STATE OF MAINE

DEPARTMENT

OF

ENVIRONMENTAL PROTECTION

JOHN ELIAS BALDACCI

GOVERNOR

DAVID P. LITTELL
COMMISSIONER

VIA ELECTRONIC MAIL December 7, 2009 Frank H. Dunlap Senior Environmental Specialist FPL Energy Maine Hydro LLC 160 Capitol Street, Suite 8 Augusta, ME 04330 RE: Application for Water Quality Certification Flagstaff Storage Project FERC No. 2612

Dear Frank: The purpose of this letter is to summarize the status of water quality certification for the Flagstaff Storage Project. On November 14, 2003, the Department approved water quality certification for the Flagstaff Project, subject to a number of conditions, including conditions regarding lake levels and flow releases. With respect to lake levels, the Department established a maximum winter drawdown limit of 24 feet below full pond, except when excessive snowpack or precipitation requires an additional drawdown in order to maintain the historic level of flood protection for the Kennebec River. This approval was based in part on the Departments finding that (t)he available evidence indicates that the structure and function of the resident biological community in Flagstaff Lake is the structure and function that would be expected to exist in a water storage reservoir with a drawdown of similar magnitude. The Department also established a maximum summer (June 1 to August 31, inclusive) drawdown limit of 4.5 feet below full pond. With respect to flow releases, the Department required that a minimum flow of 200 cfs, or such higher flow as is needed, be released from the Flagstaff (Long Falls) Dam to the Dead River to achieve a target minimum flow of 300 cfs below Spencer Stream, except under specified circumstances. The Department also required specified whitewater boating flow releases from the Flagstaff (Long Falls) Dam to the Dead River. On December 9, 2003, separate appeals of the Departments decision were filed by the Town of Eustis and by a group of non-governmental organizations (NGOs), including Maine Rivers, Trout Unlimited, the Appalachian Mountain Club, and the Natural Resources Council of Maine.

Letter to Frank H. Dunlap December 7, 2009 Page 2 of 5

In its appeal, the Town of Eustis contended that the summer drawdown limit approved by the Department would adversely affect public access and recreation, wetlands and wildlife habitat, loon nesting, and the local economy. The Town requested that the Board modify the Departments action to reduce allowable summer/fall drawdowns.1 In their appeal, the NGOs contended that the winter drawdown limit approved by the Department violated applicable water quality standards for aquatic life, that the Department improperly created a subclass under Maines water quality standards without conducting the required use attainability analysis,2 and that the Departments action was based on a new interpretation of water quality standards that must be approved by EPA. The NGOs requested that the Board reverse the Departments action and deny water quality certification for the project. On March 30, 2004, FERC issued a new license for the project incorporating the winter drawdown limit and flow requirements contained in the Departments certification. The new license also incorporated the summer drawdown limit contained in the Departments certification, but, in response to concerns expressed by the Town of Eustis, stipulated a gradual drawdown over the summer/early fall months.3 On July 15, 2004, on appeal, the Board of Environmental Protection reversed the Department and denied certification for the project, without prejudice, until such time as either EPA approves Resolves 2003, Chapter 37 (which authorized an impoundment-toimpoundment comparison for meeting aquatic life standards in water storage reservoirs) or FPL Energy conducts a use attainability analysis (UAA) to support the adoption of new water quality standards for Flagstaff Lake.4 FPL Energy subsequently appealed the Boards decision to state court. On September 21, 2004, in response to the Boards action and FPL Energys appeal of that action, FERC stayed the new license pending the outcome of the state litigation. FPL Energy then appealed FERCs decision to federal court. On July 26, 2007, the Boards action was upheld by the Maine Supreme Court. The Court found that the Boards interpretation of the States water quality statute was
1

The Town requested that lake drawdowns be limited to 6 inches (0.5 feet) in June, 18 inches (1.5 feet) in July, 30 inches (2.5 feet) in August, 42 inches (3.5 feet) in September, and 60 inches (5.0 feet) in October. 2 A use attainability analysis (UAA) is a structured scientific assessment of the factors affecting the attainment of a designated use in a waterbody. The assessment may include consideration of physical, chemical, biological and economic factors. 38 MRSA Section 466(11-A). 3 License Article 402 provides that the licensee shall maintain water surface levels in Flagstaff Lake at or above 1 foot below full pond during June; 2 feet below full pond during July; 3 feet below full pond during August; and 4.5 feet below full pond during September, based on a full pond elevation of 1,146 feet USGS. This Article does not conflict with the maximum summer drawdown limit established in the Departments certification. 4 Because the Board denied certification for the project, no action was taken on the appeal filed by the Town of Eustis.

Letter to Frank H. Dunlap December 7, 2009 Page 3 of 5

entitled to deference and that the Boards position that the impoundment-toimpoundment standard was a new standard requiring EPA approval or a UAA was a reasonable interpretation and was consistent with legislative intent. The Court also found that the issuance of an approval by the Department within one year of the last re-filing of the application was sufficient to prevent a waiver of certification, and that subsequent appeals of the agency decision were not required to be completed within the one-year period for action on a request for certification. FPL Energys subsequent request that the U.S. Supreme Court review the case was denied, so the Maine Supreme Courts decision is now final. On December 23, 2008, FERCs action was upheld by the First Circuit Court of Appeals. The Court found that the legal principles of res judicata barred it from re-examining the Maine Supreme Courts decision upholding the validity of the Boards denial of certification. The Court also found that FERC had authority to stay a license already granted. No further appeal was filed, so the First Circuit decision is now final. As a consequence of the Maine Supreme Court and First Circuit Court decisions, the Boards denial of water quality certification for the project stands and FERCs stay of the new license for the project remains in effect. This means that, for now, the project continues to operate under the terms of its original 1979 FERC license, which does not contain any drawdown limits for Flagstaff Lake or minimum flow requirements for the Dead River. In a letter dated September 24, 2009, FERC asked that FPL Energy provide evidence that you have filed a new certification request and inform [FERC] of any other steps you are taking to ensure that you will be able to obtain a new certification.5 By letter dated November 16, 2009, FPL Energy has now submitted a new Application for Water Quality Certification for the continued operation of the Flagstaff Storage Project, FERC No. 2612. The application incorporates by reference all prior filings and submittals related to this matter. Your application has been accepted for processing as of todays date. It is the DEPs understanding that FPL Energy proposes to continue to operate the project with lake levels generally following the long-term average operating curve, and with a maximum allowable drawdown of 36 feet below full pond. It is also the DEPs understanding that a drawdown of approximately 24 feet below full pond by late March is necessary to maintain existing flood control capacity in the Kennebec River storage system6 and to allow the lake to be re-filled in the spring back to full-pond level under average runoff conditions.

Pursuant to section 401(a)(1) of the Clean Water Act, FERC cannot issue a new license for the project until water quality certification has been granted or waived by the State. 6 This system includes, in addition to Flagstaff Lake, Brassua Lake and Moosehead Lake.

Letter to Frank H. Dunlap December 7, 2009 Page 4 of 5 After a review of the available information, it is the Departments position that, in keeping with the Boards July 15, 2004 decision, the maximum drawdown of Flagstaff Lake would have to be limited to approximately 8 feet in order to maintain sufficient aquatic habitat to meet existing Class GPA water quality standards. This is based, in part, on the Departments calculation that the littoral (i.e., light-penetrating) zone of the lake extends to a depth of 18.7 feet below full pond. The Department remains ready to consider any new information that may expand the calculated depth of the littoral zone and, in so doing, increase the allowable drawdown of the lake.7 It is further the Departments position that any drawdown of Flagstaff Lake in excess of approximately 8 feet can only be approved through a UAA process that leads to the adoption of new water quality standards for the lake. The Department stands ready to work in cooperation with FPL Energy to conduct a UAA for Flagstaff Lake to accommodate a drawdown for the lake that will maintain the significant flood control and energy generation benefits of the project.8 Please advise me at your earliest convenience as to how you would like to proceed in this matter. In the meantime, the Department suggests that FPL Energy discuss summer/fall lake level issues directly with the Town of Eustis.9 Sincerely,

Dana Paul Murch Dams & Hydropower Supervisor

The DEP defines the littoral zone as twice the average summer water clarity (i.e., Secchi disk) reading, or the depth at which 1% of incident light remains. Based on the available information, a drawdown of 5 feet during the open water season will maintain 75% of the littoral zone habitat, while a drawdown of 8 feet during ice-in conditions will maintain about 75% of the lake surface area and about 50% of the lake volume, all compared to full pond conditions. 8 As you know, subsequent to the Boards action on the Flagstaff project, the Department successfully conducted a UAA and the Board, the Maine Legislature, and EPA approved new water quality standards for Ragged and Seboomook Lakes that accommodated drawdowns of up to 20 feet and 17 feet, respectively, for these lakes. 9 It is the Departments understanding that the Town of Eustis is prepared to accept summer/fall drawdown limits as established by FERC in the new license issued March 30, 2004. As noted above, this license is currently stayed.

Letter to Frank H. Dunlap December 7, 2009 Page 5 of 5 cc: Chad Clark, FPL Energy Matt Manahan, Pierce Atwood Andy Fisk, DEP Dave Courtemanch, DEP Roy Bouchard, DEP Brian Kavanah, DEP Jerry Reid, AGs Office Jan McClintock, AGs Office Curtis Webber, Linnell Choate & Webber Steve Timpano, DIFW Dave Boucher, DIFW-Region D Alan Stearns, DOC Kathy Eickenberg, DOC Fred Seavey, USFWS Steve Silva, EPA Andy Cadot, Perkins Thompson Chris Dargie, Perkins Thompson Ken Kimball, AMC Nick Bennett, NRCM Bill Townsend, Maine Rivers Landis Hudson, Maine Rivers