Feds reconsidering lease rates for hydropower operators

Federal administrators of land beneath six of Alaska’s hydroelectricity plants — including the Kenai Peninsula’s Bradley Lake plant — are considering claims by hydropower operators that the federal method of valuing this land by comparison with its value as farmland produces inflated lease rates in Alaska, a state with very few farms for comparison.

For Bradley Lake, FERC’s current evaluation method has resulted in a 384 percent increase to its federal rent since 2008. Its owner, the Alaska Energy Authority, is one of six Alaska hydropower operators that have protested to the energy infrastructure permitters of the Federal Energy Regulatory Commission (FERC), who serve as the plant’s landlord.

In a Thursday press release, FERC announced it is considering a different method of evaluating Alaskan hydropower leases and will be taking comments for the next 60 days.

FERC decided in 2013 to assess a per-acre rent for federal land leased to hydropower operators on a county-by-county basis, recalculating the rate every five years based on agricultural land values from the National Agricultural Statistics Service Census, an annual U.S Department of Agriculture survey of farms. Because Alaska lacks counties, FERC based the state’s per-acre rate on farm values in five regions — the Aleutian Islands, Fairbanks, Kenai Peninsula, Anchorage, and Juneau. Previously FERC had based its lease rates on a different Forest Service valuation method used since 1987, based instead on right-of-way values for pipelines and electrical transmission lines.

As a result of the change, the per-acre fee for Alaskan generating plants on federal land rose 179 percent on the Kenai Peninsula — from $11.48 to $32.05. Bradley Lake had been paying a $62,624 bill for its 5,412 acres in 2008; in 2015 it paid $182,973.

According to the Deapartment of Agriculture census, the value of agricultural land on the Kenai Peninsula has increased 384 percent since 2008. FERC’s pricing method, which updates every 5 years, has reflected this. Its 2016 land-fee re-evaluation raised fees for Bradley Lake by a further 71 percent to $312,176. The Swan Lake and Tyee hydroelectic plants, owned by the Ketchikan-area Southeast Alaska Power Agency, experienced rate increasesof 816 percent and 889 percent between 2008 and 2015.

Each of the six Alaskan six hydropower operators on federal land paid their bills — subject to refund if FERC decides to change its valuation method — and made a formal protest in June 2016, arguing that “there is insufficient (farm) data in any individual Alaska area … to produce a fair estimate of land values within the area,” according to the petition of the hydropower licensees.

Any assessment of agricultural land values in Alaska would draw on a very small data set. About .24 percent of Alaska’s 365 million acres is farmland. In their petition, the hydropower licensees compare the Kenai Peninsula’s farmland — about 29,140 acres as of the 2012 National Agriculture Statics Service census — to Washington’s Snohomish County, which is 1,575 percent smaller than the Kenai Peninsula and has more than twice the acreage of farmland. The small farm numbers make any valuation based on them susceptible to large shifts based on the activities of only a few farm-owners, the petitioners wrote.

“More fundamentally, the land values (of surveyed farms) simply do not reflect the prevailing economic conditions in Alaska over the past several years,” the hydropower operators wrote. “… There is no basis for concluding that federal lands, during this downturn in the Alaska economy — an economy which is highly sensitive to activities on federal lands — are increasing in value at all in Alaska.”

The six licensees requested a statewide rate — excepting Juneau and Anchorage, in keeping with a prior FERC decision that “these areas should not be used to assess federal land use charges as the urban nature of lands in the areas do not reflect the types of land used for hydropower projects,” according to the petition. Licensees on the Kenai Peninsula and Fairbanks argued that “the adjusted statewide average (of agricultural values) is a more accurate assessment of fair market value of federal lands in these areas of Alaska, because it draws on a larger and more robust dataset from across the state.”

Murkoswki opposed FERC’s valuation methods of Alaska hydropower leases and argued for a state-wide rate when FERC began considering its current valuation system in 2011 and during the 2016 re-evaluation of lease rates. In March 2016 Murkowski wrote to FERC chair Norman Bay that “significant fee changes on towns and municipalities with low population densities and small rate bases represents a substantial hardship to consumers and jeopardizes Alaskans’ access to affordable and reliable baseload hydropower.”

Reach Ben Boettger at benjamin.boettger@peninsulaclarion.com.

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