How the Bureau of Reclamation’s Lease of Power Privilege Program Relates to FERC
February 8, 2022
Federal initiatives to boost hydroelectric potential at federally owned facilities have led the Bureau of Reclamation to offer lease of power privilege (LOPP) contracts, which authorize a nonfederal entity to use its facilities to generate hydropower. However, it is not always immediately apparent whether nonfederal development on Reclamation project facilities will fall under the jurisdiction of Reclamation or of the Federal Energy Regulatory Commission (FERC). In this interview, Max Spiker, Reclamation’s senior advisor for hydropower, tells us about how such questions are resolved and about how the streamlined LOPP authorization process works.
Hydro Leader: Please tell us about your background and current role at Reclamation.
Max Spiker: I’ve been at Reclamation for almost 34 years. I started in power plant maintenance and later worked as a hydroelectric mechanic at Hoover Dam. I then gravitated toward the management and supervision of power facilities. I’ve spent over a decade in Reclamation’s Power Resource Office. As the senior advisor for hydropower, I lead the oversight of the programmatic functions of Reclamation’s hydropower program—not only the policies, but also the initiatives implemented within Reclamation’s hydropower program to ensure that we produce reliable and cost-efficient power. I work with our customers to ensure that our facilities are maintained at operational and reliable levels, providing the value our customers expect and deserve.
Hydro Leader: Please explain what LOPP is and under what circumstances it may be used.
Max Spiker: Nonfederal hydropower development contributes to local economic development, clean energy, and the climate change initiatives pursued by the Biden administration. Reclamation is committed to facilitating the development of nonfederal hydropower on our existing federal projects. A LOPP is a contractual authorization issued by Reclamation to a nonfederal entity to allow it to use a Reclamation dam, reservoir, or conduit for hydropower generation.
It is important to note that any nonfederal hydropower project developed on a Reclamation project must not impair the efficiency of any Reclamation-generated power or water deliveries, jeopardize public safety, or negatively affect any other Reclamation project purpose. Reclamation has a statutory obligation to protect the underlying Reclamation project and related resources to ensure continued, unimpaired operations and stewardship for the benefit of our customers and stakeholders. For these reasons, federal oversight over the nonfederal project is necessary, either through the LOPP process or, if applicable, the FERC licensing process.
Hydro Leader: What kinds of entities have applied for authorization under this program?
Max Spiker: We get a mix of interested parties. Applicants are usually the operating entities or beneficiaries of the proposed Reclamation project site, including entities such as water users’ associations, water conservancy districts, and irrigation districts. We also receive applications from power plant developers.
Hydro Leader: How many LOPP projects have been developed and how many are in active development?
Max Spiker: There are 14 LOPP facilities currently operating on Reclamation projects, which comprise 53 megawatts (MW) of capacity. Of those, 10 have been brought online since 2009. An additional five conventional hydropower projects, comprising approximately 16 MW, are currently in active development through the LOPP process. These nonfederal projects allow Reclamation and our stakeholders to derive additional value from existing Reclamation projects.
In terms of development trends, despite Reclamation efforts, nonfederal development is entirely dependent upon an interested developer acting in favorable market conditions. Reclamation facilitates the development and agreement process. More favorable market conditions and regulatory frameworks, namely state renewable energy portfolio standards and other incentives, may help spur future development.
Hydro Leader: What is the best way for a potential nonfederal developer to learn more about the LOPP process?
Max Spiker: Reclamation has developed several resources to aid prospective developers. I invite readers to visit our LOPP website (www.usbr.gov/power/LOPP) to get familiar with the process and available tools and resources, including reports on untapped hydropower potential on existing Reclamation project facilities. The website includes contacts for our LOPP program, including staff from my office and regional leads who are available to provide advice and answer questions related to the process and sites of interest. The website also has a summary of federal and nonfederal development activity on Reclamation projects. Updated quarterly, that summary is the best source for timely information on hydropower development on Reclamation projects.
Hydro Leader: How is it decided whether a given development should be pursued under a Reclamation LOPP or a FERC license?
Max Spiker: Both Reclamation and FERC are authorized by Congress to permit the use of Reclamation project facilities to nonfederal entities for the purposes of hydropower development.
In the interest of promoting the timely development of nonfederal hydropower, the two agencies have entered into two complementary memoranda of understanding (MOUs) to help define jurisdictional boundaries.
Unless specified by law, Reclamation project facilities authorized for federal power development fall within the exclusive jurisdiction of Reclamation, so nonfederal development there would proceed through the LOPP process. Conversely, Reclamation project facilities not authorized for federal power development are within the exclusive jurisdiction of FERC.
There are couple of cases where the law explicitly specifies Reclamation LOPP jurisdiction. The Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act (PL 113‑24) places nonfederal small conduit hydropower development sited on Reclamation projects within the exclusive jurisdiction of Reclamation. In effect, all nonfederal hydropower development sited on a Reclamation project conduit would proceed through the LOPP process. Similarly, the Infrastructure Investment and Jobs Act (PL 117‑58) places nonfederal pumped storage hydropower development exclusively using Reclamation project reservoirs within the jurisdiction of Reclamation. These projects would be authorized via LOPP, regardless of whether the applicable, underlying Reclamation site or sites were originally authorized for federal power development.
Nonfederal entities are free to contact either Reclamation or FERC to initiate the development process. Once either agency is contacted, the agencies consult the MOUs and applicable authorities to determine jurisdiction. Once jurisdiction is determined, the developer is notified, and the project proceeds through the appropriate permitting process.
Hydro Leader: Is it usually clear whether the power development authorization existed in the first place, or are there ambiguous cases in which the two agencies need to work out the jurisdiction determination?
Max Spiker: It is not always clear. Some power authorizations are explicit and clear cut, and some are not. Keep in mind that some authorizations are well over a century old now, and some have been amended numerous times. The MOUs lay out a process for determining jurisdiction both in cases in which the authorization is explicit and clear cut and in those in which it is more ambiguous. When it comes to determining jurisdiction under the MOUs, Reclamation is afforded the opportunity to submit a preliminary determination to FERC, but the final jurisdiction determination is made by FERC, not Reclamation. Each Reclamation project facility is subject to one (and only one) agency jurisdiction and permitting process in accordance with the MOUs and/or applicable law. Developers and federal agencies cannot freely choose which permitting process to follow.
Hydro Leader: What are the potential overlaps between Reclamation’s and FERC’s jurisdictions?
Max Spiker: Per our MOUs, no overlaps exist between the jurisdictional boundaries of Reclamation and FERC. Each Reclamation project facility is within either Reclamation’s or FERC’s jurisdiction. With that said, nonfederal pumped storage development sited in part on Reclamation project facilities would require both a Reclamation LOPP and FERC license if the proposed nonfederal project uses a Reclamation project reservoir within the jurisdiction of Reclamation and any second nonfederal reservoir, preexisting or to be constructed, within the jurisdiction ofFERC. Currently, Reclamation is aware of four proposed nonfederal pumped storage projects subject to both Reclamation and FERC jurisdiction.
Hydro Leader: What kind of issues arise that need to be solved in these cases?
Max Spiker: These dual jurisdiction projects are a relatively new phenomenon. The two agencies are actively coordinating to administer our respective permitting processes in a common-sense, streamlined manner for the benefit of the project developer, project stakeholders, and the federal government in accordance with all statutory, regulatory, and policy requirements. FERC has been a great partner in this effort, and we look forward to continued coordination in pursuit of our mutual goal of the timely development of nonfederal hydropower.
Hydro Leader: How does the LOPP proceed once it is determined that it is the correct process?
Max Spiker: The complete LOPP process is described on our website. Once the process determination is made, Reclamation consults with our stakeholders and the local power marketing administration to evaluate interest in the federal development of the site. If federal development is declined (which has historically been the case under the current LOPP process), Reclamation may solicit nonfederal proposals for site development through a public process to ensure open and fair competition. This competitive solicitation process may not apply to small conduit hydropower projects proposed by conduit beneficiaries.
Proposals are then evaluated, and a recommendation is made to the appropriate Reclamation regional director. Depending on the decision of the regional director, a preliminary lease may be awarded, in which case a cost-recovery agreement is executed. Once the lessee is selected, all costs incurred by Reclamation in administering the LOPP project are to be reimbursed by the lessee. Reimbursable Reclamation costs include, but are not limited to, environmental and regulatory compliance activities and the review of LOPP project plans, designs, and studies.
In general, the preliminary lease directs the lessee to conduct studies that allow Reclamation to evaluate potential effects on the underlying Reclamation project and related resources. These studies focus on public and dam safety impacts, project features and design, and security assessments. Compliance with the National Environmental Policy Act, the Endangered Species Act, the National Historic Preservation Act, and other applicable laws is evaluated during the preliminary lease phase. Provided that preliminary lease requirements are completed to Reclamation’s satisfaction, Reclamation then awards a LOPP contract.
In general, during the LOPP contract phase, the lessee provides final project plans and specifications for Reclamation’s review and approval—including project design drawings and specifications; construction, operations, and site restoration plans; the documentation of mitigation measures and environmental commitments made in environmental compliance documents and related documents; emergency action plans; and security plans. Provided that the plans are approved, Reclamation may give written authorization to commence facility construction. Developers are allowed 4 years from preliminary lease selection to begin construction for projects sited on dams and 3 years for projects sited on conduits.
For awareness, over the past decade, we’ve streamlined our LOPP process in coordination with stakeholder groups, including our customers and operating partners, members of the industry, and others. The feedback has been overwhelmingly positive, and the process is working well. A report published in 2018 by the U.S. Department of Energy’s National Renewable Energy Laboratory found that “Reclamation’s efforts to streamline the LOPP regulatory process, beginning in 2012, coupled with federal statutory changes in 2013, have decreased processing timelines and have led to an increased interest in nonfederal hydropower development on Reclamation dams and conduits.”
Hydro Leader: Does Reclamation have continuing oversight roles with projects under the LOPP?
Max Spiker: We do have oversight roles on LOPP projects. Once the LOPP project comes online, Reclamation continues to oversee it to ensure that all LOPP contract terms and conditions are being met. These terms and conditions exist to ensure that there are no negative effects on the underlying Reclamation project. This oversight includes periodic inspections of the LOPP project.
Hydro Leader: What is your vision for the future of the LOPP program?
Max Spiker: We support the nonfederal development of power dams, reservoirs, and conduits. As I’ve mentioned, the LOPP program allows our stakeholders to derive additional value from existing Reclamation projects while contributing to local economic development and clean energy and climate change initiatives. Really, it is the energy market that is driving the development of these projects. Whenever it is economically feasible to build these projects, we will continue to support them.
Max Spiker is the senior advisor for hydropower at the Bureau of Reclamation. He can be contacted at firstname.lastname@example.org.