On January 17, 2019, FERC denied requests for rehearing of its prior order to revoke Boyce Hydro Power, LLC’s (“Boyce Hydro”) license for its 4.8 MW Edenville Project No. 10808 (“Edenville Project”), which consists of a 6,600-foot-long dam in Michigan. Boyce Hydro and the Sanford Lake Preservation Association (“Sanford Lake”) (together, the “Petitioners”) raised several claims in their requests for rehearing, including that FERC discounted the efforts Boyce Hydro took to remedy safety issues at the dam.

In denying rehearing, FERC detailed prior orders where FERC concluded that Boyce Hydro failed to comply with its license for the Edenville Project. FERC explained that it began notifying Boyce Hydro and its predecessor of noncompliance issues dating back to 2004. The prime concern at the time for FERC was the Edenville Project’s failure to pass the Probable Maximum Flood (“PMF”) due to the project’s spillway capacity. On February 15, 2018, after Boyce Hydro failed to comply with multiple attempts by FERC to compel it to address the PMF issue, FERC issued an Order Proposing Revocation of Boyce Hydro’s license to operate the Edenville Project. In a September 10, 2018 order (“Revocation Order”), FERC revoked the license, and on October 18, 2018, FERC rejected Petitioners’ arguments to stay the revocation proceedings (see October 30, 2018 edition of the WER). Petitioners subsequently submitted requests for rehearing of the Revocation Order.

Petitioners first argued that, in the Revocation Order, FERC made it impossible for any other party to acquire the Edenville Project when faced with the prospect of a multiple year process to obtain an original license. Even though many parties are investigating ways of acquiring the Edenville Project’s license, FERC revoked the license anyway, according to Petitioners. In discounting this concern, FERC stated that it was not in the public interest to delay revoking a license based on the “possibility based mostly on speculation that some third party might accept transfer of the license” and bring the project into compliance with FERC orders and regulations. FERC added that Petitioners could not provide a “date certain” by which ownership of the project would be transferred to another party.

Petitioners also contended that revoking the license for the Edenville Project would make the public safety situation worse by hindering Boyce Hydro’s ability to attract capital in order to make the necessary repairs to the dam. In addition, Boyce Hydro argued that it would not have enough revenue to comply with state regulatory requirements after FERC relinquishes authority over the project. Sanford Lake added that the license is a “valuable property right” that would attract a new owner and the necessary investments to repair the spillway capacity. In rejecting these arguments in its order denying rehearing, FERC stated that Boyce Hydro continually disregarded its compliance requirements for fourteen years, even when it benefited from the increased revenues from the Edenville Project. FERC reasoned that since Boyce Hydro did not make the necessary expenditures to increase public safety in that time, there was little evidence that it would do so if it kept the license. Further, FERC stated that there was only speculative evidence that a party would be interested in the Edenville Project and that a transfer agreement is not set in stone.

Finally, Boyce Hydro argued that FERC ignored its good faith attempts to remedy the spillway issue in the Revocation Order. Boyce Hydro stated that it took the necessary steps to build an auxiliary spillway and provided evidence of the economic loss it incurred to design it. Boyce Hydro claimed that because it was in such dire financial straits, it could not obtain traditional financing. In rejecting these arguments, FERC stated that Boyce Hydro’s claims of dire financial straits “are not compelling” because of its continued “unfulfilled promises to the Commission.” FERC also reasoned that “a licensee is obligated to satisfy the terms of its license regardless of what revenues are generated from the project…[and] holding a license…carries with it the obligation to meet public interest obligations.” If a licensee cannot meet its obligations, then that “leads to the conclusion that the entity in question should not continue to hold a license.”

FERC’s order denying Petitioners’ rehearing request can be found here.