NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9650
SPONSOR: McDonald TITLE OF BILL: An act to amend the environmental conservation law, in
relation to abolishing the Hudson river-Black river regulating district
and devolving such powers to the power authority of the state of New
York; and to repeal certain provisions of such law relating thereto
PURPOSE OR GENERAL IDEA OF THE BILL:
Abolishes the Hudson River-Black River regulating district and devolves
such powers to the power authority of the state of New York; repealer.
SUMMARY OF SPECIFIC PROVISIONS:
Section one amends the environmental conservation law by adding a new
section 15-2142.
Section two repeals Section 15-2137 of the environmental conservation
law.
Section three repeals section 15-2139 of the environmental conservation
law.
Section four repeals section 15-2141 of the environmental conservation
law.
Section five provides that the effective date is on the first of July
next succeeding the date on which it shall have become law.
JUSTIFICATION:
The Hudson River Regulating District was formed in 1922 with the intent
"to regulate the flow of the Hudson and Sacandaga Rivers as required by
the public welfare including health and safety". In 1959 the New York
State Legislature merged the Hudson River Regulating District with the
Black River Regulating District to form the current Hudson River-Black
Regulating District (HRBRRD). According to the HRBRRD web site, "New
York State created the Regulating District to develop dams and reser-
voirs to capture excess run-off to prevent flooding in the Hudson River
and Black River basins, and to release such captured water gradually
during periods of low river_ flow to maintain water quality in each
river basin. This system was designed to reduce damage from spring
storms and snowmelt, including disease and destruction of life and prop-
erty, and to improve river navigation and public sanitation."
In 1927 the HRBRRD entered into an Agreement with New York Power and
Light Corporation (predecessor of Niagara Mohawk Power Corporation) to
construct the Conklingville Dam on the Sacandaga River in the Hudson
River Area and create the Sacandaga Reservoir (now Great Sacandaga
Lake). Conklingville Dam has a total head (height) of 71 feet. The
Agreement allowed Niagara Mohawk to construct the EJ West powerhouse at
the dam, utilizing its original 15 feet of head (from an earlier dam, at
no charge) plus the HRBRRD's additional 56 feet of head (for an annual
water fee). In 1980, upon expiration of the 1927 Agreement, the HRBRRD
and NMPC entered into a new Agreement to provide for the continued oper-
ation of both Great Sacandaga Lake and EJ West. In 1999 Niagara Mohawk
sold the EJ West hydroelectric facility to Erie Boulevard Hydropower,
L.P. (now owned by Brookfield Renewable Power). In 2003 the 1980 Agree-
ment was prematurely terminated and the HRBRRD and Brookfield entered
into a new Reservoir Operating Agreement. As stated, the intent of the
2003 Reservoir Operating Agreement was to "to maximize Erie's hydroelec-
tric energy generation at, and revenue from, the Erie facilities (EJ
West)." Erie was to pay the HRBRRD a Water Fee for the use of the
HRBRRD's 56 feet of head and the HRBRRD agreed not to exercise eminent
domain with respect to EJ West. At the time the 1980 Agreement was
terminated, Niagara Mohawk was paying the HRBRRD a Water Fee of
$925,000. Under the 2003 Agreement, Brookfield's Water Fee was decreased
to $850,000 (increasing at 3% each year). The 2003 Agreement was amended
in 2006 to (1) extend the term until June 30, 2021 and (2) lower the
criteria for adjustments in the Water Fee, both of which accrue to the
benefit of the operator.
Under the Reservoir Operating Agreement, Brookfield utilizes the full 71
feet of head provided by Conlingville Dam for its hydroelectric plant
operations at EJ West, but it owns only 15 feet. The remaining 56 feet
(79%) of available head at El West is owned by the HRBRRD. The HRBRRD
has abdicated its responsibility for flow regulation to Brookfield who
operates EJ West (and hence Great Sacandaga Lake) to allow the operator
to maximize its revenue. This means that the operator can take releases
from Great Sacandaga Lake to generate electricity during hours when
power sales rates are high and withhold releases when rates are low. The
result is a daily pulsing of flows in the Hudson River, up and down like
a yo-yo, not the steady regulated flow one would expect from a regulat-
ing district. In water year 2013 (October 1, 2012-September 30, 2013),
Brookfield reported to the Federal Energy Regulatory Commission (FERC)
that it generated 67,401,742 kwh at EJ West. Because the operator is
allowed to control its operation to take advantage of higher on-peak
power rates, it's not known exactly what Brookfield's revenue was for
that generation; however, it can be estimated that a run-of-river hydro-
electric plant (unable to control flow conditions) would have garnered
at least $3,360,000 for the same generation. Because of Brookfield's
ability to pulse its operation, it can certainly be assumed that the
operator maximized its revenue opportunity. Brookfield's Water Fee to
the HRBRRD was reported to be $1,100,000 in 2012 and, as reported in the
2014-15 HRBRRD budget, will continue to remain at that level.
The HRBRRD is also responsible for maintaining permits to Great Sacanda-
ga Lake for exclusive use of the shoreline. The permits, roughly 4,500
in total at amounts starting at $50 each, bring in revenue of $425,000
per year. The permit fee has not been increased since 1983. The land
that is owned by the district is forest preserve land, which is state
land that is protected as "forever wild" and therefore cannot be leased
or sold unless a constitutional amendment is put forward. The land is
permitted each year for recreational purposes, although there is some
question about whether actual surveys exist for the issued permits.
Consequently, it is unclear as to the assignment of liability in the
unlikely event there is a claim.
In 2008, in a case brought by an independent hydroelectric licensee, the
United States Court of Appeals for the District of Columbia rendered a
decision that HRBRRD had no authority to exact compensation from the
licensee for headwater benefits. The matter was remanded to FERC who
convened a headwater benefits determination proceeding that resulted in
significantly reducing the allowable headwater benefits assessments that
HRBRRD can charge all hydroelectric plants located downstream of Conl-
ingville Dam. This created a $4.45 million budget gap in the HRBRRD
operating budget. In an attempt to rectify this situation, in February
2010 the HRBRRD assessed the five county regions of Albany, Rensselaer,
Saratoga, Warren and Washington a total of $4.45 million for a newly
determined flood control benefit. It should be noted that the HRBRRD had
the opportunity to assess individual property owners (public and
private) and/or individual municipalities however assessment of the
counties was chosen. The counties responded by filing a lawsuit against
the HRBRRD to protect their taxpayers' rights. In 2013, the five coun-
ties and HRBRRD settled the lawsuit with the following payment schedule
for the next four years:
Albany County $1,034,698
Rensselaer County $ 542,447
Saratoga County $1,035,809
Warren County $ 242,908
Washington County $ 138,238
TOTAL $ 2,994,100
As part of the 2013 settlement, New York State agreed to offset some of
the costs of this burden by adding $1 million a year to the operating
budget of the HRBRRD, which will reduce. the charges to the counties by
that amount.
Nevertheless, the counties will have to pass along the remaining burden
of this settlement to their county property taxpayers by raising their
taxes in order to generate the necessary revenue. This bill is a step
toward saving local taxpayers millions of dollars by eliminating the
Hudson River Black River Regulating District and, consequently, their
onerous fees and yet another unfunded mandate on county government.
Through a careful review of the timeline listed above, at various peri-
ods under the prior management of the HRBRRD amendments and changes were
made to the Reservoir Operating Agreement that provided significant
operational control and revenue-generating opportunities to the owner of
the EJ West hydroelectric plant. During these same periods there were
several reports of excessive and lavish spending by the prior management
of the HRBRRD. In as much as the current management and board is operat-
ing the HRBRRD as efficiently as possible, actions taken prior to the
current management and board provided the lack of control over flow
management and the additional burden on county taxpayers is not tolera-
ble. When the State Legislature created the Regulating District, it was
never intended that the counties, and more importantly their taxpayers,
would be responsible for the operational costs. In fact, the private
companies that generated power were responsible for the cost of oper-
ations of the district.
Currently, the New York State Power Authority (NYPA) manages several
dams and reservoirs and is well qualified and equipped to perform the
functions of the HRBRRD. Transferring the duties of the HRBRRD to NYPA
would be a logical and prudent transition. It would allow for the
continued management of the permit system, but also provide an opportu-
nity to allow for better flow regulation and increase government effi-
ciency.
LEGISLATIVE HISTORY:
2011-2012: S.591A/A.3075A Remained in the Senate Committee on Education
and the Assembly Committee on Environmental Conservation
2009-2010: S.8118A/A.11401A Remained in the Senate/Assembly Committees
on Environmental Conservation
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect on the first of July next succeeding the date
on which it shall have become a law; provided, however, that effective
immediately, the addition, amendment and/or repeal of any rule or regu-
lation necessary for the implementation of this act on its effective
date is authorized and directed to be made and completed on or before
such effective date.
