Balancing Environmental Protection and Energy Production in the Federal Hydropower Licensing Process

Abstract

The Federal Energy Regulatory Commission must balance environmental protection of riverine resources with the nation's growing demand for power production every time it issues a new hydroelectric license. This paper models the bureaucratic agency's decision making process in issuing these licenses, in an effort to understand which factors most influence the regulatory decision. Data on nearly 500 hydropower licenses issued from 1983-2005 is utilized. It is discovered that legislative and institutional constraints are, by far, the largest influences on FERC's regulatory decisions. These results imply that if the current allocation of surface water in the United States between its competing environmental protection and energy production end uses is considered inefficient, the most effective way to alter the current allocation is by passing new legislation, or by implementing institutional reform at FERC.

Keywords: regulation, energy, environment, hydropower, interest groups

JEL Classification: Q2, Q4