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Federal Register / Vol. 86, No. 15 / Tuesday, January 26, 2021 / Notices in the event of a dam failure or breach, as demonstrated by the failure of the Edenville and Sanford dams near Midland, Michigan, on May 19, 2020.
The cause of these dam failures is still under investigation. Nonetheless, the licensee of both projects had for many years failed to comply with dam safety directives, at least in part due to the alleged lack of financial capacity to meet Commission requirements, which resulted in the Commission revoking the license for the Edenville project in 2018.14 The dam failures created an immediate safety hazard requiring thousands to evacuate, and estimates to repair and restore the dams have been more than $300 million dollars, which does not include the damages that property owners affected by the flooding may have suffered.
8. While significant dam failures have fortunately been very rare, the Commission has seen increasing numbers of projects that are nonoperational or out of compliance with their license conditions, where licensees have stated that they cannot afford to operate or maintain the projects or implement required environmental or safety measures. Commission staff regularly works with these licensees to bring these projects back into operation or compliance, but only with mixed success.15
9. As of December 2020, Commission staff is aware of approximately 88
projects that are non-operational and is working with licensees of non-operating projects to restore operations. A
licensees lack of financial resources is often a key factor in a project becoming non-operational. For those licensees that cannot restore operation, some licensees apply to surrender their licenses.
However, for those where operating the project or bringing the project into compliance is too financially burdensome, the surrender process may also be economically infeasible. Where licensees show the inability or unwillingness to maintain their projects and do not voluntarily seek surrender, the Commission has terminated licenses by implied surrender.16 But implied 14 See Boyce Hydro Power, LLC, 164 FERC
61,178 2018 revoking the license for the Edenville Project No. 10808 due to the licensees longstanding failure to increase the projects spillway capacity to safely pass flood flows, as well as its failure to comply with its license, the Commissions regulations, and a June 15, 2017
Compliance Order, order on rehg, 166 FERC
61,029 2019.
15 Section 6.4 of the Commissions regulations gives licensees three years to resolve their nonoperating issues. 18 CFR 6.4.
16 See, e.g., Brentwood Dam Ventures, LLC, 158
FERC 61,037 2017 terminating the exemption for the Exeter River Hydro 1 Project No. 4254 by
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surrender may not be appropriate where environmental or dam safety measures need to be taken to leave the project in acceptable condition. In addition to voluntary and implied surrender, the Commission has enforcement mechanisms at its disposal, including license revocation, the imposition of civil penalties, seeking injunction relief in federal court, and referral to the Department of Justice for criminal prosecution. These measures, while appropriate in some cases, may not result in necessary license compliance.
10. Based on the concern that inadequate financing may result in threats to public safety and environmental resources, the Commission is considering whether additional measures should be taken to ensure licensees have the financial resources to operate and maintain their projects for the life of the project, including under unforeseen circumstances. We recognize that imposing additional financial requirements may pose difficulties for licensees, particularly those operating small projects, but are also cognizant of our responsibilities to the public.
Therefore, the Commission is soliciting public comment on potential mechanisms to ensure that licensees can afford required safety measures, ongoing project operation and maintenance expenses, and license compliance to prevent future safety and environmental hazards.

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Commission reopen licenses to impose financial assurance measures? Should the Commission require licensees to reaffirm or recertify that they have adequate financial assurance instruments every few years during their license term? If so, how often during a license term should the Commission require licensees to demonstrate that they still have adequate finances?
Should the Commission require licensees to notify the Commission if the circumstances underlying their financial assurance instruments have changed?
12. Below we outline three potential options that Commission staff has identified for establishing financial assurance mechanisms in hydroelectric licenses: 1 Requiring licensees to obtain bonds to cover the costs of safety measures and project operation and maintenance; 2 establishing an industry-wide trust or remediation fund or requiring licensees to maintain an individual trust, escrow, or remediation fund; or 3 requiring licensees to obtain insurance policies for unforeseen safety hazards or dam failures. We encourage comments on these options as well as the suggestion of any other alternatives.
While the Commission will consider all comments filed, the Commission may not, and is not required to, take further action.

II. Subject of the Notice of Inquiry 11. The Commission seeks comments on whether, and, if so, how the Commission should revise its practices for requiring financial assurance mechanisms in the licenses and other authorizations it issues for hydroelectric projects. First, we solicit comments regarding how and when the Commission should require financial assurance from licensees. Specifically, should a financial assurance requirement be included in original licenses and/or on relicense? If on relicense, should such a requirement be included in both new licenses for major projects and subsequent licenses for minor projects? Should the Commission also require financial assurance requirements in other authorizations, such as all exemptions, amendment requests, and transfers? Should the
A. Bonds 13. The Commission could require licensees to obtain bonds to ensure they have sufficient funds to pay for operation, maintenance, environmental, and safety measures throughout the duration of the license. The Commission seeks comment on this option and the following questions:
i. Should the Commission require licensees to obtain bonds as a financial assurance mechanism?
ii. If so, how should the Commission determine the amount of the bond or what factors should the Commission consider when determining the bond amount?
iii. Are bonds within the resources of all licensees, including those of small hydroelectric projects. Could the Commission mitigate these expenses?
iv. What other challenges would bond requirements pose to individual licensees, municipal licensees, the public, or the Commission?

implied surrender because the exemptee did not make the necessary repairs to restore project operation; see also James Lichoulas Jr., 124 FERC
61,255 2008 terminating the license for the Appleton Trust Project No. 9300 by implied surrender because the licensee failed to restore project operation after more than a decade, affd, Lichoulas v. FERC, 600 F.3d 769 D.C. Cir. 2010.

B. Trust, Escrow, or Remediation Fund 14. The Commission could establish an industry-wide trust or remediation fund to pay for necessary repairs and remediation, similar to the Environmental Protection Agencys superfund program, or could require
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