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Economic and dam related articles

Little Paid for U.S. Land Use,
Study Says

by Greg Edwards
Richmond Times-Dispatch, May 24, 2003

GAO urges higher rates for hydropower firms

Private companies operating hydropower projects on federal land have been paying less than 2 percent of the fair market value for using the land, a congressional study says.

One of 24 hydropower facilities sampled for the study by the General Accounting Office was the Bath County Pumped Storage project, which is jointly owned by Dominion Virginia Power and Allegheny Power.

The project is located in Virginia's George Washington National Forest.

The GAO reported that the fair market value for using all the land in the projects it studied nationwide is at least $157 million annually (and millions more under some market conditions), but in 2002, the Federal Energy Regulatory Commission collected only $2.7 million from those projects for the land's use.

The agency recommended that FERC develop a new way of assessing annual charges that is more in line with the benefits going to companies that operate hydropower projects.

It also said FERC needs to improve its system for accounting for the use of the federal lands, noting the agency, in some cases, didn't know for sure how much land is being used.

A 'timely' report
In a statement, two conservation groups, American Rivers and Hydropower Reform Coalition, called the report "timely," having been released as energy industry lobbyists are roaming the Capitol.

The report, they noted, was issued as the Senate considers action on the Energy Policy Act, which "would strip the Forest Service and other federal agencies of their ability to protect the environment or improve public recreation at utility-owned hydropower dam sites."

In comments filed with the GAO, the National Hydropower Association, an industry group, argued that increasing annual charges for using the federal land would increase electricity rates to consumers and hurt the economies of states that benefit from low-cost hydropower.

FERC's current system for figuring the value of federal land to hydropower projects dates from 1987 and is based on one originally used to figure fees for such things as power lines and pipelines on federal land. The GAO noted that those uses are much less valuable than hydropower.

Hydropower projects generate electricity, generally, from water that flows from dams to turn turbines. Hydropower projects generate 10 percent of the nation's electricity.

Federally owned projects generate about half of that electricity, and about 1,000 privately owned projects, of which 173 are located on at least some federal lands, generate most of the remaining half.

List of 56 projects
The 24 projects that were sampled by the GAO for its study were drawn from a list of 56 projects that account for roughly 90 percent of the private hydropower produced on federal lands. All but two of those projects, one in Bath County and one in Alabama, were in the American West.

The estimated annual value for the use of federal lands by each of the 24 projects ranged from $194.2 million for Hells Canyon in Idaho and Oregon to a negative $20 million for the California Aqueduct. The estimated value for use of federal lands by the Bath County project was $12 million.

By contrast, the FERC assessed Hells Canyon $371,000 in 2002 for using federal land, the California Aqueduct $17, 000 and the Bath County project $48,000.

The GAO said 28 percent of the Bath County project is on federal lands. This year, Bath County is expected to produce 4.14 trillion watt hours of electricity valued at $300 million, The GAO said.

A spokesman for Virginia Power, part owner of the Bath County project, said the company is still studying the report and will not comment.

The Bath County project is a pumped storage facility, in which water is pumped into an upper reservoir at night when electricity is cheap. The water is then released to generate power during times of peak demand in the daytime when electricity prices are high.

Greg Edwards, Richmond Times-Dispatch Staff Writer
Little Paid for U.S. Land Use, Study Says
Richmond Times-Dispatch, May 24, 2003

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