127 FERC ¶ 62,237

127 FERC ¶ 62,237

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Brazos River Authority

Project No.

1490-049

ORDER DENYING REQUEST TO CHANGE PROJECT BOUNDARY

(Issued June 25, 2009)

1. On March 6, 2009, Brazos River Authority (Brazos), licensee for the Morris Sheppard Dam Hydroelectric Project No. 1490, filed an application requesting Commission authorization to change the project boundary to remove approximately 335 acres of buffer strip land along the shoreline of Possum Kingdom Lake from the project boundary, and as mitigation to add another 930 acres of land to the project boundary for public recreation. The project is located on the Brazos River, in Palo, Pinto, Young, and Stephans Counties, Texas.

BACKGROUND

2. A new license for the Morris Sheppard Dam Project was issued on September 14, 1989.[1] Brazos currently owns almost all of the land within the project boundary, including approximately 310 miles of shoreline around the project reservoir, Possum Kingdom Lake. The lake is an important recreational resource to the area, and the licensee works with local and state agencies in operating and/or maintaining an extensive network of recreational areas within and around the project area. Pursuant to Article 409 of the license and the approved recreation plan for the project, the licensee provides for a variety of recreational activities, including camping, picnicking, hiking, swimming, fishing, and boating. In addition, the licensee provides public safety measures at all recreation facilities. According to the recreation plan, recreational facilities were developed in two phases, the first between 1991 and 1996, and the second between 1996 and 2001.

3. Of the 310 miles of shoreline, approximately 55 miles is leased to residential lessees. During the term of the previous license, the licensee filed revisions to the exhibits R and K requesting to remove from the project boundary all lands designated in the approved recreational use plan as existing or future cottage lease sites. By order issued May 15, 1980, in response to that request, the Commission required Brazos to “retain within the project boundary along the entire shoreline of any cottage site lease area in which…development has already occurred, a shoreline control strip at least 25 feet wide, measured horizontally from the edge of the reservoir at the normal maximum surface elevation of 1,000 feet m.s.l.”[2] The Commission decided specifically to retain this portion because removing those lands from the project boundary would make it difficult for the licensee and Commission staff to administer the license and, moreover, would not be sufficient to ensure the adequate protection of “the scenic, aesthetic, public recreation, and other environmental values of the reservoir shoreline.”[3] When the project was relicensed in 1989, Article 409 retained the requirement to maintain a buffer strip along the shoreline cottage sites.[4]

4. On August 27, 2008, Brazos filed a petition for a declaratory order in which it stated that the Texas legislature, in its next session, might consider legislation requiring Brazos to sell its leased property, including lands within the project boundary, to its cottage and commercial lessees. Brazos posed the following three questions: (1) would the Commission approve an application to transfer fee ownership of 330 acres of project land in the buffer strip to cottage site owners; (2) would the Commission approve an application to transfer fee ownership of 550 acres of project lands to commercial lessees; and (3) what actions should Brazos take if the Commission answers the first two questions in the negative and the Texas legislature nonetheless enacts legislation requiring Brazos to transfer the property in question?

5. The Commission issued an order responding to Brazos’ petition on September 18, 2008.[5] In this order, the Commission stated that any application to remove lands from a project boundary will be approved only if the Commission determines that the lands are no longer necessary or appropriate for project purposes, and that all project purposes will continue to be satisfied in the absence of the lands. It further stated that it often requires licensees to retain an undeveloped buffer strip between the project reservoir and any areas that are to be developed, in order to protect public recreation and other environmental values. The Commission stated that it could not state with certainty how it would react to arguments Brazos might make in an application as to whether specific lands were needed for project purposes. However, it stated that “…given that we have repeatedly concluded that it is necessary to retain at least a 25-foot buffer strip in areas subject to cottage leases in order to meet recreational and other environmental needs, it appears unlikely that we would grant an application to remove such lands from the boundary.”[6]

6. On October 20, 2008, the Possum Kingdom Lake Association, Custard/Pitts Land and Cattle Co., LP, and Costello Island, Inc. (Lessees), which lease lands in the project area, filed a request for clarification or, in the alternative, rehearing of the September 18 order. On November 20, 2008, the Commission issued an order on clarification in which it responded to specific questions posed by the Lessees.[7] Among other things, the Commission confirmed that a determination under the Federal Power Act as to what lands are required for project purposes and what type of property ownership by a licensee is acceptable is case-specific. The Commission also confirmed that the statement “it appears unlikely that we would grant an application to remove [leased] lands from the [project] boundary” was not based on a review of facts specific to the Lessees’ lands and is not a determination that those lands are needed for project purposes. In addition, the Commission confirmed that Standard Article 5 does not require all lands within the project boundary to be held in fee, and that the project license does not specifically prohibit the sale of fee ownership of project lands. However, the Commission pointed out that, pursuant to Standard Article 5, Commission authorization is required prior to the alienation of project lands.

LICENSEE’S APPLICATION

7. According to the application, the residential lessees along the 55 miles of the reservoir’s shoreline have constructed improvements, including cottages and large homes, adjacent to or partially within the project boundary. The licensee requests removal of approximately 335 acres of buffer strip land along this 55 miles of shoreline from the project boundary,[8] and as mitigation for taking land out of the project boundary, to add another 930 acres of land to the project boundary for public recreation. A 280-acre parcel of the 930 acres would be sold to the Texas Parks and Wildlife Department (TPWD) to expand the existing state park. The TPWD is evaluating options for recreation on this parcel, which could include water access sites, observation areas, camping facilities, or leaving the area natural to provide undisturbed habitat and public viewing. The other 650 acres proposed for inclusion in the project boundary would consist of four parcels to be developed in four phases into approximately 21 miles of a hike and bike trail system. At this time, phase one of the trail system has been completed, phase two is near completion, phase three is designed, and phase four is conceptual.[9]

8. According to the licensee, the Texas Legislature is planning to enact legislation that would require Brazos to sell land currently owned at the cottage lease sites around Possum Kingdom Lake, excluding the buffer strip lands located within the project boundary. In anticipation of this legislation, Brazos decided to initiate a process to divest its leased landholdings at Possum Kingdom Lake. Brazos also determined that a lot-by-lot sale of this leased property posed numerous administrative problems. To avoid these problems, the Brazos Board of Directors decided to sell all applicable leased lands to a third party in one sale. The Brazos Board of Directors directed Brazos staff to prepare an application to remove the buffer strip lands from the project boundary so that the acreage could be included in the above-described one-time sale.

9. Under the licensee’s proposal, the project boundary line would be redrawn at the maximum normal reservoir elevation of 1,000 feet m.s.l., so that the land within the existing 25- or 50-foot-wide buffer area adjacent to existing cottage lease areas would be removed from the boundary. Brazos proposes to place a Declaration of Restrictive Covenants (Declaration) on the buffer strip and adjoining land in order to provide access and control. This Declaration, which would run with the land when sold, would reserve the following for Brazos: an easement across the conveyed property to access the lake to allow it to maintain the lake, to perform its duties as a river authority and licensee, and to comply with applicable statutes, rules, and regulations; a flowage easement over relevant portions of the property; the right to maintain and implement its shoreline management plan; allowance to regulate on-site sewage facilities and, where appropriate, require tie-in to regional wastewater services if such become available; and mineral and groundwater interests. In addition, the Declaration would restrict the property to single-family residential use, prohibit the diversion or alteration of the natural drainage of the terrain and the clearing of vegetation on any portion of the property in such a manner that would cause unnatural erosion or silting of the lake (i.e, provide for drainage and erosion control), and restrict hazardous activities and materials. Finally, the Declaration would require landowners to comply with any applicable local, state, and federal laws related to water quality or the environment, including laws governing toxic wastes and hazardous substances.

10. The licensee states that the buffer lands are not needed for project purposes, specifically recreation, since it is difficult for members of the public to access the buffer strip due to the numbers of residences, boat docks, and similar structures located close to the reservoir. The licensee further states that retaining the buffer strip within the project boundary is not necessary to control activities that may cause erosion along the shoreline since Brazos must issue permits for construction activity in this location. Finally, as discussed above, Brazos will maintain other necessary control (e.g. flowage, shoreline management plan implementation, water quality and erosion control) through the Declaration.

11. Brazos states that its proposed change in the project boundary is in the public interest because it would not adversely affect project resources, would increase land available for public recreation, should not result in any adverse environmental impacts, and would substantially reduce Brazos’s administrative burden of overseeing the cottage lease sites. According to the application, Brazos devotes considerable staff resources and money to ensure compliance with lease conditions, to resolve disputes regarding rebuilds and rent increases, and to address the recent issues raised by the Texas Legislature.

MOTION TO INTERVENE AND COMMENTS

12. On April 21, 2009, Costello Island, Inc. (Costello Island) intervened in this proceeding. Costello Island states that it and its members have an interest in this proceeding because they lease all lands on Costello Island (approximately 300 acres) from Brazos, none of which lands Brazos has proposed to remove from the project boundary even though they are above the 1000 foot m.s.l. contour. Costello Island also filed comments on June 17, 2009. The comments are in support of the licensee’s application, stating that approval is in the public interest. The reasons asserted for approval being in the public interest are that: the inclusion of protective covenants will preserve the licensee’s ability to control certain activities; it will reduce the licensee’s administrative burden; the buffer area is not necessary for recreation and access; and adding 930 acres to the project boundary outweighs potential negative effects of the proposed removal of buffer lands. Costello Island indicates that legislation was enacted by the Texas Legislature on May 19, 2009, and signed by the Governor on May 27, 2009, directing Brazos to make the property in the buffer strip available for sale, conditioned on approval of the removal of the buffer strip from the project boundary.

13. In its June 17, 2009 filing, Costello Island also requests that the Commission make a determination that certain lands on Costello Island are also not necessary for project purposes, that those lands need not be retained in the project boundary, and that no further lands would need to be added to the project boundary if the Costello Island lands were removed from the project boundary. However, Brazos has not requested in its application that these lands be removed from the project boundary. As this is a proceeding to consider Brazos’s application, the issues raised by Costello Island as to these additional lands are not within the scope of this proceeding.

14. Possum Kingdom Lake Association (PKLA) also intervened in this proceeding on June 17, 2009. PKLA states that it supports the Brazos application to change the project boundary, and that it concurs with the Costello Island comments and request for a determination on the need for other lands to be retained in the project boundary.

DISCUSSION AND CONCLUSION

15. Project boundaries are used to designate the geographic extent of the lands, waters, works and facilities that the license identifies as comprising the licensed project and for which the licensee must hold the rights necessary to carry out project purposes. Project purposes include operation and maintenance, flowage, recreation, public access, protection of environmental resources, and shoreline control, including protection of shoreline aesthetic values.[10]

16. The primary issues to be weighed under the licensee’s proposal are, first, whether or not the lands proposed for removal from the project boundary are necessary for project purposes, and second, if they are, whether the lands proposed for addition to the project boundary would adequately mitigate the effects of removing the existing lands. As mitigation for removing the 335 acres, the licensee proposes to add 930 acres of land to the project boundary. However, the licensee plans to sell a 280-acre parcel of the proposed 930 acres to the TPWD. Commission policy requires a licensee to retain any lands needed for project purposes. Because ownership of these lands would not be retained by the licensee, no actions with respect to the continuing use of those lands could be made requirements of the license. Consequently, the lands could not be included in the project boundary, and their transfer to the TPWD could not be considered mitigation for the removal of the 335 acres. Therefore, only the four parcels totaling 650 acres that would continue to be owned by Brazos could be included in the project boundary and considered as mitigation. Exchanging the buffer lands for the proposed 650 acres would result in a net increase of 315 acres in project lands.

17. Brazos states that the buffer strip lands are not needed for public recreation, and that the Commission’s 1980 order did not identify specifically what environmental values the buffer strip was to protect. Article 409 requires the licensee to “provide a buffer strip along the shoreline at the cottage sites,” and the EA issued with the license order (dated December 22, 1988) states that Brazos maintains a 25-foot-wide buffer at developed cottage site areas and a 50-foot-wide buffer along shoreline reserved for future cottage site development. The purpose of a buffer strip is not solely to ensure public access for recreation, and in fact, at the Brazos Project, it is not the primary purpose. Rather, it is to ensure that the licensee has the rights necessary to control uses within that buffer area to protect the scenic, aesthetic, public recreation, and other environmental values of the reservoir shoreline. Removing the 335 acres from the project boundary would effectively remove the buffer zone entirely, and eliminate the licensee’s, and ultimately the Commission’s, ability to control and protect this portion of the shoreline. The proximity and density of private development directly adjacent to the buffer make control of the shoreline in this area more important, not less. The 650 acres that Brazos proposes to add to the project boundary, while providing additional recreational opportunities, could not replace the value of the buffer land proposed for removal from the project boundary. The location of the buffer strip, not its acreage or specific environmental value, is what is at issue in this case, and therefore, it cannot be exchanged for acreage in a different location.

18. The licensee indicates that it will maintain necessary control of the buffer lands through the issuance or permits and the Declaration placed on the lands to be sold and removed from the project boundary. However, once these lands are outside of the project boundary, the Commission would have no control or enforcement mechanism to ensure project purposes are met (e.g., buffering the project and reservoir from impacts due to vegetation removal, erosion, unauthorized activities, etc). In addition, while it may seem that all of the control issues are covered under the licensee’s current permitting system and the Declaration, we cannot foresee all of the circumstance that might warrant additional or different management activities on the buffer strip lands. These lands are directly adjacent to the reservoir, and as such any activity on this land has a unique ability to directly impact the project and reservoir.

19. In fact, the licensee’s proposal to include each specific provision of the Declaration indicates that the licensee fully understands the importance of these buffer lands. Several of the covenants (e.g., prohibiting clearing of vegetation) reserved in the Declaration concern specifically-stated project purposes, such as erosion control, flowage, and shoreline control.

20. Generally, adding acreage to the project boundary is in the public interest, and adding approximately 21 miles of trails on the 650 acres proposed for inclusion in the project boundary would unquestionably increase the project’s public recreational resources.[11] However, it appears that portions of the proposed trail system have been completely or partially constructed, and are therefore already providing benefits to the public. Including them in the project boundary would provide federal control and allow them to be considered a project resource, but otherwise would not provide a great public benefit over and above what is already being provided, since the trails are being built and open to the public regardless of whether or not we include them in the project boundary.[12] In addition, past recreation monitoring reports indicated that the number and types of facilities and opportunities provided by the licensee were sufficient to meet recreation demand at the project. So, while the licensee’s proposal to add lands is generally positive, it does not meet any specifically-identified recreational need at the project.

21. Licensees are responsible for operating and maintaining projects in accordance with license requirements and project purposes, including public recreation and environmental and shoreline protection. As development and multiple uses of the shoreline continue to grow over the license term, it is expected that licensees may face increasing challenges related to such development. Brazos’s administrative costs relating to the lease sites adjacent to the buffer zone are an example of such challenges, but they do not negate the licensee’s responsibilities to manage the shoreline, which is a license requirement. It appears that the Texas legislature has specifically conditioned its directed sale of project lands on Commission approval of their removal from the project boundary, so there is not any conflict between the legislation and the license requirement for Brazos to retain ownership of the acreage within the buffer zone.

22. In its filing, Brazos correctly points out that there are numerous other licensed projects that have project boundaries at the reservoirs’ normal high water elevation, without a buffer strip. However, the Commission has stated, “[a]s a general matter, we consider it contrary to the public interest to allow a licensee that holds in fee lands needed for project purposes to transfer those lands to a third party, thus taking the lands away from an entity over which we have jurisdiction and giving them to one over which we do not.”[13] We have analyzed the facts regarding this specific property, and for the reasons stated above, we find that the land within the buffer zone is needed for project purposes.[14] Therefore, the licensee’s request to change the project boundary to remove approximately 335 acres of buffer strip land along the shoreline of Possum Kingdom Lake from the project boundary is denied.

The Director orders:

(A) Brazos River Authority’s application, filed March 6, 2009, for Commission authorization to change the project boundary for the Morris Sheppard Dam Hydroelectric Project No. 1490, is denied.

(B) This order constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this order, pursuant to 18 C.F. R. §385.713.

Joseph D. Morgan

Director

Division of Hydropower

Administration and Compliance

[1] Brazos River Authority, 48 FERC ¶ 62,190 (1989).

[2] Brazos River Authority, 11 FERC ¶ 61,162, at 61,348 (1980).

[4] Brazos River Authority, 48 FERC ¶62,190 at 63,238.

[5] Brazos River Authority, 124 FERC ¶ 61,253 (2008).

[8] The lease areas include land owned by Brazos both inside and outside the project boundary, and in the application, the licensee estimates the total acreage of land between the project boundary and the 1,000 feet m.s.l. to be 335 acres.

[9] This trail system is not part of the licensee’s existing recreation plan.

[10] South Carolina Public Service Authority, 7 FERC ¶61,148 (1979).

[11] If these lands were put into the project boundary, license Articles 407 and 408 would require consultation with the U.S. Fish and Wildlife Service (FWS) and the Texas State Historic Preservation Officer (SHPO) prior to any further ground-disturbing activity on those lands.

[12] Project recreational resources include boat docks, swimming areas, camping units, restrooms, and picnic sites at eight different locations around the reservoir.

[14] In its comments supporting the change in the project boundary, Costello Island puts forth essentially the same facts and arguments as the licensee.