A Case Study:Red Rock Hydroelectric Project

Missouri River Energy Services (MRES) is currently constructing a hydroelectric facility at the Red Rock Dam on the Des Moines River near Pella, Iowa.  Construction began in August of 2014 and the project is expected to be operational in the spring of 2018.  The hydro project is located on an existing U.S. Army Corps of Engineers dam.  The project will have a nameplate capacity of 36.4 MW at rated conditions and will operate in “Run-of-Release” mode.  The hydro facility will be owned by Western Minnesota Municipal Power Agency (WMMPA), the financing agency for MRES.  

The project started in early 2005 when the application for a preliminary permit was submitted by Nelson Energy.  The preliminary permit was issued by the Federal Energy Regulatory Commission (FERC) in March 2006 and Nelson Energy then began work to develop the project.  They filed the final License Application with FERC in February 2009.  The FERC licensing procedures included a scoping process and the issuance of an Environmental Assessment/Impact Statement, among other things.  The FERC license was issued in April of 2011, taking 6 years from start to completion.  WMMPA purchased the FERC license from Nelson Energy in mid-2011.    

The FERC license requires the start of construction within 2 years of receiving the license and operation of the hydroelectric facility within 5 years.  Licensees can apply for one extension up to 2 years.  This timeframe is problematic for the navigation of other regulatory processes, including the 401, 404 and 408 processes.  The deadline for licensees to begin construction should be tied to the completion of the 408 Design Review Process, rather than from the date the FERC License is issued.  WMMPA did request and receive a 2 year extension from FERC which requires commercial operation of the Red Rock Hydroelectric Project by April 2018.  

In October of 2011, MRES started preparing an application for the U.S. Corps of Engineers (USACE) 408 Design Review Process for access, design, and construction of the project.  The 408 process primarily addresses dam safety, but also includes real estate and environmental assessments.  In order to reduce risk, the developer should know about all of the environmental issues as early as possible.  The environmental assessments/impact statement done through the FERC licensing process should include all other environmental requirements for the project.  The real estate permits should be done in parallel with the 408 process, but they should not be part of the 408 process itself.  

The timing of the 408 process also increases the developer’s risk.  The process required 100 percent of the design to be completed and identification of the means to construct the project.  This resulted in identifying methods of construction that were ultimately not optimum for the contractor, thus increasing costs.  Also, in order to meet the projected timelines for the delivery of turbine/generator equipment, WMMPA had to sign an agreement with the equipment supplier and make a significant financial investment before the 408 approvals were obtained, creating substantial risk for WMMPA. During the 408 Design Review Process, MRES on behalf of WMMPA responded to over 700 comments.  WMMPA received the 408 approval in March 2014.  

The application for the 401/404 Wetlands/Water Quality Certification was submitted to the USACE and  Iowa Department of Natural Resources (IDNR) jointly in August 2012, which was early in the design stage of the project.  The 404 process was sequential with the 408 process, so approval could not be given on the 404 process until the 408 process was approved.  In order to meet the timing required by the FERC License, WMMPA had to solicit bids for the General Contractor on the project before receiving the 404 regulatory approval.  WMMPA received the 401 process approval in October 2013 and received the 404 process approval in April 2014.  

The Red Rock Hydroelectric project is expected to take a total of 13 years from the start of the permitting process to project completion.  In total, the project required nearly 40 plans, permits, and licenses.  Almost all had to be acquired one at a time.  FERC tried to get the regulatory agencies and stakeholders to engage early in the FERC licensing process, but FERC did not have the authority to hold others to the schedule. 

Improvements could be made by providing licensees, stakeholders, and agencies with a defined process that includes the application for a FERC License as well as the subsequent 408/404/401 processes.  Upon submission of an application for a FERC License, a schedule of the regulatory process should be developed which seeks to eliminate duplication of regulatory requirements, reduces the financial risk currently encountered by licensees, allows the various permitting processes to occur on parallel paths, and maintains sufficient flexibility to overcome any obstacles that may arise.  Lastly, FERC should be provided with the means to keep the regulatory process moving forward so that no single stakeholder or agency can significantly delay or disrupt development of the project.