In a policy statement issued October 19, 2017, FERC revised its longstanding approach to setting the license terms for hydroelectric projects. The new policy establishes a default term of 40 years for non-federal projects. The default term can be shortened or extended in certain identified circumstances.According to Section 6 of the Federal Power Act, the term of a hydroelectric license may not exceed 50 years, but the Act sets no minimum license term. It has been FERC’s policy to set a 50-year term for licenses issued to federal projects and to base the license term for non-federal projects on the level of redevelopment, new construction, or environmental mitigation and enhancement slated for the project. FERC has set a 30-year term for projects involving little to no such activity, a 40-year term for a moderate amount of activity, and a 50-year term for extensive activity.

In November 2016, FERC issued a Notice of Inquiry seeking comment on whether it should revise its current policy. FERC sought comment on five different options, including leaving the current policy as it stands, and replacing the current policy with a 50-year default license term unless a shorter term would benefit the public interest. The majority of commenters favored revising the current policy. While industry commenters were largely in favor of setting a default license term of 50 years, environmental groups and resource agencies resoundingly opposed this option.

Thursday’s revised policy statement, which announces a default license term of 40 years for non-federal projects, identifies three circumstances in which FERC will consider issuing a shorter or longer license term: 1) when necessary to coordinate license terms for projects located in the same river basin; 2) when a specific term is explicitly agreed to in a comprehensive settlement agreement, unless it would conflict with coordination within the river basin; and 3) when a license applicant requests a longer term based on significant measures to be required during the new license term or voluntarily implemented during a prior license term and not accounted for in setting the term of the previous license, again, provided that doing so is consistent with coordination within the river basin. FERC specifically identified several measures that have previously warranted longer license terms, including pumped storage facilities, fish passage facilities, fish hatcheries, substantial recreation facilities, dams, and powerhouses.

The new policy statement will apply to all licenses issued following publication of the policy in the Federal Register. It is not clear yet whether FERC’s new policy will reduce the number of licensees contesting their permit terms. In recent years, there has been an upswing in the number of licensees seeking rehearing to contest the length of their license terms in relicensing situations. In each case, FERC declined to extend the length of the license. In February 2017, Duke Energy brought suit in the U.S. Court of Appeals for the D.C. Circuit challenging FERC’s decision to relicense its Catawba-Wateree Project for 40 years instead of 50 years. Duke argued that FERC’s approach to determining license terms was “untethered to cost or other objective criteria…[and] nothing more than a ‘we-know-it-when-we-see-it’ approach.” The Duke Energy suit is still pending, with oral argument scheduled for December 8, 2017.