2011-24335. Notice of Intent to Accept Proposals, Select Lessee, and Contract for Hydroelectric Power Development at Caballo Dam, Rio Grande Project, New Mexico

AGENCY:

Bureau of Reclamation, Interior.

ACTION:

Notice.

SUMMARY:

Current Federal policy encourages non-Federal development of environmentally sustainable hydropower potential on Federal water resource projects. The Bureau of Reclamation (Reclamation), in consultation with the Department of Energy, Western Area Power Administration (Western), will consider proposals for non-Federal development of hydroelectric power at Caballo Dam, a feature of the Rio Grande Project. Reclamation 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 Rio Grande Project is a Federal Reclamation project. This notice presents background information, proposal content guidelines, and information concerning selection of a non-Federal entity to develop hydroelectric power at Caballo Dam.

DATES:

A written proposal and seven copies must be submitted on or before 5 p.m. (MST) on January 20, 2012. A proposal will be considered timely only if it is received in the office of the Area Manager 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 proposal and seven copies to Mr. Mike Hamman, Area Manager, Albuquerque Area Office, Bureau of Reclamation, 555 Broadway Avenue, NE., Suite 100, Albuquerque, New Mexico 87102, telephone [phone].

A copy of the proposal should also be sent at or about the time it is due at Reclamation to: CRSP Manager, Western Area Power Administration, 150 Social Hall Avenue, Suite 300, Salt Lake City, Utah 84111-1534. Western is available to meet with Reclamation and interested entities to discuss Western's potential marketing of hydropower.

FOR FURTHER INFORMATION CONTACT:

Technical data may be obtained by contacting Ms. Kathleen Dickinson, Albuquerque Area Office, Bureau of Reclamation, 555 Broadway Avenue, NE., Suite 100, Albuquerque, New Mexico 87102, e-mail: [e-mail]. Reclamation will be available to meet with interested entities only upon written request to Ms. Kathleen Dickinson at the above cited address. Reclamation will provide an opportunity for a site visit. In addition, Reclamation reserves the right to schedule a single meeting and/or visit to address the questions of all entities that have submitted questions or requested site visits.

Information related to Western's purchasing and/or marketing of the power may be obtained by contacting Ms. LaVerne Kyriss, CRSP Manager, Western Area Power Administration, 150 Social Hall Avenue, Suite 300, Salt Lake City, Utah 84111-1534, telephone [phone].

SUPPLEMENTARY INFORMATION:

Construction of the Rio Grande Project was authorized by the Secretary of the Interior (Secretary) on December 2, 1905, under provisions of the Reclamation Act of 1902 (Act of June 17, 1902, 32 Stat. 388). The Reclamation Act was extended to the entire state of Texas on June 12, 1906 (34 Stat. 259), following a partial extension for Engle (Elephant Butte) Dam in 1905 (33 Stat. 814). Caballo Dam was included as a flood control unit in the Rio Grande Canalization Project (Act of June 4, 1936, 49 Stat. 1463). Construction of Caballo Dam took place from 1936 to 1938. Flood control operations of the dam are governed by the agreement of October 9, 1935, between the Departments of State and Interior. Caballo Reservoir has a surface area of about 11,500 acres and is located approximately 17 miles south of Truth or Consequences, New Mexico. Caballo Reservoir also provides replacement for storage lost at Elephant Butte Reservoir due to silt deposition and enables more efficient power generation at Elephant Butte Dam. Additional information about the Rio Grande Project can be found at: http://www.usbr.gov/​projects/​Project.jsp?​proj_​Name=​Rio+​Grande+​Project. Additional information about Caballo Reservoir operations can be found at: http://www.usbr.gov/​uc/​crsp/​GetSiteInfo.

Reclamation, in consultation with Western, is considering hydroelectric power development at Caballo Dam under 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, the Town Sites and Power Development Act of 1906 (43 U.S.C. Sec. 522) and the Reclamation Project Act of 1939 (43 U.S.C. 485h(c)) (1939 Act). Reclamation will be the lead Federal agency for ensuring compliance with the National Environmental Policy Act (NEPA) and all other relevant Federal environmental compliance laws such as the Endangered Species Act, National Historic Preservation Act, and Clean Water Act for any lease of power privilege considered in response to this notice. Leases of power privilege may be issued only when Reclamation, upon completion of the NEPA process, determines that the proposed hydropower development is environmentally acceptable. Any lease of power privilege at Caballo Dam must accommodate existing contractual and environmental commitments related to operation and maintenance of existing Rio Grande Project facilities, including water delivery contracts, flood control operations, and compliance with the Rio Grande Compact (Act of May 31, 1939, 53 Stat 785) and the convention between the United States and Mexico concluded on May 21, 1906. Caballo Reservoir storage levels must comply with the Court Order CIV-90-95 HB/WWD, dated October 17, 1996. The lessee (i.e., successful proposing entity) would be required to coordinate operation and maintenance of any proposed hydropower development with existing Federal features. The lessee will be required to meet all Bulk Electric System (BES) electrical reliability standards that apply to the proposed hydro-generation facilities.

Western would have the first opportunity to purchase and/or market the power that would be generated under any lease of power privilege. Western would have 60 days from the date of notification of selection of a 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 environmental compliance, engineering reviews, and development of the lease of power privilege, would be at 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 Federal Government facility. Depending on the economic viability of the proposed hydropower development, this amount will be not less than 3 mills per kilowatt-hour of generation. If conditions provide opportunity for substantial benefits 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 Reclamation Fund.

Proposal Content Guidelines

Interested parties should submit proposals explaining in as precise detail as is practicable how the hydropower potential 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 1939 Act 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 and BES electrical reliability compliance if required.

(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) Identify water rights applicable to the operation of the proposed development(s), the holder of such rights, and how these rights would be used, acquired, or perfected. No new net depletions will be permitted since the Rio Grande is already fully appropriated.

(e) Discuss any studies necessary to adequately define impacts on the Rio Grande Project 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.

(f) Describe anticipated contractual arrangements with Reclamation, which has operation and maintenance responsibility, for any Rio Grande Project feature(s) that are proposed for utilization in the hydropower development under consideration. Define how the hydropower development would operate in harmony with the multiple purposes of the Rio Grande Project, existing applicable water delivery contracts, flood control operations, compliance with court-ordered reservoir storage levels, the Rio Grande Compact (Act of May 31, 1939, 53 Stat 785), the convention between the United States and Mexico concluded on May 21, 1906, and the treaty between the United States and Mexico dated February 1, 1933.

(g) Describe plans for continuing downstream flows during construction that are required to meet irrigation demands, flood control operations, and Rio Grande Compact and international treaty requirements.

(h) Describe plans for assuming liability for damage to the operational and structural integrity of the Rio Grande Project caused by construction, operation, and/or maintenance of the hydropower development.

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

(j) Provide a management plan to accomplish such activities as planning, environmental and electrical reliability 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.

(k) Estimate development cost. This cost should include all investment costs such as the cost of studies to determine feasibility, environmental and electrical reliability 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; annual payments to the United States; expenses that may be associated with the Rio Grande Project; 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 Lessee

Reclamation, in consultation with Western, will evaluate proposals received in response to this published notice. Reclamation 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 lessee.

Reclamation will give more favorable consideration to proposals that (1) are well adapted to developing, conserving, improving, and utilizing the water and natural resources in an environmentally and economically sound manner; (2) clearly demonstrate that the offeror is qualified to develop the hydropower facility and provide for long-term operation and maintenance; and (3) 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 Rio Grande Project purposes, as determined by Reclamation. Reclamation 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 submitting proposals 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 of power privilege. Western will consult with Reclamation on such power purchasing and/or marketing considerations.

Western may market the power available from the project as part of, and under the existing marketing plan of, its Salt Lake City Area Integrated Projects. Western may also market the power 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 lessee, the lessee 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). In addition, if Western elects to not purchase and or market the power generated by the hydropower development, the Lessee will be responsible to coordinate the appropriate transmission service that may be required.

Notice and Time Period To Enter Into Lease of Power Privilege

Reclamation will notify, in writing, all entities submitting proposals of Reclamation's decision regarding selection of the potential lessee. The selected potential lessee will have two years from the date of such notification to accomplish NEPA compliance and enter into a lease of power privilege for the proposed development of hydropower at Caballo Dam. Any excessive delay resulting from compliance with the provisions of Federal environmental laws or administrative review by a Federal agency, pertaining to the project, may extend the two-year time period for a period equal to that of the delay. In the event of litigation related to the proposed project, the two-year time period will be extended for a period equal to that of the delay, provided such litigation was initiated by parties other than the selected potential lessee or its employees, officers, agents, assigns, shareholders, customers, or persons or groups served by or in privity with the potential lessee. The lessee will then have up to two years from the date of execution of the lease to complete the designs and specifications and an additional year to begin construction.

Dated: August 8, 2011.

Larry Walkoviak,

Regional Director, Upper Colorado Region.