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Exelon Generation Company, LLC (“Exelon”) and the State of Maryland recently entered into a multimillion-dollar settlement agreement to resolve federal and State litigation, along with two administrative actions, stemming from the State’s Water Quality Certification for the Conowingo Hydroelectric Project. The Water Quality Certification (“Certification”) was one of the final outstanding items in the relicensing process for the Conowingo Project, which Exelon initiated over a decade ago. Exelon was required to request the Certification pursuant to Section 401 of the Clean Water Act from states adjacent to the Project where its activity may result in a “discharge” to state waters. The goal of this provision in the Clean Water Act is to ensure that operation of the Project, or any federally licensed activity, will not harm state water quality. Maryland issued the Certification on April 27, 2018. Among other things, the primary issue contested by Exelon was a requirement in the Certification that the corporation take responsibility for downstream water quality impacts resulting from nutrients and sediment released by the Conowingo Dam under certain environmental conditions.

When Conowingo Dam came online in 1928, neither the Clean Water Act nor the Chesapeake Bay TMDL could have been contemplated by its designers or constructors. For decades the dam trapped much of the sediment and nutrient pollution carried by the Susquehanna River and prevented it from reaching the main stem of the Chesapeake Bay. In the mid-1990s, researchers estimated that the three upstream Susquehanna dams, including the Conowingo Dam, were trapping about two percent of the nitrogen (most of the nitrogen is dissolved in the water column), 40 percent of the phosphorus, and 70 percent of the sediment that would have entered the Bay from the Susquehanna River. In other words, while not designed to do so, the Conowingo Dam had inadvertently helped reduce contributions of sediment and phosphorus to the Chesapeake. Over the decades since its construction, the sediment storage capacity of the reservoir behind the dam gradually declined. According to the 2016 report which presented the findings of the Lower Susquehanna River Watershed Assessment led by the Corps of Engineers and the Maryland Department of the Environment, the Conowingo Dam is now in a state of “dynamic equilibrium,” meaning that it is no longer trapping sediment and associated nutrients over the long term. Thus, during high river flow events, such as major storms, some of that stored sediment is scoured and washed downstream. The phosphorus bound with that sediment in turn feeds algal blooms in the mainstem of the Chesapeake Bay. The algae then die and contribute to depressed dissolved oxygen levels in that portion of the Bay which affect aquatic life. Such water quality conditions are primarily what the Chesapeake Bay TMDL was created to address.

It is undisputed that the Conowingo Dam directly affects water quality conditions and aquatic habitat through its presence on the river, such as altering river flow and impeding fish and eel passage. It is also clear that the bulk of the nutrients and sediment flowing down the Susquehanna River originate from non-point sources such as agriculture in Pennsylvania and New York. What remains disputed is the extent to which the operation of the Conowingo Project affects the form and timing of the delivery of the sediments and nutrients trapped behind Conowingo Dam. In the Certification, the State of Maryland attributed impacts to downstream water quality from sediment and nutrients released through scouring during storm events and required Exelon to reduce nitrogen discharges by six million pounds and phosphorus discharges by two hundred and sixty thousand pounds or pay an annual fee in-lieu at $17.00 per pound of nitrogen and $270.00 per pound of phosphorus. Exelon vigorously contested these and other conditions and filed two judicial actions: one in the U.S. District Court for District of Columbia and another in the Circuit Court of Baltimore City. Exelon also filed a “Protective Petition for Reconsideration and Administrative Appeal” with the Maryland Department of the Environment (“the Department”) in which it requested that the Department reconsider and stay its decision to issue the Certification. Two environmental advocacy organizations aggrieved by what they described as shortcomings in the Certification also filed for reconsideration of its terms by the Department. Finally, Exelon filed a Petition for Declaratory Order with the Federal Energy Regulatory Commission (“FERC” or the “Commission”) on February 28, 2019 requesting that the Commission find that the State of Maryland waived its authority to issue the Water Quality Certification based on the recent decision by the United States Court of Appeals for the District of Columbia Circuit in Hoopa Valley Tribe v. FERC, 913 F.3d 1099 (D.C. Cir. 2019). In that case, the Court of Appeals held that the withdrawal and resubmittal of section 401 Water Quality Certifications does not avoid waiver under the Clean Water Act which requires that the State must act on the application within one year. 33 U.S.C. § 1341(a)(1). While we can argue whether the operative facts in Hoopa Valley are distinguishable from those here, this last proceeding could have had implications beyond the matter at issue should it have been litigated or appealed, given the current federal Administration’s views on state application of section 401 Water Quality Certifications on federally licensed energy projects such as natural gas pipelines. The enforcement of a hard, one-year deadline for a state to approve or deny a licensee’s application for a Water Quality Certification could result in numerous opportunities for environmental litigation in Maryland and throughout the nation should states start denying certifications for complex projects outright in lieu of a longer-term analysis of a project’s water quality impacts.

Is the Conowingo saga nearing its close – at least for the next fifty years? Stakeholders and members of the public have until January 17, 2020 to weigh in by filing comments with FERC on the settlement agreement. Reply comments are due by January 31, 2020, after which time the license may be issued upon the resolution of any contested issues in the settlement and a finding by the Commission “that the settlement appears to be fair and reasonable and in the public interest.”

Paul W. Smail is the Director of Litigation at the Chesapeake Bay Foundation and a Member of the MSBA’s Energy and Environmental Law Section. The foregoing summary does not constitute legal advice and the views and opinions expressed are those of the author and do not necessarily reflect the official policy or position of the Chesapeake Bay Foundation, Inc.