The Relicensing of the New York Power Authority’s Niagara Power Project:
Lessons Learned Jay Ryan, Rick Chase, and Keith Silliman
Abstract: During the last Waterpower conference, we presented a paper examining the New York Power Authority’s use of alternative licensing procedures (ALP) for the relicensing of the Niagara Power Project. At 2,400 MW, the Niagara Power Project is the largest FERC-licensed project in the United States. As explained in our previous presentation, the ALP was structured around an Applicant Prepared Environmental Assessment (APEA), collaborative public scoping, and independent facilitation.
As a follow-up to that discussion, this paper examines some of the “lessons learned” that may be of interest to other licensees as they consider their own relicensing strategies. While the Commission’s new Integrated Licensing Process (ILP) will become the default relicensing process in the near future, the insights gleaned from the Niagara relicensing have general applicability and may be useful as other licensees embark on their relicensings.
I. BACKGROUND A. New York Power Authority In 1931, the New York State Legislature created the Power Authority of the State of New York (“Power Authority” or “NYPA”) to provide low-cost power to the people of New York State. Through power that it produces or obtains under contract, NYPA currently provides about one-quarter of New York State’s power requirements, operating twenty-one generating facilities and more than 1,400 miles of transmission lines. NYPA sells power to government agencies, community-owned electric systems and rural electric cooperatives, job-producing companies, private utilities (for resale—without profit—to their retail customers), and to neighboring states, under federal requirements. NYPA’s low-cost power helps support nearly 450,000 jobs statewide; its business customers range from Fortune 100 companies competing in international markets to small manufacturing or service firms that are vital to local economies. B. The Niagara Project License In 1957, Congress passed the Niagara Redevelopment Act which, among other things, directed the Federal Power Commission (“FPC”) to issue a license to the Power Authority “for the construction and operation of a power project with the capacity to utilize all of the United States share of the Niagara River permitted to be used by international agreement.” On January 30, 1958, the FPC issued a license to the Power Authority, effective September 1, 1957, for a term of fifty (50 years). By law, the Power
Authority must file its application for a new license on or before August 31, 2005. At 2,400 MW, the Niagara Project is the largest FERC-licensed Project in the country. C. The ALP Process and Settlement Negotiations The relicensing of the Power Authority’s Niagara Project generated considerable interest from a variety of Stakeholders, including local communities, industrial, municipal, and out-of-state customers, labor unions, environmental groups, Indian Nations, federal and state regulatory agencies, educational institutions, and local health and safety concerns (collectively, “Stakeholders”). To address the high degree of public awareness about the relicensing, NYPA sought – and received – approval from FERC to utilize an ALP that would foster stakeholder participation.
A comprehensive description of the ALP process is set forth in our previous paper entitled “The Relicensing of the New York Power Authority’s Niagara Power Project: A Case Study of the Design, Development, and Implementation of an Alternative Licensing Process” (on file with the authors). Additional information about the Niagara relicensing is available at
Beginning in December 2002, the Power Authority hosted several public scoping sessions that were administered by an independent facilitator. During these sessions, which were often attended by more than 150 stakeholders, issues sheets were developed as a mechanism to define the scope of relicensing studies. In September of 2004, when the majority of licensing studies had been completed, the Power Authority began a series of meetings with stakeholders to negotiate a comprehensive settlement. By January 2005, the Power Authority was able to reach conceptual settlement with most – but not all – major stakeholders. The Authority expects to submit a comprehensive relicensing settlement agreement with FERC concurrent with the filing of its license application.
II. LESSONS LEARNED There are a number of factors that contributed to the Niagara Power Project’s relatively successful relicensing process. The following list identifies some of the more important lessons learned from our experience and we share these insights for other licensees who are engaged, or about to engage, in relicensing.
A. Assemble the Right Team Passing the “Beer Test”. Assembling the right mix of personnel is one of the most important steps a licensee can undertake at the outset of the relicensing process. In the case of the Niagara Project, the Power Authority was fortunate enough to have outstanding in-house environmental and legal departments that would assist the relicensing effort. However, given the intense public interest in the Niagara relicensing, the likely scope of issues and attendant studies, and the resources that would be needed in managing the ALP, NYPA made a determination early to supplement its internal resources with outside personnel having specialized experience in FERC relicensing matters.
As a result, the Power Authority interviewed a number of competent outside consultants. However, given the amount of time that licensees spend with their consultants – on the road, on the phone, locked in conference rooms for three or four days – NYPA made a decision to hire only competent consultants with the right personality mix. In the case of the Niagara Project, NYPA assembled an outside team that consisted of Tom Sullivan, Lana Khitrik, and Dave Frazier (Gomez & Sullivan), Mike Murphy and Brent McCarthy (EPRO Consulting), Mary Bitka (URS Corporation), and Jay Ryan (Van Ness Feldman). This core group, which was led by Rick Chase (Executive Director of Relicensing) and Keith Silliman (Director of Niagara Relicensing), worked together seamlessly and functioned as an integrated whole. This result was, in large measure, due to the fact that the team was able to establish friendships that transcended relicensing. Consequently, if you can’t see yourself having a beer or dinner with a particular contractor on a repeated basis: don’t hire them. The importance of hiring personnel that you respect -- and like -- cannot be underestimated because the relationship between a licensee and its consultants permeates all aspects of relicensing.
The Right Mix and Use of Skill Sets. When pulling its team together, NYPA ensured that it had the right mix of resources to staff the relicensing. In addition to its inhouse resources, NYPA hired an experienced team that could: (1) conduct and oversee environmental studies; (2) plan and conduct large-scale meetings; (3) prepare relicensing documents (including the APEA, the license application, and the comprehensive settlement agreement); (4) manage outside contractors working on studies; (5) lead scoping and settlement discussions; (6) facilitate relations with FERC Staff; and (7) develop and implement settlement strategies. During all facets of relicensing, NYPA continuously engaged the different skill sets of its team members. As a result, legal and policy personnel reviewed all technical documents, including study scopes, relicensing studies, the draft APEA, and application exhibits. Conversely, team members with a technical background reviewed legal and policy documents, such as the comprehensive settlement agreement, FERC filings, and proposed settlement positions. While there was some redundancy built into the process, ultimately this type of review saved the Power Authority time, money, effort, and headaches. With each relicensing team member bringing his or her unique perspective to an issue, the Power Authority ensured that each aspect of relicensing was fully vetted, well-considered, and reviewed from a technical, legal, and policy perspective before it was put before senior management or the public. As a consequence, there were few – if any – surprises during the relicensing process.
B. Develop a Schedule / Start Early. Develop a Schedule. Prior to any public relicensing activities, have your team develop a detailed schedule of relicensing activities; this is equally applicable to the ILP which provides broad timelines for major relicensing activities. To make the schedule work, start from the date the application is due and work backwards. First identify major milestones and then go back and fill in tasks that you will need to complete in order to meet each milestone. While the schedule need not be inflexible, and will change throughout the relicensing process, it is important to retain a schedule of timelines so that your team (and you), and those stakeholders involved in the relicensing process, have notice of what to expect and what is expected from them.
Start Your Internal Process Early. Before the public relicensing process begins, use your time wisely. Establish your team early and work with them to identify available information and obvious data gaps, and conduct any necessary studies that you believe would help inform your relicensing strategy. This includes the development of legal memoranda addressing potential FERC issues. Once the relicensing begins, factors beyond the licensee’s control can lead to “managed chaos” where the licensee rushes from one fire drill to another while, at the same time, trying to prepare its license application and negotiate a settlement. The process will go much easier if your ducks are in a row from the start; predict, and then answer, as many issues as you can prior to the kick-off of the public process. Use the Calendar to Help Drive the Process. While NYPA began its internal planning process fairly early, the public relicensing process was fairly compressed. Formal scoping essentially began in January 2003 and the license application is due on or before August 31, 2005. Given that we only had a little more than a year-and-a-half to address scoping, conduct studies, negotiate settlement, prepare and circulate a draft APEA and a draft license application, and file our final licensing documents by a statutory deadline that could not be waived, deadlines became a useful tool to move the ALP process to completion. Recognizing that time was constrained, Stakeholders and NYPA took on a shared responsibility to act efficiently and effectively with all aspects of the ALP; this was due, in large part, to an understanding that achieving a timely comprehensive settlement – which became a common goal – required cooperation from all of the parties. As a result, fast approaching milestones in the ALP helped bring about closure to each aspect of the ALP and minimized the inclination (often present in relicensing) to engage in disagreements over minor issues.
C. Pick A Strategy and Stick With It After you have a knowledge foundation from which to work, develop a strategy and let it guide you throughout the relicensing process. In NYPA’s case, given its position as a public body owned by the State, and the very visible presence of the Niagara Project in the Western New York Region, it was determined that NYPA would work to achieve a comprehensive settlement that would address both relicensing (i.e. FERCjurisdictional issues) and non-relicensing issues. Having established this position, NYPA made a concerted effort to go beyond FERC-required licensing requirements and accommodated a number of Stakeholder requests for studies that exceeded its licensing obligations.
To that end, NYPA did not argue over information needs during scoping; as a result, NYPA developed credibility with the Stakeholders during the scoping process. Additionally, because NYPA usually said “yes” to obtaining information that the Stakeholders thought they needed, when NYPA had to say “no,” the Stakeholders accepted the response without much push-back. Thus, while NYPA exceeded its regulatory obligations with regard to scopes and types of studies that were conducted, the approach avoided a second round of studies and eliminated the need for dispute resolution to address study modeling, methods, and results.
This is not to suggest that this settlement strategy is best for every project; it will depend on each project’s relative strength and weakness with regard to its impacts and the means by which those impacts might be addressed. It is important, however, to set a tone early on and to maintain a consistent message throughout the process until such time as circumstances (i.e., the breakdown of settlement negotiations) require a change in strategy. By exhibiting a willingness to meet stakeholder needs, and reinforcing its interest in a comprehensive settlement, NYPA was able to build up the necessary trust with Stakeholders throughout the process; this, in turn, created conditions in which settlement could be achieved.
D. Tell ‘em What You Want. Often. The relicensing process is a forum for all sorts of interested participants to come out and tell the Licensee how the project has wronged them and what the Licensee needs to do to make things right. It is just as important for stakeholders to hear what you need out of the process; therefore, it’s necessary to develop a simple, clear, and consistent message and repeat it often. For the Niagara Project, NYPA made clear that it wanted three things out of the relicensing process: (1) a fifty (50) year license; (2) no expansion of the existing project boundary; and (3) no changes to existing Project operations. Making clear the Licensee’s needs throughout the process made it easier to successfully negotiate a settlement that NYPA could endorse.
E. Continuous Information Flow Stakeholder Outreach. Licensees and federal resource agencies are generally familiar with the relicensing process. Depending on your particular location, state agencies also can have a solid understanding of Federal Power Act requirements and FERC’s relicensing regulations. However, the rest of relicensing participants – community groups, local environmental organizations, and local elected officials – are likely to be unfamiliar with FERC’s processes and a licensee’s statutory obligations. Moreover, participants in the process are likely to be highly suspect (at least initially) of your actions and any underlying motivations. To help compensate for this information void, it is essential that a relicensing team devote a significant amount of time to informal outreach with Stakeholders. In the Niagara process, we continually met with Stakeholders in small groups outside of the ALP: sometimes in a conference room, but more often for coffee, lunch, or dinner. This served two purposes. First, it allowed us to constantly update Stakeholders as to where we were in the process, what they could expect in the future, and what actions they should be undertaking in order to engage in information-based settlement. Second, and just as important, the outreach sessions allowed us to build up (and continually reinforce) rapport with the Stakeholders. Over time, the dynamic changed from “us vs. them” to a
6 perception that all of the relicensing participants – including NYPA – were working together to achieve a common goal. FERC Can Be Your Friend. During the ALP process, we continuously met with FERC Staff in Washington, D.C. to provide them with updates on the ALP process and to share with them our thoughts on how best to comply with our regulatory obligations while achieving a negotiated comprehensive settlement. Throughout the relicensing, FERC Staff provided us with valuable feedback that enabled us to ultimately produce a relicensing application and an APEA that was consistent with FERC’s needs. These consultations ensured that there were no stumbling blocks for FERC in the relicensing documents and related settlement, and kept FERC fully informed about the status of settlement negotiations with various Stakeholders. Similar consultations occurred with the Department of the Interior and the New York State Department of Environmental Conservation.
Keep Management Informed. Too often, relicensing teams will negotiate settlements or develop a licensing strategy without first obtaining “buy-in” from senior management. Unfortunately, this can produce a situation where the relicensing team must backtrack from public statements or commitments in order to accommodate the goals and objectives of management. As important as it is to reach out to Stakeholders and regulatory agencies, it is equally important to make company executives aware of, and have them endorse, your relicensing strategy. Without management backing at the commencement of the relicensing process, the relicensing team may be impotent to drive the relicensing process and reach closure on major issues.
G. Continually Assess Your Vulnerabilities. At the early stages of the relicensing, before the public process, NYPA began an assessment of its potential vulnerabilities based on available information. This assessment included both a legal (i.e., what does FERC precedent say about a particular issue) and a political/public affairs component (i.e., what are the potential ramifications for the Power Authority’s image as a corporate citizen in the community). This analysis, the “Best Alternative to a Negotiated Settlement” or “BATNA”, was continuously reevaluated as new information became available. The information gleaned from these assessments allowed NYPA to judge what its regulatory risks were in the absence of a settlement. Having this information available allowed NYPA to intelligently formulate its settlement positions.