Annual Charges for Use of Government Lands, 72134-72142 [2011-30110]
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Federal Register / Vol. 76, No. 225 / Tuesday, November 22, 2011 / Proposed Rules
satisfy the need for scientifically
credible taxonomic information.’’ 19
HSUS noted that ITIS lists the common
name of nyctereutes procyonoidos as
‘‘Raccoon Dog,’’ and presented evidence
that the scientific community refers to
the species by that name.20 Finally,
HSUS asserted that the name ‘‘Asiatic
Raccoon’’ may confuse consumers
because the animal is also found in
Europe.21
In contrast, the Fur Information
Council of America (‘‘Fur Council’’) and
the National Retail Federation (‘‘NRF’’)
supported retaining ‘‘Asiatic Raccoon.’’
The Fur Council asserted that the name
‘‘Raccoon Dog’’ would mislead
consumers because nyctereutes
procyonoidos is no more closely related
to domestic dogs than foxes, wolves, or
coyotes.22 In addition, the Fur Council
stated that ‘‘[w]ere the Commission to
require the use of the term ‘raccoon
dog,’ there would no longer be a market
for Asiatic/Finnraccoon fur, and
garments with this type of fur would be
eliminated.’’ 23 NRF concurred with the
Fur Council’s view that nyctereutes
procyonoidos is ‘‘not a true-dog or doglike canine,’’ and suggested retaining
‘‘Asiatic Raccoon’’ or changing it to
‘‘Tanuki’’ or ‘‘Magnut.’’ 24
Finally, the Fur Council and Finnish
Fur Sales, supported by the Finnish
Ministry for Foreign Affairs and
Ministry of Agriculture and Forestry,
suggested allowing the name
‘‘Finnraccoon’’ for nyctereutes
procyonoidos raised in Finland. These
commenters noted that calling such furs
‘‘Asiatic Raccoon’’ could mislead
consumers because ‘‘finraccoons’’ are
not from Asia and are raised under
different conditions than those that
generally exist in Asia.25
II. Issues for Discussion at the Hearing
The Commission invites attendees to
share views on any aspect of the Name
Guide at the hearing. The Commission
specifically requests views on: (1) The
appropriateness of using the ITIS system
to determine an animal’s true English
name; (2) whether using the name
‘‘Asiatic Raccoon’’ to describe
nyctereutes procyonoidos fur products
accurately informs consumers about the
source, quality, and characteristics of
those products; (3) what, if any,
alternative name, including ‘‘Tanuki’’ or
‘‘Magnut,’’ should the Name Guide
require for nyctereutes procyonoidos; (4)
whether the Name Guide should allow
‘‘Finnraccoon’’ for nyctereutes
procyonoidos raised in Finland; and (5)
whether the Commission should
modify, add, or delete other names.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011–30050 Filed 11–21–11; 8:45 am]
BILLING CODE 6750–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 11
[Docket No. RM11–6–000]
Annual Charges for Use of
Government Lands
Federal Energy Regulatory
Commission, DOE.
ACTION: Notice of Proposed Rulemaking.
AGENCY:
The Federal Power Act
requires hydropower licensees to
recompense the United States for the
use, occupancy, and enjoyment of its
lands. The Commission assesses annual
charges for the use of Federal lands
through Part 11 of its regulations. The
Commission is proposing to revise the
methodology used to compute these
annual charges. Under the proposed
rule, the Commission would create a fee
schedule based on the U.S. Bureau of
Land Management’s (BLM) methodology
for calculating rental rates for linear
SUMMARY:
rights of way. This methodology
includes a land value per acre, an
encumbrance factor, a rate of return, and
an annual adjustment factor. The fee
schedule would include all adjustments
described in the BLM rule adopting this
methodology, except the allocation of
county land values into zones. In
addition, the Commission proposes to
eliminate its current practice of
doubling the per-acre rental rate for
non-transmission line lands.
DATES: Comments are due January 6,
2012.
Comments, identified by
docket number, may be filed by the
following methods:
• Electronic Filing through https://
www.ferc.gov. Documents created
electronically using word processing
software should be filed in native
applications or print-to-PDF format and
not in a scanned format.
• Mail/Hand Delivery: Those unable
to file electronically may mail or handdeliver comments to: Federal Energy
Regulatory Commission, Secretary of the
Commission, 888 First Street NE.,
Washington, DC 20426.
Instructions: For detailed instructions
on submitting comments and additional
information on the rulemaking process,
see the Comment Procedures Section of
this document.
FOR FURTHER INFORMATION CONTACT:
Doug Foster, Office of the Executive
Director, Federal Energy Regulatory
Commission, 888 First Street NE.,
Washington, DC 20426, (202) 502–
6118, doug.foster@ferc.gov.
Kimberly Ognisty, Office of General
Counsel, Federal Energy Regulatory
Commission, 888 First Street NE.,
Washington, DC 20426, (202) 502–
8565, kimberly.ognisty@ferc.gov.
SUPPLEMENTARY INFORMATION:
ADDRESSES:
Notice of Proposed Rulemaking
November 17, 2011.
Table of Contents
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Paragraph
Nos.
I. Background ............................................................................................................................................................................................
II. Comments on Notice of Inquiry ..........................................................................................................................................................
III. Proposed Rule .....................................................................................................................................................................................
A. Per-Acre Land Value ....................................................................................................................................................................
B. Encumbrance Factor .....................................................................................................................................................................
C. Rate of Return ...............................................................................................................................................................................
D. Annual Adjustment Factor ..........................................................................................................................................................
IV. Regulatory Requirements ...................................................................................................................................................................
A. Information Collection Statement ...............................................................................................................................................
B. Environmental Analysis ...............................................................................................................................................................
19 Id.
22 Fur
20 Id.
23 Id.
Council Comment at 5.
at 6.
24 NRF Comment at 4.
at 8–9.
21 Id. at 9.
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25 See, e.g., Fur Council Comment at 3–4; Finnish
Fur Sales comment at 1–2.
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Paragraph
Nos.
C. Regulatory Flexibility Act ............................................................................................................................................................
D. Comment Procedures ...................................................................................................................................................................
E. Document Availability ..................................................................................................................................................................
1. The Federal Power Act (FPA)
requires licensees using Federal lands to
recompense the United States for the
use, occupancy, and enjoyment of its
lands.1 The Commission has assessed
this portion of annual charges at rental
rates established by the U.S. Bureau of
Land Management (BLM) (and adopted
by the U.S. Forest Service), which are
published annually in a fee schedule
that identifies per-acre rental rates by
state and county for linear rights of way.
Under the proposed rule, the
Commission would create a fee
schedule based on the BLM
methodology promulgated in 2008 for
calculating rental rates for linear rights
of way. This methodology includes a
land value per acre, an encumbrance
factor, a rate of return, and an annual
adjustment factor. The Commissioncreated fee schedule would base county
land values on average per-acre values
from the National Agricultural Statistics
Service (NASS) Census, and would not
use the zone system adopted by the
2008 BLM rule. All other adjustments to
the formula components described in
the BLM rule would apply to the
Commission’s creation of a fee
schedule.2 In addition, the Commission
proposes to eliminate its current
practice of doubling the rental rate for
non-transmission line lands.
I. Background
2. Section 10(e)(1) of the Federal
Power Act (FPA) requires Commission
hydropower licensees using Federal
lands to:
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pay to the United States reasonable annual
charges in an amount to be fixed by the
Commission * * * for recompensing [the
United States] for the use, occupancy, and
enjoyment of its lands or other property
* * * and in fixing such charges the
Commission shall seek to avoid increasing
the price to the consumers of power by such
charges, and any such charges may be
adjusted from time to time by the
Commission as conditions may require
* * * .3
1 16
U.S.C. 803(e)(1) (2006).
of Linear Right-of-Way Rent Schedule,
73 FR 65040 (October 31, 2008) (codified at 43 CFR
2806.20–2806.23).
3 16 U.S.C. 803(e)(1) (2006) (emphasis added).
Section 10(e)(1) also requires licensees to reimburse
the United States for the costs of the administration
of Part I of the FPA. Those charges are calculated
and billed separately from the land use charges, and
are not the subject of this proposed rule.
2 Update
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In other words, where hydropower
licensees use and occupy Federal lands
for project purposes, they must
compensate the United States through
payment of an annual fee, to be
established by the Commission.4
3. Over time, the Commission has
adopted a number of methodologies to
effectuate this statutory directive. This
has included conducting project-byproject appraisals,5 charging a single
national average land value per acre,6
and using a fee schedule for linear rights
of way developed jointly by the BLM
and Forest Service.7
4. From 1937 to 1942, the
Commission based annual charges for
the use of Federal lands by hydropower
licensees on individual land appraisals
for each project.8 In 1942, the
Commission rejected this approach in
favor of a single national average peracre land value because it determined
that project-by-project appraisals were
more costly to administer than the value
collected in rent, the values for
inundated lands would become
distorted, the values could only be
maintained with re-appraisals, and
disputes over values may lead to costly
litigation.9 Eventually, the Commission
also rejected the use of a single national
average per-acre land value because the
Inspector General of the Department of
Energy concluded that this methodology
resulted in an under-collection of over
$15 million per year due to the use of
outdated land values.10
4 Pursuant to FPA section 17(a), 16 U.S.C. 810(a)
(2006), the fees collected for use of government
lands are allocated as follows: 12.5 percent is paid
into the Treasury of the United States, 50 percent
is paid into the federal reclamation fund, and 37.5
percent is paid into the treasuries of the states in
which particular projects are located. No part of the
fees discussed in this proposed rule is used to fund
the Commission’s operations.
5 See Revision of the Billing Procedures for
Annual Charges for Administering Part I of the
Federal Power Act and to the Methodology for
Assessing Federal Land Use Charges, Order No.
469, FERC Stats. & Regs., Regulations Preambles ¶
30,741, at 30,584 (1987).
6 Id. See also Order Prescribing Amendment to
Section 11.21 of the Regulations Under the Federal
Power Act, Order No. 560, 56 FPC 3860 (1976).
7 Order No. 469, FERC Stats. & Regs. ¶ 30,741 at
30,584.
8 See 56 FPC 3860 at 3863.
9 See 56 FPC 3860 at 3863–64.
10 See Assessment of Charges under the
Hydroelectric Program, DOE/IG Report No. 0219
(September 3, 1986); see also More Efforts Needed
to Recover Costs and Increase Hydropower Charges,
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71
75
5. In 1987, the Commission adopted
use of a fee schedule developed by the
BLM and Forest Service that identified
per-acre rental rates by county for linear
rights of way on Federal lands.11 BLM
and Forest Service produced the fee
schedule by taking a survey of market
values by county for the various types
of land that the agencies had allowed to
be occupied by linear rights of way.12
The range of per-acre land values was
divided into eight zones, and each zone
value was pegged to the highest raw
value within that zone.13 The rental rate
in the fee schedule was calculated by
multiplying the zone value by an
encumbrance factor of 70 percent,14 a
rate of return of 6.41 percent, and an
annual inflation adjustment factor. The
resulting fee schedule assigned one of
eight rental rates to all counties.15
6. BLM would use individual land
appraisals to substitute for the fee
schedule rental rate only if the resulting
rent would be significantly higher than
that produced by the schedule.16
7. In adopting the 1987 BLM fee
schedule, the Commission found that
the methodology promulgated by BLM
and Forest Service for linear rights of
way was the ‘‘best approximation
U.S. General Accounting Office Report No. RCED–
87–12 (November 1986). The single national
average land value per acre in 1942 was $50 per
acre, and, by 1976, the value was $150 per acre. 56
FPC 3860.
11 Order No. 469, FERC Stats. & Regs. ¶ 30,741 at
30,584.
12 51 FR 44014 (Dec. 5, 1986). BLM explained that
the value of timber had not been included, and that
the values were not for urban or suburban
residential areas, industrial parks, farms or
orchards, recreation properties or other such types
of land. The agencies tried to avoid using attractive
public use areas such as lakeshores, streamsides,
and scenic highways frontage.
13 The per-acre zone values were $50, $100, $200,
$300, $400, $500, $600, and $1000.
14 The encumbrance factor adjusts the zone value
to reflect the degree that a particular type of facility
encumbers the right-of-way area or excludes other
types of land uses. If the encumbrance factor is 100
percent, the right-of-way facility (and its operation)
is encumbering the right-of-way area to the
exclusion of all other uses.
15 The per-acre zone fee under the 1987 BLM fee
schedule ranged from $2.24 to $44.87. By 2008, the
per-acre zone fee under the 1987 BLM fee schedule,
having been adjusted each year for inflation, ranged
from $3.76 to $75.23.
16 51 FR 44014 (Dec. 5, 1986). BLM would use
individual appraisals only if it could be determined
that sufficient area within a right of way would, at
a minimum, exceed the zone value by a factor of
ten and the expected return was sufficient to
initiate a separate appraisal.
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available of the value of lands used for
transmission line rights-of-way.’’ 17
Therefore, the Commission assessed the
schedule rate for transmission line
rights of way on Federal lands, and
doubled this rate for other project works
on Federal lands (e.g., dams,
powerhouses, reservoirs) because,
historically, appraisers had determined
that the market value of transmission
line rights of way is roughly half of the
market value of other land.18
8. In the 1987 proceeding, the
Commission found no merit to claims
that charging fair market value for
Federal lands is prohibited by the FPA:
All increases in charges will result in some
impact on consumers. The statutory
provision bars the Commission from
assessing unreasonable charges that would be
passed along to consumers. Reasonable
annual charges are those that are
proportionate to the value of the benefit
conferred. Therefore, a fair market approach
is consistent with the dictates of the Act.
Furthermore, as land values have not been
adjusted in over ten years, an adjustment
upwards is warranted and overdue.19
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The Commission also rejected the
argument that it should intentionally set
low land charges based on the public
benefits provided by hydropower
projects. The Commission explained
that the public benefits provided by
licensed projects are considered in the
licensing decision and these benefits are
the quid pro quo for the ability to
operate the project in a manner
consistent with the needs of society. In
contrast, the purpose of the rental fee is
to establish a fair market rate for the use
of government land.20
9. In adopting the 1987 BLM fee
schedule, the Commission rejected
several other proposed methods of
assessing annual charges for the use,
occupancy, and enjoyment of
government lands by hydropower
licensees. The Commission rejected a
proposal to use an agricultural land
value index created by the U.S.
Department of Agriculture (USDA),
which used a state-by-state average
value per acre of farm lands and
buildings, concluding that this index
would require such major adjustments
that it would be an inefficient measure
of land value for hydropower projects.21
The Commission also rejected a
proposal to assess a fee based on the
17 Order No. 469, FERC Stats. & Regs. ¶ 30,741 at
30,588 (emphasis added).
18 Id. at 30,589.
19 Id. (footnotes omitted).
20 Id. at 30,587.
21 Id. at 30,589. The potential adjustments
included accounting for farm buildings, for the
cleared, arable, level land that it represented, and
for the fact that the index represented private and
not federal lands.
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percentage of gross revenues from
power sales or a rate per kilowatt hour,
concluding that such methods would be
unreasonable because they would result
in a royalty as though the occupied
Federal lands themselves were
producing power. The Commission
explained that this would overlook the
fact that power output is the result of
many factors (e.g., water rights, head,
project structures), and not just the
acreage of the Federal lands involved.22
Finally, the Commission again rejected
a proposal to use individual project
appraisals because such appraisals
would be too costly and result in timeconsuming litigation.23
10. From 1987 to 2008, the
Commission assessed annual charges for
the use, occupancy, and enjoyment of
government lands according to the BLM
fee schedule. Each year, BLM adjusted
the fee schedule for inflation, and each
year the Commission published notice
of the updated schedule.24
11. In 2005, Congress passed the
Energy Policy Act (EPAct) of 2005,
which required BLM ‘‘to update [the
schedule] to revise the per acre rental
fee zone value schedule * * * to reflect
current values of land in each zone.’’ 25
Congress further ordered that ‘‘the
Secretary of Agriculture shall make the
same revision for linear rights-of-way
* * * on National Forest System land.’’
12. On October 31, 2008, BLM issued
a final rule promulgating its updated
rental schedule for linear rights of way
to satisfy the congressional mandate in
EPAct 2005,26 and the Forest Service
subsequently adopted the 2008 BLM fee
schedule.27 As had been the case with
the methodology underlying the 1987
BLM fee schedule, the updated fee
schedule is based on the same formula,
which has four components: (1) An
average per-acre land value by county
(grouped into zones); (2) an
encumbrance factor reduction; (3) a rate
of return; and (4) an annual adjustment
factor for inflation.
13. Under the updated 2008 BLM fee
schedule, the per acre land value by
county is based on the NASS Census
22 Id.
at 30,589–90.
at 30,590.
24 See, e.g., Update of the Federal Energy
Regulatory Commission’s Fee Schedule for Annual
Charges for the Use of Government Lands, 73 FR
3626 (Jan. 22, 2008), FERC Stats. & Regs. ¶ 31,262
(2008).
25 42 U.S.C. 15925 (2006).
26 Update of Linear Right-of-Way Rent Schedule,
73 FR 65040.
27 See Fee Schedule for Linear Rights-of-Way
Authorized on National Forest System Lands, 73 FR
66591 (November 10, 2008). The Forest Service
noted it had given notice, in the preambles to
BLM’s proposed and final rules, that it would adopt
BLM’s revised fee schedule.
23 Id.
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data. To determine a county per-acre
land value, BLM uses the average per
acre land value from the ‘‘land and
buildings’’ category of the NASS
Census. The ‘‘land and buildings’’
category is a combination of NASS
Census land categories, and includes
irrigated and non-irrigated cropland,
pastureland, rangeland, woodland, and
the ‘‘other’’ category, which includes
roads, ponds, wasteland, and land
encumbered by non-commercial or nonresidential buildings. BLM consulted
with officials from NASS to arrive at an
appropriate method for removing the
value of irrigated cropland and land
encumbered by buildings because these
types of land are generally of higher
value than the types of lands over which
rights of way would be granted. This
resulted in a reduction in the average
per-acre land value by 20 percent (a 13
percent reduction to remove all irrigated
acres and a 7 percent reduction to
remove all lands in the ‘‘other’’
category, which includes all improved
land or land encumbered by buildings)
‘‘to eliminate the value of all land that
could possibly be encumbered by
buildings or which could possibly have
been developed, improved, or
irrigated.’’ 28
14. In response to comments that the
non-irrigated cropland category also
represented higher value lands and
therefore should be removed from the
‘‘land and buildings’’ category, BLM
explained that in comparing the
categories from the NASS Census data,
it found little difference in the midwestern and western states between the
average per acre values of non-irrigated
cropland and pastureland/rangeland.29
Furthermore, if the non-irrigated lands
category were removed from the peracre average, the per-acre average would
undervalue Federal land holdings in the
eastern U.S., including Forest Service
lands, that have largely been acquired
from the private sector (primarily farm
real estate) and would likely fall into the
same land categories covered by the
NASS Census.30
15. In response to comments objecting
to the zone system, BLM explained that
it chose to retain the zone system
because the 2005 congressional mandate
directed it to revise the schedule to
reflect current land values in each zone.
BLM also explained that it considered
using the midpoint of the zone value to
base its calculations instead of the
upper limit. It chose not to do this
because it would have been significantly
different from the methodology used in
28 73
29 Id.
FR 65040 at 65043.
at 64044.
30 Id.
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the previous schedule (which used the
upper zone amount) and its use would
have generated significantly lower per
acre rent amounts, even though land
values have generally increased.
Because of the larger range in values,
the 2008 fee schedule included twelve
zones rather than eight.
16. BLM will update the per-acre land
values by county every five years on a
defined schedule that is linked to the
NASS Census updates, which are also
updated every five years. Therefore, the
2011–2015 fee schedules would be
based on the 2007 NASS Census data,31
adjusting in intermediary years with an
annual inflation adjustment factor, the
2016–2020 fee schedules would be
based on the 2012 NASS Census, the
2021–2025 fee schedules would be
based on the 2017 NASS Census, and so
on.
17. In promulgating the 2008 fee
schedule, BLM made additional changes
to the methodology underlying the fee
schedule. BLM reduced the
encumbrance factor from 70 percent to
50 percent after a review of public
comments, industry practices in the
private sector, and the Department of
Interior’s appraisal methodology for
right-of-way facilities on Federal
lands.32 BLM revised the fixed rate of
return downward from 6.41 percent to
5.27, which is the 10-year average
(1998–2008) of the 30-year and 20-year
Treasury bond yield rate.33 To stay
current with inflationary or deflationary
trends, BLM will apply an annual
adjustment factor, which is currently 1.9
percent, to the per-acre rental rate in the
fee schedule.34 The annual adjustment
factor is based on the average annual
change in the Implicit Price DeflatorGross Domestic Product (IPD–GDP) for
the 10-year period immediately
preceding the year that the NASS
Census data become available.35 The
BLM rule makes clear that the fee
schedule is the only basis for
determining an annual rental fee for
rights of way on Federal lands.36
18. On February 17, 2009, the
Commission issued notice (February 17
Notice) of the 2008 BLM fee schedule,
31 There is an 18-month delay in NASS’s
publication of the census data. In BLM’s
administration of its formula, it provides another
18-month delay to allow notice of any changes in
applicable county values.
32 Id. at 65047.
33 Id. at 65049.
34 Id. at 65050.
35 The annual adjustment factor will be updated
every ten years.
36 If lands are to be transferred out of federal
ownership, BLM allows a right-of-way occupier to
submit an appraisal report to determine a one-time
rental payment for perpetual linear grants or
easements.
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which was based on its revised
methodology, as it had done for every
annual update to the 1987 fee
schedule.37 Because of the land value
revisions and methodology adjustments
in response to EPAct 2005, the 2008 fee
schedule resulted, in some cases, in
significantly higher annual charge
assessments of Commission licensees.38
19. On March 6, 2009, a group of
licensees requested rehearing of the
February 17 Notice, which the
Commission denied.39 The licensees
petitioned for review of the
Commission’s orders in the United
States Court of Appeals for the District
of Columbia Circuit. On January 4, 2011,
the Court granted the petition for review
and vacated the Commission’s February
17 Notice.40 The DC Circuit found that
the Commission is required by the
Administrative Procedure Act to seek
notice and comment on the
methodology used to calculate annual
charges because the Commission’s fee
schedule is based on the BLM fee
schedule, and BLM has made changes to
the methodology underlying its fee
schedule.
20. On February 17, 2011, the
Commission issued a Notice of Inquiry
soliciting comments on proposed
methodologies for assessing annual
charges for the use, occupancy, and
enjoyment of Federal lands by
hydropower licensees. The Notice of
Inquiry identified five requirements that
any proposed methodology should
satisfy, which are derived from the
Commission’s statutory obligations
under the FPA and the Commission’s
past practice in implementing various
methodologies. Any proposed
methodology must: (1) apply uniformly
to all licensees; (2) avoid exorbitant
administrative costs; (3) not be subject
to review on an individual basis; (4)
reflect reasonably accurate land
valuations; and (5) avoid an
unreasonable increase in costs to
consumers.
II. Comments on Notice of Inquiry
21. In response to the Notice of
Inquiry, comments were filed by eight
entities representing licensees, industry
trade groups, and Federal agencies. No
37 Update of the Federal Energy Regulatory
Commission’s Fees Schedule for Annual Charges
for the Use of Government Lands, 74 FR 8184 (Feb.
24, 2009) FERC Stats. & Regs. ¶ 31,288 (2009).
38 However, a handful of licensees, in
geographical locations throughout the country, had
their rates reduced.
39 Update of the Federal Energy Regulatory
Commission’s Fee Schedule for Annual Changes for
the Use of Government Lands, 129 FERC ¶ 61,095
(2009).
40 City of Idaho Falls, Idaho v. FERC, 629 F.3d
222 (D.C. Cir. 2011).
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72137
commenters suggested, and the
Commission is unaware of, any existing
index other than the NASS Census to
determine per acre rental rates by
county.
22. 2008 BLM Fee Schedule. The
Forest Service is the only commenter
that recommends straight-forward
adoption of the 2008 BLM fee schedule
for assessing annual charges for the use
of Federal lands by hydropower
licensees. The Forest Service identified
several advantages to adopting the BLM
fee schedule, including: (1) Consistent
application of linear rights-of-way rental
values among Federal agencies; (2)
parity in rental rates for projects
licensed or exempted from licensing
under the FPA; and (3) reduced
administrative burden because BLM
maintains and updates the schedule
with periodic revisions to reflect
changes in land values, treasury rates,
and inflation.
23. Per-Acre Land Value. The Federal
Lands Group 41 believes that the NASS
Census land values should be reduced
by 50 percent, instead of the 20 percent
reduction incorporated into the BLM fee
schedule, to reflect the fact that lands
used for hydropower projects rarely
have any value for agricultural
purposes. The Federal Lands Group also
recommends that the Commission use
actual county land values from the
NASS Census instead of the zone values
created by BLM, which would result in
a more accurate valuation of the project
lands, with only minimal additional
burden on the Commission because it is
responsible for assessing Federal lands
charges for fewer than 250 projects.
24. Similarly, Southern California
Edison (SCE) generally supports use of
the 2008 BLM fee schedule but believes
that the 20 percent reduction in per-acre
county land value does not properly
account for the reduced value of vacant
land. SCE recommends the Commission
use the pastureland average value per
acre category from the NASS Census to
capture the value of vacant, unimproved
lands. In addition, SCE recommends the
Commission adjust downward the land
values from the NASS Census because
of the dramatic decrease in value that
has occurred since the 2002 NASS
Census.
25. Idaho Power Company (Idaho
Power) believes that in order to
accurately reflect the fair market value
of Federal lands, the NASS Census land
and buildings category should be
reduced by an additional 26 percent for
a total reduction of 46 percent.
41 The Federal Lands Group is a group of 16
private and municipal licensees that operate 37
licensed projects in the western U.S.
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26. The National Hydropower
Association (NHA) argues that any
methodology based on an agricultural
index, without an adjustment to more
accurately capture the character of lands
present at hydroelectric project, is
inherently flawed because the lands
typically present at hydroelectric
projects are steeply sloped, rocky, and
remote.
27. PG&E objects to the use of the
NASS Census for per acre county land
values because the land values reflect
values from the beginning of the real
estate bubble and may have improperly
inflated the true value of the
government lands. PG&E states that an
agricultural index overvalues
government lands used by hydroelectric
projects, and points out that the
Commission previously found, in Order
No. 469, that farm land values were
typically much higher than the value of
Federal land used for hydroelectric
projects.
28. Individual Appraisals. The
Federal Lands Group argues that the
Commission should provide a limited
opportunity for a licensee, at its own
expense, to demonstrate through
periodic, independent appraisals the
actual fair market value of Federal lands
at a project.
29. Placer County also supports a
mechanism for individual licensees to
demonstrate, at their own expense, that
the fair market value of the Federal
lands at a hydropower project are
substantially less than the annual
charges billed by the Commission.
Placer County suggests that a licensee
could submit a land sales value
appraisal performed by a state certified
and licensed real estate appraiser. If that
appraised value is substantially lower
than the assumed land value used to
derive the Commission’s default annual
charges, then the Commission should
adjust the charges.
30. Placer County proposes two
alternative approaches to making this
adjustment. First, the Commission could
reassign the specific project to the BLM
fee schedule zone that corresponds to
the appraised land value. Second, the
Commission could develop a projectspecific multiplier based on the
difference between the values yielded
by the default methodology and the
individual assessment. For each
subsequent year, the charge yielded by
the default methodology would be
multiplied by the same percentage.
Under either of these proposals,
licensees could be required to provide
an updated appraisal periodically in
order to continue to be assessed a rate
other than that produced by the default
methodology.
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31. NHA also recommends that the
Commission allow an alternative land
valuation method on a case-by-case
basis to resolve anomalies that may
occur in the application of an indexbased valuation system.
32. PG&E objects to independent
appraisals on a case-by-case basis
because such a practice would be time
consuming and would result in
exorbitant administrative costs,
ultimately resulting in increased annual
charge assessments to licensees for the
administration of Part I of the FPA.
However, PG&E believes that it might be
appropriate for the Commission to allow
a licensee to challenge the application
of a uniform formula, if it results in an
inappropriate annual charge given the
peculiar characteristics of particular
projects.
33. Encumbrance Factor. The Federal
Lands Group argues that the
encumbrance factor should be 30
percent because, unlike other energy
infrastructure, hydroelectric projects
encumber Federal lands minimally, and
substantially enhance the management
objectives of the Federal lands
management agencies.
34. Placer County also argues that the
Federal lands rental fee should be
reduced because hydropower licensees
do not fully encumber the Federal lands
within their projects, much of those
lands remain available for other uses,
the Federal government retains
significant rights in its lands, and
licensees use the Federal lands within
their projects to provide benefits to the
public. Placer County suggests that the
Commission adopt an encumbrance
factor between 30 and 50 percent for all
project areas occupying Federal lands.
35. SCE believes that a 50 percent
encumbrance factor is the highest that is
appropriate for a hydropower facility,
and that the Commission should
consider a public benefit credit system
to offset the encumbrance factor when it
is determined a hydropower facility
provides recreational and other benefits
to the general public (e.g., recreational
activities, flood control, or water
storage).
36. Idaho Power also believes an
encumbrance factor of 100 percent for
non-transmission line lands is
inappropriate because Federal
landowners such as BLM and Forest
Service issue commercial permits and
collect fees for the use of project lands,
and licensees are required to make
significant investment for the protection
of Federal lands from natural and
manmade impacts or enhancements to
Federal lands. Idaho Power believes an
appropriate encumbrance factor is zero.
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37. NHA believes that the hydropower
industry’s contributions to multiple use
of Federal lands should be reflected in
the Commission’s valuation method by
significantly reducing the level of
encumbrance of hydropower projects on
Federal lands. NHA states that
Commission-issued licenses reserve
authority for Federal land management
agencies to authorize non-project uses
on Federal lands within the project
boundary, such as flood control,
navigation, and storage for water supply
and irrigation. NHA further states that
many projects significantly enhance the
multiple use management of the lands
they occupy by providing recreational
attractions such as fishing, boating,
camping, and other activities, and many
licensees also provide funding to the
land managing agency in addition to the
recreation facilities they construct,
operate, and maintain.
38. Non-Transmission Line Lands.
The Federal Lands Group, PG&E, Idaho
Power, NHA, and SCE object to the
Commission’s practice of automatically
doubling the linear rights-of-way fee for
non-transmission line project areas
because this practice does not recognize
that these other project areas are
frequently used for non-hydroelectric
purposes, such as public recreation,
private recreation (e.g., residential boat
docks), and general environmental
preservation, and are accessible by the
general public for a variety of uses.
PG&E also argues that, in the case of
government lands administered by the
Forest Service, the Forest Service
reserves to itself the right to use, or to
permit others to use, project lands for
any purpose. PG&E suggests that the
Commission charge some lesser factor
than doubling for non-transmission line
project areas.
39. Rate of Return and Annual
Adjustment Factor. SCE recommends
use of the 30-year Treasury Bond rate
rather than the 10-year average of the
30-year Treasury bond yield rate
because the former is a more accurate
valuation of a long-range asset. SCE
proposes that the Commission use the
IPD–GDP to track inflation of land
values annually.
40. 1987 Fee Schedule. PG&E
recommends the Commission continue
use of the 1987 BLM fee schedule, with
annual adjustments for inflation. PG&E
states that it recognizes that Congress
appeared to believe the BLM fee
schedule for linear rights of way did not
reflect current land values, but asserts
there is no indication in the statutory
provision that Congress intended that
the Commission use the revised fee
schedules for hydroelectric projects, or
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that the use of the 1987 BLM fee
schedule was inappropriate.
41. Income- or Generation-Based
Methodologies. PG&E and NHA object to
any methodology for assessing annual
charges that would use an income- or
generation-based methodology to
establish annual land use charges.
42. Phase-In of New Fee Schedule.
PG&E requests that the increase in
annual charges be phased in over a
number of years thereby avoiding an
increase to the price of consumers of
power.
43. Edison Electric Institute. The
Edison Electric Institute (EEI) endorses
the comments submitted by the Federal
Lands Group, PG&E, SCE, Idaho Power,
and NHA. EEI emphasizes the
importance of such factors as the rural,
unfarmed, undeveloped nature of
hydropower project lands, the local
nature of land values, the modest
encumbrance of Federal lands used by
hydropower facilities, changes in land
values from year to year, use of
reasonable long-term discount rates, and
the need for project-by-project
adjustments in fee assessments.
III. Proposed Rule
44. The Commission proposes to
adopt the 2008 BLM methodology for
creating a fee schedule of rental rates by
county to assess annual charges for the
use, occupancy, and enjoyment of
Federal lands by hydropower licensees.
Four components comprise the
proposed formula: (1) An average peracre land value by county based on the
‘‘land and buildings’’ category from the
NASS Census; (2) an encumbrance
factor; (3) a rate of return; and (4) an
annual adjustment factor. The
Commission proposes to use this
methodology to create its own schedule,
based on the NASS Census, without
using the zone system incorporated into
the BLM fee schedule. Except for this
difference, the Commission proposes to
adopt all other aspects of the BLM
methodology for producing a fee
schedule to assess rental rates for the
use of Federal lands. In addition, the
Commission proposes to eliminate the
current practice of doubling the fee
schedule rate for non-transmission line
lands. The proposed rule does not
include a graduated phase-in rate for the
new schedule. Thus, the Commission
would assess annual charges for the use
of Federal lands by multiplying the rate
in its fee schedule by the number of
Federal acres occupied by a licensee.
45. The per-acre land value would be
based on the NASS Census, adjusted
downward to remove the value of
irrigated lands and buildings, and
would be updated with current land
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values every five years. The
encumbrance factor, which adjusts for
the degree to which an occupation of
Federal lands precludes other uses,
would be 50 percent. The rate of return,
which converts the per-acre land value
into an annual rental value, would be
5.27 percent. Finally, the annual
adjustment factor, which adjusts the
rental rate to reflect inflationary or
deflationary trends, would be 1.9
percent, and would be adjusted every
ten years.
46. The Commission proposes to track
BLM’s timing for incorporating the
periodic updates to the NASS Census
data. Therefore, the Commission’s
2011–2015 fee schedules would be
based on the 2007 NASS Census data,42
adjusting in intermediary years with the
annual adjustment factor, the 2016–
2020 fee schedules would be based on
the 2012 NASS Census, the 2021–2025
fee schedules would be based on the
2017 NASS Census, and so on. The
annual adjustment factor would be
revised every ten years, and the
encumbrance factor and rate of return
would remain unchanged unless by
future rulemaking.
A. Per-Acre Land Value
47. The Commission proposes to
adopt BLM’s practice of creating a peracre land value by using the ‘‘land and
buildings’’ category from the NASS
Census. The ‘‘land and buildings’’
category is a combination of all the land
categories in the NASS Census, and
includes croplands (irrigated and nonirrigated), pastureland/rangeland,
woodland, and ‘‘other’’ (roads, ponds,
wasteland, and land encumbered by
non-commercial/non-residential
buildings). The Commission would
apply a 20 percent reduction to remove
the value of irrigated farmland and
buildings from the ‘‘land and buildings’’
category, but would avoid grouping the
resulting land values into zones. Thus,
under the BLM zone system, if the peracre land value for County A, after the
20 percent reduction, is $3,500 and the
zone range is $3,000 to $5,000, then
County A’s per-acre land value for
purposes of the BLM formula would be
$5,000. In contrast, under the proposed
rule, the per-acre land value for County
A would be $3,500, rather than
$5,000.43
42 There is an 18 month delay in NASS’s
publication of the census data. In BLM’s
administration of its formula it provides another 18
month delay to allow notice of any changes in
applicable county values.
43 After the other components of the BLM formula
are applied (encumbrance factor reduction, rate of
return, and adjustment for inflation), County A’s
per-acre rent in 2011 under the Commission’s
proposed rule would be approximately $94.
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48. Using the county-by-county data
is the ‘‘best approximation’’ of county
values of which the Commission is
aware. This method would result in
more accurate land valuations for all
licensees because under the zone
system, every county is priced at the
highest zone value (and thus the value
of every county is inflated). In addition,
the use of NASS Census data, which is
updated every five years, alleviates
commenters’ concern that values are
based on short-term anomalies in real
estate prices.
49. Several commenters disagree with
the use of an agricultural index as the
basis for per-acre land values, arguing
that the Commission has previously
rejected use of an agricultural-based
index in Order No. 469.44 In Order No.
469, the Commission determined that
the BLM fee schedule, which was based
on a survey of lands that had been
occupied by BLM and Forest Service
linear rights of way, was the best
approximation of per-acre rental rates
for linear rights of way. The
Commission rejected use of the
agricultural index produced by the
USDA at that time because the index
overvalued the types of lands that are
used for hydropower purposes,
provided values only for states and not
by county, and required too many
adjustments by the Commission to
account for farm buildings, cleared and
arable land, and the private ownership
of the lands.45 The Commission
concluded that the administrative
efficiencies provided by the 1987 BLM
fee schedule were superior to the many
adjustments the Commission would
have had to make to the USDA’s
agricultural index.
50. This is no longer the case. BLM
has adopted use of the NASS Census for
determining per-acre land values by
county and has incorporated reasonable
adjustments to the raw NASS Census
data to more accurately value the types
of lands used as Federal rights of way.
Unlike the previous agricultural index
created by USDA, the NASS Census
includes land values at the county level,
allowing differentiation within each
state.
51. In addition, BLM’s methodology
for producing the fee schedule provides
for significant adjustments to the NASS
Census land values to account for the
same concerns the Commission had
when considering use of the USDA
agricultural index. BLM uses the total
average ‘‘land and buildings’’ category
from the NASS Census, which includes,
irrigated and non-irrigated croplands
44 FERC
Stats. & Regs. ¶ 30,741 at 30,589.
45 Id.
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(but not the value of crops),
pasturelands, rangelands, woodlands,
and interstitial lands, such as roads,
ponds, wastelands, and lands
encumbered by non-commercial or nonresidential buildings. In consultation
with NASS officials, BLM determined
that a 20 percent reduction to the
average per-acre ‘‘land and buildings’’
category would remove the value of
irrigated croplands and lands
encumbered by buildings, which are
generally not the types of lands used for
linear rights of way or hydropower
projects. Because the Commission
proposes to adopt the BLM fee schedule,
the Commission would not be required
to make these adjustments itself.
Therefore, the NASS Census data and
BLM’s application of this data alleviates
the concerns the Commission once had
with USDA’s previous agricultural
index.
52. Several commenters object to use
of the BLM fee schedule because recent
NASS Census data was gathered during
a national real estate bubble. The
Commission recognizes that property
values have increased significantly in
some parts of the country in the last
decade. One of the significant
advantages to the new BLM
methodology is that the land values will
be updated every five years. Because
there is a delay in BLM’s adoption of the
NASS Census data, there will also be a
delay in including these values into the
fee schedule. However, over time, all
increases and decreases in land values
will be reflected in the NASS Census
data and in the fee schedule.
53. Several commenters believe that
licensees should have the opportunity,
at their own expense, to submit
individual appraisals to demonstrate the
NASS Census per-acre land values are
inaccurate. The Commission continues
to believe that individual land
appraisals would be difficult to
administer, would increase the costs of
administering Part I of the FPA, and
would increase the potential for
disputes and litigation over annual
charges.
54. Commenters argue that the
Commission should allow individual
appraisals because BLM allows for such
an opportunity. This is not accurate.
The BLM rule makes clear that all
entities with linear rights of way are to
be assessed a rental rate according to the
published fee schedule. The BLM rule
allows appraisals to be submitted where
an entity is making a one-time rental
payment for a perpetual right of way or
easement on land that will be
transferred out of Federal ownership. If
Federal lands within a licensee’s project
boundary were transferred out of
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Federal ownership, then the
Commission would no longer collect
annual charges for the use of those
Federal lands from that licensee.46
55. The Commission recognizes that
for some licensees regional land values
have increased dramatically, resulting
in a significant increase in the rental
rate for the use of Federal lands by
hydropower licensees. This is primarily
the result of a shift from a methodology
that used land values from 1987 to a
methodology that uses current market
land values. Because the 2008 BLM
methodology incorporates five year
updates to the per-acre county land
values, it is not anticipated that such a
large increase in annual charges for the
use of Federal lands will occur again.
B. Encumbrance Factor
56. The encumbrance factor is a
measure of the degree that a particular
type of facility encumbers the right-ofway area or excludes other types of land
uses.47 If the encumbrance factor is 100
percent, the right-of-way facility (and its
operation) is encumbering the right-ofway area to the exclusion of all other
uses. Impacts could include visual,
open space, wildlife, vegetative,
cultural, recreation, and other public
land resources. The updated BLM
methodology reduces the encumbrance
factor from 70 percent to 50 percent.
57. Several commenters believe that
the encumbrance factor should be less
than 50 percent, particularly because
other uses are often authorized on the
Federal lands. In promulgating the 2008
fee schedule, BLM revisited its survey of
the degrees of encumbrance presumed
by utility facilities and infrastructure,
and determined that 50 percent was
more reasonable than 70 percent
because lands often can be used for
other purposes. BLM made this change
as a result of comments received on its
proposed rule, a review of industry
practices in the private sector, and a
review of the Department of Interior’s
appraisal methodology for right-of-way
facilities located on Federal lands.48
However, BLM explained that the
degree to which Federal lands can be
used for multiple purposes does not
reduce the rental rate to be assessed,
and clarified that grants issued for
rights-of-way facilities are nonexclusive, such that BLM reserves the
46 Annual charges for the use of Federal lands
would still be assessed if the lands transferred out
of federal ownership were subject to a power site
classification under section 24 of the FPA. 16 U.S.C.
818 (2006).
47 73 FR 65040 at 65047.
48 Id.
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right to authorize other uses within a
right-of-way area.49
58. Several commenters suggested the
public benefits provided by hydropower
licensees should result in a reduced
encumbrance factor.50 However, the
public benefits required by a license
cannot completely offset the rental fee
for use of Federal lands. Rather, the
public benefits, including aesthetics,
recreation, environmental, fish and
wildlife, and others, are required by the
FPA in order to receive a license, not in
exchange for occupying Federal lands.
We acknowledge these public uses at
many projects by discontinuing the
practice of doubling the charges for nontransmission line lands. However,
because hydropower projects located on
Federal lands do indeed make use of
public property for which the FPA
requires us to set a reasonable fee, we
agree with BLM’s use of a 50 percent
encumbrance factor.
59. The Commission’s practice has
been to charge the fee schedule rental
rate for transmission line lands and to
double this rate for other project areas
based on the theory that linear rights of
way represent a lesser encumbrance
than do rights of way over other project
areas. Most commenters request that the
Commission discontinue this practice.
The 1987 fee schedule was developed
for linear rights of way on Federal lands,
which was based on a survey of market
values for the various types of land that
the Forest Service and BLM had allowed
to be occupied by linear rights of way.
When the Commission adopted BLM’s
1987 fee schedule, it recognized that the
values identified in the BLM schedule
were the ‘‘best approximation’’ available
of the value of lands used for
transmission linear rights of way. Thus,
it was reasonable at that time for the
Commission to assess transmission line
lands at this rate, but to double the rate
for non-linear project areas that
involved a more comprehensive
occupation of Federal lands than a
linear right of way. However, because
the NASS Census provides a per-acre
value for lands generally, and not
specifically for linear sections of land,
there is no compelling reason to double
the underlying value represented in the
NASS Census for non-linear lands.
Therefore, we agree with commenters
and propose to discontinue this
practice.
49 Id.
50 Idaho Power believes the encumbrance factor
should be zero, which would zero out the rental
rate as well.
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C. Rate of Return
60. The BLM fee schedule adopts a
fixed rate of return of 5.27 percent,
which is the most current 10-year
average (1998–2008) of the 30-year and
20-year Treasury bond yield rate. This is
a reduction from the rate of return of
6.41 percent under the 1987 fee
schedule, which was the 1-year
Treasury Securities ‘‘Constant Maturity’’
rate from June 30, 1986. The rate of
return component used in the fee
schedule formula reflects the
relationship of income to property
value, as modified by any adjustments
to property value. BLM reviewed a
number of appraisal reports that
indicated the rate of return for land can
vary from seven to twelve percent and
is typically around ten percent. These
rates take into account certain risk
considerations, and BLM chose to use a
‘‘safe rate of return,’’ such as the
prevailing rate on insured savings
accounts or guaranteed government
securities. In its 2008 rule, BLM
explained that a 10-year average is more
appropriate than a rate selected from
one point in time, and that a periodic
adjustment of the rate of return would
lead to uncertainty in rental fees, which
would have a negative impact on
utilities and customers and duplicate
the changes reflected in the GDP index.
61. SCE commented that the
Commission should use the 30-year
Treasury bond rate rather than the 10year average of the 30-year Treasury
bond yield rate because use of the actual
30-year rate is the most accurate
valuation of a long-range asset. While
using the actual 30-year rate would be
more accurate, we agree with BLM’s
rationale that an annual adjustment of
the rate of return would result in
unnecessary uncertainty with respect to
rental rates. Therefore, the Commission
finds that BLM’s use of the 5.27 percent
fixed rate of return is reasonable.
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D. Annual Adjustment Factor
62. The BLM fee schedule includes an
annual adjustment factor, which is
currently 1.9 percent. The annual
adjustment factor allows the rental rate
to stay current with inflationary or
deflationary trends. In its 2008 rule,
BLM explained that it will adjust the
per-acre rent each calendar year based
on the average annual change in the
IPD–GDP for the 10-year period
immediately preceding the year that the
NASS Census data becomes available.
Thus, the IPD–GDP will change every
ten years. The annual adjustment factor
is based on the average annual change
in the IPD–GDP for the 10-year period
immediately preceding the year (2004)
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that the 2002 NASS Census data became
available. This figure is 1.9 percent and
will be applied for each calendar year
through 2015.
63. BLM will recalculate the annual
index adjustment in 2014 based on the
average annual change in the IPD–GDP
from 2004 to 2013 (the 10-year period
immediately preceding the year (2014)
when the 2012 NASS Census data will
become available) and will apply it
annually to the fee schedule for years
2016 through 2025. The Commission
proposes to adopt BLM’s decadal
updates to the annual index adjustment.
IV. Regulatory Requirements
A. Information Collection Statement
64. The Office of Management and
Budget (OMB) regulations require OMB
to approve certain information
collection requirements imposed by
agency rule.51 The proposed regulations
discussed above do not impose or alter
existing reporting or recordkeeping
requirements on applicable entities as
defined by the Paperwork Reduction
Act.52 As a result, the Commission is
not submitting this proposed rule to
OMB for review and approval.
B. Environmental Analysis
65. The Commission is required to
prepare an Environmental Assessment
or an Environmental Impact Statement
for any action that may have a
significant adverse effect on the human
environment.53 Commission actions
concerning annual charges are
categorically exempted from the
preparation of an Environmental
Assessment or an Environmental Impact
Statement.54
C. Regulatory Flexibility Act
66. The Regulatory Flexibility Act of
1980 (RFA) 55 generally requires a
description and analysis of final rules
that will have a significant economic
impact on a substantial number of small
entities. The RFA mandates
consideration of regulatory alternatives
that accomplish the stated objectives of
a proposed rule and that minimize any
significant economic impact on a
substantial number of small entities.
The Small Business Administration’s
(SBA) Office of Size Standards develops
the numerical definition of a small
business.56 The SBA has established a
51 5
CFR 1320.11 (2011).
U.S.C. 3502(2)–(3) (2006).
53 Regulations Implementing the National
Environmental Policy Act of 1969, Order No. 486,
52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs.
Regulations Preambles 1986–1990 ¶ 30,783 (1987).
54 18 CFR 380.4(a)(11) (2011).
55 5 U.S.C. 601–612 (2006).
56 13 CFR 121.101 (2011).
52 44
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size standard for hydroelectric
generators, stating that a firm is small if,
including its affiliates, it is primarily
engaged in the transmission, generation,
and/or distribution of electric energy for
sale and its total electric output for the
preceding 12 months did not exceed
four million megawatt hours.57
67. Section 10(e)(1) of the FPA
requires that the Commission fix a
reasonable annual charge for the use,
occupancy, and enjoyment of Federal
lands by hydropower licensees.58 The
Commission has issued 253 licenses
that occupy Federal lands to 135
discrete licensees, who will be impacted
by the proposed rule. The proposed rule
adopts a methodology promulgated by
BLM, based on the NASS Census data,
to determine the annual charge for the
use of Federal lands. The methodology
for assessing this annual charge under
the existing rule is based on land values
from 1987, whereas the proposed rule
incorporates current land values, and
would update those values every five
years. As a result, some of the 135
licensees may experience a one-time
increase in their annual charge for the
use of Federal lands.
68. Nevertheless, based on a review of
the 135 licensees with Federal lands
that will be impacted by the proposed
rule, we estimate that less than ten
percent are small entities under the SBA
definition. The 135 licensees represent
utilities, cities, and private and public
companies in 30 states or territories.
Many of the utilities which may seem to
be under the four million megawatt
hours per year threshold are also
engaged in electricity production
through other forms of generation, such
as coal or natural gas, or also provide
other utility services such as natural gas
or water delivery. Similarly, many
licensees that are small hydropower
generators are affiliated with a larger
entity or entities in other industries.
Therefore, we estimate that less than ten
percent of the impacted licensees are
actually small, unaffiliated entities who
are primarily engaged in hydropower
generation and whose total electrical
output through transmission,
generation, or distribution is less than
four million megawatt hours per year.
69. Any impact on these small entities
would not be significant. Under the
proposed rule there may be a one-time
increase for some licensees in the
annual charge for the use of Federal
lands, but because the new methodology
for calculating the annual charge will be
updated every five years, any future
57 13 CFR 121.201, Sector 22, Utilities & n.1
(2011).
58 16 U.S.C. 803(e)(1) (2006).
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Federal Register / Vol. 76, No. 225 / Tuesday, November 22, 2011 / Proposed Rules
erowe on DSK2VPTVN1PROD with PROPOSALS
increases or decreases will be
incremental. In addition, small,
unaffiliated entities generally occupy
less Federal lands than larger projects
that generate more power. Therefore, as
a class of licensees, small entities would
be less impacted by an annual charge for
the use of Federal lands. Furthermore,
this proposed rule does not incur any
additional compliance or recordkeeping
costs on any licensees occupying
Federal lands. Consequently, the
proposed rule should not impose a
significant economic impact on small
entities.
70. Based on this understanding, the
Commission certifies that the proposed
rule will not have a significant
economic impact on a substantial
number of small entities. Accordingly,
no regulatory flexibility analysis is
required.
D. Comment Procedures
71. The Commission invites interested
persons to submit comments on the
matters and issues proposed in this
notice to be adopted, including any
related matters or alternative proposals
that commenters may wish to discuss.
Comments are due January 6, 2012.
Comments must refer to Docket No.
RM11–6–000, and must include the
commenter’s name, the organization
they represent, if applicable, and their
address in their comments.
72. The Commission encourages
comments to be filed electronically via
the eFiling link on the Commission’s
web site at https://www.ferc.gov. The
Commission accepts most standard
word processing formats. Documents
created electronically using word
processing software should be filed in
native applications or print-to-PDF
format and not in a scanned format.
Commenters filing electronically do not
need to make a paper filing.
73. Commenters that are not able to
file comments electronically must send
an original of their comments to:
Federal Energy Regulatory Commission,
Secretary of the Commission, 888 First
Street NE., Washington, DC 20426.
74. All comments will be placed in
the Commission’s public files and may
be viewed, printed, or downloaded
remotely as described in the Document
Availability section below. Commenters
on this proposal are not required to
serve copies of their comments on other
commenters.
E. Document Availability
75. In addition to publishing the full
text of this document in the Federal
Register, the Commission provides all
interested persons an opportunity to
view and/or print the contents of this
VerDate Mar<15>2010
13:44 Nov 21, 2011
Jkt 226001
document via the Internet through the
Commission’s Home Page (https://
www.ferc.gov) and in the Commission’s
Public Reference Room during normal
business hours (8:30 a.m. to 5 p.m.
Eastern time) at 888 First Street NE.,
Room 2A, Washington, DC 20426.
76. From the Commission’s Home
Page on the Internet, this information is
available on eLibrary. The full text of
this document is available on eLibrary
in PDF and Microsoft Word format for
viewing, printing, and/or downloading.
To access this document in eLibrary,
type the docket number excluding the
last three digits of this document in the
docket number field.
77. User assistance is available for
eLibrary and the Commission’s Web site
during normal business hours from the
Commission’s Online Support at (202)
502–6652 (toll free at 1–(866) 208–3676)
or email at ferconlinesupport@ferc.gov,
or the Public Reference Room at (202)
502–8371, TTY (202) 502–8659. Email
the Public Reference Room at
public.referenceroom@ferc.gov.
List of Subjects in 18 CFR Part 11
Dams, Electric power, Indians-lands,
Public lands, Reporting and
recordkeeping requirements.
By direction of the Commission.
Commissioner Spitzer is not participating.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
In consideration of the foregoing, the
Commission proposes to amend Part 11,
Chapter I, Title 18, Code of Federal
Regulations, as follows:
PART 11—ANNUAL CHARGES UNDER
PART I OF THE FEDERAL POWER ACT
1. The authority citation for part 11
continues to read as follows:
Authority: 16 U.S.C. 791a–825r; 42 U.S.C.
7101–7352.
§ 11.2
[Amended]
2. Amend § 11.2 by deleting
paragraph (a).
3. Amend § 11.2 by revising paragraph
(b) to read as follows:
(b) Pending further order of the
Commission, annual charges for the use
of government lands will be payable in
advance, and will be set on the basis of
an annual schedule of rental fees for
linear rights-of-way as set out in
Appendix A of this part. Annual charges
for transmission line rights of way and
other project lands will be equal to the
per-acre charges established by the
above schedule. The Commission, by its
designee the Executive Director, will
update its fee schedule to reflect
changes in land values established by
the U.S. National Agricultural Statistics
PO 00000
Frm 00015
Fmt 4702
Sfmt 4702
Service Census, and to reflect changes
in the annual adjustment factor, as
calculated by the U.S. Bureau of Land
Management. The Executive Director
will publish the updated fee schedule in
the Federal Register.
4. Amend § 11.2 by deleting existing
paragraphs (c)(1) and (c)(2).
5. Amend § 11.2 by redesignating
paragraph (b) as new paragraph (a), and
by redesignating paragraphs (d) and (e)
as new paragraphs (b) and (c),
respectively.
[FR Doc. 2011–30110 Filed 11–21–11; 8:45 am]
BILLING CODE 6717–01–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–R09–OAR–2011–0875; FRL–9495–1]
Revisions to the California State
Implementation Plan, South Coast Air
Quality Management District
Environmental Protection
Agency (EPA).
ACTION: Proposed rule.
AGENCY:
EPA is proposing to approve
revisions to the South Coast Air Quality
Management District portion of the
California State Implementation Plan
(SIP). These revisions concern
particulate matter (PM) emissions from
paved and unpaved roads and livestock
operations and aggregate and related
operations. We are approving local rules
that regulate these emission sources
under the Clean Air Act as amended in
1990 (CAA or the Act). We are taking
comments on this proposal and plan to
follow with a final action.
DATE: Any comments must arrive by
December 22, 2011.
ADDRESSES: Submit comments,
identified by docket number EPA–R09–
OAR–2011–0875, by one of the
following methods:
1. Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
on-line instructions.
2. Email: steckel.andrew@epa.gov.
3. Mail or deliver: Andrew Steckel
(Air-4), U.S. Environmental Protection
Agency Region IX, 75 Hawthorne Street,
San Francisco, CA 94105–3901.
Instructions: All comments will be
included in the public docket without
change and may be made available
online at https://www.regulations.gov,
including any personal information
provided, unless the comment includes
Confidential Business Information (CBI)
or other information whose disclosure is
restricted by statute. Information that
SUMMARY:
E:\FR\FM\22NOP1.SGM
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]]>Agencies
[Federal Register Volume 76, Number 225 (Tuesday, November 22, 2011)]
[Proposed Rules]
[Pages 72134-72142]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30110]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 11
[Docket No. RM11-6-000]
Annual Charges for Use of Government Lands
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Notice of Proposed Rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Federal Power Act requires hydropower licensees to
recompense the United States for the use, occupancy, and enjoyment of
its lands. The Commission assesses annual charges for the use of
Federal lands through Part 11 of its regulations. The Commission is
proposing to revise the methodology used to compute these annual
charges. Under the proposed rule, the Commission would create a fee
schedule based on the U.S. Bureau of Land Management's (BLM)
methodology for calculating rental rates for linear rights of way. This
methodology includes a land value per acre, an encumbrance factor, a
rate of return, and an annual adjustment factor. The fee schedule would
include all adjustments described in the BLM rule adopting this
methodology, except the allocation of county land values into zones. In
addition, the Commission proposes to eliminate its current practice of
doubling the per-acre rental rate for non-transmission line lands.
DATES: Comments are due January 6, 2012.
ADDRESSES: Comments, identified by docket number, may be filed by the
following methods:
Electronic Filing through https://www.ferc.gov. Documents
created electronically using word processing software should be filed
in native applications or print-to-PDF format and not in a scanned
format.
Mail/Hand Delivery: Those unable to file electronically
may mail or hand-deliver comments to: Federal Energy Regulatory
Commission, Secretary of the Commission, 888 First Street NE.,
Washington, DC 20426.
Instructions: For detailed instructions on submitting comments and
additional information on the rulemaking process, see the Comment
Procedures Section of this document.
FOR FURTHER INFORMATION CONTACT:
Doug Foster, Office of the Executive Director, Federal Energy
Regulatory Commission, 888 First Street NE., Washington, DC 20426,
(202) 502-6118, doug.foster@ferc.gov.
Kimberly Ognisty, Office of General Counsel, Federal Energy Regulatory
Commission, 888 First Street NE., Washington, DC 20426, (202) 502-8565,
kimberly.ognisty@ferc.gov.
SUPPLEMENTARY INFORMATION:
Notice of Proposed Rulemaking
November 17, 2011.
Table of Contents
------------------------------------------------------------------------
Paragraph
Nos.
------------------------------------------------------------------------
I. Background............................................... 2
II. Comments on Notice of Inquiry........................... 21
III. Proposed Rule.......................................... 44
A. Per-Acre Land Value.................................. 47
B. Encumbrance Factor................................... 56
C. Rate of Return....................................... 60
D. Annual Adjustment Factor............................. 62
IV. Regulatory Requirements................................. 64
A. Information Collection Statement..................... 64
B. Environmental Analysis............................... 65
[[Page 72135]]
C. Regulatory Flexibility Act........................... 66
D. Comment Procedures................................... 71
E. Document Availability................................ 75
------------------------------------------------------------------------
1. The Federal Power Act (FPA) requires licensees using Federal
lands to recompense the United States for the use, occupancy, and
enjoyment of its lands.\1\ The Commission has assessed this portion of
annual charges at rental rates established by the U.S. Bureau of Land
Management (BLM) (and adopted by the U.S. Forest Service), which are
published annually in a fee schedule that identifies per-acre rental
rates by state and county for linear rights of way. Under the proposed
rule, the Commission would create a fee schedule based on the BLM
methodology promulgated in 2008 for calculating rental rates for linear
rights of way. This methodology includes a land value per acre, an
encumbrance factor, a rate of return, and an annual adjustment factor.
The Commission-created fee schedule would base county land values on
average per-acre values from the National Agricultural Statistics
Service (NASS) Census, and would not use the zone system adopted by the
2008 BLM rule. All other adjustments to the formula components
described in the BLM rule would apply to the Commission's creation of a
fee schedule.\2\ In addition, the Commission proposes to eliminate its
current practice of doubling the rental rate for non-transmission line
lands.
---------------------------------------------------------------------------
\1\ 16 U.S.C. 803(e)(1) (2006).
\2\ Update of Linear Right-of-Way Rent Schedule, 73 FR 65040
(October 31, 2008) (codified at 43 CFR 2806.20-2806.23).
---------------------------------------------------------------------------
I. Background
2. Section 10(e)(1) of the Federal Power Act (FPA) requires
Commission hydropower licensees using Federal lands to:
pay to the United States reasonable annual charges in an amount
to be fixed by the Commission * * * for recompensing [the United
States] for the use, occupancy, and enjoyment of its lands or other
property * * * and in fixing such charges the Commission shall seek
to avoid increasing the price to the consumers of power by such
charges, and any such charges may be adjusted from time to time by
the Commission as conditions may require * * * .\3\
---------------------------------------------------------------------------
\3\ 16 U.S.C. 803(e)(1) (2006) (emphasis added). Section
10(e)(1) also requires licensees to reimburse the United States for
the costs of the administration of Part I of the FPA. Those charges
are calculated and billed separately from the land use charges, and
are not the subject of this proposed rule.
In other words, where hydropower licensees use and occupy Federal lands
for project purposes, they must compensate the United States through
payment of an annual fee, to be established by the Commission.\4\
---------------------------------------------------------------------------
\4\ Pursuant to FPA section 17(a), 16 U.S.C. 810(a) (2006), the
fees collected for use of government lands are allocated as follows:
12.5 percent is paid into the Treasury of the United States, 50
percent is paid into the federal reclamation fund, and 37.5 percent
is paid into the treasuries of the states in which particular
projects are located. No part of the fees discussed in this proposed
rule is used to fund the Commission's operations.
---------------------------------------------------------------------------
3. Over time, the Commission has adopted a number of methodologies
to effectuate this statutory directive. This has included conducting
project-by-project appraisals,\5\ charging a single national average
land value per acre,\6\ and using a fee schedule for linear rights of
way developed jointly by the BLM and Forest Service.\7\
---------------------------------------------------------------------------
\5\ See Revision of the Billing Procedures for Annual Charges
for Administering Part I of the Federal Power Act and to the
Methodology for Assessing Federal Land Use Charges, Order No. 469,
FERC Stats. & Regs., Regulations Preambles ] 30,741, at 30,584
(1987).
\6\ Id. See also Order Prescribing Amendment to Section 11.21 of
the Regulations Under the Federal Power Act, Order No. 560, 56 FPC
3860 (1976).
\7\ Order No. 469, FERC Stats. & Regs. ] 30,741 at 30,584.
---------------------------------------------------------------------------
4. From 1937 to 1942, the Commission based annual charges for the
use of Federal lands by hydropower licensees on individual land
appraisals for each project.\8\ In 1942, the Commission rejected this
approach in favor of a single national average per-acre land value
because it determined that project-by-project appraisals were more
costly to administer than the value collected in rent, the values for
inundated lands would become distorted, the values could only be
maintained with re-appraisals, and disputes over values may lead to
costly litigation.\9\ Eventually, the Commission also rejected the use
of a single national average per-acre land value because the Inspector
General of the Department of Energy concluded that this methodology
resulted in an under-collection of over $15 million per year due to the
use of outdated land values.\10\
---------------------------------------------------------------------------
\8\ See 56 FPC 3860 at 3863.
\9\ See 56 FPC 3860 at 3863-64.
\10\ See Assessment of Charges under the Hydroelectric Program,
DOE/IG Report No. 0219 (September 3, 1986); see also More Efforts
Needed to Recover Costs and Increase Hydropower Charges, U.S.
General Accounting Office Report No. RCED-87-12 (November 1986). The
single national average land value per acre in 1942 was $50 per
acre, and, by 1976, the value was $150 per acre. 56 FPC 3860.
---------------------------------------------------------------------------
5. In 1987, the Commission adopted use of a fee schedule developed
by the BLM and Forest Service that identified per-acre rental rates by
county for linear rights of way on Federal lands.\11\ BLM and Forest
Service produced the fee schedule by taking a survey of market values
by county for the various types of land that the agencies had allowed
to be occupied by linear rights of way.\12\ The range of per-acre land
values was divided into eight zones, and each zone value was pegged to
the highest raw value within that zone.\13\ The rental rate in the fee
schedule was calculated by multiplying the zone value by an encumbrance
factor of 70 percent,\14\ a rate of return of 6.41 percent, and an
annual inflation adjustment factor. The resulting fee schedule assigned
one of eight rental rates to all counties.\15\
---------------------------------------------------------------------------
\11\ Order No. 469, FERC Stats. & Regs. ] 30,741 at 30,584.
\12\ 51 FR 44014 (Dec. 5, 1986). BLM explained that the value of
timber had not been included, and that the values were not for urban
or suburban residential areas, industrial parks, farms or orchards,
recreation properties or other such types of land. The agencies
tried to avoid using attractive public use areas such as lakeshores,
streamsides, and scenic highways frontage.
\13\ The per-acre zone values were $50, $100, $200, $300, $400,
$500, $600, and $1000.
\14\ The encumbrance factor adjusts the zone value to reflect
the degree that a particular type of facility encumbers the right-
of-way area or excludes other types of land uses. If the encumbrance
factor is 100 percent, the right-of-way facility (and its operation)
is encumbering the right-of-way area to the exclusion of all other
uses.
\15\ The per-acre zone fee under the 1987 BLM fee schedule
ranged from $2.24 to $44.87. By 2008, the per-acre zone fee under
the 1987 BLM fee schedule, having been adjusted each year for
inflation, ranged from $3.76 to $75.23.
---------------------------------------------------------------------------
6. BLM would use individual land appraisals to substitute for the
fee schedule rental rate only if the resulting rent would be
significantly higher than that produced by the schedule.\16\
---------------------------------------------------------------------------
\16\ 51 FR 44014 (Dec. 5, 1986). BLM would use individual
appraisals only if it could be determined that sufficient area
within a right of way would, at a minimum, exceed the zone value by
a factor of ten and the expected return was sufficient to initiate a
separate appraisal.
---------------------------------------------------------------------------
7. In adopting the 1987 BLM fee schedule, the Commission found that
the methodology promulgated by BLM and Forest Service for linear rights
of way was the ``best approximation
[[Page 72136]]
available of the value of lands used for transmission line rights-of-
way.'' \17\ Therefore, the Commission assessed the schedule rate for
transmission line rights of way on Federal lands, and doubled this rate
for other project works on Federal lands (e.g., dams, powerhouses,
reservoirs) because, historically, appraisers had determined that the
market value of transmission line rights of way is roughly half of the
market value of other land.\18\
---------------------------------------------------------------------------
\17\ Order No. 469, FERC Stats. & Regs. ] 30,741 at 30,588
(emphasis added).
\18\ Id. at 30,589.
---------------------------------------------------------------------------
8. In the 1987 proceeding, the Commission found no merit to claims
that charging fair market value for Federal lands is prohibited by the
FPA:
All increases in charges will result in some impact on
consumers. The statutory provision bars the Commission from
assessing unreasonable charges that would be passed along to
consumers. Reasonable annual charges are those that are
proportionate to the value of the benefit conferred. Therefore, a
fair market approach is consistent with the dictates of the Act.
Furthermore, as land values have not been adjusted in over ten
years, an adjustment upwards is warranted and overdue.\19\
---------------------------------------------------------------------------
\19\ Id. (footnotes omitted).
The Commission also rejected the argument that it should
intentionally set low land charges based on the public benefits
provided by hydropower projects. The Commission explained that the
public benefits provided by licensed projects are considered in the
licensing decision and these benefits are the quid pro quo for the
ability to operate the project in a manner consistent with the needs of
society. In contrast, the purpose of the rental fee is to establish a
fair market rate for the use of government land.\20\
---------------------------------------------------------------------------
\20\ Id. at 30,587.
---------------------------------------------------------------------------
9. In adopting the 1987 BLM fee schedule, the Commission rejected
several other proposed methods of assessing annual charges for the use,
occupancy, and enjoyment of government lands by hydropower licensees.
The Commission rejected a proposal to use an agricultural land value
index created by the U.S. Department of Agriculture (USDA), which used
a state-by-state average value per acre of farm lands and buildings,
concluding that this index would require such major adjustments that it
would be an inefficient measure of land value for hydropower
projects.\21\ The Commission also rejected a proposal to assess a fee
based on the percentage of gross revenues from power sales or a rate
per kilowatt hour, concluding that such methods would be unreasonable
because they would result in a royalty as though the occupied Federal
lands themselves were producing power. The Commission explained that
this would overlook the fact that power output is the result of many
factors (e.g., water rights, head, project structures), and not just
the acreage of the Federal lands involved.\22\ Finally, the Commission
again rejected a proposal to use individual project appraisals because
such appraisals would be too costly and result in time-consuming
litigation.\23\
---------------------------------------------------------------------------
\21\ Id. at 30,589. The potential adjustments included
accounting for farm buildings, for the cleared, arable, level land
that it represented, and for the fact that the index represented
private and not federal lands.
\22\ Id. at 30,589-90.
\23\ Id. at 30,590.
---------------------------------------------------------------------------
10. From 1987 to 2008, the Commission assessed annual charges for
the use, occupancy, and enjoyment of government lands according to the
BLM fee schedule. Each year, BLM adjusted the fee schedule for
inflation, and each year the Commission published notice of the updated
schedule.\24\
---------------------------------------------------------------------------
\24\ See, e.g., Update of the Federal Energy Regulatory
Commission's Fee Schedule for Annual Charges for the Use of
Government Lands, 73 FR 3626 (Jan. 22, 2008), FERC Stats. & Regs. ]
31,262 (2008).
---------------------------------------------------------------------------
11. In 2005, Congress passed the Energy Policy Act (EPAct) of 2005,
which required BLM ``to update [the schedule] to revise the per acre
rental fee zone value schedule * * * to reflect current values of land
in each zone.'' \25\ Congress further ordered that ``the Secretary of
Agriculture shall make the same revision for linear rights-of-way * * *
on National Forest System land.''
---------------------------------------------------------------------------
\25\ 42 U.S.C. 15925 (2006).
---------------------------------------------------------------------------
12. On October 31, 2008, BLM issued a final rule promulgating its
updated rental schedule for linear rights of way to satisfy the
congressional mandate in EPAct 2005,\26\ and the Forest Service
subsequently adopted the 2008 BLM fee schedule.\27\ As had been the
case with the methodology underlying the 1987 BLM fee schedule, the
updated fee schedule is based on the same formula, which has four
components: (1) An average per-acre land value by county (grouped into
zones); (2) an encumbrance factor reduction; (3) a rate of return; and
(4) an annual adjustment factor for inflation.
---------------------------------------------------------------------------
\26\ Update of Linear Right-of-Way Rent Schedule, 73 FR 65040.
\27\ See Fee Schedule for Linear Rights-of-Way Authorized on
National Forest System Lands, 73 FR 66591 (November 10, 2008). The
Forest Service noted it had given notice, in the preambles to BLM's
proposed and final rules, that it would adopt BLM's revised fee
schedule.
---------------------------------------------------------------------------
13. Under the updated 2008 BLM fee schedule, the per acre land
value by county is based on the NASS Census data. To determine a county
per-acre land value, BLM uses the average per acre land value from the
``land and buildings'' category of the NASS Census. The ``land and
buildings'' category is a combination of NASS Census land categories,
and includes irrigated and non-irrigated cropland, pastureland,
rangeland, woodland, and the ``other'' category, which includes roads,
ponds, wasteland, and land encumbered by non-commercial or non-
residential buildings. BLM consulted with officials from NASS to arrive
at an appropriate method for removing the value of irrigated cropland
and land encumbered by buildings because these types of land are
generally of higher value than the types of lands over which rights of
way would be granted. This resulted in a reduction in the average per-
acre land value by 20 percent (a 13 percent reduction to remove all
irrigated acres and a 7 percent reduction to remove all lands in the
``other'' category, which includes all improved land or land encumbered
by buildings) ``to eliminate the value of all land that could possibly
be encumbered by buildings or which could possibly have been developed,
improved, or irrigated.'' \28\
---------------------------------------------------------------------------
\28\ 73 FR 65040 at 65043.
---------------------------------------------------------------------------
14. In response to comments that the non-irrigated cropland
category also represented higher value lands and therefore should be
removed from the ``land and buildings'' category, BLM explained that in
comparing the categories from the NASS Census data, it found little
difference in the mid-western and western states between the average
per acre values of non-irrigated cropland and pastureland/
rangeland.\29\ Furthermore, if the non-irrigated lands category were
removed from the per-acre average, the per-acre average would
undervalue Federal land holdings in the eastern U.S., including Forest
Service lands, that have largely been acquired from the private sector
(primarily farm real estate) and would likely fall into the same land
categories covered by the NASS Census.\30\
---------------------------------------------------------------------------
\29\ Id. at 64044.
\30\ Id.
---------------------------------------------------------------------------
15. In response to comments objecting to the zone system, BLM
explained that it chose to retain the zone system because the 2005
congressional mandate directed it to revise the schedule to reflect
current land values in each zone. BLM also explained that it considered
using the midpoint of the zone value to base its calculations instead
of the upper limit. It chose not to do this because it would have been
significantly different from the methodology used in
[[Page 72137]]
the previous schedule (which used the upper zone amount) and its use
would have generated significantly lower per acre rent amounts, even
though land values have generally increased. Because of the larger
range in values, the 2008 fee schedule included twelve zones rather
than eight.
16. BLM will update the per-acre land values by county every five
years on a defined schedule that is linked to the NASS Census updates,
which are also updated every five years. Therefore, the 2011-2015 fee
schedules would be based on the 2007 NASS Census data,\31\ adjusting in
intermediary years with an annual inflation adjustment factor, the
2016-2020 fee schedules would be based on the 2012 NASS Census, the
2021-2025 fee schedules would be based on the 2017 NASS Census, and so
on.
---------------------------------------------------------------------------
\31\ There is an 18-month delay in NASS's publication of the
census data. In BLM's administration of its formula, it provides
another 18-month delay to allow notice of any changes in applicable
county values.
---------------------------------------------------------------------------
17. In promulgating the 2008 fee schedule, BLM made additional
changes to the methodology underlying the fee schedule. BLM reduced the
encumbrance factor from 70 percent to 50 percent after a review of
public comments, industry practices in the private sector, and the
Department of Interior's appraisal methodology for right-of-way
facilities on Federal lands.\32\ BLM revised the fixed rate of return
downward from 6.41 percent to 5.27, which is the 10-year average (1998-
2008) of the 30-year and 20-year Treasury bond yield rate.\33\ To stay
current with inflationary or deflationary trends, BLM will apply an
annual adjustment factor, which is currently 1.9 percent, to the per-
acre rental rate in the fee schedule.\34\ The annual adjustment factor
is based on the average annual change in the Implicit Price Deflator-
Gross Domestic Product (IPD-GDP) for the 10-year period immediately
preceding the year that the NASS Census data become available.\35\ The
BLM rule makes clear that the fee schedule is the only basis for
determining an annual rental fee for rights of way on Federal
lands.\36\
---------------------------------------------------------------------------
\32\ Id. at 65047.
\33\ Id. at 65049.
\34\ Id. at 65050.
\35\ The annual adjustment factor will be updated every ten
years.
\36\ If lands are to be transferred out of federal ownership,
BLM allows a right-of-way occupier to submit an appraisal report to
determine a one-time rental payment for perpetual linear grants or
easements.
---------------------------------------------------------------------------
18. On February 17, 2009, the Commission issued notice (February 17
Notice) of the 2008 BLM fee schedule, which was based on its revised
methodology, as it had done for every annual update to the 1987 fee
schedule.\37\ Because of the land value revisions and methodology
adjustments in response to EPAct 2005, the 2008 fee schedule resulted,
in some cases, in significantly higher annual charge assessments of
Commission licensees.\38\
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\37\ Update of the Federal Energy Regulatory Commission's Fees
Schedule for Annual Charges for the Use of Government Lands, 74 FR
8184 (Feb. 24, 2009) FERC Stats. & Regs. ] 31,288 (2009).
\38\ However, a handful of licensees, in geographical locations
throughout the country, had their rates reduced.
---------------------------------------------------------------------------
19. On March 6, 2009, a group of licensees requested rehearing of
the February 17 Notice, which the Commission denied.\39\ The licensees
petitioned for review of the Commission's orders in the United States
Court of Appeals for the District of Columbia Circuit. On January 4,
2011, the Court granted the petition for review and vacated the
Commission's February 17 Notice.\40\ The DC Circuit found that the
Commission is required by the Administrative Procedure Act to seek
notice and comment on the methodology used to calculate annual charges
because the Commission's fee schedule is based on the BLM fee schedule,
and BLM has made changes to the methodology underlying its fee
schedule.
---------------------------------------------------------------------------
\39\ Update of the Federal Energy Regulatory Commission's Fee
Schedule for Annual Changes for the Use of Government Lands, 129
FERC ] 61,095 (2009).
\40\ City of Idaho Falls, Idaho v. FERC, 629 F.3d 222 (D.C. Cir.
2011).
---------------------------------------------------------------------------
20. On February 17, 2011, the Commission issued a Notice of Inquiry
soliciting comments on proposed methodologies for assessing annual
charges for the use, occupancy, and enjoyment of Federal lands by
hydropower licensees. The Notice of Inquiry identified five
requirements that any proposed methodology should satisfy, which are
derived from the Commission's statutory obligations under the FPA and
the Commission's past practice in implementing various methodologies.
Any proposed methodology must: (1) apply uniformly to all licensees;
(2) avoid exorbitant administrative costs; (3) not be subject to review
on an individual basis; (4) reflect reasonably accurate land
valuations; and (5) avoid an unreasonable increase in costs to
consumers.
II. Comments on Notice of Inquiry
21. In response to the Notice of Inquiry, comments were filed by
eight entities representing licensees, industry trade groups, and
Federal agencies. No commenters suggested, and the Commission is
unaware of, any existing index other than the NASS Census to determine
per acre rental rates by county.
22. 2008 BLM Fee Schedule. The Forest Service is the only commenter
that recommends straight-forward adoption of the 2008 BLM fee schedule
for assessing annual charges for the use of Federal lands by hydropower
licensees. The Forest Service identified several advantages to adopting
the BLM fee schedule, including: (1) Consistent application of linear
rights-of-way rental values among Federal agencies; (2) parity in
rental rates for projects licensed or exempted from licensing under the
FPA; and (3) reduced administrative burden because BLM maintains and
updates the schedule with periodic revisions to reflect changes in land
values, treasury rates, and inflation.
23. Per-Acre Land Value. The Federal Lands Group \41\ believes that
the NASS Census land values should be reduced by 50 percent, instead of
the 20 percent reduction incorporated into the BLM fee schedule, to
reflect the fact that lands used for hydropower projects rarely have
any value for agricultural purposes. The Federal Lands Group also
recommends that the Commission use actual county land values from the
NASS Census instead of the zone values created by BLM, which would
result in a more accurate valuation of the project lands, with only
minimal additional burden on the Commission because it is responsible
for assessing Federal lands charges for fewer than 250 projects.
---------------------------------------------------------------------------
\41\ The Federal Lands Group is a group of 16 private and
municipal licensees that operate 37 licensed projects in the western
U.S.
---------------------------------------------------------------------------
24. Similarly, Southern California Edison (SCE) generally supports
use of the 2008 BLM fee schedule but believes that the 20 percent
reduction in per-acre county land value does not properly account for
the reduced value of vacant land. SCE recommends the Commission use the
pastureland average value per acre category from the NASS Census to
capture the value of vacant, unimproved lands. In addition, SCE
recommends the Commission adjust downward the land values from the NASS
Census because of the dramatic decrease in value that has occurred
since the 2002 NASS Census.
25. Idaho Power Company (Idaho Power) believes that in order to
accurately reflect the fair market value of Federal lands, the NASS
Census land and buildings category should be reduced by an additional
26 percent for a total reduction of 46 percent.
[[Page 72138]]
26. The National Hydropower Association (NHA) argues that any
methodology based on an agricultural index, without an adjustment to
more accurately capture the character of lands present at hydroelectric
project, is inherently flawed because the lands typically present at
hydroelectric projects are steeply sloped, rocky, and remote.
27. PG&E objects to the use of the NASS Census for per acre county
land values because the land values reflect values from the beginning
of the real estate bubble and may have improperly inflated the true
value of the government lands. PG&E states that an agricultural index
overvalues government lands used by hydroelectric projects, and points
out that the Commission previously found, in Order No. 469, that farm
land values were typically much higher than the value of Federal land
used for hydroelectric projects.
28. Individual Appraisals. The Federal Lands Group argues that the
Commission should provide a limited opportunity for a licensee, at its
own expense, to demonstrate through periodic, independent appraisals
the actual fair market value of Federal lands at a project.
29. Placer County also supports a mechanism for individual
licensees to demonstrate, at their own expense, that the fair market
value of the Federal lands at a hydropower project are substantially
less than the annual charges billed by the Commission. Placer County
suggests that a licensee could submit a land sales value appraisal
performed by a state certified and licensed real estate appraiser. If
that appraised value is substantially lower than the assumed land value
used to derive the Commission's default annual charges, then the
Commission should adjust the charges.
30. Placer County proposes two alternative approaches to making
this adjustment. First, the Commission could reassign the specific
project to the BLM fee schedule zone that corresponds to the appraised
land value. Second, the Commission could develop a project-specific
multiplier based on the difference between the values yielded by the
default methodology and the individual assessment. For each subsequent
year, the charge yielded by the default methodology would be multiplied
by the same percentage. Under either of these proposals, licensees
could be required to provide an updated appraisal periodically in order
to continue to be assessed a rate other than that produced by the
default methodology.
31. NHA also recommends that the Commission allow an alternative
land valuation method on a case-by-case basis to resolve anomalies that
may occur in the application of an index-based valuation system.
32. PG&E objects to independent appraisals on a case-by-case basis
because such a practice would be time consuming and would result in
exorbitant administrative costs, ultimately resulting in increased
annual charge assessments to licensees for the administration of Part I
of the FPA. However, PG&E believes that it might be appropriate for the
Commission to allow a licensee to challenge the application of a
uniform formula, if it results in an inappropriate annual charge given
the peculiar characteristics of particular projects.
33. Encumbrance Factor. The Federal Lands Group argues that the
encumbrance factor should be 30 percent because, unlike other energy
infrastructure, hydroelectric projects encumber Federal lands
minimally, and substantially enhance the management objectives of the
Federal lands management agencies.
34. Placer County also argues that the Federal lands rental fee
should be reduced because hydropower licensees do not fully encumber
the Federal lands within their projects, much of those lands remain
available for other uses, the Federal government retains significant
rights in its lands, and licensees use the Federal lands within their
projects to provide benefits to the public. Placer County suggests that
the Commission adopt an encumbrance factor between 30 and 50 percent
for all project areas occupying Federal lands.
35. SCE believes that a 50 percent encumbrance factor is the
highest that is appropriate for a hydropower facility, and that the
Commission should consider a public benefit credit system to offset the
encumbrance factor when it is determined a hydropower facility provides
recreational and other benefits to the general public (e.g.,
recreational activities, flood control, or water storage).
36. Idaho Power also believes an encumbrance factor of 100 percent
for non-transmission line lands is inappropriate because Federal
landowners such as BLM and Forest Service issue commercial permits and
collect fees for the use of project lands, and licensees are required
to make significant investment for the protection of Federal lands from
natural and manmade impacts or enhancements to Federal lands. Idaho
Power believes an appropriate encumbrance factor is zero.
37. NHA believes that the hydropower industry's contributions to
multiple use of Federal lands should be reflected in the Commission's
valuation method by significantly reducing the level of encumbrance of
hydropower projects on Federal lands. NHA states that Commission-issued
licenses reserve authority for Federal land management agencies to
authorize non-project uses on Federal lands within the project
boundary, such as flood control, navigation, and storage for water
supply and irrigation. NHA further states that many projects
significantly enhance the multiple use management of the lands they
occupy by providing recreational attractions such as fishing, boating,
camping, and other activities, and many licensees also provide funding
to the land managing agency in addition to the recreation facilities
they construct, operate, and maintain.
38. Non-Transmission Line Lands. The Federal Lands Group, PG&E,
Idaho Power, NHA, and SCE object to the Commission's practice of
automatically doubling the linear rights-of-way fee for non-
transmission line project areas because this practice does not
recognize that these other project areas are frequently used for non-
hydroelectric purposes, such as public recreation, private recreation
(e.g., residential boat docks), and general environmental preservation,
and are accessible by the general public for a variety of uses. PG&E
also argues that, in the case of government lands administered by the
Forest Service, the Forest Service reserves to itself the right to use,
or to permit others to use, project lands for any purpose. PG&E
suggests that the Commission charge some lesser factor than doubling
for non-transmission line project areas.
39. Rate of Return and Annual Adjustment Factor. SCE recommends use
of the 30-year Treasury Bond rate rather than the 10-year average of
the 30-year Treasury bond yield rate because the former is a more
accurate valuation of a long-range asset. SCE proposes that the
Commission use the IPD-GDP to track inflation of land values annually.
40. 1987 Fee Schedule. PG&E recommends the Commission continue use
of the 1987 BLM fee schedule, with annual adjustments for inflation.
PG&E states that it recognizes that Congress appeared to believe the
BLM fee schedule for linear rights of way did not reflect current land
values, but asserts there is no indication in the statutory provision
that Congress intended that the Commission use the revised fee
schedules for hydroelectric projects, or
[[Page 72139]]
that the use of the 1987 BLM fee schedule was inappropriate.
41. Income- or Generation-Based Methodologies. PG&E and NHA object
to any methodology for assessing annual charges that would use an
income- or generation-based methodology to establish annual land use
charges.
42. Phase-In of New Fee Schedule. PG&E requests that the increase
in annual charges be phased in over a number of years thereby avoiding
an increase to the price of consumers of power.
43. Edison Electric Institute. The Edison Electric Institute (EEI)
endorses the comments submitted by the Federal Lands Group, PG&E, SCE,
Idaho Power, and NHA. EEI emphasizes the importance of such factors as
the rural, unfarmed, undeveloped nature of hydropower project lands,
the local nature of land values, the modest encumbrance of Federal
lands used by hydropower facilities, changes in land values from year
to year, use of reasonable long-term discount rates, and the need for
project-by-project adjustments in fee assessments.
III. Proposed Rule
44. The Commission proposes to adopt the 2008 BLM methodology for
creating a fee schedule of rental rates by county to assess annual
charges for the use, occupancy, and enjoyment of Federal lands by
hydropower licensees. Four components comprise the proposed formula:
(1) An average per-acre land value by county based on the ``land and
buildings'' category from the NASS Census; (2) an encumbrance factor;
(3) a rate of return; and (4) an annual adjustment factor. The
Commission proposes to use this methodology to create its own schedule,
based on the NASS Census, without using the zone system incorporated
into the BLM fee schedule. Except for this difference, the Commission
proposes to adopt all other aspects of the BLM methodology for
producing a fee schedule to assess rental rates for the use of Federal
lands. In addition, the Commission proposes to eliminate the current
practice of doubling the fee schedule rate for non-transmission line
lands. The proposed rule does not include a graduated phase-in rate for
the new schedule. Thus, the Commission would assess annual charges for
the use of Federal lands by multiplying the rate in its fee schedule by
the number of Federal acres occupied by a licensee.
45. The per-acre land value would be based on the NASS Census,
adjusted downward to remove the value of irrigated lands and buildings,
and would be updated with current land values every five years. The
encumbrance factor, which adjusts for the degree to which an occupation
of Federal lands precludes other uses, would be 50 percent. The rate of
return, which converts the per-acre land value into an annual rental
value, would be 5.27 percent. Finally, the annual adjustment factor,
which adjusts the rental rate to reflect inflationary or deflationary
trends, would be 1.9 percent, and would be adjusted every ten years.
46. The Commission proposes to track BLM's timing for incorporating
the periodic updates to the NASS Census data. Therefore, the
Commission's 2011-2015 fee schedules would be based on the 2007 NASS
Census data,\42\ adjusting in intermediary years with the annual
adjustment factor, the 2016-2020 fee schedules would be based on the
2012 NASS Census, the 2021-2025 fee schedules would be based on the
2017 NASS Census, and so on. The annual adjustment factor would be
revised every ten years, and the encumbrance factor and rate of return
would remain unchanged unless by future rulemaking.
---------------------------------------------------------------------------
\42\ There is an 18 month delay in NASS's publication of the
census data. In BLM's administration of its formula it provides
another 18 month delay to allow notice of any changes in applicable
county values.
---------------------------------------------------------------------------
A. Per-Acre Land Value
47. The Commission proposes to adopt BLM's practice of creating a
per-acre land value by using the ``land and buildings'' category from
the NASS Census. The ``land and buildings'' category is a combination
of all the land categories in the NASS Census, and includes croplands
(irrigated and non-irrigated), pastureland/rangeland, woodland, and
``other'' (roads, ponds, wasteland, and land encumbered by non-
commercial/non-residential buildings). The Commission would apply a 20
percent reduction to remove the value of irrigated farmland and
buildings from the ``land and buildings'' category, but would avoid
grouping the resulting land values into zones. Thus, under the BLM zone
system, if the per-acre land value for County A, after the 20 percent
reduction, is $3,500 and the zone range is $3,000 to $5,000, then
County A's per-acre land value for purposes of the BLM formula would be
$5,000. In contrast, under the proposed rule, the per-acre land value
for County A would be $3,500, rather than $5,000.\43\
---------------------------------------------------------------------------
\43\ After the other components of the BLM formula are applied
(encumbrance factor reduction, rate of return, and adjustment for
inflation), County A's per-acre rent in 2011 under the Commission's
proposed rule would be approximately $94.
---------------------------------------------------------------------------
48. Using the county-by-county data is the ``best approximation''
of county values of which the Commission is aware. This method would
result in more accurate land valuations for all licensees because under
the zone system, every county is priced at the highest zone value (and
thus the value of every county is inflated). In addition, the use of
NASS Census data, which is updated every five years, alleviates
commenters' concern that values are based on short-term anomalies in
real estate prices.
49. Several commenters disagree with the use of an agricultural
index as the basis for per-acre land values, arguing that the
Commission has previously rejected use of an agricultural-based index
in Order No. 469.\44\ In Order No. 469, the Commission determined that
the BLM fee schedule, which was based on a survey of lands that had
been occupied by BLM and Forest Service linear rights of way, was the
best approximation of per-acre rental rates for linear rights of way.
The Commission rejected use of the agricultural index produced by the
USDA at that time because the index overvalued the types of lands that
are used for hydropower purposes, provided values only for states and
not by county, and required too many adjustments by the Commission to
account for farm buildings, cleared and arable land, and the private
ownership of the lands.\45\ The Commission concluded that the
administrative efficiencies provided by the 1987 BLM fee schedule were
superior to the many adjustments the Commission would have had to make
to the USDA's agricultural index.
---------------------------------------------------------------------------
\44\ FERC Stats. & Regs. ] 30,741 at 30,589.
\45\ Id.
---------------------------------------------------------------------------
50. This is no longer the case. BLM has adopted use of the NASS
Census for determining per-acre land values by county and has
incorporated reasonable adjustments to the raw NASS Census data to more
accurately value the types of lands used as Federal rights of way.
Unlike the previous agricultural index created by USDA, the NASS Census
includes land values at the county level, allowing differentiation
within each state.
51. In addition, BLM's methodology for producing the fee schedule
provides for significant adjustments to the NASS Census land values to
account for the same concerns the Commission had when considering use
of the USDA agricultural index. BLM uses the total average ``land and
buildings'' category from the NASS Census, which includes, irrigated
and non-irrigated croplands
[[Page 72140]]
(but not the value of crops), pasturelands, rangelands, woodlands, and
interstitial lands, such as roads, ponds, wastelands, and lands
encumbered by non-commercial or non-residential buildings. In
consultation with NASS officials, BLM determined that a 20 percent
reduction to the average per-acre ``land and buildings'' category would
remove the value of irrigated croplands and lands encumbered by
buildings, which are generally not the types of lands used for linear
rights of way or hydropower projects. Because the Commission proposes
to adopt the BLM fee schedule, the Commission would not be required to
make these adjustments itself. Therefore, the NASS Census data and
BLM's application of this data alleviates the concerns the Commission
once had with USDA's previous agricultural index.
52. Several commenters object to use of the BLM fee schedule
because recent NASS Census data was gathered during a national real
estate bubble. The Commission recognizes that property values have
increased significantly in some parts of the country in the last
decade. One of the significant advantages to the new BLM methodology is
that the land values will be updated every five years. Because there is
a delay in BLM's adoption of the NASS Census data, there will also be a
delay in including these values into the fee schedule. However, over
time, all increases and decreases in land values will be reflected in
the NASS Census data and in the fee schedule.
53. Several commenters believe that licensees should have the
opportunity, at their own expense, to submit individual appraisals to
demonstrate the NASS Census per-acre land values are inaccurate. The
Commission continues to believe that individual land appraisals would
be difficult to administer, would increase the costs of administering
Part I of the FPA, and would increase the potential for disputes and
litigation over annual charges.
54. Commenters argue that the Commission should allow individual
appraisals because BLM allows for such an opportunity. This is not
accurate. The BLM rule makes clear that all entities with linear rights
of way are to be assessed a rental rate according to the published fee
schedule. The BLM rule allows appraisals to be submitted where an
entity is making a one-time rental payment for a perpetual right of way
or easement on land that will be transferred out of Federal ownership.
If Federal lands within a licensee's project boundary were transferred
out of Federal ownership, then the Commission would no longer collect
annual charges for the use of those Federal lands from that
licensee.\46\
---------------------------------------------------------------------------
\46\ Annual charges for the use of Federal lands would still be
assessed if the lands transferred out of federal ownership were
subject to a power site classification under section 24 of the FPA.
16 U.S.C. 818 (2006).
---------------------------------------------------------------------------
55. The Commission recognizes that for some licensees regional land
values have increased dramatically, resulting in a significant increase
in the rental rate for the use of Federal lands by hydropower
licensees. This is primarily the result of a shift from a methodology
that used land values from 1987 to a methodology that uses current
market land values. Because the 2008 BLM methodology incorporates five
year updates to the per-acre county land values, it is not anticipated
that such a large increase in annual charges for the use of Federal
lands will occur again.
B. Encumbrance Factor
56. The encumbrance factor is a measure of the degree that a
particular type of facility encumbers the right-of-way area or excludes
other types of land uses.\47\ If the encumbrance factor is 100 percent,
the right-of-way facility (and its operation) is encumbering the right-
of-way area to the exclusion of all other uses. Impacts could include
visual, open space, wildlife, vegetative, cultural, recreation, and
other public land resources. The updated BLM methodology reduces the
encumbrance factor from 70 percent to 50 percent.
---------------------------------------------------------------------------
\47\ 73 FR 65040 at 65047.
---------------------------------------------------------------------------
57. Several commenters believe that the encumbrance factor should
be less than 50 percent, particularly because other uses are often
authorized on the Federal lands. In promulgating the 2008 fee schedule,
BLM revisited its survey of the degrees of encumbrance presumed by
utility facilities and infrastructure, and determined that 50 percent
was more reasonable than 70 percent because lands often can be used for
other purposes. BLM made this change as a result of comments received
on its proposed rule, a review of industry practices in the private
sector, and a review of the Department of Interior's appraisal
methodology for right-of-way facilities located on Federal lands.\48\
However, BLM explained that the degree to which Federal lands can be
used for multiple purposes does not reduce the rental rate to be
assessed, and clarified that grants issued for rights-of-way facilities
are non-exclusive, such that BLM reserves the right to authorize other
uses within a right-of-way area.\49\
---------------------------------------------------------------------------
\48\ Id.
\49\ Id.
---------------------------------------------------------------------------
58. Several commenters suggested the public benefits provided by
hydropower licensees should result in a reduced encumbrance factor.\50\
However, the public benefits required by a license cannot completely
offset the rental fee for use of Federal lands. Rather, the public
benefits, including aesthetics, recreation, environmental, fish and
wildlife, and others, are required by the FPA in order to receive a
license, not in exchange for occupying Federal lands. We acknowledge
these public uses at many projects by discontinuing the practice of
doubling the charges for non-transmission line lands. However, because
hydropower projects located on Federal lands do indeed make use of
public property for which the FPA requires us to set a reasonable fee,
we agree with BLM's use of a 50 percent encumbrance factor.
---------------------------------------------------------------------------
\50\ Idaho Power believes the encumbrance factor should be zero,
which would zero out the rental rate as well.
---------------------------------------------------------------------------
59. The Commission's practice has been to charge the fee schedule
rental rate for transmission line lands and to double this rate for
other project areas based on the theory that linear rights of way
represent a lesser encumbrance than do rights of way over other project
areas. Most commenters request that the Commission discontinue this
practice. The 1987 fee schedule was developed for linear rights of way
on Federal lands, which was based on a survey of market values for the
various types of land that the Forest Service and BLM had allowed to be
occupied by linear rights of way. When the Commission adopted BLM's
1987 fee schedule, it recognized that the values identified in the BLM
schedule were the ``best approximation'' available of the value of
lands used for transmission linear rights of way. Thus, it was
reasonable at that time for the Commission to assess transmission line
lands at this rate, but to double the rate for non-linear project areas
that involved a more comprehensive occupation of Federal lands than a
linear right of way. However, because the NASS Census provides a per-
acre value for lands generally, and not specifically for linear
sections of land, there is no compelling reason to double the
underlying value represented in the NASS Census for non-linear lands.
Therefore, we agree with commenters and propose to discontinue this
practice.
[[Page 72141]]
C. Rate of Return
60. The BLM fee schedule adopts a fixed rate of return of 5.27
percent, which is the most current 10-year average (1998-2008) of the
30-year and 20-year Treasury bond yield rate. This is a reduction from
the rate of return of 6.41 percent under the 1987 fee schedule, which
was the 1-year Treasury Securities ``Constant Maturity'' rate from June
30, 1986. The rate of return component used in the fee schedule formula
reflects the relationship of income to property value, as modified by
any adjustments to property value. BLM reviewed a number of appraisal
reports that indicated the rate of return for land can vary from seven
to twelve percent and is typically around ten percent. These rates take
into account certain risk considerations, and BLM chose to use a ``safe
rate of return,'' such as the prevailing rate on insured savings
accounts or guaranteed government securities. In its 2008 rule, BLM
explained that a 10-year average is more appropriate than a rate
selected from one point in time, and that a periodic adjustment of the
rate of return would lead to uncertainty in rental fees, which would
have a negative impact on utilities and customers and duplicate the
changes reflected in the GDP index.
61. SCE commented that the Commission should use the 30-year
Treasury bond rate rather than the 10-year average of the 30-year
Treasury bond yield rate because use of the actual 30-year rate is the
most accurate valuation of a long-range asset. While using the actual
30-year rate would be more accurate, we agree with BLM's rationale that
an annual adjustment of the rate of return would result in unnecessary
uncertainty with respect to rental rates. Therefore, the Commission
finds that BLM's use of the 5.27 percent fixed rate of return is
reasonable.
D. Annual Adjustment Factor
62. The BLM fee schedule includes an annual adjustment factor,
which is currently 1.9 percent. The annual adjustment factor allows the
rental rate to stay current with inflationary or deflationary trends.
In its 2008 rule, BLM explained that it will adjust the per-acre rent
each calendar year based on the average annual change in the IPD-GDP
for the 10-year period immediately preceding the year that the NASS
Census data becomes available. Thus, the IPD-GDP will change every ten
years. The annual adjustment factor is based on the average annual
change in the IPD-GDP for the 10-year period immediately preceding the
year (2004) that the 2002 NASS Census data became available. This
figure is 1.9 percent and will be applied for each calendar year
through 2015.
63. BLM will recalculate the annual index adjustment in 2014 based
on the average annual change in the IPD-GDP from 2004 to 2013 (the 10-
year period immediately preceding the year (2014) when the 2012 NASS
Census data will become available) and will apply it annually to the
fee schedule for years 2016 through 2025. The Commission proposes to
adopt BLM's decadal updates to the annual index adjustment.
IV. Regulatory Requirements
A. Information Collection Statement
64. The Office of Management and Budget (OMB) regulations require
OMB to approve certain information collection requirements imposed by
agency rule.\51\ The proposed regulations discussed above do not impose
or alter existing reporting or recordkeeping requirements on applicable
entities as defined by the Paperwork Reduction Act.\52\ As a result,
the Commission is not submitting this proposed rule to OMB for review
and approval.
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\51\ 5 CFR 1320.11 (2011).
\52\ 44 U.S.C. 3502(2)-(3) (2006).
---------------------------------------------------------------------------
B. Environmental Analysis
65. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\53\
Commission actions concerning annual charges are categorically exempted
from the preparation of an Environmental Assessment or an Environmental
Impact Statement.\54\
---------------------------------------------------------------------------
\53\ Regulations Implementing the National Environmental Policy
Act of 1969, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats.
& Regs. Regulations Preambles 1986-1990 ] 30,783 (1987).
\54\ 18 CFR 380.4(a)(11) (2011).
---------------------------------------------------------------------------
C. Regulatory Flexibility Act
66. The Regulatory Flexibility Act of 1980 (RFA) \55\ generally
requires a description and analysis of final rules that will have a
significant economic impact on a substantial number of small entities.
The RFA mandates consideration of regulatory alternatives that
accomplish the stated objectives of a proposed rule and that minimize
any significant economic impact on a substantial number of small
entities. The Small Business Administration's (SBA) Office of Size
Standards develops the numerical definition of a small business.\56\
The SBA has established a size standard for hydroelectric generators,
stating that a firm is small if, including its affiliates, it is
primarily engaged in the transmission, generation, and/or distribution
of electric energy for sale and its total electric output for the
preceding 12 months did not exceed four million megawatt hours.\57\
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\55\ 5 U.S.C. 601-612 (2006).
\56\ 13 CFR 121.101 (2011).
\57\ 13 CFR 121.201, Sector 22, Utilities & n.1 (2011).
---------------------------------------------------------------------------
67. Section 10(e)(1) of the FPA requires that the Commission fix a
reasonable annual charge for the use, occupancy, and enjoyment of
Federal lands by hydropower licensees.\58\ The Commission has issued
253 licenses that occupy Federal lands to 135 discrete licensees, who
will be impacted by the proposed rule. The proposed rule adopts a
methodology promulgated by BLM, based on the NASS Census data, to
determine the annual charge for the use of Federal lands. The
methodology for assessing this annual charge under the existing rule is
based on land values from 1987, whereas the proposed rule incorporates
current land values, and would update those values every five years. As
a result, some of the 135 licensees may experience a one-time increase
in their annual charge for the use of Federal lands.
---------------------------------------------------------------------------
\58\ 16 U.S.C. 803(e)(1) (2006).
---------------------------------------------------------------------------
68. Nevertheless, based on a review of the 135 licensees with
Federal lands that will be impacted by the proposed rule, we estimate
that less than ten percent are small entities under the SBA definition.
The 135 licensees represent utilities, cities, and private and public
companies in 30 states or territories. Many of the utilities which may
seem to be under the four million megawatt hours per year threshold are
also engaged in electricity production through other forms of
generation, such as coal or natural gas, or also provide other utility
services such as natural gas or water delivery. Similarly, many
licensees that are small hydropower generators are affiliated with a
larger entity or entities in other industries. Therefore, we estimate
that less than ten percent of the impacted licensees are actually
small, unaffiliated entities who are primarily engaged in hydropower
generation and whose total electrical output through transmission,
generation, or distribution is less than four million megawatt hours
per year.
69. Any impact on these small entities would not be significant.
Under the proposed rule there may be a one-time increase for some
licensees in the annual charge for the use of Federal lands, but
because the new methodology for calculating the annual charge will be
updated every five years, any future
[[Page 72142]]
increases or decreases will be incremental. In addition, small,
unaffiliated entities generally occupy less Federal lands than larger
projects that generate more power. Therefore, as a class of licensees,
small entities would be less impacted by an annual charge for the use
of Federal lands. Furthermore, this proposed rule does not incur any
additional compliance or recordkeeping costs on any licensees occupying
Federal lands. Consequently, the proposed rule should not impose a
significant economic impact on small entities.
70. Based on this understanding, the Commission certifies that the
proposed rule will not have a significant economic impact on a
substantial number of small entities. Accordingly, no regulatory
flexibility analysis is required.
D. Comment Procedures
71. The Commission invites interested persons to submit comments on
the matters and issues proposed in this notice to be adopted, including
any related matters or alternative proposals that commenters may wish
to discuss. Comments are due January 6, 2012. Comments must refer to
Docket No. RM11-6-000, and must include the commenter's name, the
organization they represent, if applicable, and their address in their
comments.
72. The Commission encourages comments to be filed electronically
via the eFiling link on the Commission's web site at https://www.ferc.gov. The Commission accepts most standard word processing
formats. Documents created electronically using word processing
software should be filed in native applications or print-to-PDF format
and not in a scanned format. Commenters filing electronically do not
need to make a paper filing.
73. Commenters that are not able to file comments electronically
must send an original of their comments to: Federal Energy Regulatory
Commission, Secretary of the Commission, 888 First Street NE.,
Washington, DC 20426.
74. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described in the
Document Availability section below. Commenters on this proposal are
not required to serve copies of their comments on other commenters.
E. Document Availability
75. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (https://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street NE., Room 2A,
Washington, DC 20426.
76. From the Commission's Home Page on the Internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downl
