July 29, 2003
Hon. Magalie Salas,
Secretary
Federal Energy
Regulatory Commission
888
First Street, NE
Washington
,
DC
20426
Re:
Yadkin Hydroelectric Project
FERC Project 2197
Subject:
Administrative Review requested by the High Rock Lake Association
On
June 2, 2003
, The High Rock Lake Association (HRLA) requested from the FERC a clarification
of the “Operating Guidelines” for FERC Project 2197 via letter forwarded to
the FERC by the office of Congressman Howard Coble.
On
July 26, 2003
, LeBoeuf, Lamb, Greene, and MacRae,
the legal firm representing Alcoa Power Generating Inc (APGI) provided a comment
to the FERC concerning the request. In
the comment they expressed their concern that the request was “procedurally
deficient” since it had not been sent to everyone on the service list for
project 2197. They further stated
their belief that the terms included in the Headwater Benefits agreement amended
in 1968 between Alcoa and Progress Energy (CP&L) provided the explanation
for the discrepancy between APGI’s interpretation of the “Operating
Guidelines” as amended in 1968 and the interpretation by the HRLA.
Their closing comments suggested they had no problem with the FERC
providing their interpretation of the “Operating Guidelines” and Headwater
Benefits to the HRLA. The request
from HRLA was not to obtain APGI’s interpretation of the “Operating
Guidelines”, the request was to clarify the actual intent of the FERC when the
“Operating Guidelines” were amended in 1968.
Based on recent correspondence, it appears the Commission is indeed
performing the requested administrative review.
SaveHighRockLake.org is an organization representing the
environmental and recreational interests of approximately 7000 stakeholders of
Project 2197. As noted in many
previous filings, our organization and our members are deeply concerned with
environmental issues affecting the entire Yadkin-Pee Dee river basin as well as
issues dealing specifically with
High
Rock
Lake
. We have only recently been able to
obtain a copy of the Headwater Benefits agreement between Alcoa and Progress
Energy. We have now had a chance to
review the Headwater Benefits agreement from 1926, the 1968 letter of agreement
between Alcoa and CP&L, the Order Approving the Headwater Benefits
Settlement and the Order Amending License (MAJOR) for Project 2197.
After reading the comments from APGI, we believe the true issue at hand
is the use of the terms contained in the 1968 Headwater Benefits agreement to
establish the “minimum” discharge requirement from
High
Rock
Lake
and Project 2197 as a whole. We
would like to offer our support of HRLA’s request and ask that the Commission
consider the following information when performing their administrative review.
Headwater Benefits and License
amendment issues:
The Headwater
Benefits regulations:
According to all of the information we could find on the
FERC web site, the Headwater Benefits program is to provide financial
compensation for headwater improvements resulting in additional energy
generation capabilities. We have
been unable to identify any provisions within the Headwater Benefits regulations
that would address the many environmental studies necessary to establish a
“minimum” river flow parameter within an approved Headwater Benefits
Agreement. There is no mention of
using this program to establish specific operating parameters that would
supercede or modify those specifically included as part of the license to
operate a hydroelectric project. There
is no indication this is a goal of, or even allowed by the Headwater Benefits
regulations. There is no mention of
methods available to Governmental Agencies or recognized stakeholders to comment
on or participate in the process of determining Headwater Benefits settlements.
The approval of the 1926 agreement between Tallassee Power
and Carolina Power appears to have been approved as a negotiated settlement for
headwater benefits charges between CP&L and Alcoa in 1965.
There is no evidence of any information being supplied that would be
necessary for the Commission to determine the Energy Gains, Sections 10(f)
Costs, the Annual energy gains received at the downstream project or the portion
of the annual energy generated at the headwater project that is assigned to the
joint-use power costs to accurately calculate the headwater benefits.
The 1926
Headwater Benefits Agreement:
The original 1926 Headwater Benefits agreement stated the
purpose of constructing
High
Rock
Lake
was to impound the FLOOD WATERS of the
Yadkin
River
within the High Rock Reservoir AND the Narrows Reservoir and to subsequently
release those waters in a controlled fashion from BOTH reservoirs.
The agreement did NOT attempt to establish any type of minimum discharge
requirement other than stating in Section II that discharges below the
Narrows
plant “shall be sustained at the highest practicable amount”.
To the contrary, it did specifically state that any time the inflow to
High
Rock
Lake
dropped below 3600 cfs that CP&L could request “in no event more than the
equivalent of the daily flow into the High Rock Reservoir”.
Section III of the agreement states that changes or suspension to the
regulated flow can be made “at any time and from time to time by mutual
agreement”. This agreement
established in Section V, an annual headwater benefits payment of $100,000 which
was a very large sum in 1926 and guaranteed CP&L would contribute a minimum
of $4,000,000 over the next 40 years toward the construction and operational
costs of
High
Rock
Lake
. The 1926 agreement also included
wording in Section VIII stating that “None of the parties hereto shall be
liable for any act or thing done or omitted to be done or occurring in whole or
in part by reason of act of God …… dry weather, … or any other thing
reasonably beyond the control and not attributable to the neglect or fault of
the parties hereto.” This
agreement was legal and binding on all parties and their successors until
December 31, 1967
, and thereafter until terminated by mutual consent of the parties, but in no
event longer than ninety-nine years beginning on
January 1st, 1968
.
The 1968
Headwater Benefits amendments:
In the Commission’s
March 29, 1968
, ORDER APPROVING HEADWATER BENEFITS SETTLEMENT, the letter of agreement between
Alcoa and CP&L is specifically listed as a modification to the agreement of
February 19, 1926
. The wording in the letter
agreement included modifications to the minimum average weekly regulated flow
below the
Narrows
plant, but did NOT state these changes would be a complete replacement for all
of the conditions defined in Section II of the 1926 agreement.
The only stated replacement of specific sections of the 1926 agreement
was to Section V, pertaining to the annual headwater benefits payment reduction
to $62,500. There is no indication
in the letter agreement or the Order Approving Headwater Benefits Settlement
that the two page letter agreement between Alcoa and CP&L was intended to be
a complete replacement for the 1926 agreement.
The 1968 Project
License amendment:
The stated intent
of the “Operating Guides for Operation of Badin Works,” Parts I through IV
amendment request from Alcoa in 1968 was to keep the levels of High Rock Lake
within the limits defined by Line 7 and stated that the discharge limits
imposed by rule # 8 would take precedence over all other rules during the
defined recreation season. This rule
effectively established the maximum discharge limits from Project 2197 that are
not to be exceeded if the elevation of
High
Rock
Lake
is below the levels defined by line 7. There
was no indication in the “Operating Guidelines” amendment or in any public
forum that these changes would establish a minimum amount that MUST be
discharged. Alcoa claimed publicly
that this change could cost them power generation revenues but was being done to
provide enhanced recreational opportunities at
High
Rock
Lake
. This Operating Guidelines
amendment was approved by order of the FERC on March 29, 1968, based on the
specific wording “to limit” the discharge and “to maintain higher water
levels in High Rock Reservoir during the recreation season” included in the
license amendment request. The
“ORDER AMENDING LICENSE (MAJOR)” specifically stated the licensee was to
“operate the High Rock Reservoir generally in accordance with the “Operating
Guides for Operation of Badin Works,” Parts I through IV.
There was no mention of including terms from the Headwater Benefits
financial compensation agreement.
Conclusions:
The
February 19, 1926
agreement between Tallassee Power and CP&L was approved as an appropriate
Headwater Benefits settlement between Alcoa Aluminum and CP&L by the FERC in
1965. The terms and provisions of Section II and Section V are the only portions
of the 1926 agreement have been specifically modified. The modifications to
Section II were not requested or approved by the Commission as complete
replacements for Section II, effectively making them additions to Section II but
not specifically replacing any of the terms of Section II.
Section VIII of the agreement is still fully in effect, effectively
addressing periods of low flow conditions in the
Yadkin
River
and the possible need to vary from the terms of the agreement in the event of a
drought. This combined with the
provisions of Section III would allow Alcoa to react to adverse environmental
conditions in the river basin without penalty and without the need to request a
license variance simply by coming to a “mutual agreement” with CP&L.
The establishment of a minimum river flow parameter greater than what
would occur naturally during periods of low flow was appropriately not even
attempted in the 1926 agreement. There
is no indication this is a goal of, or even allowed by the Headwater Benefits
regulations. Establishment of a
minimum river flow requirement without the proper environmental assessments can
NOT be allowed based solely on a financial compensation agreement between two
corporations and should be expressly prohibited as this could create a direct
conflict of interests. This is truly
an environmental consideration impacting millions of citizens throughout the
entire river basin and can only be appropriately determined by extensive
environmental studies. Allowing this degree of latitude would permit any
licensee to effectively write their own rules outside the boundaries of their
license, avoiding the costs associated with the environmental studies that would
be necessary and circumventing the process of stakeholder and Governmental
Agency participation. Any other
method of establishing a minimum river flow requirement would be highly
“procedurally deficient”.
The stated INTENT
of the 1968 license amendment for Project 2197 was to LIMIT the discharge from
High
Rock
Lake
and to maintain higher lake levels during the recreation season.
The actual wording in the Order Amending the Project license stated
“According to the Licensee, the effect of using the proposed rule curve would
be to maintain higher water levels in High Rock reservoir during the recreation
season, May 15 to September 15.” This
would imply there were no scientific studies supplied to support this claim and
the intent of the Commission would have been for the Licensee to live up to this
claim. This stated goal could
only be accomplished by interpreting the word limit to mean “maximum
discharge” with the understanding that this limit would be less than the
amount of water flowing into
High
Rock
Lake
. In the absence of any supporting
studies or data, the Commission and stakeholders entitled to comment on license
modifications were forced to accept the word of the licensee that these changes
would accomplish the stated goals.
While the license amendment was highly publicized by the
licensee, the Headwater Benefits agreement terms appear to have been unmentioned
and undisclosed to the public in 1968. The subtle wording differences in the
Project License amendment and the Headwater Benefits amendments were not
typographical errors. The specific
terms used in each case would not commonly be mistaken for each other and were
obviously intended to ensure the highest chance of approval from the group(s)
directly affected by each amendment.
Applying the wording included in the License amendment
allowed those entitled to comment on the license modification to erroneously
believe that during the recreation season the discharge would be maintained
somewhere between 0 and the limits established by Rule # 8 of the “Operating
Guides for Operation of Badin Works”, and High Rock Lake would be maintained
within the limits defined by Line 7. Believing
this interpretation at least removed the ambiguity of the original wording
stating “the minimum flow shall be sustained at the highest practicable
amount”. This gave stakeholders
some assurance that the “highest practicable amount” would not be solely at
the discretion of the licensee and virtually guaranteed they would respond
positively. Again, the actual
wording in the Order Amending the Project license stated “The State of North
Carolina Wildlife Resources Commission, the Corps of Engineers, and the
Department of the Interior, each reported favorably on the proposal to limit the drawdown of the reservoir as outlined in the
Licensee’s application filed
January 8, 1968
.” There is no indication these
agencies supported or condoned the establishment of a minimum river flow
requirement as contained in the Headwater Benefits amendment.
Applying the wording included in the Headwater Benefits
agreement letter between Alcoa and CP&L would indicate that the flow would
never drop below the values stated in Rule # 8 of the “Operating Guides for
Operation of Badin Works”. This
virtually guaranteed a positive response from CP&L since their required
annual payment was being reduced and the conditions of the Headwater Benefits
agreement would not be subject to scrutiny or comment from stakeholders and
Governmental Agencies.
Our Request of the Commission:
The Commission recently stated in it’s clarification of
APGI’s responsibilities under the “Drought contingency Plan for 2003” that
APGI’s ultimate responsibility is to fulfill the terms specifically included
in their license to operate Project 2197. In
support of the request from HRLA and in the interest of a fair and comprehensive
review for all stakeholders in FERC Project 2197, SaveHighRockLake.org
respectfully requests that the Commission specifically consider the following
while performing the Administrative Review:
- Verify
that the terms and conditions contained in Sections III and Section VIII of
the original 1926 agreement continue to be recognized as part of the FERC
approved Headwater Benefits Settlement Agreement.
- The
“not less than” wording of the terms included in the 1968 Headwater
Benefits amendment between APGI and CP&L should be specifically excluded
as parameters affecting the “Operating Guides for Operation of Badin
Works,” Parts I through IV for Project 2197 as they attempt to establish
an environmental condition without appropriate environmental assessments,
have not be appropriately reviewed or commented on by stakeholders or
Governmental Agencies and are not specifically included within the project
license.
- APGI
should be instructed to operate Project 2197 within the discharge and lake
level limits specified in the “Operating Guides for Operation of Badin
Works,” Parts I through IV that are specifically
included in the Project license.
- Since
Rule # 8 of the amended license does not contain a minimum discharge
requirement, clarify that APGI may respond in an environmentally appropriate
manner to future drought conditions simply by “mutual agreement” with
CP&L to “suspend or change such regulation of the flow” as stated in
Section III of the 1926 agreement.
- In
the absence of the necessary environmental studies to establish an
appropriate minimum discharge requirement for Project 2197, establish the
restriction imposed by nature and stated in the original 1926 agreement of
“in no event more than the equivalent of the daily flow into the High Rock
Reservoir” to be used as the minimum discharge requirement for Project
2197 during periods of low flow conditions until the required studies have
been completed for relicensing of the project in 2008.
Respectfully submitted,
Robert
W. Petree
Robert W. Petree
Chairman of the
Board
SaveHighRockLake.org