Three recent FERC staff decisions (“Decisions”) confirm that, for purposes of establishing the mandatory licensing requirements under the Federal Power Act (“FPA”), groundwater is not a “non-navigable Commerce Clause stream.” Thus, a hydropower project—and particularly a closed-loop pumped storage project—that uses only groundwater as its water source will not require FERC licensing if the project does not trigger other jurisdictional tests under the FPA.
A central challenge to the development of hydropower pumped storage has been the FERC licensing process. The licensing process is a multi-agency effort that can take five and eight years to complete, and which involves significant costs and uncertainties to project developers. The Decisions provide a potential solution to the challenges of FERC licensing. These orders involved projects that propose to use only groundwater for project operations. And in response to separate requests from the developers, FERC staff, relying on prior FERC precedent, held that the three projects at issue did not require FERC licensing under the FPA because: (1) the projects proposed to use only groundwater resources; and (2) the projects did not meet any other trigger for mandatory licensing jurisdiction under FPA section 23(b)
Specifically, section 23(b) of the FPA mandates FERC licensing for any project that: (1) is located on a navigable waterway; (2) occupies federal public land or a federal reservation; (3) uses surplus water or water power from a government dam; or (4) is located on a non-navigable Commerce Clause stream, affects the interests of interstate or foreign commerce, and has undergone construction or modification since August 26, 1935. The three proposed projects at issue in these recent Decisions did not meet any of these jurisdictional requirements. None of these projects would be located on a navigable waterway, occupy federal land, or use a federal dam. Thus, FERC staff’s decisions focused on the last jurisdictional trigger—a post-1935 project that is located on a Commerce Clause waterway and which affects interstate or foreign commerce. Obviously, all three projects would undergo construction post-1935 and would affect interstate commerce, so staff’s decisions hinged entirely on whether groundwater constitutes a Commerce Clause stream for purposes of establishing mandatory licensing jurisdiction under the FPA.
In holding that groundwater does not constitute a Commerce Clause waterway, FERC staff did not establish new FERC precedent regarding the jurisdictional reach of the FPA, as they relied on the Commission’s 1995 ruling in Swanton Village, Vermont Hydro Associates that first made this holding. Nonetheless, these orders may be helpful to developers looking to site closed-loop pumped storage projects in locations that offer streamlined environmental approval. Locating a closed-loop pumped storage project in an area that relies exclusively on groundwater can avoid FERC licensing—so long as the project does not trigger the other jurisdictional requirements identified above. Developers should be mindful, however, that other federal permitting requirements (e.g., dredge and fill permit under Clean Water Act section 404), as well as any state requirements, would likely apply to these developments.