Power & Pipes

FERC, CFTC, and State Energy Law Developments

As an example of its renewed focus on dam safety, FERC recently issued an order assessing a $600,000 civil penalty to Ampersand Cranberry Lake Hydro LLC for a violation of Ampersand’s hydro license for the 500 kW Cranberry Lake Project No. 9658. The violation is related to Ampersand’s failure to complete known dam safety repairs over multiple years and its loss of property rights needed for the Cranberry Lake Project, located on the Oswegatchie River in St. Lawrence County, New York.

Penalties for hydro project license violations are uncommon. However, the Cranberry Lake Project dam has a “high hazard potential rating,” which means that a failure of the project works would result in a probable loss of human life or economic or environmental losses. FERC has stated that dam safety is a top priority and that it will use its authority to ensure that licensees do what is necessary to protect the public against dam failures.

Licensees must maintain possession of property rights for their hydroelectric projects to ensure (1) proper operation and maintenance of the projects and (2) that they can address dam safety issues. Licensees of FERC-jurisdictional hydroelectric projects must comply with all safety requirements of their licenses, as public safety is a top priority at these facilities. Article 5 of the Cranberry Lake Project license states, “The Licensee or its successors and assigns shall, during the period of the license, retain the possession of all project property covered by the license as issued or as later amended, including the project area, the project works, and all franchises, easements, water rights, and rights of occupancy and use . . . .”

Oswegatchie River–Cranberry Reservoir Regulating District Corporation (OR-CRRDC), a state municipal corporation, owns the Cranberry Lake Project’s dam, which Ampersand had maintained pursuant to a lease agreement with OR-CRRDC. In 2021, Ampersand and OR-CRRDC executed a settlement and release agreement resolving claims litigated in New York State in part related to Ampersand’s failure to perform maintenance and repairs. Under the settlement, Ampersand agreed to terminate the lease and convey by quitclaim sale to OR-CRRDC assets related to the Cranberry Lake Project and surrendered the keys and access equipment for the dam and powerhouse. Ampersand did not perform outstanding maintenance and repairs since it lost possession of the project works.

As we previously reported, on October 21, 2021, FERC ordered Ampersand to show cause as to why it should not be found to have violated Article 5 of the project license by failing to retain possession of all project property covered by the license, and to show cause as to why it should not be assessed a civil penalty for that violation. On November 22, 2021, Ampersand responded to the order to show cause, conceding that it violated Article 5 of its license by losing possession of the Cranberry Lake Project. Ampersand elected to proceed under Section 31(d) of the Federal Power Act, which provides for a prompt assessment of a penalty by FERC and makes FERC’s order not subject to rehearing.