2011-11525. Central Utah Project Completion Act; Notice of Intent To Accept Proposals, Select a Potential Lessee, and Contract for Hydroelectric Power Development at the Spanish Fork Flow Control Structure

AGENCY:

Office of the Assistant Secretary—Water and Science, Department of the Interior.

ACTION:

Notice.

SUMMARY:

Current Federal policy encourages non-Federal development of environmentally sustainable hydropower potential on Federal water resource projects. The Department of the Interior (Interior), in consultation with the Department of Energy, Western Area Power Administration (Western), will consider proposals for non-Federal development of hydroelectric power at the Spanish Fork Flow Control Structures of the Central Utah Project (CUP). Interior is considering such hydroelectric power development under a lease of power privilege. No Federal funds will be available for such hydroelectric power development. Western would have the first opportunity to purchase and/or market the power that would be generated by such development under a lease of power privilege. The CUP is a Federal Bureau of Reclamation (Reclamation) project under the administration of the Assistant Secretary for Water and Science. This notice presents background information, proposal content guidelines, and information concerning selection of a non-Federal entity to develop hydroelectric power at the Spanish Fork Flow Control Structure, and power purchasing and/or marketing considerations. Interested entities are invited to submit a proposal for hydroelectric power development at the Spanish Fork Flow Control Structure site for consideration by Interior.

DATES:

A written proposal and seven copies must be submitted on or before 5 p.m. (MST), on October 14, 2011. A proposal will be considered timely only if it is received in the office of the Program Director by or before 5 p.m. on the designated date. Interested entities are cautioned that delayed delivery to this office due to failures or misunderstandings of the entity and/or of mail, overnight, or courier services will not excuse lateness and, accordingly, are advised to provide sufficient time for delivery. Late proposals will not be considered.

ADDRESSES:

Send written proposals and seven copies to Mr. Reed R. Murray, Program Director, Central Utah Project Completion Act, Department of the Interior, 302 East 1860 South, Provo, UT 84606-7317. Requests for technical data should also be sent to Mr. Murray. Any release of such data will be subject to applicable Homeland Security laws and policy.

A copy of the proposal should also be sent to Ms. LaVerne Kyriss, CRSP Manager, Western Area Power Administration, 150 Social Hall Avenue, Suite 300, Salt Lake City, UT 84111-1580. Information related to Western's purchasing and/or marketing the power may also be obtained from Ms. Kyriss at the address above, or by calling [phone].

Information related to the operation and maintenance of the Spanish Fork Flow Control Structure may be obtained from Mr. Rich Tullis, Central Utah Water Conservancy District, 355 West University Parkway, Orem, UT 84058-7303; or by calling [phone].

FOR FURTHER INFORMATION CONTACT:

Mr. Lynn Hansen, [phone].

SUPPLEMENTARY INFORMATION:

Background Information: The CUP, Bonneville Unit, located in northern Utah, was originally authorized for construction, including hydroelectric power, by the Colorado River Storage Project (CRSP) Act of April 11, 1956 (ch. 203, 70 Stat. 105) (CRSP Act). The Spanish Fork Flow Control Structure was constructed under the Central Utah Project Completion Act (CUPCA), comprised of Titles II-VI of the Act of October 30, 1992 (106 Stat. 4600, Pub. L. 102-575). CUPCA also authorized the construction of other features of the Bonneville Unit. Section 208 of CUPCA provides that power generation facilities associated with the CUP be developed and operated in accordance with the CRSP Act, which explicitly embodies all Reclamation law except as otherwise provided in the CRSP Act. Section 208 also specifies that water diverted for power purposes shall only be incidental to the delivery of water for other authorized project purposes. The Central Utah Water Conservancy District (District), under its contracts with the United States and under CUPCA has certain responsibilities and obligations for the CUP and specifically for the Spanish Fork Flow Control Structure including operation, maintenance, replacement, and repayment.

Interior, in consultation with Western, is considering hydroelectric power development at the Spanish Fork Flow Control Structure through a lease of power privilege. A lease of power privilege is an alternative to Federal hydroelectric power development. A lease of power privilege is a contractual right given to a non-Federal entity to use a Reclamation facility for electric power generation consistent with Reclamation project purposes. Leases of power privilege have terms not to exceed 40 years. The general authority for lease of power privilege under Reclamation law includes, among others, Section 5 of the Town Sites and Power Development Act of 1906 (43 U.S.C. 522) and Section 9(c) of the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)) (1939 Act). Interior will be the lead Federal agency for ensuring compliance with the National Environmental Policy Act (NEPA) of any lease of power privilege considered in response to this notice. Leases of power privilege may be issued only when Interior, upon completion of the NEPA process, determines that the affected hydroelectric power sites are environmentally acceptable. Any lease of power privilege at the Spanish Fork Flow Control Structure must accommodate existing contractual commitments related to operation and maintenance of such existing facilities. The potential lessee (i.e., successful proposing entity) would be required to coordinate with the District in the operation and maintenance of any proposed hydropower developments with existing project features.

Western would have the first opportunity to purchase and/or market the power that would be generated under any lease of power privilege. Under this process, Western would either purchase and market the power as Salt Lake City Area—Integrated Projects (SLCA-IP) power or market the power independently by first offering it to preference entities and secondly to non-preference entities. Western would have 60 days from the date of notification of selection of a potential lessee in which to decide whether to purchase and/or market the power.

All costs incurred by the United States related to development and operation and maintenance under a lease of power privilege, including NEPA compliance and development of the lease of power privilege, would be the expense of the lessee. In addition, the lessee would be required to make annual payments to the United States for the use of a Government facility. Depending on the economic capability of the proposed hydroelectric development, this amount will not be less than 3 mills per kilowatt-hour of generation. If conditions provide opportunity for substantial benefit to accrue to the lessee, then the United States will benefit proportionally. Also, under the lease of power privilege, provisions will be included for inflation of the annual payment with time. Such annual payments to the United States would be deposited as a credit to the Upper Colorado River Basin Fund.

Interested Parties: Interior will be available to meet with interested entities only upon written request to the Program Director at the above address. Interior reserves the right to schedule a single meeting and/or visit to address at once the questions of all entities that have submitted questions or requested site visits. Western will also be available to meet with Interior and interested entities to discuss Western's potential marketing of hydropower.

Proposal Content Guidelines: Interested parties should submit a proposal explaining in as precise detail as is practicable how the hydropower potential at the site would be developed. Factors which a proposal should consider and address include, but are not limited to, the following:

A. Provide all information relevant to the qualifications of the proposing entity to plan and implement such a project, including, but not limited to, information about preference status, type of organization, length of time in business, experience in funding, design and construction of similar projects, industry rating(s) that indicate financial soundness and/or technical and managerial capability, experience of key management personnel, history of any reorganizations or mergers with other companies, and any other information that demonstrates the interested entity's organizational, technical and financial ability to perform all aspects of the work. Include a discussion of past experience in operating and maintaining similar facilities and provide references as appropriate. The term “preference entity,” as applied to a lease of power privilege, means an entity qualifying for preference under Section 9(c) of the Reclamation Project Act of 1939, as a municipality, public corporation or agency, or cooperative or other nonprofit organization financed in whole or in part by loans made pursuant to the Rural Electrification Act of 1936, as amended.

B. Provide geographical locations and describe principal structures and other important features of the proposed development including roads and transmission lines. Estimate and describe installed capacity and the capacity of the power facilities under dry, average, and wet hydrological conditions. Also describe seasonal or annual generation patterns. Include estimates of the amount of electrical energy that would be produced from the facility for each month of average, dry, and wet water years. If capacity and energy can be delivered to another location, either by the proposing entity or by potential wheeling agents, specify where capacity and energy can be delivered. Include concepts for power sales and contractual arrangements, involved parties and the proposed approach to wheeling if required. To determine the marketability of the generated hydropower, Western requires the following information: cost of delivered generation in $/megawatt-hour, including any variations in cost (on-peak, off-peak, seasonal), including escalation factors and any other charges; delivery point and voltage of generation plus any arrangements the lessee has to wheel power to an alternate location(s); the daily, weekly, monthly, and annual pattern of expected generation under average, wet, and dry hydrological conditions; ability of generation to provide ancillary services such as regulation, spinning reserves, and volt-ampere reactive support; and information on the reliability of the generation, potential maintenance outage schedule, and duration.

C. Indicate title arrangements and the ability for acquiring title to or the right to occupy and use lands necessary for the proposed development(s), including such additional lands as may be required during construction.

D. Discuss any studies necessary to adequately define impacts on the CUP and the environment of the development. Describe any significant environmental issues associated with the development and the proposing entity's approach for gathering relevant data and resolving such issues to protect and enhance the quality of the environment. Explain any proposed use of the hydropower development for conservation and utilization of the available water resources in the public interest.

E. Describe any contractual arrangements with the entity having operation and maintenance responsibility for the CUP feature(s) that are proposed for utilization in the hydropower development under consideration. Define how the hydropower development would operate in harmony with the CUP and existing applicable contracts related to operation and maintenance of CUP feature(s) being considered for modification.

F. Identify plans for assuming liability for damage to the operational and structural integrity of the CUP caused by construction, operation, and/or maintenance of the hydropower development.

G. Identify the organizational structure planned for the long-term operation and maintenance of any proposed hydropower development.

H. Provide a management plan to accomplish such activities as planning, NEPA compliance, lease of power privilege development, design, construction, facility testing, and start of hydropower production. Prepare schedules of these activities as is applicable. Describe what studies are necessary to accomplish the hydroelectric power development and how the studies would be implemented.

I. Estimate development cost. This cost should include all investment costs such as the cost of studies to determine feasibility, NEPA compliance, design, construction, and financing as well as the amortized annual cost of the investment; also, the annual operation, maintenance, and replacement expense for the hydropower development; lease payments to the United States; and expenses that may be associated with the CUP; and the anticipated return on investment. If there are additional transmission or wheeling expenses associated with the development of the hydropower development, these should be included. Identify proposed methods of financing the hydropower development. An economic analysis should be presented that compares the present worth of all benefits and costs of the hydropower development.

Selection of the Potential Lessee: Interior, in consultation with Western, will evaluate proposals received in response to this published notice. Interior may request additional information from individual proposing entities and/or all proposing entities after proposals are submitted, but prior to making a selection of a potential lessee.

Interior will give more favorable consideration to proposals that (1) utilize water and natural resources in an environmentally and economically sound manner: (2) improve ecosystem function; (3) clearly demonstrate that the offeror is qualified to develop the hydropower facility and provide for long-term operation and maintenance, and (4) best share the economic benefits of the hydropower development among parties (including the United States) to the lease of power privilege. A proposal will be deemed unacceptable if it is inconsistent with CUP purposes, as determined by Interior. Interior will give preference to those entities that qualify as preference entities (as defined under Proposal Content Guidelines, item A.), provided that their proposal is at least as well-adapted to developing, conserving, and utilizing the water and natural resources as other submitted proposals and that the preference entity is well qualified. Through written notice, all preference entities would be allowed 90 days to improve their proposals, if necessary, to be made at least equal to a proposal(s) that may have been submitted by a non-preference entity.

Power Purchasing and/or Marketing Considerations: Western would have the first opportunity to purchase and/or market the power that would be generated by the project under a lease(s) of power privilege. Western will consult with Interior on such power purchasing and/or marketing considerations.

Western may market the power available from the project as part of its Salt Lake City Area Integrated Projects (SLCA/IP) or on a stand-alone basis, first to preference entities qualified under criteria established by Western and second to non-preference entities, by developing an individual marketing plan for this power. This marketing plan would be developed through a separate subsequent public process beginning with a notice in the Federal Register of Western's intent to market the power. The marketing plan would include all aspects of marketing the power, including assignment of power to qualified preference and/or non-preference entities, pricing, transmission, and delivery of power. Western would recover the costs it would incur in purchasing and/or marketing the power through the rates charged for the power. Firm power rates would be established through a public process, initiated by a notice in the Federal Register, separate from the marketing plan.

In the event Western elects to not purchase and/or market the power generated by the hydropower development or such a decision cannot be made within 60 days of notification of selection of a potential lessee, the lessee(s) would be responsible for marketing the power generated by the project with priority given to preference entities as heretofore defined in Proposal Content Guidelines, item A.

Notice and Time Period to Enter Into Lease of Power Privilege: Interior will notify, in writing, all entities submitting proposals of Interior's decision regarding selection of the potential lessee(s). The selected potential lessee(s) will have five years from the date of such notification to enter into a lease(s) of power privilege for the site or sites identified in the proposal. This period may only be extended by the United States in writing.

Dated: May 4, 2011.

Reed R. Murray,

Program Director, Department of the Interior.