Water User / Managing Entity Involvement If Managing Entity has O&M responsibility of project but not participating in lease lease will include their involvement as appropriate Lessee will help with costs of O&M of facilities that benefit the new power facility

13 Title Title of Federal Facility remains with the U.S. Title of proposed powerplant is with lessee unless legislated or contracted otherwise. U.S. will have first right to takeover powerplant in the event of sale or default etc.

14 Power Marketing At Reclamation Projects where a power marketing entity is responsible for part of project repayment, that entity is given opportunity to purchase power from facility.

15 Reclamation Expenses Develop Preliminary Lease (Cost Recovery Agreement) Create Account Reclamation Bills Lessee in advance Preliminary Lessee will advance funds to Reclamation for costs related to: Development and negotiation of lease NEPA Administrative Costs Design Reviews Construction, Operation, Maintenance and Security

16 Lease Payments to the U.S. Who Gets the Money? Consistent with Section 9(c) of the Reclamation Project Act of 1939, Colorado River Storage Project Act of 1956, Colorado River Basin Project Act of 1968 Could be others Deposited in Reclamation Fund or Colorado River Basin Fund and credited to the Federal Project for repayment or statutory credit

17 Timeframes After Selection Dams 24 Months from date of Preliminary Lease to complete NEPA and sign LOPP 12 Months from date of LOPP to complete final designs 12 Additional Months to begin construction Conduits 15 Months from date of Preliminary Lease to complete NEPA and sign LOPP 9 Months to complete final designs 12 Additional Months to begin construction

18 Regional Guidelines Each Reclamation Regional Office may have additional policy, guidelines, or requirements.

19 LOPP Website Features: Reclamation/FERC jurisdiction discussion How to initiate a project LOPP D&S LOPP Flowcharts, Example and Guidance Documents Contact Information Current Development Catalog Guiding Legislation and Memorandum

20 Questions