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Niagara Mohawk Power Corporation - Ruling, April 20, 1994

Ruling April 20, 1994

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of the Application of the NIAGARA MOHAWK POWER CORPORATION for 401 Water Quality Certifications for Nine Hydroelectric Power Facilities:

RULINGS OF ADMINISTRATIVE LAW JUDGE

Facility DEC Project No. FERC Project No.
Beaver River 6-2240-00038/00001-9 2645
E.J. West 5-4136-00016/00001-9 2318
Middle Raquette 6-4099-00006/00001-9 2320
Lower Raquette 6-4009-00006/00001-9 2330
Black River 6-2240-00038/00001-9 2569
School Street 4-6103-00027/00001-9 2539
Hudson River 5-4100-00019/00001-9 2482
Hoosic River 4-9904-00017/00001-9 2616

This proceeding presents the issue of the scope of the State's authority to review, deny, and condition 401 water quality certifications for the relicensing of hydroelectric projects before the Federal Energy Regulatory Commission. These rulings find that, under New York law, the State's authority is limited to certifying compliance with the State's water quality criteria designed to protect the designated best uses of the several classes of waters of the State. The rulings also recommend deletions and modifications in the language of the draft water quality certifications proposed by the Department Staff for these Projects.

Potential factual issues are drawn between the Applicant and Department Staff on the need for monitoring the bypass reaches of these facilities as proposed in the current draft water quality certifications. Since examination of factual issues was generally deferred until resolution of the legal issues in this proceeding, the parties will have a further opportunity to review the application materials to determine whether they wish to attempt to raise any additional factual issues that may require adjudication.

Project Descriptions and Background

The Niagara Mohawk Power Corporation ("Niagara Mohawk") is an investor-owned electric utility company headquartered at 300 Erie Boulevard West, Syracuse, New York 13202. Niagara Mohawk owns and operates approximately 74 hydroelectric power developments throughout upstate New York as part of its electric generating capacity mix. Niagara Mohawk has applied to the Federal Energy Regulatory Commission ("FERC") for relicensing, for new 50-year terms for nine of its hydroelectric facilities, comprising 30 developments, listed in the caption above. In this proceeding, the Applicant has applied to the New York State Department of Environmental Conservation (the "Department") for a Water Quality Certification pursuant to Section 401 of the Federal Clean Water Act (33 U.S.C. 1341) needed in order to obtain renewal of its FERC licenses for these Projects.

The nine Projects that are the subject of this proceeding are located on the Raquette, Hudson, Mohawk, Sacandaga, Hoosic, Black, and Oswego in upstate New York. Their locations are shown on the map attached to this Report as Appendix A. Collectively, these facilities produce 307.2 megawatts of electric power. In the relicensing applications, Niagara Mohawk is seeking approval improve the power generation facilities of some of these Projects to expand their capacity, resulting in a total increase of 60.7 megawatts. The Applicant is also proposing other improvements to the facilities to enhance recreational and fishing opportunities. Attached as Appendix B is a list of these Project and developments summarizing Niagara Mohawk's relicensing plans for each.

Proceedings - Legal History

The proceedings and legal history of this proceeding are described in detail below. The law applicable to state 401 water quality certifications law was (and may still be) in flux during the pendency of this and similar proceedings. It is necessary to trace the evolution of this application, and the evolution in the positions of the parties, in that context in order to present a complete explanation for these rulings.

- FERC Renewal Application

Niagara Mohawk's current license for these Projects expire on December 31, 1993. Niagara Mohawk filed its applications for renewal with FERC in November and December 1991. The application process before FERC for hydroelectric power facility licenses is governed by the Federal Power Act, 16 U.S.C. 792, et seq, and its implementing regulations, 18 CFR Parts 4 and 16. The FERC regulations outline an application process that consists of successive stages of consultation, comments, and responses among the Applicant, FERC, and interested "resource agencies."

The New York State Department of Environmental Conservation has actively participated in this consultation process since August 1989 through frequent correspondence, attendance at meetings, and formal intervention. The Department has petitioned to intervene in Niagara Mohawk's FERC application proceeding. The United States Fish and Wildlife Service ("USFWS") has also participated and intervened in the FERC proceeding as an interested resource agency. One of the main issues addressed by these parties before FERC is the same that formed one of the main bases for the Department Staff's denial of Niagara Mohawk's WQC applications: the need to study fish entrainment at these facilities or to install certain fish protection devices.

- 401 Water Quality Certification Application

Pursuant to the Federal Water Pollution Control Act, or Clean Water Act ("CWA") 401 (33 U.S.C. 1341) an applicant for a federal license for an activity that may result in a discharge into navigable waters, such as a hydropower project, must obtain a certification from the State in which the discharge originates that the discharge will comply with applicable provisions of the CWA, including federally-approved state water quality standards. The application for such a water quality certification is made pursuant to 6 NYCRR 608.7. Relevant to hydroelectric projects is 608.7(a)(2), which references New York's "water quality standards and thermal discharge criteria set forth in Parts 701, 702 and 704 of [6 NYCRR]." These provisions of the CWA and the state's water quality standards are described in detail and analyzed below in the discussion section of these rulings.

Niagara Mohawk wrote to the Department Staff concurrently with its FERC applications in November and December 1991 to request issuance of the 401 water quality certifications ("WQCs") for these Projects. The Department's uniform permit processing regulations govern applications for WQCs (6 NYCRR 621.2[e]; 608.7). The applications were deemed complete in June and July 1992.

On November 19, 1992, the Department Staff wrote Niagara Mohawk a letter denying each of the nine applications without prejudice. The letter included an attachment stating the reasons for denial for each WQC application for each Project. The reasons for denial varied somewhat for each Project, but generally Staff required more information on the following matters: fish entrainment and mortality at many of the developments or installation of fish passage devices; reservoir level fluctuations; aquatic habitat in the bypass reaches; and recreational enhancements. Attached as Appendix C is a list of the Projects with a summary of the reasons for denial applicable to each application. In a letter dated December 16, 1992, the Applicant then requested a hearing on the denials.

- Issues Conference - Initial Positions of the Parties

The administrative permit hearing was noticed and convened pursuant to the procedures in 6 NYCRR Part 624. Administrative Law Judge Andrew S. Pearlstein convened a combined legislative hearing session and issues conference on August 5, 1993 at the Radisson Inn in Utica, New York. Approximately 40 persons attended.

The Applicant, Niagara Mohawk, was represented by Michael W. Murphy, General Counsel, Syracuse. The Department Staff was represented by Keith G. Silliman, Esq., Assistant Counsel, Albany. New York Rivers United ("NYRU") was represented by Richard Roos-Collins, Esq., of the Natural Heritage Institute, San Francisco, California. The parties listed in this paragraph participated actively in briefing all legal issues.

Several other parties made brief statements at the issues conference stating their limited interest in the proceeding and asking to remain on the distribution list. The City of Cohoes, represented by Peter Henner, Esq., Albany, for example, is interested in the issue of recreational access to the School Street facility. The City of Cohoes did submit a legal brief following the issues conference. Ernest J. Wolfe, Jr., Esq. represented a group of persons living near the Beaver River Project who were interested in the environmental effects of that facility. The United States Fish & Wildlife Service, represented by David S. Bryson of the Cortland office, expressed continuing interest in the outcome of this proceeding with respect to aquatic habitat and fish protection in the affected rivers. Other parties who appeared and/or asked to remain on the mailing list are listed in the Distribution List at the end of this Report.

At the issues conference the parties agreed that a legal issue existed concerning the authority of the Department to impose certain conditions, such as those addressing fish entrainment, in WQCs or to deny certification based on the failure of the Applicant to accept such conditions. The parties and ALJ agreed to defer consideration of any potential factual issues until resolution of this legal issue.

The Applicant, Department Staff, and the intervenors NYRU and the City of Cohoes submitted briefs and reply briefs on the legal issue which were received by August 28, 1993. Another round of briefs focusing on the effect of the State's "anti-degradation" policy was submitted by those parties in October 1993.

-- Initial Position of Department Staff

The Department Staff denied the WQC applications for these Projects due to the failure of the Applicant to submit sufficient information on such matters as fish entrainment and mortality, fish passage, reservoir level fluctuations, bypass flows, aquatic habitat in the bypass reaches, and erosion control. The reasons for denial varied somewhat for each Project, and are listed in Appendix C.

In support of its denial of these applications, the Department Staff cited the Department's broad authority to review WQC applications as granted in the Department's declaratory ruling #15-09 on the petition of Niagara Mohawk, which at that time had not yet been overturned by the Court of Appeals (See the section below on the Niagara Mohawk litigation for a full explanation.). Staff asserted it had authority to request information on fish entrainment or require installation of fish protection devices, as within its authority in considering a WQC. Staff further contended that, even apart from the Niagara Mohawk litigation, the existing Part 701-704 water quality standards provided a sufficient basis to deny the Niagara Mohawk WQC application for the stated reasons.

-- Initial Position of Applicant

The Applicant contested the legal authority of the Department to require fish entrainment studies or any of the other requested information, arguing that such considerations are within the exclusive jurisdiction of FERC. Niagara Mohawk also contended that the Department Staff's denial of its applications for WQCs violated lawful procedure. The Applicant further argued that the "anti-degradation policy" cited by NYRU did not provide any basis to deny these applications for WQCs. Therefore, the Applicant sought an order from the Commissioner ordering issuance of its WQCs or waiving it for these Projects.

-- Initial Position of NYRU

The intervenor NYRU generally agreed with the Department Staff's position that it had authority to deny these WQCs due to Niagara Mohawk's refusal to submit the requested information on fish entrainment, reservoir fluctuations, and the other items. NYRU did not rely on the Niagara Mohawk declaratory ruling, but contended that, apart from that ruling and the ensuing litigation, the Department's current water quality standards, which include designated uses for the various stream classifications, provide a sufficient basis to support Staff's denial of Niagara Mohawk's applications for these WQCs. NYRU further contended that New York's federally approved anti-degradation policy, which is implemented through the State Environmental Quality Review Act (ECL Article 8, or "SEQRA"), provides a further basis to support the Department Staff's denial of these applications.

The City of Cohoes agreed with the Department Staff and NYRU at this stage that the Department had authority to deny Niagara Mohawk's WQC applications for the reasons stated.

- Niagara Mohawk Litigation

At the issues conference, the parties also discussed the effect on this proceeding of litigation that was then pending before the State of New York Court of Appeals: the matter of Niagara Mohawk Power Corporation v. New York State Department of Environmental Conservation, 187 A.D.2d 7, aff'd 82 N.Y.2d 191 (1993). This action stems from Niagara Mohawk's petition in May 1990 for a declaratory ruling (#15-09) pursuant to the State Administrative Procedure Act 204. Niagara Mohawk sought the Department's interpretation of the extent of its authority to implement certain substantive provisions of Article 15, Title 5 of the Environmental Conservation Law ("ECL") and other environmental laws in reviewing an application for a 401 water quality certification for FERC-licensed hydropower project.

Deputy Commissioner and General Counsel Marc S. Gerstman responded on August 27, 1990 in a letter in which he outlined the Department's broad interpretation of its authority under the CWA 401 (33 U.S.C. 1341) to review a hydropower project's compliance with water quality related laws and regulations. In its declaratory ruling the Department took the position that Congress intended states to have authority to review compliance with all state laws which bear on water quality before granting a certification.

The Department declared the following laws and regulatory requirements applicable through 6 NYCRR 608.7(6) in reviewing an application for a WQC: ECL 15-0501 (Protection of Waters: disturbance of stream beds); ECL 15-0503 (Protection of Waters: dam construction); ECL 15-0505 (Protection of Waters: excavation or fill); ECL 15-0507 (Dam Safety); ECL 15-0801 et seq (Reservoir Releases); ECL 15-2700 et seq (Wild, Scenic and Recreational River System); ECL Article 24 (Freshwater Wetlands); ECL Article 11 (Fish and Wildlife); and ECL Article 8 (Environmental Quality Review). The declaratory ruling analyzed prior case law and the legislative history of the CWA, with particular reference to the 1972 amendments that added the language in 401(d) (33 U.S.C. 1341[d]). That subsection states that certifications must contain conditions to ensure the facility's compliance with water quality standards and "any other appropriate requirement of State law."

Niagara Mohawk then brought an Article 78 proceeding in which it sought a judgment determining that the Department's declaratory ruling was erroneous as a matter of law; arbitrary and capricious; and that the Federal Power Act preempts the Department from applying the substantive provisions of the ECL related to water quality in reviewing an application for a WQC, other than the water quality standards set forth in 6 NYCRR Parts 701-704. Niagara Mohawk won a favorable ruling in its Article 78 petition in the Supreme Court of Albany County, J. Hughes, on April 1, 1991 [cite]. The Appellate Division, Third Department affirmed this judgment on November 19, 1992. 187 A.D.2d 7, 592 N.Y.S.2d 141. The Court of Appeals granted leave to the Department to appeal. In a decision dated November 11, 1993, the Court of Appeals affirmed the Appellate Division judgment (82 N.Y.2d 191), thus settling for now the law in New York restricting the Department's review of 401 WQCs to ensuring compliance with duly adopted water quality standards.

The Department has, however, filed a writ of certiorari in the United States Supreme Court seeking review of the Court of Appeals decision. As recognized in the Court of Appeals decision, other state courts have ruled on this issue differently, particularly the Washington Supreme Court in State of Washington v. P.U.D. No. 1, 849 P.2d 646 (Wash., 1993). The United States Supreme Court has granted certiorari in that case (114 S.Ct. 55), and both Niagara Mohawk and the Department have filed amicus briefs. Hence it appears likely that the United States Supreme Court will ultimately determine the scope of the states' authority to review 401 water quality certifications for federally licensed hydropower projects.

- Revised Draft WQCs - Positions of the Parties

In response to the Court of Appeals decision in Niagara Mohawk, the Department Staff rescinded its denials of Niagara Mohawk's applications for water quality certifications, and, on January 3, 1994, issued draft WQCs for the nine Projects. Simultaneously, Staff distributed draft WQCs for two other applicants who had begun similar hearing processes in 1993, after the Niagara Mohawk issues conference. The hearing and issues conference on the application of Finch, Pruyn & Company, Inc.'s application for a WQC was held on March 17, 1993 in Glens Falls, New York. The hearing and issues conference for Rochester Gas & Electric Corporation's ("RG&E") applications for four WQCs for four hydropower projects convened before Administrative Law Judge Andrew S. Pearlstein on June 9, 1993 in Rochester, New York. After issuance of the draft WQCs the parties submitted written comments stating their objections and agreements, and proposing alternative terms. Those written statements were received by February 25, 1994.

Since the Niagara Mohawk issues conference in August 1993, the hearings on these 14 applications for WQCs by these three applicants have been generally handled together by all parties and the ALJ to promote administrative efficiency, although they are not formally consolidated. The three applicants have joined in certain correspondence and submissions, while the Department Staff and NYRU have also addressed all these projects together in their briefs. This ruling on the Niagara Mohawk application for a WQC is being issued simultaneously with the rulings on the applications of RG&E and Finch Pruyn. Although this application is for multiple hydroelectric projects, in some portions of these rulings the singular form may be used to address issues applicable to all the facilities generically.

-- Position of Department Staff - Draft WQC

The Department Staff noted with its submission of the draft WQCs that the Court of Appeals decision in Niagara Mohawk "has eliminated Staff's ability to apply substantive provisions of the State's water quality-related regulatory requirements (Articles 8, 15, 17 & 24) through the 401 Water Quality Certificate." Staff further asserts that the State's "current water quality standards do not establish adequate parameters to rely upon at this time to impose minimum flow or entrainment and impingement measures." Therefore, the draft WQCs are intended to limit their conditions to "the current standards in 702-704 which implement the water quality classifications found in 701." The draft WQCs for Niagara Mohawk nine Projects thus contain no conditions respecting fish entrainment studies, fish protection devices, the aquatic habitat in the bypass reach -- the original main bases for the denials.

The draft WQCs consist of a cover page and two sections: General Conditions and Special Conditions. A copy of a typical draft WQC, for the Hoosic River Project, is attached as Appendix D to this Report. The General Conditions are virtually identical to the standard provisions inserted into any of the Department's permits issued by the various program divisions through the Division of Regulatory Affairs (e.g., air pollution control, freshwater wetlands, solid waste management, etc.). The various permit programs are listed on the cover page of the draft WQC. The General Conditions cover such matters as Department inspections, "permit" changes and renewals, and other legal obligations of the "permittee."

The Special Conditions begin with a statement of certification that the "permittee" will comply with the state regulatory provisions implementing 401 of the CWA. The conditions are then stated to be applicable to the construction and operation activities proposed in Niagara Mohawk's relevant FERC application, and any maintenance or other activities that could contravene water quality standards. The nine special conditions themselves address the following concerns: maintenance of downstream water quality; adequate release of water to the bypass reach; sediment analysis and disposal; erosion and sediment control measures; and environmental management plan for construction and maintenance activities affecting the bed or banks of the Hudson River; placement of cofferdams; maintenance of river flow; and turbidity monitoring.

The special conditions require the Applicant to monitor its bypass reach and downstream releases for the three water quality parameters of chief concern in hydropower projects -- dissolved oxygen, temperature, and turbidity -- and to adjust operations to ensure that the water quality standards for those parameters will be met. Some of the Projects (Middle Raquette, Lower Raquette, Oswego River, Black River, and Beaver River) have minimum flow requirements for downstream releases. The others (Hoosic River, E.J. West, Hudson River, and School Street) require release of sufficient water to maintain water quality, supplemented by a monitoring program. The Applicant is also required to submit to Staff an approvable "Environmental Management Plan" to minimize erosion and other disturbances to the river before beginning any significant construction or maintenance activities.

-- Position of Applicant

Niagara Mohawk objects to the inclusion of Staff's draft WQC conditions proffered its own draft WQC as its preferred alternative. Niagara Mohawk's draft WQC, a copy of which is attached to these rulings as Appendix E, consists of only one page and omits any conditions. It simply states that the Department has reviewed the application materials and certifies that the Project will comply with applicable sections of the Clean Water Act, including duly adopted state water quality standards.

The Applicant specifically asserts that all the General Conditions in Staff's drafts should be omitted as inappropriate in WQCs for a federally licensed projects and inconsistent with FERC's procedures. Niagara Mohawk asserts that it has submitted sufficient information to enable the Department Staff to render the certifications without any special conditions as well. The Applicant particularly contends that monitoring of the bypass and downstream reaches is not necessary based on available water quality data. Niagara Mohawk also proposes changes in the language and organization of the certification as indicated in its attached draft WQC.

-- Position of NYRU

NYRU maintains that the Niagara Mohawk decision did not invalidate the Department Staff's initial denials of the WQCs for these Projects since the WQCs could properly be denied on the basis of the State's water quality standards, including the designated best usages for the rivers in the vicinity of the Projects. NYRU then criticizes the Department Staff's draft WQCs for the Niagara Mohawk Projects on several grounds. NYRU asserts the draft WQCs do not contain sufficient substantiation or assurance that the Projects will actually comply with applicable water quality standards. NYRU also continued to argue that the draft WQCs do not comply with the federally approved anti-degradation policy implemented through SEQRA. NYRU attached a WQC from the state of Vermont as a suggested preferred alternative form. NYRU thus opposes issuance of the draft WQCs in the proposed form of the Staff's drafts, and seeks an order reaffirming the original denial of the Niagara Mohawk applications for WQCs, or reopening the issues conference.

The City of Cohoes stated its opposition to the draft WQC due to its failure to include any condition for recreational access to the viewing of the falls at the School Street facility. However, the City indicated it hoped to resolve this issue by reaching an agreement with Niagara Mohawk.

DISCUSSION

Legal Framework

The Federal Power Act (16 U.S.C. 791 et seq) governs applications for hydroelectric power projects on the navigable waters of the United States. The general power of FERC to grant licenses for such projects is set forth at 16 U.S.C. 797(e). That subsection was amended as part of the Electrical Consumers Protection Act in 1986 to add the following:

"In deciding whether to issue any license under this Part for any project, the Commission, in addition to the power and development purposes for which licenses are issued, shall give equal consideration to the purposes of energy conservation, the protection, mitigation of damage to, and enhancement of, fish and wildlife (including related spawning grounds and habitat), the protection of recreational opportunities, and the preservation of other aspects of environmental quality."

FERC is required to exercise its judgment in conditioning projects according to a comprehensive plan accommodating the purposes of power development, navigation, commerce, the "adequate protection" of fish and wildlife resources, and for other public uses including recreation, flood control, and water supply. (16 U.S.C.[a][1]).

As described above in this Report, FERC's licensing regulations, 18 C.F.R. Parts 4 and 16, provide a full opportunity for interested federal, state and local resource agencies to participate in the application process. Those agencies may consult with FERC and the applicant, state their concerns and provide their recommendations for license conditions related to these environmental impacts of hydropower projects. FERC is directed to consider the recommendations of those agencies in reaching its final decision (16 U.S.C. 803[2][B]). The Department has actively participated in the Niagara Mohawk relicensing application before FERC, and is continuing to do so.

The states do have an additional direct certifying role in this process under the Clean Water Act 401, (33 U.S.C. 1341[a][1]), which provides as follows:

"Any applicant for a Federal license or permit to conduct any activity including, but not limited to, the construction or operation of facilities, which may result in the discharge into the navigable waters, shall provide the licensing or permitting agency a certification from the State in which the discharge originates . . . that any such discharge will comply with the applicable provisions of sections 1311, 1312, 1313, 1316 and 1317 of this title. . . . No license or permit shall be granted until the certification required by this section has been obtained or has been waived as provided in the preceding sentence. No license or permit shall be granted if certification has been denied by the State, interstate agency, or the Administrator, as the case may be."

The standard to be applied is that of "reasonable assurance that the activity will be conducted in a manner which will not violate applicable water quality standards." 40 CFR 121.2(a)(3). Of the cited provisions of the CWA, the only one applicable to hydroelectric power facilities is 1313, which authorizes the states to adopt water quality standards and implementation plans, subject to the EPA's approval. In New York, those water quality standards are found in 6 NYCRR Parts 701-704. In this proceeding, the Department must therefore certify that Niagara Mohawk's Glens Falls Project will comply with the water quality standards in Parts 701-704.

The Clean Water Act was amended in 1972 to add the following language in 33 U.S.C. 1341(d):

"Any certification provided under this section shall set forth any effluent limitations and other limitations, and monitoring requirements necessary to assure that any applicant for a Federal license or permit will comply with any applicable effluent limitations and other limitations, under section 1311 or 1312 of this title, standard of performance under section 1316 of this title, or prohibition, effluent standard, or pretreatment standard under section 1317 of this title, and with any other appropriate requirement of State law set forth in such certification, and shall become a condition on any Federal license or permit subject to the provisions of this section." (emphasis added).

As described above in the section on the Niagara Mohawk litigation, that cased primarily focused on the meaning of the phrase "any other appropriate requirement of State law." The Court of Appeals found that this language did not support the Department's interpretation in its declaratory ruling that the Department could condition WQCs on compliance with an array of water quality-related laws and regulatory programs. However, since the issue was not squarely raised in Niagara Mohawk, the Court did not address the proper scope of the Parts 701-704 water quality standards themselves as a basis for denying or conditioning certifications under 1341(a)(1).

In a broader context, Niagara Mohawk follows precedent from New York and the Federal courts in delineating the overall Federal-State scheme for licensing hydroelectric power projects. Although predating the enactment of the Clean Water Act, the leading case of First Iowa Hydro-Electric Cooperative v. Federal Power Commission, 328 U.S. 152, 66 S.Ct. 906 (1946) addressed the interplay between the licensing authority of the Federal Government, through the Federal Power Commission (now FERC), and potentially conflicting state laws. The Court stated that the Federal Power Act "leaves to the states their traditional jurisdiction subject to the admittedly superior right of the Federal Government, through Congress, to regulate interstate and foreign commerce . . ." 66 S.Ct. 915. The Act granted the Commission the comprehensive and final authority to license hydroelectric power projects, which supersedes state authority wherever they may conflict. "A dual final authority, with a duplicate system of state permits and federal licenses required for each project, would be unworkable." 66 S.Ct. 913.

The Supreme Court reaffirmed the pre-emptive effect of the Federal Power Act over conflicting state requirements in the case of California v. F.E.R.C., 495 U.S. 490, 110 S.Ct. 2024 (1990). The Court, quoting with approval from First Iowa, found that California's attempt to require a higher minimum flow for a hydroelectric project than determined appropriate by FERC would "interfere with [FERC's] comprehensive planning authority . . , would be contrary to congressional intent regarding the Commission's licensing authority and would `constitute a veto of the project that was approved and licensed by FERC.'" The California decision explicitly construed 27 of the FPA (16 U.S.C. 821, which reserves proprietary rights in other water uses to the laws of the states), rather than the CWA 401 (33 U.S.C. 1341) certification we are concerned with here. However, the Court left no doubt that it takes a broad view of the intent of Congress expressed in the Federal Power Act to establish a comprehensive national program for hydroelectric development that pre-empts any conflicting State law.

The New York courts, most recently in the Niagara Mohawk case, have embraced the broad view of Federal authority under the FPA expressed by the United States Supreme Court. In Matter of de Rham v. Diamond, 32 N.Y.2d 34 (1973) the Court of Appeals considered the scope of the Commissioner of this Department's authority to issue a certificate (under former 21[b], the predecessor of the CWA 401) for Consolidated Edison's proposed Storm King pumped storage project on the Hudson River in Cornwall. The Court noted that Congress, through the Federal Power Act, vested the Federal Power Commission (now FERC) with broad, sweeping powers and planning responsibility in regulating and licensing of hydroelectric facilities affecting the navigable waters of the United States. The Court continued as follows:

"The Commission's jurisdiction with respect to such projects pre-empts all State licensing and permit functions. [citations omitted]. Section 21 (subd.[b]) of the Federal Water Pollution Act relinquishes only one element of the otherwise exclusive jurisdiction granted the Power Commission by the Federal Power Act. It authorizes States to determine and certify only that the construction and operation of a proposed project `will not violate applicable water quality standards' of the State. That is all that section 21 (subd. [b]) did, and all it was designed to do. Congress did not empower the States to reconsider matters, unrelated to their water quality standards, which the Power Commission has within its exclusive jurisdiction under the Federal Power Act." 32 N.Y.2d 44.

The Court further held that the Department had no authority or duty to consider matters that were decided by the Federal Power Commission, including "the protection of the River's fish life, apart from the effect that destruction of, or injury to, fish may have, by introduction of pollutants, on the water quality standards required by the applicable regulations." 32 N.Y.2d 45.

After passage of the current applicable provisions of the Clean Water Act, 33 U.S.C. 1341, the Court of Appeals expressly followed de Rham in Matter of Power Authority of the State of New York v. Williams, 60 N.Y.2d 315 (1983), which concerned the Power Authority's proposed Prattsville pumped storage project. The Court of Appeals characterized the scope of the State's authority in reviewing a 401 certification application as "very limited." The Court continued to describe the scope of the State's activity as follows:

"The certification referred to in the Federal Clean Water Act, insofar as relevant to the Prattsville Project, is simply of compliance with section 303 of the Federal statute (US Code, tit 33, 1313), which provides for either State-adopted, Federally approved water quality standards or the promulgation of standards by the Federal Environmental Protection Agency. In the case of New York State, the standards adopted by DEC and Federally approved establish use classifications of waters within the State with specific, individual standards, relating to such things as turbidity and temperature change, assigned to the various classifications (e.g., 6 NYCRR 701.4, 704.2[b]). The section 401 certification process is accomplished by a determination that a proposed project will meet the particular water quality standards for the applicable classification." 60 N.Y.2d 327.

The Court concluded that the Department could not consider or balance energy or other environmental factors, since that function was pre-empted by FERC under the Federal Power Act.

The principle of Federal pre-emption over hydropower projects, except for the State's limited authority to certify compliance with water quality standards, has been followed in two recent cases. In Fourth Branch Associates v. Department of Environmental Conservation, 146 Misc.2d 334 (1989), the Supreme Court, Albany County (J. Harris), determined that the Department could not implement its certification review to encompass the State Environmental Quality Review Act ("SEQRA," ECL Article 8). "SEQRA review would clearly violate the implicit prohibition of dual control inherent in the Federal Government's preemption of the field." 146 Misc.2d 334. In Long Lake Energy Corporation v. New York State Department of Environmental Conservation, 164 A.D.2d 396 (1990), the Appellate Division, Third Department held that the denial of the petitioner's applications for WQCs was proper where the petitioner failed to respond to the Department's requests for additional information related to the projects' effects on water quality standards such as dissolved oxygen and temperature in the affected waters.

We have seen that the Court of Appeals in Niagara Mohawk has now further clarified the limited scope of the Department's authority to deny or condition WQCs. The Court restated these principles as follows:

"We agree with the Appellate Division that the Federal Power Act establishes a comprehensive scheme of federal regulation of hydroelectric projects that essentially preempts state regulation of hydroelectric facilities within the Federal Energy Regulatory Commission's jurisdiction. Settled law in New York has consistently supported the view that 401 gives the State regulatory entity only a limited role of review, based on requirements affecting water quality, not on all state water quality provisions. Review by state agencies that would overlap or duplicate the federal purview and prerogatives was not contemplated and would infringe on and potentially conflict with an area of the law dominated by the nationally uniform Federal statutory scheme." 82 N.Y.2d 195.

The Court found that the amendments to the CWA that incorporated the phrase "any other appropriate requirement of State law" into 33 U.S.C. 1341(d) did not expand the Department's authority to review applications for WQCs for compliance with any other provisions of State law other than the water quality standards adopted by the State and approved by the EPA pursuant to the CWA 303 (33 U.S.C. 1313). The Court stated that those water quality standards are found only in 6 NYCRR Parts 701-704. "Therefore, while DEC is correct that Congress sought in 401 to preserve the states' role in maintaining water quality, Congress simultaneously maintained essentially pre-emptive Federal control by restricting state certification to compliance with requirements issued or approved by EPA." 82 N.Y.2d 196.

State Water Quality Standards

In the legal history outlined above, however, no court has expressly considered the proper interpretation and scope of New York's water quality standards themselves as a basis for denying or conditioning WQCs for hydropower projects. NYRU contends that the Part 701-704 water quality standards encompass best usage and narrative standards that are sufficiently broad to justify the Department's denial of the WQCs here for reasons related to fish survival and aquatic habitat. NYRU maintains that compliance with a water quality standard encompasses the potential impairment of the best usage designated for the particular water body classification. It therefore urges that the original denials of the WQCs for these Projects be reaffirmed on the bases then stated concerning fish entrainment, the habitat in the bypass reaches, and impacts of reservoir fluctuation.

The Department Staff initially joined in this contention, stating in its April 9, 1993 brief that "regardless of the outcome of the Niagara Mohawk litigation, the Department has the authority to impose conditions through the 401 WQC to protect fish from entrainment and impingement in order to comply with the `suitable for fish protection and survival' requirement of the Water Quality Classifications." However, after the Court of Appeals decision in Niagara Mohawk, the Department Staff stated (letter from Keith Silliman, Esq., December 6, 1993), without further explanation, that "[o]ur current water quality standards do not establish adequate parameters to rely upon at this time to impose minimum flow or entrainment and impingement protection measures." Staff then stated that any conditions in the WQCs would be limited to the standards in 702-704 that implement the water quality classifications found in 701. The specific proposed conditions and language set forth in the actual draft WQCs for these Projects will be addressed below in this report.

Niagara Mohawk has maintained throughout that the Staff's reasons for denying its applications, concerning fish entrainment, aquatic habitat, reservoir fluctuations, and the others, are outside the proper scope of the Department's authority in reviewing applications for WQCs. The Applicant contends that compliance with water quality standards is determined only with reference to the numerical or narrative water quality criteria that are established to protect the waters for their designated best uses under the various classifications. To interpret the standards to encompass the uses themselves, the Applicant asserts, would lead to impermissible infringement by the State on FERC's exclusive jurisdiction to review and render its licensing decision on a comprehensive analysis of all factors, including the project's effect on fish, other than the State's duly adopted and EPA-approved water quality criteria. Niagara Mohawk further argues that the fish entrainment concern expressed by the Department Staff does not relate to a discharge from the project, and is therefore not properly considered in a WQC review.

We have already seen that 33 U.S.C. 1341(a)(1) (CWA 401) requires States to certify that a discharge into navigable waters complies with applicable water quality standards. "Discharge" is defined in the CWA, 33 U.S.C. 1362(16), as a discharge of a pollutant or pollutants. "Pollutant," defined at 1362(6), includes many kinds of wastes and materials, including heat. "Pollution" is defined at 1362(19) as "the man-made or man-induced alteration of the chemical, physical, biological, and radiological integrity of water."

The substance of water quality standards and the procedure for their adoption by the States and approval by EPA are set forth in the CWA 303 (33 U.S.C. 1313). The statute provides as follows with respect to the adoption of new or revised water quality standards:

"Such revised or new water quality standard shall consist of the designated uses of the navigable waters involved and the water quality criteria for such waters based upon such uses. Such standards shall be such as to protect the public health or welfare, enhance the quality of water and serve the purposes of this chapter. Such standards shall be established taking into consideration their use and value for public water supplies, propagation for fish and wildlife, recreational purposes, and agricultural, industrial, and other purposes, and also taking into consideration their use and value for navigation." 33 U.S.C. 1313(c)(2)(A).

The EPA's regulations further define water quality standards and criteria. 40 CFR 131.2 states the purpose of a water quality standard and meaning of criteria as follows:

"131.2 Purpose. A water quality standard defines the water quality goals of a water body, or portion thereof, by designating the use or uses to be made of the water and by setting criteria necessary to protect the uses. . . (b) Criteria are elements of State water quality standards, expressed as constituent concentrations, levels, or narrative statements, representing a quality of water that supports a particular use. When criteria are met, water quality will generally protect the designated use."

Water quality standards are thus defined to consist of both the means -- the water quality criteria -- and the desired end -- the designated uses or goals of a water body that will be achieved by enforcing the water quality criteria. A third element directed by the CWA for inclusion in state water quality standards, an anti-degradation policy, is discussed below.

New York's program for adopting water quality standards and administering the State's entire water quality program has been approved and delegated to the State by the EPA in accord with the federal Clean Water Act. New York's declaration of policy, consistent with that in the CWA, 33 U.S.C. 1251, is stated in ECL 17-0101 as follows:

"It is declared to be the public policy of the state of New York to maintain reasonable standards of purity of the waters of the state consistent with public health and the public enjoyment thereof, the propagation and protection of fish and wild life, including birds, mammals and other terrestrial and aquatic life, and the industrial development of the state, and to that end require the use of all known available and reasonable methods to prevent and control the pollution of the waters of the state of New York."

The State has implemented its water quality standards through ECL 17-0301. Subdivision 2 directs the Department to group the designated waters of the state into classifications made in accordance with considerations of best usage of the waters, and provides a list of factors to guide such classifications. Subdivision 4 then directs the Department to "adopt and assign standards of quality and purity for each such classification necessary for the public use or benefit contemplated by such classification." The statute continues by providing a list of substantive parameters for incorporation into the water quality standards in 6 NYCRR.

The State's duly promulgated water quality standards are set forth in 6 NYCRR Parts 700-705. Part 700 contains definitions applicable to those Parts. Part 702 contains the technical procedures for derivation and use of standards and guidance values. Part 701 contains the classifications and designated best uses of the waters in each classification. Part 703 contains the actual numerical and narrative water quality standards or criteria for various parameters, substances, and contaminants applicable to each classification. Part 704 contains the State's thermal discharge criteria. Part 705 contains references to relevant Federal statutes, regulations, and publications.

The river reaches that may be affected by Niagara Mohawk's nine Projects are all designated in fresh surface water Classes B and C. Under 6 NYCRR 701.7, "[t]he best usages of Class B waters are primary and secondary contact recreation and fishing. These waters shall be suitable for fish propagation and survival." Under 701.8, the best usage of Class C waters is fishing. Also "[t]hese waters shall be suitable for fish propagation and survival. The water quality shall be suitable for primary and secondary contact recreation, although other factors may limit the use for these purposes." 6 NYCRR 701.1 states the general conditions applicable to all water classifications as follows: "The discharge of sewage, industrial waste or other wastes shall not cause impairment of the best usages of the receiving water as specified by the water classifications at the location of the discharge and at other locations that may be affected by the discharge."

The main basis for the Department Staff's denials of the WQCs for these Projects was its concern for the entrainment and impingement of fish in the facilities' turbines and penstocks. Such entrainment and impingement will result in the killing of some proportion of the fish in the affected reaches of the rivers (The potential factual issues surrounding entrainment are not before us in these rulings.). It does seem logical that a facility's actual effect of killing fish will impair the best usage of the receiving waters, which require that the waters be "suitable for fish propagation and survival." However, there are several reasons why it is not appropriate to deny or condition a WQC based on such concerns as fish entrainment under the existing State and Federal scheme for licensing hydroelectric projects and certifying water quality.

New York's water quality program, approved by the EPA, focuses on prevention of water pollution in order to achieve the goals or and best usages of water bodies (see ECL 17-0101). The goals are accomplished through implementation and enforcement of the water quality criteria that consist of numerical concentrations or narrative statements for the various pollutants and parameters applicable for each classification of water body. These criteria are the means to achieve the desired end. They are designed specifically to achieve and maintain the best usage for each classification under ECL 17-0301. To skip over the water quality criteria and look at the possible effect of a project on the goal or best use for the water body would be putting the cart before the horse, and would run afoul of the water quality standards program.

For example, the water quality parameters that are most likely to be affected by hydroelectric projects, and that could affect fish survival and propagation, are dissolved oxygen, temperature, and turbidity. The Department has already determined that for Class B and C "nontrout" waters, such as are present at some of the Project sites, dissolved oxygen concentrations must meet a minimum daily average concentration of 5 mg/L, and must at no time be less than 4 mg/L (6 NYCRR 703.3). Applicable thermal discharge criteria, including a maximum surface temperature of 90F, are set forth in 6 NYCRR 704.2. The applicable turbidity standard for these waters is a narrative statement in 703.2 that prohibits any "increase that will cause a substantial visible contrast to natural conditions." The State has already determined that if these criteria are met, the waters will be suitable for fish propagation and survival. Although some fish may be lost through entrainment, the waters remain suitable for fish propagation and survival if the water quality criteria are met.

If the Department has legitimate concerns that these criteria may not be met, it may certainly impose conditions or deny the certification. The Department did in fact deny the certification in Power Authority, supra, based on the applicant's failure to demonstrate the project's discharge would comply with thermal water quality criteria. The appropriate scope of the Department's review should be limited to the water quality criteria that were specifically promulgated to protect the designated beneficial uses. That review should not be expanded to examine the impairment of the uses themselves unless the water quality criteria are first implicated. This would accord with the structure of the existing State water quality standards in 6 NYCRR Parts 701-704. Those standards are implemented by essentially an iterative system that first establishes the water quality criteria as the means to achieve the best uses, or the desired ends. Meaningful analysis of compliance with the standards necessarily requires focus on the means, or water quality criteria themselves, rather than the ends. This would also accord with the statement of the Court of Appeals in Power Authority, supra, that "the section 401 certification process is accomplished by a determination that a proposed project will meet the particular water quality standards for the applicable classification." 60 N.Y.2d 327.

In addition, the State agency reviewing a water quality certification under 33 U.S.C. 1341(a)(1) is specifically directed to consider the "discharge" from a project. The effect of entrainment and impingement of fish in a project's turbines does not fall within the definition of a discharge in the CWA (see 33 U.S.C. 1362[16]), unless, as stated in de Rham, supra, the effect is that of the introduction of pollutants into the River as a result of fish entrainment. It is evident that the Department's concern stated in its denial letter is with the entrainment itself, and not any resulting discharge of pollutants.

The other reasons given for the denials in this proceeding, involving reservoir fluctuations and the aquatic habitat in the bypass reaches, do arguably relate to a discharge from the Project in its altering of flow rates and impoundment levels. But again, a concern about possible impairment of a designated best use is not a valid basis for denial of a WQC without an underlying reason based on the applicable water quality criteria designed to support and protect those uses. As discussed in the following section of these rulings, the Department Staff has pursued its concern about the water quality in the bypass reaches by proposing special conditions in the WQC requiring the Applicant to release an adequate flow and to monitor the water quality in the bypass reaches. Similar special conditions apply to downstream releases, or in some cases, the draft WQCs do contain minimum downstream release requirements.

The Department Staff has indicated it intends to modify the water quality standards and promulgate new standards to address fish protection and minimum flows. Staff would then proceed to modify these WQCs under 6 NYCRR 621.14. This course of action is of course speculative at this time, but it evinces Staff's recognition that the current water quality standards do not provide adequate bases to deny or condition WQCs based on fish protection concerns.

The decisions of the New York Court of Appeals and United States Supreme Court outlined above provide further support for this interpretation of the proper scope of review of compliance with the State's water quality standards in a WQC application. Although the Court in Niagara Mohawk did not specifically address the scope of the water quality standards themselves in this context, it strongly reaffirmed the overarching principle of "settled law" in New York declared in de Rham and Power Authority: federal pre-emption to avoid duplication of FERC's comprehensive regulation of hydroelectric facilities. "Review by state agencies that would overlap or duplicate the federal purview and prerogatives was not contemplated and would infringe on and potentially conflict with an area of the law dominated by the nationally uniform Federal statutory scheme." 82 N.Y.2d 195.

FERC, in its relicensing review of these Projects, is actively considering the issues of fish entrainment and aquatic habitat raised by the Department Staff in its initial denials. NYRU contends these remain valid bases for affirming those denials. The Department Staff and U.S. Fish and Wildlife Service have consulted with FERC and raised these concerns in the FERC licensing proceedings. For the Department Staff to also deny or condition the WQCs on the basis of fish entrainment concerns would create dual permitting authorities that could likely conflict with each other. This would directly contravene the United States Supreme Court's holding in First Iowa, supra, prohibiting a dual permitting system as "unworkable." 66 S.Ct. 913.

It is true, as NYRU asserts, that the courts of other states have decided this and closely related issues differently. Also, the EPA has expressed a broad view of the states' role in protecting water quality and in reviewing 401 water quality certifications (letter from Lajuana S. Wilcher, Assistant Administrator, EPA to Lois D. Cashell, Secretary, FERC, Jan. 18, 1991). However, the opinions expressed by the EPA or other state courts cannot control over those expressed by the highest court of this State.

In Bangor Hydro-Electric Company v. Board of Environmental Protection, 595 A.2d 438 (Me., 1991) the Maine Supreme Court upheld the state agency's denial of a WQC for the applicant's failure to submit requested information relating to fish passage and recreational access to the affected river. The Court found that the state agency could properly look beyond compliance with the water chemistry criteria and examine whether the designated uses actually existed. The Court stated that the designated uses "would be rendered a nullity if the agency responsible for reviewing compliance could consider only the numerical criteria and not whether the designated uses actually were achieved in a particular river." 595 A.2d 442. The Vermont Supreme Court in Georgia-Pacific Corporation v. Vermont Department of Environmental Conservation 35 E.R.C. 2052 (1992) upheld a continuous minimum flow requirement in a hydroelectric project, citing the state's water quality standards which encompass aesthetic and recreational uses. The Washington Supreme Court in Washington v. P.U.D. No.1, supra, upheld a minimum flow requirement in a state certification on the basis of both the state's water quality standards (33 U.S.C. 1341[a][1]) and the integration of "any other appropriate requirement of state law" under 1341(d).

These cases may be distinguished from New York's on the basis of differing language and structure in the respective states' duly adopted water quality standards. In any event, New York's Court of Appeals recognized in Niagara Mohawk that other states had construed their authority to review WQCs more broadly, and that the issue will shortly be before the United States Supreme Court on certiorari granted in Washington v. P.U.D. No.1, supra. In New York we must follow our highest court which said "[w]hatever the outcome in the Supreme Court of the United States, we respectfully reach a different conclusion from those courts based on our analysis and precedents." 82 N.Y.2d 198.

- Anti-Degradation Policy

The federal regulations promulgated to implement the Clean Water Act require the states to adopt an "anti-degradation" policy as the third element, after the designated uses and water quality criteria, in their water quality standards. 40 C.F.R. 131.12. The anti-degradation policy is to protect the existing level of water quality and beneficial uses unless the state determines that a lower level of quality is necessary to accommodate important economic or social development. Each state's anti-degradation policy is approved by the EPA along with the rest of the state's water quality standards.

NYRU contends that New York's anti-degradation policy provides an additional basis for the Department to expand the scope of its review of 401 WQCs. In addition to the water quality standards in 6 NYCRR Parts 701-704, the Department's former Commissioner, Henry G. Williams, promulgated an Organization and Delegation Memorandum ("O&D Memo") No. 85-40 on September 9, 1985 entitled "Water Quality Antidegradation Policy." This document restates the federal purpose of the policy and outlines the various state laws and regulatory programs through which it is to be implemented. Among these are the Part 701-704 water quality standards, and SEQRA. The EPA approved this O&D Memo along with other revisions in New York's water quality standards in subsequent correspondence.

The anti-degradation policy as embodied in the O&D memo, however, adds nothing substantive to the State's water quality standards and nothing to our analysis of the proper scope of the State's review of a WQC application. The substance of the anti-degradation policy is already incorporated into the Part 701-704 standards through the designated best uses of the State's waters and the water quality criteria. Those regulations provide that discharges "shall not cause impairment of the best usages" of the receiving waters (6 NYCRR 701.2).

The O&D Memo cites SEQRA only as a possible vehicle to prevent degradation of water quality in matters that are not subject to other superseding laws, and where SEQRA is otherwise applicable. In this proceeding, the Project is governed by superseding federal law in the licensing proceeding before FERC under the Federal Power Act, as well as the state certification under the CWA. Further, the Project is an excluded action under SEQRA. It is a renewal of an approval for a facility in existence before SEQRA's enactment (6 NYCRR 617.2[p]). Even if it were not grandfathered from SEQRA, the Court of Appeals in Niagara Mohawk, supra has specifically held that SEQRA is pre-empted from applying in water quality certifications for hydroelectric projects under the Federal Power Act. Therefore, neither the anti-degradation policy nor SEQRA provides any support for broadening the scope of the Department's review of 401 water quality certifications beyond the water quality standards themselves.

Draft Water Quality Certifications

The Court of Appeals decision in the Niagara Mohawk case led to a fundamental re-alignment of the positions of the parties in this proceeding. The Department Staff, which had previously denied Niagara Mohawk's applications for WQCs, has now proffered draft WQCs that do not require the fish entrainment studies and related conditions it had earlier sought. Although the Staff and Applicant still disagree over the proper content of certification, there is considerable common ground. Their differences center on the procedural philosophy behind issuance of a WQC, and the need for general and special conditions. In light of the Niagara Mohawk decision Staff does now however adopt the basic position of the Applicant that the Department's authority under the CWA 401 is limited to water quality and should not infringe on FERC's preemptive role in reviewing a renewal application for a hydropower project. This is reflected in the draft WQC attached as an appendix to this report. Also attached is the draft WQC form proposed by Niagara Mohawk.

NYRU, on the other hand, was little swayed by the Niagara Mohawk decision. NYRU, as we have seen, takes a fundamentally broader view of the Department's authority to review applications for 401 WQCs for compliance with the State's water quality standards. NYRU therefore objects to issuance of the proposed draft WQCs and urges reopening the issues conference or reaffirming the Department Staff's original denial of Niagara Mohawk's applications.

- Applicant's Objections to the Draft WQC

-- General Conditions

The Applicant objects to the inclusion of all the General Conditions in the draft WQC. The General Conditions are apparently the standard "boilerplate" conditions included in all the Department's environmental permit programs, such as wetlands, solid waste, air emissions, and SPDES (see cover page of draft WQC). Niagara Mohawk maintains that these conditions and the use of the terms "permit" and "permittee" are inappropriate in the context of a 401 water quality certification. The Department Staff has not responded substantively with any defense of its use of the standard permit General Conditions in its WQCs.

The 401 certification is fundamentally different from a permit issued under one of the Department's regulatory programs. In this proceeding the Department is only certifying the Project's compliance with a limited set of State laws governing water quality. The Department does not have present or continuing pervasive oversight and administrative responsibilities over the operation of this Project. As we have seen above, FERC has pre-emptive jurisdiction over the entire procedure and substance of this licensing proceeding. It will continue to oversee the operation of the Glens Falls Project under the applicable Federal regulations, fulfilling the role that this Department would fill in a typical State permit program.

Nevertheless, the Department does retain continuing authority consistent with the limited purpose of the certification -- to verify the Projects' compliance with water quality standards. Although not a "permit," the uniform permit processing procedures are in 6 NYCRR Part 621 are applicable to an application for a water quality certification (621.4[e]). The Department may retain limited powers and rights over these Projects along the lines suggested in at least some of the General Conditions. Certain of the proposed General Conditions may be inappropriate and should be deleted, while others may be retained with some language modifications. These rulings will not attempt to dictate the specific language for the General or Special Conditions, but will provide guidelines based on the arguments presented by the parties. Throughout the General Conditions and the entire WQC, all references to "permit" or "permittee" should be replaced by "certification" and "licensee" or "FERC licensee." This is simply correct usage, as the Applicant here is not a Department permittee.

Draft General Condition 1 vests the Department with inspection rights and the authority to issue "stop work" orders. The Applicant contends this conflicts with FERC's Regional Engineer's power to oversee operations at licensed facilities under Article 4 of FERC's standard license conditions. While Article 4 certainly gives FERC's representative such powers, it does not on its face grant him or her exclusive powers. The Department should retain power to at least inspect the facility for its continuing compliance with water quality standards, and be able to require the licensee to stop any activity that is violating water quality standards. General Condition 1 should therefore be redrafted to so limit the Department's powers and to reference FERC's concurrent and broader powers over the facility.

Draft General Conditions 2-4 address permit changes and renewals. The Applicant contends this is inappropriate in a WQC as inconsistent with FERC's procedures. 33 U.S.C. 1341(a)(3) requires states to notify the Federal agency when the State wishes to withdraw its certification due to changed conditions or changes in the water quality criteria. This procedure is not necessarily inconsistent however with the Department's internal procedure for modifying a permit or certification set forth in 6 NYCRR 621.14, and which is essentially repeated in General Condition 2. While it is true that it is not necessary to insert in permits regulatory provisions that would apply anyway, there is no reason to exclude them when they ordinarily do appear in all other permits the Department issues. Leaving them in the permit, or, in this case, the certification, could provide better notice to the permittee and to the public.

Any permit modification and renewal proceedings would have to be consistent with FERC proceedings, however. 401 water quality certifications are not renewed until expiration of the FERC license. To the extent the application and deadline requirements in General Conditions 2, 3 and 4 may conflict with FERC procedures, they should be modified, and the FERC procedure referenced. The language in General Condition 2 should be modified to indicate its limitation to violations of water quality standards. As appropriately modified, General Conditions 2, 3, and 4 may remain in the WQC for this Project.

General Condition 5 states that "issuance of this permit does not modify, supersede, or rescind" any prior order or determination of the Department. Staff has not explained the purpose of this condition. As currently drafted it is vague and could cause confusion. If there is any particular prior order or determination that the Department wishes to remain applicable to this Project, it should be specifically cited. Otherwise, General Condition 5 should be deleted.

General Condition 6 is an indemnification clause in which the "permittee" agrees to assume legal responsibility and indemnify the State from any lawsuits or damages arising from the Project. The Applicant argues that this is inappropriate where the State is not the chief licensing agency. As currently drafted, this provision is overbroad, since this State does not authorize the activity, but only certifies compliance with water quality standards. Perhaps a more restrictive indemnification clause could be drafted limited to legal responsibility for water quality compliance. Staff may attempt to so limit this indemnification clause or delete it.

General Conditions 7 and 8 state that the "permittee" is not authorized to trespass, and is responsible for obtaining any other necessary permits or approvals for the Project. These provisions may not be necessary, but they were not substantively contested. They could apply in certain situations, and they may be retained.

-- Certifying Language

The Applicant proposes modifying the actual certifying language to more closely follow the language of 33 U.S.C. 1341(a)(1) and to omit a broader reference to all applicable laws in the Staff's draft WQC. The Applicant's language in its draft WQC is clearer and preferable to that on page 3 of Staff's draft. The Applicant cites the actual applicable laws and regulations rather than referring twice to "whatever may be applicable," as Staff does in its draft.

Niagara Mohawk recommends adding a statement to the effect that the Department Staff has reviewed the Applicant's FERC application and all available studies and information on the water quality in the Hudson River that could be affected by this Project, and renders its certification based on that review. This is an excellent suggestion. In fact such a statement is required by the Federal regulations governing WQCs (40 CFR 121.2[a][2]). It also addresses one of the objections of NYRU, that the draft WQC on its face does not provide assurance that the Project will comply with water quality standards.

-- Applicability

The Applicant's draft WQC omits any "Applicability" section. The language suggested by the applicants in the parallel proceedings, to distinguish between those conditions governing routine operations and those governing construction or other activity in the bed or banks of the River that could affect water quality (pp. 3-4 of Niagara Mohawk draft WQC) is preferable. This suggestion should be incorporated into the Staff's "Applicability" section to help clarify this section of the WQC.

-- Special Conditions in General

The Applicant's draft includes no conditions, general or special. However, the Department is authorized by 40 CFR 121.2(a)(3) to include conditions it deems necessary and desirable to ensure compliance with water quality standards. Therefore, these rulings on the specific draft WQC conditions will proceed on the premise that conditions are appropriate if factually justified. Factual issues may be raised, of course, if the Applicant contends the proposed specific condition is not factually supported.

Since the Applicant's draft WQC did not include any conditions, it is not clear whether it wishes to raise a factual to any or all of the proposed draft WQC conditions. However, Niagara Mohawk did indicate its opposition to the condition addressed in the next paragraph, and stated its disagreement with the language of other special conditions. In general, the language differences do not appear substantial, but the Applicant will have an opportunity to further indicate whether it wishes to raise any factual issues with respect to any of the other draft special conditions.

-- Release of Water to Bypass Reach

Niagara Mohawk opposes this condition and its requirement for a monitoring program. The Applicant states it is unnecessary based on available data indicating no dissolved oxygen or temperature problems in any of the affected waters. The Applicant did not specifically address the proposed similar special conditions for downstream releases and monitoring, or, for some Projects, requirements for minimum downstream release flows. However, since Niagara Mohawk's draft WQC does not include those conditions, it is assumed they are opposed on a similar basis.

The Applicant's objection to the proposed requirements for monitoring the bypass or downstream reaches creates potential factual issues for adjudication unless they are otherwise resolved. The Department has authority to require such conditions it deems necessary or desirable to ensure that future operation of the facility will not contravene water quality standards for the parameters of concern (40 CFR 121.2[a][3]; see De Rham, supra, 32 N.Y.2d 42). The Applicant has the right to object on the grounds that such permit conditions are not reasonably necessary for its Projects. As in any hearing on a disputed permit condition, the burden will be on the Applicant to prove that the Project will comply with the applicable laws, without the disputed condition (6 NYCRR 621.7[f]; 624.9[f]).

- NYRU's Objections to the Draft WQCs

To a large degree, NYRU's objections to the draft WQCs repeat its contentions on the scope of the Department's authority to review such certification applications. In this section, those legal arguments that were dealt with above will only be briefly alluded to where they directly concern the draft WQCs. In particular, NYRU's renewed argument on the anti-degradation policy as implemented through SEQRA will not be addressed again in this section of these rulings.

NYRU complains that the draft WQCs do not on their face include any data or analysis to provide the necessary "reasonable assurance" that the Projects will comply with water quality standards. However, there is no requirement that the certification document itself contain the underlying data and analysis to support the certification. To the contrary, the regulations (40 CFR 121.2[a]) contemplate a short certification that essentially includes only a statement attesting that the certifying agency has examined the application and other information to enable it to make the requisite certification, the certification itself, and any conditions deemed necessary by the certifying agency.

NYRU submitted a Vermont WQC as a proposed alternative form that consists of some 80 pages of findings of fact, conclusions, comments and responses. A WQC of this length and in this form to is unwieldy, uncalled for by the regulations, and inappropriate for issuance in this State. Under our procedure, these rulings and any subsequent hearing record and report will provide the underlying findings and conclusions to support the certification. The certification document itself, however, like a permit, should be short and to the point.

For these Projects, the Department Staff has had an opportunity to review the Applicant's FERC applications, which include extensive technical data and consultants reports, and other available information on the water quality of the affected reaches of the various rivers. These documents fully describe the Projects' proposed modes of operation and their potential effects on water quality. It is true that any potential factual issues concerning these matters were held in abeyance on the agreement of all parties pending the resolution of the legal issue concerning the scope of the Department's authority to review, deny and condition WQCs. Therefore, NYRU will have an opportunity during the upcoming review period to also review these materials and determine if it wishes to raise any factual issues with regard to the certifications or draft conditions. As indicated above, such a potential factual issue is already drawn between the Applicant and Staff with respect to the need for monitoring the bypass reaches.

NYRU also contends that the draft WQCs are vague and improperly depend on information to be submitted in the future after FERC relicensing, on such matters as operational regimes and monitoring protocols. This, however, is not necessarily improper at all. The Department Staff is satisfied that it had sufficient information in the application materials at this time to render the certifications, although there may be some variations in the final FERC licenses. Depending on the relevant facts and level of concern, conditions such as these that require an applicant to undertake studies or finalize monitoring programs after license or permit issuance, may be entirely appropriate. Again, NYRU will have an opportunity to review the application materials for potential factual issues, including the sufficiency of the information available for Staff to render the certifications.

Similarly, NYRU asserts that the continued operation of the Projects "may violate" certain of the water quality criteria, including turbidity (6 NYCRR 703.2), dissolved oxygen (703.3), and temperature (Part 704). At this juncture NYRU has not had an opportunity to review the application materials for potential factual issues. After such review, NYRU may seek to raise such factual issues if it disagrees with the certifications that the facilities will comply with such standards. As in any permit hearing where an intervenor seeks to raise an issue for adjudication, NYRU will have to demonstrate through an offer of proof that the issue is substantive and significant (6 NYCRR 624.4[c]; 624.5[b][2]).

In accord with the analysis of the legal issues above in these rulings, no potential issue is raised by NYRU's allegations that the draft WQCs may cause impairment of the River's best uses for fishing and recreation. Those are matters reserved to FERC for its determination under the Federal Power Act.

Propriety of Original Denial of WQC

Niagara Mohawk throughout its submissions in this proceeding has continued to reserve its rights to claim that the Department did not lawfully deny its certification applications within one year of the date of its submittal, and that therefore the Department has waived the certification of this Project under 401. Certainly, Niagara Mohawk may continue to reserve its right to make that claim in this or any other forum. However, it will be addressed in these rulings for the purposes of this proceeding at this juncture.

Niagara Mohawk objected to the Department Staff's denial for failure to submit information on fish entrainment and other matters although the Department had issued a Notice of Complete Application and had not formally requested additional information before the denials. Although there may have been some mis-communication, this does not constitute improper procedure. Staff had met with Niagara Mohawk during this period and maintained a consistent position that the it would require such information for issuance of the WQCs. When that material was not forthcoming as the one-year FERC deadline for certification approached, Staff could properly deny the applications without prejudice for the reasons stated. Applications may be denied at any time for the failure of the applicant to submit requested additional reasonably necessary information (6 NYCRR 621.15[b]).

Niagara Mohawk also contends that such denials were unlawful and therefore the certifications have been waived. The denials, however, led the Applicant to request this hearing. The hearing proceeding, in which we have since been continuously engaged, has intervened and superseded Staff's prior actions in processing these applications. It is true that these rulings, in the wake of the Niagara Mohawk decision, agree with Niagara Mohawk's original position on the denials. In fact, even Staff has significantly reversed that position. The fact that the Applicant's legal position has been upheld does not make the prior Staff action unlawful. Further, in this case the Staff's subsequent issuance of the draft WQCs has completely superseded the prior determinations in the same way as if an applicant had significantly modified its project. Therefore, the original denial is now moot. This proceeding will now move forward by focusing on the draft WQCs and determining whether any legal or factual issues remain for adjudication before final action is taken by this Department on this application.

Summary of Rulings

  1. Under New York law, the Department is limited to certifying compliance with water quality criteria in 6 NYCRR Parts 703-704, designed to protect the designated uses of waters in Part 701, in reviewing an application for a 401 water quality certification.
  2. The draft WQCs recently proposed by Staff would constitute valid WQCs for these Projects with some modifications suggested in these rulings.
  3. A potential factual issue or issues are raised between the Applicant and Staff on the need for special conditions requiring monitoring of the bypass reaches of these facilities.
  4. The intervenor NYRU, along with the other parties, will have an opportunity to further review the application materials to determine if they wish to attempt to raise any additional factual issues for adjudication.

Future Proceedings

The parties will now have an opportunity to reassess their positions in accord with these rulings. Staff should re-draft the draft WQCs as indicated in these rulings, preferably in consultation with the Applicant. The Applicant and Staff should make the application materials available to NYRU at a reasonable time and place. The parties are also of course encouraged to negotiate among themselves and attempt to narrow or resolve any and all remaining disputed issues.

These rulings are appealable to the Commissioner, and this re-drafting and review may occur simultaneously with any filing of appeals. However, it would be more efficient to allow the review period to extend beyond the appeal period. Therefore I will set a tentative date approximately 60 days from the date of these rulings (subject to any decision of the Commissioner on any appeals), June 23, 1994, for the parties to submit updated statements of position. These would be the equivalent of filings for party status in what would be essentially a second issues conference stage to determine whether any potential substantive or significant factual issues remain in dispute among the parties. Upon receipt of those filings, possible options would include directing issuance of the certifications, reconvening the issues conference, or directing an adjudicatory hearing be held on a particular issue or issues.

Appeals

These rulings may be appealed to the Acting Commissioner, Langdon Marsh. Since the legal issues have already been thorougly briefed, an extended period is not necessary. Any appeals must be received at the Commissioner's office no later than May 4, 1994. The parties may file responses to the appeals no later than May 13, 1994. Copies of all appeals and responses must be sent to the ALJ and the other parties.

/s/
Andrew S. Pearlstein
Administrative Law Judge

DATED: April 20, 1994
Albany, New York

TO: Attached Distribution List

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