FirstEnergy, Seneca Nation battle over control of hydro project

FirstEnergy (NYSE: FE) in its Aug. 6 Form 10-Q report offered details on its battle with the Seneca Nation over who should control in the future FirstEnergy’s Seneca Pumped Storage Project in Pennsylvania.

The Seneca Pumped Storage Project is a 451-MW hydroelectric project located in Warren County, Pa., and is owned and operated by FirstEnergy Generation LLC (FG). FG holds the current Federal Energy Regulatory Commission license, which will expire on Nov. 30, 2015. FERC’s regulations call for a five-year relicensing process. In November 2010, FG initiated the relicensing process by filing its notice of intent to relicense and related documents in the license docket.

Section 15 of the Federal Power Act (FPA) contemplates that third parties may file a “competing application” to assume ownership and operation of a hydroelectric facility upon relicensure and payment of net book value of the plant to the original owner/operator. In November 2010, the Seneca Nation filed its notice of intent to relicense and related documents necessary for the Seneca Nation to submit a competing application.

“FG believes it is entitled to a statutory ‘incumbent preference’ under Section 15 and that it ultimately should prevail in these proceedings,” said the Form 10-Q. “Nevertheless, the Seneca Nation’s pleadings reflect the Nation’s apparent intent to obtain the license for the facility, and to assume ownership and operation of the facility as contemplated by the statute.”

The Seneca Nation and certain other intervenors have asked FERC to redefine the “project boundary” to include dam and reservoir facilities operated by the U.S. Army Corps of Engineers. In May 2011, FirstEnergy filed a Petition for Declaratory Order with FERC seeking an order to exclude the dam and reservoir facilities from the project. The Seneca Nation, the New York State Department of Environmental Conservation, and the U.S. Department of Interior each submitted responses to FirstEnergy’s petition, including motions to dismiss FirstEnergy’s petition. The “project boundary” issue is pending before FERC.

In September 2011, FirstEnergy and the Seneca Nation each filed “Revised Study Plan” documents. These documents describe the parties’ respective proposals for the scope of the environmental studies that should be performed as part of the relicensing process.

On Jan. 7, FirstEnergy and the Seneca Nation submitted their respective reports for the 2012 study season. On Jan. 31 and Feb. 1, respectively, the Seneca Nation and FirstEnergy each submitted their respective proposed study plans for the 2013 study season. On March 4, the Seneca Nation and other parties submitted comments regarding FirstEnergy’s proposed study plans. In its comments, the Seneca Nation alleged that FirstEnergy does not hold the real estate rights necessary to operate a hydroelectric project in circumstances where there is flowage over the Seneca Nation’s lands.

On April 3, FirstEnergy filed its response to these and other assertions by the Seneca Nation and its allied parties. On May 3, FERC’s Director of the Office of Energy Projects issued FERC Staff’s study plan determinations for the 2013 study year. The Director determined that water level fluctuations in the lower reservoir due to hydroelectric project operations have no discernible effect on reservoir lands or environmental resources. This finding is expected to strengthen FirstEnergy’s position that the project boundary should be defined to exclude the U.S. Army Corps of Engineers dam and reservoir facilities, the Form 10-Q noted. FERC Staff’s determinations also largely adopted FirstEnergy’s position and arguments as to the proper scope of environmental studies for the 2013 study season. The study processes will extend through about November 2013.

On July 3, FirstEnergy and the Seneca Nation each submitted “Preliminary License Proposals” in the relicensing dockets. These submissions are intended to be non-binding indications of types of project upgrades that may be proposed in the parties’ respective final licensing applications, as well as an indication of the scope and direction of the parties’ plans for the upcoming final licensing applications. “FirstEnergy is evaluating the Seneca Nation’s proposal,” the Form 10-Q said.

Said the Seneca Nation in a March 7 statement posted to its website: “FirstEnergy, the operator of the Seneca Pumped Storage Project near the Kinzua Dam in northwestern Pennsylvania, lacks the necessary property rights to successfully operate the Project, the Seneca Nation of Indians asserted in an official submission filed on Monday with the Federal Energy Regulatory Commission (FERC). The Seneca Nation made this submission in connection with the relicensing proceedings before the federal agency for the hydropower generation project. The Seneca Nation and FirstEnergy are both competing for the federal license to run the facility.”

In connection with its efforts to regain the federal license, FirstEnergy is seeking to condemn the Seneca Nation’s sovereign land rights as part of the regulatory process, the tribe said. Under the Seneca Nation’s 1794 Treaty of Canandaigua, its lands are protected and not subject to ordinary condemnation for power development, the tribe added. The original recipient of the project’s license in the 1960s, and now FirstEnergy as its successor, did not seek or obtain from the Seneca Nation the property rights necessary for its operation, the tribe claims.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.