[Federal Register Volume 83, Number 1 (Tuesday, January 2, 2018)]
[Rules and Regulations]
[Pages 1-7]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28095]



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 Rules and Regulations
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
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  Federal Register / Vol. 83, No. 1 / Tuesday, January 2, 2018 / Rules 
and Regulations  

[[Page 1]]



DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 11

[Docket No. RM16-19-000; Order No. 838]


Annual Charges for Use of Government Lands in Alaska

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Federal Power Act requires hydropower licensees to 
recompense the United States for the use, occupancy, and enjoyment of 
federal lands. The Federal Energy Regulatory Commission (Commission) 
assesses annual charges for the use of federal lands through its 
regulations concerning charges for the use of government lands. In this 
Final Rule, the Commission revises the per-acre land value component of 
its methodology for calculating these annual charges for hydropower 
projects located in Alaska. Pursuant to the Final Rule, the Commission 
will calculate a statewide per-acre land value for hydropower lands in 
Alaska. The Commission will use this statewide per-acre land value, 
rather than a regional per-acre land value, to calculate annual charges 
for use of federal lands for all hydropower projects in Alaska, except 
those located in the Aleutian Islands Area.

DATES: This rule will become effective February 1, 2018.

FOR FURTHER INFORMATION CONTACT: 
Tara DiJohn (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street NE, Washington, DC 
20426, (202) 502-8671, [email protected]
Norman Richardson (Technical Information), Office of the Executive 
Director, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-6219, [email protected]

SUPPLEMENTARY INFORMATION:

Table of Contents

 
                                                         Paragraph Nos.
 
I. Background........................................                  2
    A. Order No. 774.................................                  4
        1. Per-Acre Land Value.......................                  6
        2. Per-Acre Land Value for Alaska............                  8
    B. Fiscal Year 2016 Fee Schedule.................                 11
    C. Petition for Rulemaking.......................                 12
    D. Notice of Inquiry.............................                 15
    E. Notice of Proposed Rulemaking.................                 22
II. Discussion.......................................                 27
    A. Calculation of Statewide Per-Acre Value.......                 28
    B. Application of Statewide Per-Acre Value.......                 35
    C. Effective Date of Statewide Per-Acre Value....                 36
III. Regulatory Requirements.........................                 37
    A. Information Collection Statement..............                 37
    B. Environmental Analysis........................                 38
    C. Regulatory Flexibility Act....................                 39
    D. Document Availability.........................                 45
    E. Effective Date and Congressional Notification.                 48
 

Order No. 838

Final Rule

(Issued December 21, 2017)
    1. The Federal Power Act (FPA) requires hydropower licensees that 
use federal lands to compensate the United States for the use, 
occupancy, and enjoyment of federal lands.\1\ Currently, the Commission 
uses a fee schedule, based on the U.S. Bureau of Land Management's 
(BLM) methodology for calculating rental rates for linear rights of 
way, to calculate annual charges for use of federal lands. The 
Commission's fee schedule identifies a fee for each county or 
geographic area, which is the product of four components: A per-acre 
land value, an encumbrance factor, a rate of return, and an annual 
adjustment factor. The per-acre land value for a particular county or 
geographic area (i.e., a regional per-acre land value) is determined 
using the average per-acre land value identified by the National 
Agricultural Statistics Service (NASS) Census. This Final Rule amends 
part 11 of the Commission's regulations and implements the use of a 
revised per-acre land value component for calculating these annual 
charges for hydropower projects located in Alaska. Under the Final 
Rule, the Commission will use a statewide per-acre land value, rather 
than a regional per-acre land value, to calculate annual charges for 
use of federal lands for all hydropower projects in Alaska, except 
those located in the Aleutian Islands Area.
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    \1\ 16 U.S.C. 803(e)(1) (2012).
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I. Background

    2. Section 10(e)(1) of the FPA requires Commission hydropower 
licensees using federal lands to pay reasonable annual charges, as 
determined by the Commission, to recompense the United States for the 
use and occupancy of its lands.\2\ While the Commission may

[[Page 2]]

periodically adjust these charges, it must seek to avoid increasing the 
price to power consumers by such charges.\3\ In other words, licensees 
that use and occupy federal lands for project purposes must compensate 
the United States through payment of an annual fee, to be established 
by the Commission.\4\
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    \2\ 16 U.S.C. 803(e)(1) (2012). Section 10(e)(1) also requires 
licensees to reimburse the United States for the costs of 
administering Part I of the FPA. Those charges are calculated and 
billed separately from the federal land use charges, and are not the 
subject of this rulemaking.
    \3\ Id.
    \4\ Pursuant to FPA section 17(a), 16 U.S.C. 810(a) (2012), the 
fees collected for use of government lands are allocated as follows: 
12.5 percent is paid into the Treasury of the United States, 50 
percent is paid into the federal reclamation fund, and 37.5 percent 
is paid into the treasuries of the states in which particular 
projects are located. No part of the fees discussed in this 
rulemaking is used to fund the Commission's operations.
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    3. The Commission has adopted various methods over the years to 
accomplish this statutory directive.\5\ Currently, the Commission uses 
a fee schedule method, based on land values published in the NASS 
Census, to calculate annual charges for use of government lands. The 
Commission adopted this approach in a final rule issued on January 12, 
2013.\6\
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    \5\ See Annual Charges for Use of Government Lands, Order No. 
774, FERC Stats. & Regs. ] 31,341, at PP 3-20 (2013) (cross-
referenced at 142 FERC ] 61,045) (examining the myriad methods the 
Commission has used or considered since 1937 for assessing annual 
charges for the use of government lands).
    \6\ See generally, Order No. 774, FERC Stats. & Regs. ] 31,341.
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A. Order No. 774

    4. In Order No. 774, the Commission adopted a fee schedule method 
for calculating annual charges for use of government lands, based on 
BLM's methodology for calculating rental rates for linear rights of 
way. Pursuant to Sec.  11.2 of the Commission's regulations, the 
Commission publishes an annual fee schedule which lists per-acre rental 
fees by county or geographic area.\7\ To calculate a licensee's annual 
charge for use of government lands, the Commission multiplies the 
applicable county or geographic area per-acre fee identified in the fee 
schedule by the number of federal acres used by the hydroelectric 
project, as reported by that licensee.
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    \7\ 18 CFR 11.2 (2017). The fee schedule is published annually 
as part of appendix A to part 11 of the Commission's regulations.
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    5. The per-acre rental fee for a particular county or geographic 
area is calculated by multiplying four components: (1) A per-acre land 
value; (2) an encumbrance factor; (3) a rate of return; and (4) an 
annual adjustment factor.
1. Per-Acre Land Value
    6. The first component--the per-acre land value--is based on 
average per-acre land values published in the NASS Census. The per-acre 
value for a particular county or geographic area is identified using 
the corresponding NASS-published per-acre ``land and buildings'' 
value.\8\ This per-acre value is then reduced by the sum of a state-
specific modifier (to remove the value of irrigated lands) and seven 
percent (to remove the value of buildings or other improvements). The 
end result is the adjusted per-acre land value.
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    \8\ The NASS Census ``land and buildings'' category is a 
combination of all land use categories in the NASS Census, including 
croplands (irrigated and non-irrigated), pastureland/rangeland, 
woodland, and ``other'' (roads, ponds, wasteland, and land 
encumbered by non-commercial/non-residential buildings).
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    7. The NASS Census is conducted every five years, with an 18-month 
delay before the census data is published. The Commission incorporates 
another 18-month delay to account for revisions, consistent with BLM's 
implementation of its 2008 rule. Therefore, the Commission based its 
2011-2015 fee schedules on data from the 2007 NASS Census. The 
Commission's 2016-2020 fee schedules will be based on data from the 
2012 NASS Census; the 2021-2025 fee schedules will be based on data 
from the 2017 NASS Census; the 2026-2030 fee schedules will be based on 
data from the 2022 NASS Census; and so on. State-specific adjustments 
to the per-acre land values are performed in the first year that data 
from a new NASS Census are used, and will remain the same until the 
subsequent NASS Census data are used to calculate the forthcoming set 
of fee schedules.
2. Per-Acre Land Value for Alaska
    8. With regard to Alaska, Order No. 774 explained that the final 
rule would adopt BLM's approach to per-acre land values by designating 
lands in Alaska as part of one of the five NASS Census geographic area 
identifiers: The Aleutian Islands Area, the Anchorage Area, the 
Fairbanks Area, the Juneau Area, or the Kenai Peninsula Area. Under 
BLM's 2008 rule, the Aleutian Islands Area includes all lands within 
the Aleutian Islands chain; the Fairbanks Area includes all lands 
within the BLM Fairbanks District boundaries; the Kenai Peninsula Area 
includes all lands within the BLM Anchorage District boundaries 
excluding the Aleutian Islands chain, the Anchorage Area, and, the 
Juneau Area; the Anchorage Area includes all lands within the 
Municipality of Anchorage; and the Juneau Area includes all lands 
within downtown Juneau (i.e., voting precincts 1, 2, and 3).
    9. Several commenters asserted that a per-acre statewide value, a 
category also reported by the NASS Census, should be used to establish 
assessments for federal land in Alaska.\9\ Order No. 774 considered the 
arguments raised in support of a statewide per-acre value. In 
particular, several commenters asserted that it is inappropriate to use 
regional per-acre values for Alaska because Alaska does not use county 
designations; the number of farms surveyed for the NASS Census in the 
entire state of Alaska is less than the number of farms surveyed in 
most counties in the lower-48 states; and, certain per-acre land values 
near Anchorage and Juneau are very high, resulting in a substantial 
increase in annual charges for the use of government lands by 
hydropower licensees in these areas. However, the Commission ultimately 
concluded that the commenters had not advanced a sufficient explanation 
for why it was more appropriate to use a statewide per-acre value for 
Alaska, rather than the smallest NASS Census defined area for Alaska--
the geographic area identifier.
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    \9\ Order No. 774, FERC Stats. & Regs. ] 31,341 at P 44.
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    10. Although the Commission rejected the use of a statewide per-
acre land value for Alaska in Order No. 774, the Commission clarified 
that it would not use rates based on the Anchorage Area and the Juneau 
Area values to assess annual land use charges ``because these high, 
urban-based rates would not reasonably reflect the value of government 
lands on which hydropower projects are located.'' \10\ Instead, for 
purposes of determining a per-acre land value, the Commission decided 
to apply the Kenai Peninsula Area per-acre value for projects located 
in the Anchorage Area or the Juneau Area. Therefore, Order No. 774 
explained that projects in Alaska would be assessed the Aleutian 
Islands Area per-acre land value if located in the Aleutian Islands 
chain, the Fairbanks Area per-acre land value if located in the 
Fairbanks BLM District, or the Kenai Peninsula Area per-acre land value 
if located in the Anchorage BLM District excluding the Aleutian Islands 
chain.
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    \10\ Id. P 45.
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B. Fiscal Year 2016 Fee Schedule

    11. The Commission used the 2012 NASS Census data to calculate its 
fee schedule for the first time in Fiscal Year (FY) 2016. Due to per-
acre land value

[[Page 3]]

increases in the 2012 NASS Census data, hydropower projects located in 
certain geographic areas in Alaska experienced a significant increase 
in federal land use charges when compared to the rates assessed in FY 
2015.\11\
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    \11\ In the 2012 NASS Census, changes in land values in other 
parts of the country varied widely: Some rose significantly, some 
rose by relatively small amounts, and some decreased.
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C. Petition for Rulemaking

    12. On June 6, 2016, the Alaska Federal Land Fees Group, comprising 
six hydroelectric licensees with projects in Alaska (Alaska Group),\12\ 
petitioned the Commission to conduct a rulemaking to revise its method 
of calculating federal land use charges for hydropower projects in 
Alaska. The Alaska Group's petition focused solely on the first 
component of the Commission's fee schedule--the per-acre land value--
and requested that the Commission: (1) Calculate an adjusted statewide 
average per-acre land value for Alaska and (2) apply this adjusted 
statewide average per-acre fee to all projects in Alaska, except those 
located in the Aleutian Islands area.\13\
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    \12\ Alaska Electric Light and Power, Bradley Lake Project 
Management Committee (on behalf of licensee Alaska Energy 
Authority), Chugach Electric Association, the Ketchikan Public 
Utilities, Copper Valley Electric Association, and Southeast Alaska 
Power Agency.
    \13\ The Alaska Group requests that any project located in the 
Aleutian Islands Area continue to be assessed annual charges for use 
of government lands based on a regional per-acre land value.
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    13. In support of this proposal, the Alaska Group stated that due 
to the small number of farms (and associated agricultural acreage) that 
contribute to the data compiled in the NASS Census, there is 
insufficient data in any individual Alaska area (with the exception of 
the Aleutian Islands) \14\ to produce a fair estimate of land values 
within that area. Because there are so few farms outside of the 
Aleutian Islands Area, the Alaska Group indicated that the per-acre 
land values in the other four geographic areas of Alaska are extremely 
sensitive to any changes in the self-reported farm data compiled by the 
NASS Census.
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    \14\ The Alaska Group contended that because the Aleutian 
Islands Area contains the greatest amount of farmland in the state 
(668,016 acres), the NASS Census data for the Aleutian Islands Area 
is ``robust, reliable, and an accurate estimate of fair market 
value.'' Alaska Group's June 6, 2016 Petition for Rulemaking at 18. 
Therefore, the Alaska Group requested that the proposed statewide 
per-acre land value be applied to all hydropower projects located in 
Alaska, except those projects located in the Aleutian Islands Area.
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    14. For these reasons, the Alaska Group asserted that an adjusted 
statewide per-acre land value would better reflect the diverse 
topography of the state and insulate against land value fluctuations 
caused by individual changes in farm data. The Alaska Group stated that 
this method would produce a more accurate estimate of the fair market 
value of federal lands in Alaska.

D. Notice of Inquiry

    15. On November 17, 2016, the Commission issued a Notice of Inquiry 
soliciting input on a narrow question related to its current method for 
calculating annual charges for the use of government lands--whether 
regional per-acre land values based on data published in the NASS 
Census ``land and buildings'' category result in reasonably accurate 
land valuations for projects that occupy federal lands in Alaska.\15\ 
Specifically, the Commission asked whether it should: (1) Use a 
statewide per-acre land value rather than a regional per-acre land 
value to calculate the adjusted per-acre land value for projects that 
occupy federal lands in Alaska; (2) apply such a statewide per-acre 
land value to (i) all projects in Alaska, or (ii) all projects in 
Alaska except those located in the Aleutian Islands Area; and (3) use 
only certain geographic regions of Alaska to calculate such a statewide 
per-acre land value.
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    \15\ Annual Charges for Use of Government Lands in Alaska, FERC 
Stats. & Regs. ] 31,579 (2016) (NOI). The NOI was published in the 
Federal Register on November 25, 2016. 81 FR 85173.
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    16. In addition, the Notice of Inquiry encouraged commenters to 
submit alternative proposals for determining reasonably accurate per-
acre land values for projects in Alaska, provided that any proffered 
alternatives were grounded in the NASS Census data. The notice also 
invited federal land management agencies to comment on how they would 
view reductions in annual charges for the lands they administer.
    17. In response to the Notice of Inquiry, seven entities filed 
comments, including several Alaska licensees, a U.S. senator, the U.S. 
Forest Service (Forest Service), and two individuals.
    18. The Alaska Group's comments reiterated its position that the 
Commission should adopt a statewide per-acre land value for all 
hydropower projects in Alaska, and apply the statewide per-acre value 
to all projects in Alaska, except those located in the Aleutian Islands 
Area. Similarly, U.S. Senator Lisa Murkowski and Homer Electric, an 
electric distribution cooperative in the Kenai Peninsula, urged the 
Commission to adopt a statewide per-acre land value for Alaska. These 
commenters echoed concerns that the NASS Census data fails to provide 
an accurate accounting of land values in Alaska.
    19. Kodiak Electric, a licensee of a hydropower project located in 
the Aleutian Islands Area, stated that the regional per-acre land 
values published in the NASS Census result in reasonably accurate land 
valuations for hydropower lands in the Aleutian Islands Area. Citing 
the large number of agricultural acreage reported by the NASS Census 
for the Aleutian Islands Area, Kodiak Electric recommended that any 
statewide per-acre land value for Alaska, if adopted, not be applied to 
projects located in the Aleutian Islands Area.
    20. The Forest Service was the only commenter to provide 
alternative proposals for Commission consideration. Due to the small 
number of farms in Alaska, the Forest Service cautioned against the use 
of a fee schedule based on NASS Census data. Instead, the Forest 
Service recommended that the Commission consider calculating federal 
land charges for Alaska using BLM's ``Minimum Rent Schedule for BLM 
Land Use Authorizations in Alaska 2015'' or a fee based on power 
generated, similar to BLM's solar fee schedule.
    21. Two individuals urged the Commission to decline the request to 
alter its current method for calculating federal land use charges for 
hydropower projects in Alaska. They expressed concern that the use of a 
statewide per-acre land value might result in the under-collection of 
reasonable annual charges, and questioned whether the Alaska Group 
sufficiently demonstrated that a statewide per-acre value would be more 
accurate than a regional per-acre land value.

E. Notice of Proposed Rulemaking

    22. In an August 17, 2017 Notice of Proposed Rulemaking (NOPR), the 
Commission proposed to adopt the use of a statewide per-acre land 
value, rather than a regional per-acre land value, for the purposes of 
calculating annual charges for hydropower projects that occupy federal 
lands in Alaska.\16\
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    \16\ Annual Charges for Use of Government Lands in Alaska, FERC 
Stats. & Regs. ] 32,722 (2017) (NOPR). The NOPR was published in the 
Federal Register on August 31, 2017. 82 FR 41359.
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    23. To calculate a statewide per-acre land value for Alaska, the 
NOPR proposed that the Commission would average the data published in 
the ``land and buildings'' category of the NASS Census for two 
geographic areas: The Kenai Peninsula Area and the Fairbanks

[[Page 4]]

Area.\17\ The proposed rule explained that, pursuant to the 
Commission's current methodology, the statewide per-acre value would be 
reduced by the sum of Alaska's state-specific reduction to remove the 
value of irrigated lands and a seven percent reduction to remove the 
value of buildings. The Commission would then apply the resulting 
adjusted statewide per-acre land value to all hydropower projects in 
Alaska except for projects located in the Aleutian Islands Area. The 
NOPR also stated that the Commission would continue to apply the 
regional per-acre land value for the Aleutian Islands Area.\18\
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    \17\ As we noted earlier, the Commission does not use the NASS 
Census data from the Anchorage Area or the Juneau Area for the 
purpose of determining per-acre land values because the 
predominantly high, urban-based rates do not reasonably reflect the 
value of government lands on which hydropower projects are located. 
See supra P 9.
    \18\ As explained in the NOPR, the Commission is satisfied that 
the use of the regional per-acre land value for the Aleutian Islands 
Area results in reasonably accurate land values due to the large 
amount of farmland acreage represented in the NASS Census data for 
this particular geographic area.
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    24. The proposed rule represented an effort to respond to the 
issues identified by the petitioners--the prevalence of federal lands 
in Alaska, the sparse amount of agricultural acreage reflected in the 
NASS Census, and the increase in annual charges that resulted when the 
Commission began using data from the 2012 NASS Census. Combining the 
value of the farmland acreage in the Kenai Peninsula and Fairbanks 
Areas to calculate a statewide per-acre land value, as proposed in the 
NOPR, would result in a larger, more robust data set that will be less 
prone to future fluctuation due to changes in the level of 
participation in NASS Census data reporting or specific anomalies in 
the data reported.
    25. The NOPR did not propose to adopt the Alaska Group's suggestion 
of including Aleutian Islands Area values in calculating a statewide 
per-acre land value to be applied to hydropower projects located 
outside of the Aleutian Islands Area, because those values are lower 
than land values elsewhere in the state.\19\
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    \19\ NOPR, FERC Stats. & Regs. ] 32,722 at P 27.
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    26. The NOPR also evaluated two alternative proposals recommended 
by the Forest Service: (i) A method based on the 2015 Minimum Rent 
Schedule for BLM Land Use Authorizations in Alaska; \20\ and (ii) a fee 
based on power generated, similar to BLM's solar fee schedule.\21\ 
Because these alternative proposals would likely result in higher per-
acre land fees for Alaska or would rely on practices the Commission has 
previously rejected, the Commission declined to consider these 
alternatives further.\22\
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    \20\ See generally BLM, Rent for Remote Non-Linear Rights-of-
Way, Permits and Leases, https://www.blm.gov/policy/im-ak-2015-010 
(instruction memorandum describing the U.S. Department of the 
Interior--Office of Valuation Services' April 2015 Minimum Rent 
Analysis & Schedule, which provides guidance and a rental schedule 
for land use authorizations of up to 25 acres across each of BLM's 
district and field offices in Alaska).
    \21\ See Competitive Processes, Terms, and Conditions for 
Leasing Public Lands for Solar and Wind Energy Development and 
Technical Changes and Corrections, 81 FR 92122, 92217-18 (December 
19, 2016) (to be codified at 43 CFR parts 2800 and 2880).
    \22\ See NOPR, FERC Stats. & Regs. ] 32,722 at PP 28-29.
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II. Discussion

    27. In this Final Rule, the Commission revises the per-acre land 
value component of its methodology for calculating annual charges for 
the use of federal lands by hydropower licensees in Alaska, and amends 
part 11 of its regulations accordingly. As proposed in the NOPR, the 
Commission will calculate a statewide per-acre land value for 
hydropower lands in Alaska. The Commission will use this statewide per-
acre land value, rather than a regional per-acre land value, to 
calculate annual charges for use of federal lands for all hydropower 
projects in Alaska, except those located in the Aleutian Islands Area.

A. Calculation of Statewide Per-Acre Value

    28. The Alaska Group filed comments in support of the Commission's 
proposal to use a statewide per-acre land value to calculate federal 
land charges for hydropower projects in Alaska. The Alaska Group urges 
the Commission to adopt the proposal set forth in the NOPR, with three 
``refinements.'' First, the Alaska Group requests that the Commission 
issue the Final Rule with an effective date of FY 2016 and issue 
refunds to any Alaska licensee that paid FY 2016 federal land use 
charges in excess of the amount due under the Final Rule's revised 
calculation method. Second, the Alaska Group asks the Commission to 
reconsider its decision to exclude the Aleutian Islands Area from its 
calculation of a statewide per-acre land value. Third, the Alaska Group 
reasserts its argument that the use of NASS Census data does not result 
in fair or accurate valuations of federal lands on which hydropower 
projects are located, contending that the NASS Census data 
significantly overvalues federal lands in most of Alaska. While 
expressing support for the NOPR, the Alaska Group seeks to reserve the 
right to petition for further adjustments to the Commission's method 
for calculating federal land use charges for hydropower projects 
located in Alaska.
    29. Jon Griffiths, a public policy research assistant at the George 
Washington University, expresses support for the NOPR's proposal to 
adopt a statewide per-acre land value for Alaska, but recommends that 
the statewide value be based on an average of the NASS Census data for 
all five geographic areas in Alaska, rather than just the Fairbanks and 
Kenai Peninsula Areas. In particular, Mr. Griffiths recommends that the 
Commission include the Anchorage Area in its calculation of a statewide 
per-acre land value because it has the largest number of agricultural 
properties in Alaska. In addition, Mr. Griffiths observes that 
including all five geographic areas would result in a more robust and 
representative data set. Finally, Mr. Griffiths asserts that the NOPR's 
proposal amounts to a federal subsidy for hydropower projects because 
licensees are paying for land at a value less than its current worth.
    30. Aurora Taylor, an Alaska resident, contends that the use of 
NASS Census data is an inaccurate land pricing method. She questions 
whether the use of a statewide per-acre land value--calculated by 
averaging NASS Census data from only two geographic areas (i.e., 
Fairbanks and Kenai Peninsula Areas)--would result in a more accurate 
and stable land valuation method for Alaska.\23\ Ms. Taylor also 
suggests that the Commission consider an alternative fee structure 
based on the amount of energy generated by the project. However, as 
noted in the NOPR, the Commission previously rejected as unreasonable 
proposals based on a project's power capacity, generation, or sales 
revenue because such fees would result in a royalty as if the occupied 
federal lands themselves were producing power.\24\ The Commission has 
explained that this type of fee

[[Page 5]]

schedule would overlook the fact that power output is the result of 
several factors (e.g., water rights, head, project structures), not 
just the acreage of the federal lands involved.\25\
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    \23\ Ms. Taylor also expresses concern that the Commission's 
current method for calculating federal land use charges fails to 
account for the environmental costs of damming rivers. In response, 
the Commission explains that these charges represent a rental fee 
for the licensee's use of federal acreage. Therefore, it is 
reasonable for the Commission to seek to establish a fair market 
rate for the use of federal acreage, rather than a rate based on 
quantifying environmental costs. In any event, the Commission 
evaluates the environmental impacts of a proposed hydropower project 
during the licensing decision, and has noted that it is not possible 
to assign dollar values to environmental impacts. See Great Northern 
Paper, Inc., 85 FERC ] 61,316, at 62,244-45 (1998), aff'd, 
Conservation Law Foundation v. FERC, 216 F.3d 41, 47-48 (D.C. Cir. 
2000).
    \24\ See NOPR, FERC Stats. & Regs. ] 32,722 at P 29 n.20.
    \25\ See Annual Charges for the Use of Government Lands, FERC 
Stats. & Regs ] 32,684, at P 9 (2011) (citing Revision of the 
Billing Procedures for Annual Charges for Administering Part I of 
the Federal Power Act and to the Methodology for Assessing Federal 
Land Use Charges, Order No. 469, FERC Stats. & Regs. ] 30,741, at 
30,589-90 (1987)).
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    31. The Final Rule adopts the same revised calculation method 
proposed in the NOPR. To calculate a statewide per-acre land value, the 
Commission will divide the total estimated market value by the total 
agricultural acreage (published in the ``land and buildings'' category 
of the NASS Census) for the Kenai Peninsula Area and the Fairbanks Area 
to arrive at an average per-acre land and building value. Pursuant to 
the Commission's current methodology, the Commission will adjust the 
resulting per-acre value by Alaska's state-specific reduction to remove 
the value of irrigated lands, as well as a seven percent reduction to 
remove the value of buildings (i.e., the adjusted per-acre land value). 
The Commission will apply this adjusted statewide per-acre land value 
to all hydropower projects in Alaska except those located in the 
Aleutian Islands chain. Any project located in the Aleutian Islands 
chain will continue to be assessed the Aleutian Islands Area per-acre 
land value.
    32. Two commenters recommended that the Commission calculate the 
statewide per-acre land value for Alaska using data from all five 
geographic areas identified in the NASS Census. One commented that the 
failure to incorporate data from all regions in Alaska, including the 
Anchorage and Juneau Areas, undervalues federal lands and amounts to a 
federal subsidy for hydropower projects. However, in accordance with 
the policy adopted in Order No. 774, the Commission has never used the 
NASS Census data from the Anchorage Area or the Juneau Area for the 
purposes of determining per-acre land values because the predominately 
high, urban-based rates do not reasonably reflect the value of 
government lands on which hydropower projects are located. No evidence 
has been provided during the course of this rulemaking that leads the 
Commission to reconsider this decision. Moreover, using these high, 
urban-based rates to calculate a statewide per-acre value would likely 
overvalue hydropower lands and artificially inflate federal land use 
charges.
    33. Similarly, the Commission is not persuaded by the Alaska 
Group's call to include data from the Aleutian Islands Area to 
calculate a statewide per-acre land value. The Alaska Group asks the 
Commission to use Aleutian Islands Area data to calculate the statewide 
per-acre value, but not apply the resulting statewide value to projects 
in the Aleutian Islands Area, which would dramatically lower the 
resulting statewide value, while maintaining the use of the Aleutian 
Islands Area's extremely low regional per-acre value ($1.02 per acre, 
adjusted) for projects in the Aleutian Islands Area. This inconsistent 
approach would undervalue hydropower lands and artificially deflate 
federal land use charges across the state. Commission staff compared 
the FY 2017 per-acre rates for hydropower projects located in the Kenai 
Peninsula Area under the Commission's current methodology ($57.97), the 
NOPR's proposal ($36.53), and the Alaska Group's proposal ($6.75).\26\ 
The drastic decrease between the NOPR's proposal and the Alaska Group's 
proposal directly corresponds to the inclusion of the Aleutian Islands 
Area data. We are not convinced that this lower rate would result in 
fair compensation to the United States and the taxpayers for the use of 
public lands.
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    \26\ The NOPR's proposed calculation results in a $36.53 
adjusted per-acre land value rate for FY 2017, which represents an 
approximate 9 percent increase from the FY 2015 rate for the Kenai 
Peninsula Area ($33.28). FY 2015 was the last year the Commission 
used data from the 2007 NASS Census to calculate federal land use 
charges.
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    34. We are satisfied that a statewide per-acre value, based on data 
from the Kenai Peninsula and Fairbanks Areas, is an appropriate 
response to the Alaska Group's Alaska-specific concerns. The revised 
calculation method uses a larger data set of agricultural acreage that 
will be better insulated from fluctuation between census years. It also 
excludes extreme land values that would artificially overvalue or 
undervalue hydropower lands and preserves the administrative efficiency 
benefits of using a publicly available index of land values to 
calculate rates. Therefore, on balance, the Commission finds that the 
Final Rule's revised calculation method results in a reasonable 
approximation of per-acre land values for hydropower lands in 
Alaska.\27\
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    \27\ In its comments on the NOPR, the Alaska Group stated that 
it reserves the right to petition the Commission for future 
adjustments to the land valuation method for federal lands in 
Alaska. The Commission will consider, but may not act on, future 
petitions requesting it to revise its method for calculating federal 
land use charges for hydropower projects located in Alaska.
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B. Application of Statewide Per-Acre Value

    35. Kodiak Electric filed comments on the NOPR, reiterating its 
assertion that the regional per-acre land value results in a reasonably 
accurate land valuation for hydropower lands in the Aleutian Islands 
Area. Kodiak Electric expresses support for the NOPR's proposal to 
continue to apply the regional per-acre land value, rather than the 
statewide per-acre land value, for projects located in the Aleutian 
Islands Area. Pursuant to the Final Rule, the Commission will apply the 
statewide per-acre land value to all hydropower projects located in 
Alaska, except those located in the Aleutian Islands Area. For projects 
located in the Aleutian Islands Area, the Commission will continue to 
apply the regional per-acre land value when calculating federal land 
use charges.

C. Effective Date of Statewide Per-Acre Value

    36. The Alaska Group contends that the effective date of the Final 
Rule should be FY 2016, and urges the Commission to issue refunds to 
any Alaska licensee that paid FY 2016 federal land use charges in 
excess of the amount that would be due under the Final Rule's revised 
calculation method. We deny this request. The Commission previously 
considered and rejected various legal and policy arguments made by the 
Alaska Group on behalf of its member licensees seeking partial refunds 
of their FY 2016 federal land use charges because they claimed such 
charges were unreasonable.\28\ The members of the Alaska Group elected 
not to seek judicial review of this decision, such that an attack on it 
now is untimely. Further, they have not asserted, let alone proved, 
that the past payments resulted in any hardship to the licensees in 
question. Accordingly, we will not revisit those arguments here. The 
Final Rule's revised calculation method, set forth in Sec.  
11.2(c)(1)(iv) of the Commission's regulations, will be used to 
calculate any federal land use bills for Alaska licensees that are 
issued on or after the effective date of this Final Rule (i.e., FY 2017 
bills, onward).
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    \28\ Alaska Elec. Light & Power, 157 FERC ] 61,111 (2016) 
(finding the calculation of the Alaska Group's FY 2016 federal land 
use charges reasonable, and not a change in Commission procedure or 
policy). The Alaska Group did not appeal the Commission's order 
denying rehearing of this issue. Additionally, the decision to adopt 
a revised calculation method for projects in Alaska does not negate 
the Commission's determination that the FY 2016 federal land use 
charges were reasonable and calculated appropriately.

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[[Page 6]]

III. Regulatory Requirements

A. Information Collection Statement

    37. The Paperwork Reduction Act \29\ requires each federal agency 
to seek and obtain Office of Management and Budget (OMB) approval 
before undertaking a collection of information directed to ten or more 
persons or contained in a rule of general applicability. OMB 
regulations require approval of certain information collection 
requirements contained in final rules published in the Federal 
Register.\30\ This rule does not impose or alter existing reporting or 
recordkeeping requirements on applicable entities as defined by the 
Paperwork Reduction Act.\31\ As a result, this rule does not trigger 
the Paperwork Reduction Act.
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    \29\ 44 U.S.C. 3501-3521 (2012).
    \30\ See 5 CFR 1320.12 (2017).
    \31\ 44 U.S.C. 3502(2)-(3) (2012).
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B. Environmental Analysis

    38. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant effect on the human environment.\32\ Commission 
actions concerning annual charges are categorically exempt from this 
requirement.\33\
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    \32\ Regulations Implementing the National Environmental Policy 
Act of 1969, Order No. 486, FERC Stats. & Regs. ] 30,783 (1987).
    \33\ 18 CFR 380.4(a)(11) (2017).
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C. Regulatory Flexibility Act

    39. The Regulatory Flexibility Act of 1980 (RFA) \34\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The RFA mandates consideration of regulatory alternatives that 
accomplish the stated objectives of a rulemaking and minimize any 
significant economic impact on a substantial number of small 
entities.\35\
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    \34\ 5 U.S.C. 601-612.
    \35\ 5 U.S.C. 603(c) (2012).
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    40. The Small Business Administration's (SBA) Office of Size 
Standards develops the numerical definition of a small business.\36\ 
The SBA revised its size standard for electric utilities (effective 
January 22, 2014) from a standard based on megawatt hours to a standard 
based on the number of employees, including affiliates.\37\ Under SBA's 
current size standards, a hydroelectric generator is small if, 
including its affiliates, it employs 500 or fewer people.\38\
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    \36\ 13 CFR 121.101 (2017).
    \37\ SBA Final Rule on ``Small Business Size Standards: 
Utilities,'' 78 FR 77343 (Dec. 23, 2013).
    \38\ 13 CFR 121.201, Sector 22, Utilities (2017).
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    41. Section 10(e)(1) of the FPA requires that the Commission fix a 
reasonable annual charge for the use, occupancy, and enjoyment of 
federal lands by hydropower licensees. To date, the Commission has 
issued 21 active licenses that occupy federal lands in Alaska to 15 
discrete entities. Therefore, the Final Rule will apply to a total of 
15 entities. Of these 15 entities, 13 entities would be impacted by the 
Final Rule because they hold licenses that occupy federal lands in the 
Kenai Peninsula, Fairbanks, Juneau, or Anchorage Areas.\39\ The Final 
Rule adopts the use of a statewide per-acre land value, rather than a 
regional per-acre land value, for the purposes of calculating annual 
charges for the use of federal lands in Alaska. The Commission will 
apply the statewide per-acre land value to all hydropower projects in 
Alaska, except those located in the Aleutian Islands Area. The 
Commission will continue to apply the regional per-acre land value for 
projects located in the Aleutian Islands Area.
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    \39\ We note that six of the 13 affected licensees are members 
of the Alaska Group, which petitioned the Commission to revise its 
methodology for calculating annual charges for use of federal lands 
by establishing a statewide per-acre land value for Alaska.
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    42. Based on a review of the 13 licensees that would be impacted by 
the Final Rule, we estimate that most, if not all, are small entities 
under the SBA definition. These 13 licensees include utilities, non-
for-profit electric cooperatives, cities, and companies.
    43. Any impact on these small entities would not be significant. 
Under the Final Rule, a statewide per-acre land value for hydropower 
lands in Alaska would be calculated based on a larger agricultural data 
set, resulting in land values that will be less prone to future 
fluctuation caused by changes in census data reporting. For Fiscal Year 
(FY) 2017, the statewide per-acre rate will be lower than the regional 
per-acre rates that were assessed in FY 2016 for the majority of active 
licenses in Alaska (other than those located in the Aleutian Islands 
Area). Accordingly, the 13 affected licensees' federal land use charges 
for FY 2017 will be lower than the total charges they should have paid 
in the previous fiscal year based on project geography.\40\ The use of 
a statewide per-acre rate will also result in lower FY 2017 charges for 
each of the 13 affected licensees compared to the FY 2017 charges they 
would be assessed under the regional per-acre value method. 
Consequently, the Final Rule should not impose a significant economic 
impact on small entities.
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    \40\ During this rulemaking proceeding, Commission staff 
identified two affected licensees (P-2230 and P-10773) that were 
assessed federal land use charges in FY 2013-2016 based on an 
incorrect per-acre rate--an ``All Areas'' rate, rather than the 
appropriate Kenai Peninsula Area rate--resulting in lower total 
charges during this four year period. Under the Final Rule, these 
two licensees will pay charges based on the statewide per-acre land 
value. Therefore, while their FY 2017 charges will increase compared 
to the FY 2016, these two licensees have been undercharged since FY 
2013 and will have lower FY 2017 charges under the Final Rule than 
they would under the Commission's current methodology using the 
appropriate per-acre land value (i.e., Kenai Peninsula Area rate).
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    44. Accordingly, pursuant to section 605(b) of the RFA, the 
Commission certifies that this Final Rule will not have a significant 
economic impact on a substantial number of small entities.

D. Document Availability

    45. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and print the contents of this document via the 
internet through the Commission's Home Page (http://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE, Room 2A, 
Washington, DC 20426.
    46. From the Commission's Home Page on the internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    47. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].

E. Effective Date and Congressional Notification

    48. This regulation is effective February 1, 2018. The Commission 
has determined, with the concurrence of the Administrator of the Office 
of Information and Regulatory Affairs of OMB, that this rule is not a 
``major rule'' as defined in section 251 of the Small Business 
Regulatory Enforcement Fairness Act of 1996.\41\ This rule is being 
submitted to the Senate, House, and Government Accountability Office.
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    \41\ 5 U.S.C. 804(2) (2012).

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[[Page 7]]

List of Subjects in 18 CFR Part 11

    Dams, Electric power, Indians--lands, Public lands, Reporting and 
recordkeeping requirements.

    By the Commission.
    Issued: December 21, 2017.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
    In consideration of the foregoing, the Federal Energy Regulatory 
Commission amends part 11, chapter I, title 18, Code of Federal 
Regulations, as follows:

PART 11--ANNUAL CHARGES UNDER PART I OF THE FEDERAL POWER ACT

0
1. The authority citation for part 11 continues to read as follows:

    Authority:  16 U.S.C. 792-828c; 42 U.S.C. 7101-7352.

0
2. In Sec.  11.2, add paragraph (c)(1)(iv) to read as follows:


Sec.  11.2   Use of government lands.

* * * * *
    (c) * * *
    (1) * * *
    (iv) For all geographic areas in Alaska except for the Aleutian 
Islands Area, the Commission will calculate a statewide per-acre value 
based on the average per-acre land and building values published in the 
NASS Census for the Kenai Peninsula Area and the Fairbanks Area. This 
statewide per-acre value will be reduced by the sum of the state-
specific modifier and seven percent. The resulting adjusted statewide 
per-acre value will be applied to all projects located in Alaska, 
except for projects located in the Aleutian Island Area.
* * * * *
[FR Doc. 2017-28095 Filed 12-29-17; 8:45 am]
 BILLING CODE 6717-01-P


