Senate Bill S2693

                                 BILL NUMBER:  S2693

 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 reservoirs to capture excess runoff 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 snow-melt, including disease
and destruction of life and property, 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 operation 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 Agreement 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 hydroelectric 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 regulating 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
Sacandaga 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 Conlingville 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 counties 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
periods 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 operating 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 tolerable. 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 operations 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
opportunity to allow for better flow regulation and increase
government efficiency.

 LEGISLATIVE HISTORY :

2013-2014: S.1139-b Remained in Senate Education Committee
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 regulation 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.