On October 21, 2021, the Federal Energy Regulatory Commission (FERC) issued an Order to Show Cause and Notice of Proposed Penalty to Ampersand Cranberry Lake Hydro, LLC (Ampersand) for failing to retain possession of property associated with its license for the Cranberry Lake Project (P-9685). In the Order, FERC directed Ampersand to show why it should not be found to have violated its license and should not be assessed a $600,000 civil penalty.
The Project, located on the Oswegatchie River in St. Lawrence County, New York, includes a dam, a 57,400 acre-foot reservoir, a power channel, and a powerhouse with a 595-kW generator. The dam has a high hazard potential rating because failure could result in probable loss of human life. The Oswegatchie River-Cranberry Reservoir Regulating District Corporation (OR-CRRDC), a state municipal corporation, owns the Cranberry Lake Project dam, and Ampersand has operated and maintained the dam under a lease agreement with OR-CRRDC.
In March 2015, the Project’s license was transferred to Ampersand after it gave FERC assurances that it would “operate and maintain the Project safely and in accordance with its respective license,” including completing dam safety work on the fuse plug spillway (fuse plug) and raising the earthen embankment crest. The fuse plug is a critical part of the Project because it is designed to fail during extremely high water flows, which would provide a controlled release of water and avoid full breach of the dam. Because Ampersand failed to complete the dam safety work and allegedly failed to pay rent and water taxes according to the lease agreement, OR-CRRDC filed a complaint in state court in January 2019 seeking damages, termination of the lease agreement, and an order directing Ampersand to vacate the property.
In July 2020, FERC’s Division of Hydropower Administration and Compliance (DHAC) warned Ampersand that having the lease terminated would violate terms of the Project’s license, which requires Ampersand to maintain all necessary property rights associated with the Project. In October 2020, DHAC ordered Ampersand to start construction of the fuse plug modifications by June 30, 2021 and complete construction by the end of 2021. Ampersand was cautioned again that losing property rights for the Project would place Ampersand in violation of its license. Additionally, DHAC stated that all dam safety repairs would need to be completed prior to Ampersand submitting a license transfer or surrender application, if Ampersand were to choose to do so.
In January 2021, DHAC again warned Ampersand that if the Project lease was terminated, or if Ampersand did not complete the fuse plug modifications, Ampersand would be in violation of its license, and that dam safety repairs would have to be completed before FERC would accept a transfer or surrender application submittal.
In July 2021, Ampersand and OR-CRRDC signed a settlement agreement that resolved the state litigation. Under the terms of the settlement agreement, Ampersand was to terminate the Project lease and convey by quitclaim sale all equipment, fixtures, furniture, and assets currently used to operate the Project. On July 29, 2021, Ampersand informed FERC by telephone that it lost access to the Project site on July 25, 2021.
FERC’s October 21 Show Cause Order found that Ampersand’s failure to retain possession of all project property covered by the license would be a violation of license Article 5. FERC emphasized that maintaining possession of all necessary project property is one of the most important duties of a hydroelectric project licensee because possession is essential for proper operation of a project and protection of neighboring lands. Additionally, FERC viewed the state settlement agreement as Ampersand trying to absolve itself of dam safety obligations by voluntarily signing away its property rights. FERC calculated that Ampersand had been in violation of its license for 88 days and continues to be in violation for every day it does not possess the necessary property rights. FERC calculated that the maximum civil penalty under the Federal Power Act would be $2,077,416 as of the date of the October 21 Show Cause Order. FERC assessed a potential penalty of $600,000 due to the nature and seriousness of the violations (e.g., probable loss of human life should the dam fail), along with the few efforts Ampersand took to remedy its loss of property rights after several warnings from FERC staff.
FERC directed Ampersand to respond by November 22, 2021 and detail Ampersand’s choice of an administrative hearing or a prompt penalty assessment from FERC. FERC also gave the Office of Enforcement staff the opportunity to provide an answer after Ampersand has provided its answer. FERC further stated that Ampersand must pay any penalty that may be assessed within 60 days or the Commission will institute an action in the appropriate United States district court.
For more information, please contact Peter Kissel, Sean Neal, or Ellen Hill.
