As a matter of policy, FERC now encourages settlement as the basis of a license whenever the licensee and a critical mass of other participants believe there is a reasonable prospect of timely success. A settlement is a legal document binding between signatories to settle disputed legal and factual issues. See Appendix D for forms of settlement. FERC prefers settlement as the basis of new license for a given project, no matter which of the licensing processes is used. Even though the ILP, TLP, and ALP differ in their emphasis on collaboration, Practice and Procedure Rule 601 establishes settlement as an accepted method to resolve disputed issues in any proceeding before FERC.1
This policy reflects FERC's experience that collaboration tends to reduce the transaction (or process) cost incurred by the licensee in the course of the licensing proceeding. Settlement also prevents or at least reduces the frequency or severity of disputes about the adequacy of the licensee's study plan, such as a model used to predict how alternative flow release schedules may affect the availability and quality of fish habitat below the project. In a survey of projects licensed since 1993, OEP estimated that process costs in disputed proceedings under the ALP averaged $39/kw of project capacity, versus $109/kw under the TLP.2 Indeed, such process costs under the TLP averaged nearly 30% of the cost of the actual environmental measures included in the resulting license.3 The ILP is projected to be 30% more efficient than the ALP, because of the parallel track of license application development and environmental review.4 Such process costs may be thought of as overhead associated with the production of a good or service: the lower the overhead, the more the producer may invest in quality.
See 18 CFR § 385.601 et seq.
See OEP, Report on Hydroelectric Licensing Policies, Procedures, and Regulations: Comprehensive Review and Recommendations Pursuant to Section 603 of the Energy Policy Act of 2000, p. 46 (hereinafter Section 603 Report). The GAO cautions: “FERC does not request licensees to report their process-related licensing costs. Some licensees have, however, voluntarily reported these costs to FERC so that FERC can include them together with estimated mitigation costs, annual charges, and the value of power generation lost at relicensing in its economic analysis of the projects' benefits and costs. As of February 2001, FERC had compiled data on licensees' process related licensing costs for 83 or about 20 percent of the 395 projects with licenses pending or issued between January 1, 1993, and December 31, 2000. However, because FERC did not provide licensees with guidance on what costs they should report, it has no assurance that the reported costs are consistent and comparable. Moreover, since the 83 projects did not represent a randomly selected sample, FERC cannot use these data to project the costs incurred by the universe of 395 projects. Moreover, FERC often could not link the costs to the various steps in the licensing process to identify which steps were the most costly. Finally, licensees reported only those costs that they incurred before they filed a formal application to FERC to obtain a new license and, thus, FERC has no data on any of their costs associated with the post-application analysis phase of the licensing process.” GAO, Licensing Hydropower Projects (GAO-01-499), p.13 (2001).
See id., pp. 48-50.
104 FERC ¶ 61,109, p. 139.
A licensing settlement must be filed with FERC in the form of an Offer of Settlement. As required by Rule 601, an offer must be signed by the supporting parties and must include an explanation why it is a proper basis for the license. FERC will receive and consider comments by non-signatories before decision. It may approve, disapprove, or modify a settlement in its final decision.
Under Rule 601, an Offer of Settlement may be submitted at any time before FERC's final decision in the proceeding.1 The best practice is to submit a settlement before or, at latest, during the public comment period on the REA Notice or, in an ALP, the Notice of Acceptance. FERC must base its licensing decision on an environmental document that considers Action Alternatives, and a settlement may be approved only if it is within the scope of one or more such alternatives. While FERC has approved settlements submitted after the publication of the draft or even final environmental documents, it strongly discourages such lateness, which creates a significant risk delay in the final decision if such a document must be supplemented to address a new Action Alternative, or if non-signatories submit adverse comments.
Working backwards from the REA Notice, the licensee and other participants typically decide early in a proceeding whether they will try to negotiate a settlement. The Process Plan in the ILP, like the Communications Protocol in an ALP, must address the intent and schedule for such negotiation.
Inertia is a significant impediment to settlement. Establishing a process structure as soon as possible is critical to overcome inertia. See Section 4.2.5(A) above for specific recommendations on such structure. These recommendations boil down into a few principles: (1) Adopt the process in written form to prevent misunderstanding; (2) Work on a clock; (3) Become accustomed to making little decisions together, in preparation for the bigger decisions involved in settlemen; (4) Resolve disputes as they arise, not later; and (5) Negotiate only those issues necessary for settlement.
See 18 C.F.R. § 385.602.
An Offer of Settlement must include: a settlement of disputed issues in the proceeding and an Explanatory Statement. That statement must show how the settlement is a proper basis for the licensing decision. It must cite all documents and other evidence that support it.1
An offer may be partial or complete. A offer may be partial in two ways: it may resolve some but not all of the disputed issues in the proceeding, leaving the signatories free to address the unresolved issues; or it may be signed by some but not all of the parties. A settlement in a licensing proceeding will likely be approved if it resolves the most significant project impacts, including flow regulation, and if it is supported by the licensee, agencies, tribes, and other participants representing the diversity of interests affected by a project.
18 C.F.R. § 385.602.
An offer must be served to every party on the official service list.1 The offer must expressly notify all such non-signatories when comments are due.2
See 18 C.F.R. § 385.602(d).
See id.
Comments on a settlement must be filed with the Secretary not later than 20 days after the filing of the offer, and any reply comments must be filed not later than 10 days thereafter, unless FERC provides otherwise.1 Failure to file comments waives objection.2 Any comment that disputes a factual issue relevant to the settlement must include an affidavit documenting the commenter's position in that dispute.3
See id.
See id.
See id.
Approval of a settlement as the basis of a new license must be based on substantial evidence1 and must not be arbitrary or capricious. In other words, a settlement must meet the same legal standards as a final decision in a disputed proceeding. If the record does not contain substantial evidence upon which to base a reasoned decision, FERC may establish procedures for the purpose of receiving additional evidence.2
See 18 C.F.R.§§ 385.602(g), (h).
See 18 C.F.R. § 385.602(h).
A typical settlement in a licensing proceeding has three parts. Boilerplate terms establish the contract whereby all signatories commit to file the Offer of Settlement and thereafter support is as the basis for a license. Proposed license articles are environmental or other measures that will be implemented by the licensee to protect, mitigate, and enhance natural resources impacted by the project. Non-jurisdictional measures are other measures that non-licensees will implement, either solely or in coordination with the licensee, to complement what the licensee will be obliged to do.
FERC will approve the proposed license articles, if supported by substantial evidence and otherwise consistent with the statutory requirements for a licensing decision. FERC may acknowledge or accept the boilerplate terms and the non-jurisdictional measures, but it will not approve or enforce them.1 That is because its enforcement jurisdiction under FPA Part I only runs to licensees and their licenses.2 Thus, a license may establish duties for the licensee's performance of environmental measures, and FERC will enforce such duties; while a license may not include any duties of non-licensees (whether agencies, tribes, or other participants), because FERC may not enforce such duties in any circumstance.3
See Erie Boulevard Hydropower, 88 FERC ¶ 61,176 (1999) (Black River Project); Curtis Palmer Hydroelectric Company/International Paper Company, 91 FERC ¶ 61,112 (2000) (Curtis-Palmer Project); Avista Corporation, 90 FERC ¶ 61,167 (2000), 93 FERC ¶ 61,116 (2000) (Clarks Fork Project).
See id.
See id.
A settlement is a contract between signatories to support FERC's approval of proposed license articles in the license. Like any contract, it thus includes boilerplate terms that establish the relationship between the signatories. Indeed, boilerplate is a misnomer, since it is commonly understood to mean “meaningless.” Boilerplate here means that the terms describe how the signatories will relate in the implementation of the settlement, including the response to opposition from any stranger.
Parties are the signatories of the settlement. Recitals are factual statements that provide context, including the status of the licensing proceeding, the negotiation process, and the intent of the signatories for use of the settlement. Definitions define terms that are not otherwise defined in general law or rule. Effective date is when the contract takes effect - typically, the date when the final signatory signs. Term establishes when the settlement expires - typically, when the new license expired, or earlier if the licensee withdraws from the settlement. Purpose states the signatories' intent and hope that FERC will approve the proposed license articles as the basis of the license. Resolved Issues, like its converse Unresolved Issues, define the scope of the settlement and specifically state whether the signatories will dispute any unresolved issues going forward in the proceeding. Reservation of Rights or No Precedent means that the signatories retain all legal rights except as expressly exercised in the contract. Thus, while a settlement may resolve the proposed license articles for one project, the same signatories are free to take different positions in other proceedings. Authority to Sign is a representation that each signatory is authorized to bind the represented party.
OEP will never sign a settlement, because it cannot bind the Commissioners in their decision on the offer. Regulatory agencies may sign, subject to a Reservation of Authority. This reservation means: (A) the contract does not modify in any way the agency's duty to protect the public interest as required by its organic statute and implementing rules; and (B) the agency has the right to withdraw from the settlement after signature, take a position inconsistent with the settlement, or take such other action as it determines to be necessary for such compliance. Since a settlement typically is signed before publication of an environmental document or completion of the record, this reservation typically includes the specific right to seek mutually agreeable modifications to the settlement, or withdraw in the absence of such modifications, if the subsequent development of the record requires such modifications in its judgment. An agency which has authority to prescribe conditions under FPA section 4(e) or 18, CWA section 401(a) CZMA, or ESA, may sign a settlement before prescription, and thus may use the settlement as the basis for its prescription, provided the reservation expressly acknowledges its duty to make an independent decision (taking into account the entirety of the record, including public comments) when that decision is due. For example, see Appendix D, pp. D-289, D-666.
Most importantly, the boilerplate terms establish duties and procedures for implementation of the settlement. Duty to Support commits the signatories to submit the settlement, when effective, as an Offer of Settlement and support it in the face of any adverse comments. From the licensee's perspective, this duty means that its Proposed Action is the license application not as filed, but as modified by the settlement. Implementation Procedures will be established to address contingencies that affect whether the settlement is approved. Such contingencies include an agency's adoption of mandatory conditions inconsistent with the settlement, a non-signatory's submittal of adverse comments, or even FERC's disapproval (in whole or part) of the settlement. The procedures address what actions the signatories will take in these scenarios. Dispute Resolution Procedures commit the signatories to make best efforts to resolve disputes that arise in the implementation of the settlement and may specify the form of resolution, such as mediation or arbitration. Amendment Procedures provide how the signatories will effect any mutually agreeable amendment after initial signing of the settlement. They also address whether the licensee or other signatories may seek, after approval of the settlement, to amend the relevant license. Withdrawal Procedures permit a signatory to withdraw if a significant dispute regarding the implementation of the settlement is not resolved through the dispute resolution procedures, and they typically provide that the settlement terminates if the licensee withdraws. Enforcement Procedures define the venue and remedies for enforcement of the settlement. They preserve the existing venue of a federal or state court and are typically limited to specific performance, excluding damages. FPA Part I, not the contract, governs enforcement of any proposed articles that FERC incorporates into the license.
Since 1990, more than 200 settlements have been executed and filed with FERC as the basis for licensing decisions. All include boilerplate terms in some form. Paradoxically, there is not yet a standard set of boilerplate terms, which therefore tend to be renegotiated in each proceeding. In these past settlements, the terms covering each topic above range from simple to very complex, depending on project circumstances and drafters' preferences. Simpler is better, other things being equal, since complexity inevitably results in greater difficulty in negotiation or later interpretation of the terms, which, after all, are not the substance of the settlement. You should use the examples included in Appendix D, as well as others not included (simply as a function of space limitations), and extract those terms that appear workable in your circumstances. The licensee may have preferences if it has recently negotiated a settlement for another project.
Proposed license articles are environmental and other measures that the signatories believe fall within FERC's jurisdiction to approve and then enforce. In short, each such measure must: (A) oblige the licensee, and only the licensee, to implementation; (B) be stated in a specific and enforceable form (e.g., “licensee will release X cfs,” not “licensee will release an unknown flow”); and (C) have a nexus to a project impact that a relevant statute, such as FPA section 10, requires be addressed in the licensing decision.
As preferred form, proposed license articles are stated in a discrete part of the settlement, such as Appendix A. The boilerplate terms, which form the main text of the settlement, call out specifically that Appendix A is the only part submitted for FERC's approval.
If a licensee agrees that an environmental measure will be implemented in an adaptive or collaborative manner with other signatories, that commitment must be bifurcated, as follows. Because FERC only has jurisdiction over the licensee, the proposed license article (which is being submitted for FERC's approval) should state the licensee's obligation. E.g., “Licensee will convene a Collaborative Management Team consisting of the following parties .... In consultation with those other parties, licensee will adopt protocols for the team's meetings, including schedule and a decision rule. Licensee shall consult with team before submitting the following monitoring reports to FERC for approval ....” The obligations of other signatories to participate in the team, and additional details, should be stated separately, as a non-jurisdictional provision in a separate Appendix which, while included in the settlement, is not submitted for FERC's approval. Compare Offer of Settlement on Rehearing, Roanoke Rapids and Gaston Hydroelectric Project, Article 413, available at Appendix D, p. D-625 (collaborative management in jurisdictional form) and Comprehensive Settlement Agreement, Roanoke Rapids and Gaston Hydroelectric Project, Technical Settlement, Article FL1, available at Appendix D, p. D-526 (the same in non-jurisdictional form).
Non-jurisdictional measures are substantive commitments by non-licensees in the event that the settlement is approved. In other words, leaving aside the boilerplate duty to support the settlement through such approval, a non-licensee signatory may commit to operate a monitoring station on its own property, co-fund a measure which will otherwise be implemented by the licensee at a lesser level of funding, or participate in adaptive management of a license article. As preferred form, such commitments are stated separately from the proposed license articles (e.g., in an Appendix B), and the boilerplate terms clearly state the commitments as enforceable only as a matter of contract and are not submitted for FERC's approval.