UNITED STATES OF AMERICA 106 FERC 62,232 FEDERAL ENERGY REGULATORY COMMISSION FPL Energy Maine Hydro LLC Project No. 2612-005

ORDER ISSUING NEW LICENSE (MAJOR PROJECT) (March 30, 2004) INTRODUCTION 1. This order issues a new license to FPL Energy Maine Hydro LLC (FPL Energy) for the continued operation and maintenance of the Flagstaff Storage Project No. 2612, located on the Dead River, a navigable tributary of the Kennebec River,1 in the Town of Eustis, Maine (Town of Eustis) and the unorganized townships of Dead River, Carrying Place, Bigelow, Flagstaff, and Spring Lake, in Somerset and Franklin Counties, Maine. The project does not occupy any federal lands. 2. On December 28, 1995, an application for a new license was filed pursuant to Sections 4(e) and 15 of the Federal Power Act (FPA), 16 U.S.C. 797(e) and 808, for the continued operation and maintenance of the Flagstaff Storage Project.2 The Flagstaff Project operates as a water storage facility to provide flood control and reliable flows for downstream industries, municipalities, and hydroelectric generation on the Kennebec River.3 Based on my review of the agency and public comments and recommendations1

Central Maine Power, 7 FERC 61,045 (1979).

The application was filed by former licensee, the Central Maine Power Company (Central Maine). On December 28, 1998, the Commission issued an Order Approving Transfers of Licenses, including the transfer of the Flagstaff Project, from Central Maine to FPL Energy contingent on the submission of certified copies of all instruments of conveyance and signed acceptance sheets, 88 FERC & 62,208 (1998). By letter dated July 20, 1999, Commission staff advised the parties that the requirements for the transfer were met. The Flagstaff Project operates as part of a basin storage system. The Moosehead Project No. 2671 and Brassua Project No. 2615 also contribute storage. Downstream generation occurs at eight projects, located on the Kennebec River downstream from its confluence with the Dead River. From upstream to downstream, they are the Wyman3

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and evaluation of the developmental and environmental effects of the proposed project and its alternatives, I conclude that relicensing the project as proposed, with staffs recommended measures, would be in the public interest. BACKGROUND 3. An original license for the project was issued in 1979, with an effective date of January 1, 1948, and a termination date of December 31, 1997. Project operation has continued pursuant to annual licenses, pending disposition of FPL Energy's application for a new license. See Section 15(a)(1) of the FPA, 16 U.S.C. 808(a)(1). 4. On April 4, 1996, the Commission issued public notice of the relicense application, soliciting motions to intervene. Timely motions to intervene, none in opposition, were filed by Wolfgang W. Kaiser and Alice P. Douglas (jointly); Raft Maine; the Town of Eustis, Stratton-Eustis Development Corporation, Burleigh Loveitt, Deborah Loveitt, and Linda M. Frinsko (jointly); the Maine State Planning Office (Planning Office);4 the U.S. Department of the Interior (Interior); American Rivers, American Whitewater Affiliation, Appalachian Mountain Club, New England FLOW, and Conservation Law Foundation (Conservation Intervenors, jointly); and the Kennebec Valley Chapter of Trout Unlimited.5 5. On August 21, 1996, the Commission issued public notice that the project was ready for environmental analysis and solicited comments, recommendations, and terms and conditions. In response, comments and/or recommendations were filed by the following entities: Consolidated Hydro Maine, Inc.; Raft Maine; United States Fish and Wildlife Service (FWS); Conservation Intervenors; and Kennebec Valley Chapter of Trout Unlimited. Project No. 2329, Williams Project No. 2335, Anson Project No. 2365, Abenaki Project No. 2364, Weston Project No. 2325, Shawmut Project No. 2322, Hydro-Kennebec Project No. 2611, and Lockwood Project No. 2574. A ninth project, the Edwards Project No. 2389, was removed in 1999. The Planning Office states in its intervention that it represents the state agency interests of the Department of Environmental Protection, Land Use Regulatory Commission, Department of Marine Resources, Department of Inland Fish and Wildlife, Atlantic Sea Run Salmon Authority, and Department of Conservation; and the public interest of the citizens of Maine. The motions were timely and unopposed and therefore automatically granted 18 C.F.R. ' 385.214(c)(1) (2002).5 4

6. On December 17, 1997, Commission staff issued a draft environmental assessment (EA) that evaluated the potential impacts of relicensing the project. Comments on the draft EA were considered in preparing the final EA, which was issued on February 4, 1999.6 The motions to intervene, protests, comments and recommendations have been fully considered in determining whether, and under what conditions, to issue this license. PROJECT DESCRIPTION 7. The Flagstaff Project is located on the Dead River 22 miles upstream of the confluence of the Dead and Kennebec Rivers. The projects principal existing features consist of: (1) the 1,339-foot-long, 45-foot-high Long Falls dam; (2) Flagstaff Lake, an impoundment having a length of about 23 miles, a width of about 6 miles at the widest point, and a useable storage capacity of 275,482 acre-feet; and (3) appurtenant facilities. A more detailed project description is contained in ordering paragraph (B)(2). 8. Operation of the project is coordinated with two other storage projects (Moosehead and Brassua Projects), collectively known as the Kennebec River storage system, in the headwaters of the Kennebec River Basin to provide flood protection and reliable flows for downstream industries, municipalities, and hydroelectric generators. The Kennebec River storage system is operated by the Kennebec Water Power Company (KWP), a corporation whose member companies are FPL Energy and other downstream hydro interests.7 The KWP Engineering Advisory Committee, comprising the KWP member companies, regulates flow releases from the three storage projects. 9. The Moosehead, Brassua, and Flagstaff Projects account for about 53, 20, and 27 percent, respectively, of the total available storage. Brassua Lake is located on the Moose River, a tributary of Moosehead Lake, on the Kennebec River upstream from the confluence of the Kennebec and Dead Rivers. The Kennebec River storage system is operated on an annual cycle under which the reservoirs are filled by spring runoff, historically occurring in May or early June. As the spring runoff subsides, the natural flow in the Kennebec River begins to drop below a level necessary to support the industrial, municipal, and hydroelectric uses on the river. At that time, water is drawn from these storage reservoirs to supplement the natural flow. With the onset of cold Although no comments on the final EA were solicited, comments were received from FPL Energy, the Town of Eustis, the Assessor for the Town of Eustis, U.S. Senator Susan M. Collins, and State Representative Arlan R. Jodrey. Other member companies of the KWP are Madison Paper Industries, Merimil Limited Partnership, and Scott Paper Company.7 6

weather, additional flows are released from the reservoirs for downstream users. The reservoirs are targeted to reach their lowest point by the last week of March, the historical average for the start of spring runoff. 10. FPL Energy proposes no new storage capacity and to continue to operate the project as an integral part of the Kennebec River storage system. Based on historical averages, Flagstaff Lake is drawn down about 2 feet below the full pond elevation of 1,146 feet8 by mid-July; 5 feet by August 31; 7 feet by October 15; and 9.5 feet by December 31. The historical average drawdown in late March is 17.5 feet, although drawdowns of 20 to 25 feet below full pond are not unusual, and drawdowns to 36 feet below full pond occur occasionally. FPL Energy has voluntarily released a continuous minimum flow of 50 cubic feet per second (cfs) downstream of Long Falls dam. 11. FPL Energy proposes to maintain a continuous minimum flow of 200 cfs from Long Falls dam and maintain a minimum water level in Flagstaff Lake of 4.5 feet below full pond from June 1 through August 31. WATER QUALITY CERTIFICATION 12. Under Section 401(a)(1) of the Clean Water Act, 33 U.S.C. ' 1341(a)(1), the Commission may not issue a license for a hydroelectric project unless the state water quality certifying agency has either issued a water quality certification for the project or has waived certification.9 13. On November 14, 2003, the Maine Department of Environmental Protection (Maine DEP) issued a water quality certification for the Flagstaff Project. The certification provides for minimum flows downstream of Long Falls dam and the confluence of the Dead River and Spencer Stream (Condition No. 1); periodic flow releases for whitewater boating (Condition No. 2); management of water levels in Flagstaff Lake in general conformance with the long-term operating curve with seasonal limits on the drawdown of Flagstaff Lake (Condition No. 3); a study on mercury levels in the fish and the common loon of Flagstaff Lake and reference lakes (Condition No. 4); recreation provisions (Condition No. 5); a loon management plan (Condition No. 6); and administrative conditions (Condition Nos. 7-9). Operational Condition Nos. 1, 2, and 38 9

All units of elevation are in the U.S. Geological Survey (USGS) Datum.

Section 401(a)(1) requires an applicant for a federal license or permit to conduct any activity that may result in any discharge into navigable waters to obtain from the state in which the discharge originates certification that any such discharge would comply with applicable water quality standards.

allow for temporary modification by approved maintenance activities, extreme hydrologic conditions, emergency electrical system conditions, or agreement between the applicant and appropriate state and/or federal agencies. These conditions are set forth in Appendix A of this order and incorporated in the license [see ordering paragraph (D)]. SECTION 18 FISHWAY PRESCRIPTIONS 14. Section 18 of the FPA, 16 U.S.C. ' 811, provides that the Commission shall require a licensee to construct, operate, and maintain such fishways as may be prescribed by the Secretary of the Interior or the Secretary of Commerce, as appropriate. By letter filed October 18, 1996, Interior requested that a reservation of authority to prescribe fish passage facilities be included in the license. Article 406 reserves the Commission's authority to require fishways that Interior may in the future prescribe. THREATENED AND ENDANGERED SPECIES 15. Section 7(a)(2) of the Endangered Species Act of 1973 (ESA), 16 U.S.C. ' 1536(a) (2), requires federal agencies to ensure that their actions are not likely to jeopardize the continued existence of federally-listed threatened and endangered species, or result in the destruction or adverse modification of designated critical habitat. That section further requires that formal consultation with (in this case) the FWS be initiated if the proposed agency action is likely to affect a listed species, unless through informal consultation the action agency and FWS determine that there will not likely be an adverse effect. 16. The project is located within the range of the threatened bald eagle and endangered peregrine falcon. No critical habitat has been designated for either species. On March 11, 1998, pursuant to Section 7(a)(2) of the ESA, Commission staff submitted a biological assessment to the FWS, which concluded that relicensing the project with staffs recommended measures is not likely to adversely affect peregrine falcons and may affect bald eagles. The March 11, 1998, letter initiated formal consultation regarding the bald eagle, asking for the FWS's biological opinion (BO). On July 27, 1998, the FWS informed Commission staff that the FWS concurs with staff's finding on the peregrine falcon and provided a BO on the project effects on the bald eagle. 17. The FWS concluded that the scope of the action, which is limited to Flagstaff Lake and a portion of the Dead River, will not preclude recovery and appreciably reduce the survival of the northern states population of bald eagles. The FWS also concluded that operation of the project, including large-scale drawdowns, may negatively affect the food supply for bald eagles and could be affecting the bioavailability of mercury. The FWS, however, did not issue an incidental take statement because it cannot be

demonstrated that individual bald eagles are likely to be injured or killed as a result. 18. The FWS found that cumulative effects from activities that are reasonably certain to occur during the term of the license would increase human disturbance, habitat loss, and environmental contamination. Such activities include increased recreation at Flagstaff Lake, development of the lake shoreline, and continued deposition of mercury and other toxic substances in the Flagstaff Lake watershed. 19. To ensure that impacts on the bald eagle from continued operation of the project are minimized, the FWSs July 27, 1998, letter submitted the following two conservation recommendations: (1) that the comprehensive recreation and land management plan recommended by staff in the final EA specifically address bald eagles and require FPL Energy to consult with the Maine Department of Inland Fisheries and Wildlife (Maine DIFW) before filing its Form 80 with the Commission;10 and (2) that FPL Energy develop and implement a plan for contaminant monitoring to evaluate the efficacy of the operating regime required by this license in reducing current contaminant levels (in particular, methylmercury) and provide updated information on mercury contamination at the project throughout the term of the license. 20. This license includes conditions consistent with both recommendations. Article 409 includes provisions for the Comprehensive Recreation and Land Management Plan to address bald eagles, and Article 410 requires FPL Energy to consult with the Maine DIFW and the FWS before filing its Form 80. Article 407 requires FPL Energy to consider the potential effects of mercury levels at the Flagstaff Project on the bald eagle by implementing a Mercury Evaluation Plan. RECOMMENDATIONS OF FEDERAL AND STATE FISH AND WILDLIFE AGENCIES UNDER SECTION 10(j) 21. Section 10(j) of the FPA, 16 U.S.C. ' 803(j), requires the Commission, when issuing a license, to include license conditions based upon recommendations of federal and state fish and wildlife agencies submitted pursuant to the Fish and Wildlife Coordination Act, 16 U.S.C. ' 1536(a), for the protection of, mitigation of adverse impacts to, and enhancement of fish and wildlife. Form No. 80, Hydropower Development Recreation Report, is used to gather information necessary for the Commission and other agencies to know what recreational facilities are located at licensed projects, whether public recreational needs are being accommodated by the facilities, and where additional efforts could be made to meet future needs.10

22. On October 18, 1996, Interior filed four recommendations on behalf of the FWS under Section 10(j). This license contains conditions consistent with the FWSs valid Section 10(j) recommendations to: (1) provide minimum flows of at least 300 cfs as measured in the Dead River immediately below its confluence with Spencer Stream (Condition No. 1 of Appendix A); and (2) implement a streamflow and reservoir level monitoring plan (Article 405). 23. Interiors other two recommendations filed under Section 10(j) are not subject to Section 10(j) because they are not specific measures to protect fish and wildlife. Both measures are considered under Section 10(a). See paragraphs 24 and 25. AGENCY RECOMMENDATIONS UNDER FPA SECTION 10(a)(1) 24. In its October 15, 1996, letter, the FWS recommended that the licensee: (1) monitor recreation use of the project area to determine whether existing access facilities meet the demands for public use of fish and wildlife resources; and (2) prepare a comprehensive land use management plan for the Flagstaff Project, to include at a minimum, the location and extent of buffer strips and other protective measures at the project. 25. Staff analyzed the recommendations under Section 10(a)(1) of the FPA, which requires the Commission to ensure that the project it licenses is best adapted to the comprehensive development of the waterway for all beneficial public uses. This license contains provisions consistent with FWSs two recommendations in a Comprehensive Recreation and Land Management Plan as required by Article 409 and recreation monitoring as required by Article 410. OTHER ISSUES A. Administrative Conditions 26. The Commission collects annual charges from licensees for the administration of the FPA, and to reimburse the United States for the occupancy and use of any federal lands. Article 201 provides for the collection of such funds. 27. Section 10(d) of the Federal Power Act requires licensees to establish and maintain project amortization reserves. Article 202 provides for amortization reserves. 28. Some projects directly benefited from headwater improvements that were constructed by other licensees, the United States, or permittees. Article 203 requires the

licensee to reimburse such entities for these benefits if they were not previously assessed and reimbursed. 29. The Commission requires licensees to file sets of approved project drawings on microfilm. Article 204 provides for the filing of these drawings. B. Minimum Flows

30. Condition No. 1 of Appendix A requires FPL Energy to release from Long Falls dam a minimum flow of 200 cfs, or such higher flow that may be needed, to achieve a target minimum flow of 300 cfs in the Dead River immediately below its confluence with Spencer Stream. To facilitate the refilling of Flagstaff Lake, the condition allows the minimum flow to be modified from March 16 through May 31, provided that a target minimum flow of 300 cfs is achieved below the Spencer Stream confluence with the Dead River. According to the condition, the minimum flow release may be further reduced to 100 cfs between June 1 and August 31 whenever water levels in Flagstaff Lake have been drawn down by 4.5 feet below full pond or more. Condition No. 1 of Appendix A also contains provisions for temporary modification of each flow under extreme hydrologic conditions and emergency electrical system conditions. 31. On November 26, 2003, FPL Energy filed a letter with the Commission requesting that the minimum flow regime recommended by staff in the final EA be modified to allow for flow reductions from March 16 through May 31 and June 1 through August 31, as allowed by the water quality certification, because during dry years a 200-cfs release flow would continue to draw down Flagstaff Lake. This license requires the minimum flow regime found in Condition No. 1 of Appendix A and Article 404 requires FPL Energy to file a Lake Management Plan, for Commission approval, that defines operations during dry water years. C. Fluctuation of Flagstaff Lake 32. Condition No. 3 of Appendix A requires management of water levels in Flagstaff Lake in general conformance with the long-term operating curve with seasonal limits on the drawdown of Flagstaff Lake. The seasonal limits require that drawdowns of Flagstaff Lake not exceed 4.5 feet below full pond between June 1 and August 31, inclusive, and not exceed 24 feet unless excessive snowpack or precipitation requires an additional drawdown in order to maintain the historic level of flood protection on the Kennebec River. This condition is consistent with FPL Energys proposal to maintain a minimum water level in Flagstaff Lake of 4.5 feet below full pond from June 1 through August 31.

33. In the final EA, staff recommended that drawdowns of Flagstaff Lake be limited to a maximum of 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 to provide some benefits to summer recreational use by providing higher water levels. Although this recommendation specifies monthly drawdown limits for the period June through September, it is consistent with Condition No. 3 of Appendix A, which sets a 4.5-foot maximum drawdown limit for any time in June through August. The final EA found that a drawdown restriction for September would extend the use of boat ramps through the end of September, when the 228-acre commercial Cathedral Pines campground at the Town of Eustis closes for the season. 34. The Town of Eustis, in letters filed after the final EA was issued, expressed concern that low lake levels adversely affect tourism and shoreline property values, which are a substantial part of the towns tax base, and the health and safety of its residents.11 The Town of Eustis disagrees with the drawdown allowed by the water quality certification and recommends that summer drawdowns not exceed: (a) 0.5 feet below full pond during June; (b) 1.5 feet below full pond during July; (c) 2.5 feet below full pond during August; (d) 3.5 feet below full pond during September; and (e) 5 feet below full pond during October and November.12 The town says that its recommended water surface levels would benefit summer recreation by preventing dry docks and improving public access to Flagstaff Lake; minimize the need to cancel summer recreation programs; reduce the odor from exposed lake bed deposits; reduce the amount of exposed silt and sand that can be picked up by high winds and carried into residential The Town of Eustis says it has become dependent on the lake for its economic base through tourism, including visitors with seasonal or second homes. In response to staffs recommendation in the final EA and issuance of the Water Quality Certification Condition No. 3 (included as Appendix A), the Town of Eustis made 12 filings with the Commission dated January 11, 2000; September 19, 2000; October 26, 2000; December 14, 2000; December 28, 2000; January 16, 2001; September 20, 2001; November 26, 2001; December 26, 2001; May 20, 2003; December 4, 2003; and January 8, 2004. The Town of Eustis says, in letters dated December 4, 2003, and January 8, 2004, that the Department of Environmental Protection did not take into account the Town of Eustis concern for the recreational interests of its citizens and visitors and the economic concerns of the townspeople in allowing drawdowns to 4.5 feet below full pond during the summer. The town further objects to the reclassification of Flagstaff Lake from a natural lake to a water storage reservoir, which allowed for less restrictive lake levels in Condition No. 3 of Appendix A. The classification of water bodies for state standards or determination of appropriate requirements for a water quality certification, however, is beyond the jurisdiction of the Commission.12 11

areas; improve tourism; and enhance the view from Scenic Route 27.13 35. The Town of Eustis asks the Commission to consider requiring the construction of a coffer dam at the Narrows, if its recommended drawdown limits are not adopted. However, the town does not provide sufficient details to analyze this proposal, which raises complex environmental and engineering issues. 36. About 30 percent of the shoreline of Flagstaff Lake is privately developed and most of that development is located in or around the Town of Eustis, which has a population of 700.14 Because of its location at the upper end of the 23-mile-long Flagstaff reservoir, the water depth at full pool near the Town of Eustis is only about 6 feet in the stream channel and 3 feet or less in the wider area of inundation that lies between the shoreline and the channel. The town says that at drawdowns of 3 feet below full pond, the exposed lake bed becomes primarily unsightly mudflats. The water is impossible to reach without wading across the mudflats. Further, at 3 feet below full pond submerged stumps, rocks, and small mounds make boating hazardous. High winds can carry silt and sand into homes and other facilities, including the low income housing complex, elderly housing complex, and elementary school. 37. FPL Energys license application, in Appendix E3.2-6, shows that the western end of the lake is characterized by sandy substrates, extensive wetlands, and narrow sinuous open water reaches. Appendix E.5-1 of the license application, Recreation Study Report, shows that facility uses on the more upstream, western end of the lake tend to be adversely affected by drawdown before facilities at other areas of the lake. The study report found that when the water level is 3 feet below full pond, all campsites and boat launches at the western end of the lake are still accessible by water; however, motorboats must use caution to avoid submerged natural obstacles. The study report also indicates that launching from land is difficult at the western end of the lake because of the long distances to reach the waters edge and the amount of substrate, including soft sand, boulders, and other obstacles, that must be crossed to reach the waters edge. The study report indicates that at a 3-foot drawdown, 130 feet of soft sand and boulders are exposed In addition to letters from the Town of Eustis, Susan M. Collins, United States Senator, and Arlan R. Jodrey, State Representative, filed letters on October 17, 2000, and March 13, 2001, respectively, on behalf of the town. Representative Jodrey suggests that the Town of Eustis recommendation for a 0.5-foot drawdown during the month of June be considered on a trial basis, if not a long-term solution. Table SUB-EST 2003-14-23-Maine Minor Civil Division Population Estimates and population change, sorted within county: July 1, 2001 to July 1, 2002. Population Division, U.S. Census Bureau, July 10, 2003.14 13

at the public Trout Brook campsite located at the western end of the lake, while the average distance from recreational facilities to water is only 31 feet. Also, at a 3-foot drawdown, the public finds it difficult to launch a boat at the local Maine Department of Transportation boat launch site (also, located in the western end of the lake) because 20 feet of exposed substrate must be crossed. 38. In contrast to some adverse effects at the Town of Eustis, there are some benefits related to the use of the shoreline area associated with the drawdown, particularly in the mid- to downstream sections of the lake. When considering the entire shoreline of Flagstaff Lake, at 3 feet below full pond, the exposed lake bed provides an overall increase in opportunities along the shoreline, such as walking, camping, and aesthetic enjoyment. The shoreline on the south side of the lake adjoins the State of Maines Bigelow Preserve, which is the third largest area in the State of Maine available for public outdoor recreation. 39. FPL Energys proposed lake level limits and the limits recommended in the final EA would cost an average of $28,100 per year based on the average energy loss compared to no lake level limitations. The average annual cost for the limits proposed by the Town of Eustis would be $44,300.15 The towns recommended lake levels would reduce the beach and shoreline recreational opportunities in the middle and downstream reaches of the lake, including the areas next to the state preserve. In addition, there may be adverse effects related to the towns requested lake level limits that staff has not been able to fully quantify, such as reduced flood control benefits, loss of downstream industrial and municipal water supply benefits, additional loss of hydropower benefits, loss of wastewater assimilation capacity benefits, and effects on cultural resources that may be located in the area of inundation at near full pool conditions. 40. Article 402 requires FPL Energy to operate the project to maintain the following lake levels recommended by staff in the final EA: (a) 1 foot below full pond during June; (b) 2 feet below full pond during July; (c) 3 feet below full pond during August; and (d) 4.5 feet below full pond during September. These lake level limits will provide higher lake levels for the Town of Eustis in the mid and late summer without causing any substantial reduction in other shoreline or downstream uses. 41. Because of the impacts of lake drawdowns to the Town of Eustis resources, Article 403 requires FPL Energy to consult with the town and other interested entities to Cost estimates for the alternatives for limiting lake drawdowns are based on a power value of $45/MWh and average annual energy losses of 624 MWh for FPL Energys proposed drawdown limits and the final EA recommended drawdown limits, and 984 MWh for the Town of Eustis recommended limits.15

identify and fully evaluate alternatives for maintaining higher lake levels, or other measures to address the towns concerns related to recreation and aesthetics. Article 403 further requires FPL Energy to file for Commission approval a report on the alternatives considered and any proposed modifications to the lake levels required by Article 402 or other project modifications. 42. The report shall include an estimated implementation cost and an analysis of the effects of the alternatives on other beneficial uses of the project, including recreational use, flood control, power development, downstream industrial and municipal water supplies, wastewater assimilation capacity, and cultural resource protection. 43. I anticipate that the licensee will be able to complete the report required by Article 403 at a nominal cost using its own information, or information provided by the Town of Eustis or other interested parties. I do not expect the licensee to collect or finance the collection of field data to accomplish the purpose of Article 403, which is to evaluate whether there may be alternative measures, consistent with the purposes of the project, for the further enhancement of recreation and aesthetic values related to lake levels in the western end of Flagstaff Lake. 44. By letter dated November 25, 2003, FPL Energy requests that any requirement for higher summer water levels allow for lower water levels when necessary to provide the required minimum flow releases. FPL Energy states that in dry water years providing a 200-cfs minimum flow release, as required by Condition No. 1 in Appendix A, could, itself, draw down Flagstaff Lake by 8 inches, and there are other releases such as boating flows and downstream developmental and non-developmental purposes to be considered. FPL Energy requests that the required minimum lake levels be relaxed to maintain the required minimum flow in dry water years. FPL Energy also requests that the required minimum flows be relaxed to accommodate maintaining minimum lake levels. 45. The final EA supports FPL Energys concern, saying that during dry water years and years that Flagstaff Lake does not fill, it may not be possible to release flows for downstream uses and maintain the minimum lake levels to benefit habitat and recreational use. Recognizing that operational modifications may become necessary in some situations, Article 404 requires the development and implementation of a plan for managing potentially conflicting drawdown levels and downstream minimum flow needs. D. Fall/Winter Operation of Flagstaff Lake 46. In the final EA, Commission staff recommended that winter drawdowns (October 1 through March 31) be limited to 24 feet below full pool to provide protection for

aquatic resources. In its November 26, 2003, letter, FPL Energy requests that any limit on winter drawdowns be allowed to exceed 24 feet for the same reason. I agree with FPL Energy and the Maine DEP that protection from downstream flooding is an important function of the project. Condition No. 3 of Appendix A allows drawdowns to exceed 24 feet when excessive snowpack or precipitation requires an additional drawdown in order to maintain the historic level of flood protection on the Kennebec River. E. Common Loon Protection 47. In the final EA, staff recommended that water levels at Flagstaff Lake not be drawn down more than one foot in any one 28-day period from June 1 through July 31 to protect nesting common loons. By letter filed November 26, 2003, FPL Energy objected to this requirement, saying that operations would be too restricted during early summer operations. According to FPL Energy, the project operator draws down Flagstaff Lake prior to early summer rains and thunderstorms so as not to spill flows. By preventing spill flows, FPL Energy says that the operator can store water for use later in the summer, including maintaining lake levels for recreation and releasing minimum flows for aquatic species and whitewater boating. 48. I agree that overly-restrictive operational requirements can be unduly burdensome. The Flagstaff Project functions as part of a basin system of storage and downstream power generation. With this license, the project will have requirements for environmental protection and use, including minimum flow releases and restrictions on drawdowns. Article 408, in conjunction with Condition No. 6 of Appendix A, requires FPL Energy to provide non-operational measures to benefit common loon production and to evaluate the success of those measures. F. Reference point for full pond

49. The final EA and the water quality certification present drawdowns as the number of feet below full pond. At Flagstaff Lake, the existing and historic full pond measure is at elevation 1,146 feet. In its November 26, 2003, letter, FPL Energy requests that the summer reference point be changed from full pond to from full pond or the level reached on June 1, so that if the reservoir does not fill by June 1, any drawdown limitation for the summer months (i.e., a specific number of feet below full pond) would be measured from the water surface elevation on June 1 instead of elevation 1,146 feet. 50. Should FPL Energys request be incorporated into this license, it would result in a variable full pond designation during summer months, potentially causing confusion among those who have regulatory authority and who use the lake for recreation or in association with tourism. Moreover, the level of impact to some resources (e.g.,

recreational boating and shoreline use) is dependent on the lake level, not the change in lake level from that attained on June 1. Therefore, I am not willing to approve a change in the full pond reference point to the level reached on June 1. H. Soil erosion control measures 51. In a letter dated December 28, 2000, the Town of Eustis describes the soil erosion impacts of fluctuating lake levels, especially along three tributaries, the north and south branches of the Dead River and Stratton Brook, flowing through the town. In the final EA, staff recommended that FPL Energy address soil erosion as part of the Comprehensive Recreation and Land Management Plan. I agree that project-related erosion impacts should be addressed in this license. Therefore, Article 409 requires FPL Energy to include provisions to address project-related erosion as part of the Comprehensive Recreation and Land Management Plan. I. Project Boundary/Buffer Zone/Recreation and Land Use

52. The Conservation Intervenors state that the licensee should provide a shoreline buffer zone that would preclude long-term leasing of camp lots to private parties. Further, the Conservation Intervenors recommended that the licensee prepare a land management plan that includes conservation easements to protect the undeveloped shoreline of Flagstaff Lake and the Dead River from development over the term of the license. The FWS recommended that the licensee prepare a land use management plan for the Flagstaff Project to include, at a minimum, the location and extent of buffer strips and other protective measures at the project. Article 409 requires FPL Energy to prepare a Comprehensive Recreation and Land Management Plan which would address private use permits and other issues raised by FWS and the Conservation Intervenors. Implementation of this plan will protect the shoreline and ensure acceptable uses, including public access to project lands and waters. Article 409 also includes provisions for sediment and erosion control at the project. 53. Article 409 retains the current Flagstaff Project boundary up to elevation 1,150 feet, which is 4 feet above the high water, or full pond, elevation and provides a buffer zone around the project. Article 409 also provides for modifications as necessary to include new facilities and lands required by this license (discussed below). FPL Energy owns all of or has flowage rights to the land within the project boundary. About 90 percent of the land outside of the current project boundary is owned by the State of Maine, commercial timber companies, or other private owners. The State of Maines Bigelow Preserve occupies about 22 percent of the lakes shoreline and provides protection from development to the natural resources. The buffer zone width varies depending on the gradient of the shoreline. In the southeast area of Flagstaff Lake, where

much of the shoreline is steep, typical buffer zone widths are less than 50 feet. In other areas, particularly at the western, or upstream, end of the lake, the buffer zone is larger, but is typically less than 200 feet.16 The current project boundary, as far as it relates to the 1,150-foot contour, is generally consistent with the Commissions policy to require a shoreline buffer not to exceed 200 feet17 from the high water mark.18 Article 301 requires the licensee to file revised Exhibit G drawings that identify the project boundary and the normal, full pool reservoir elevation to clearly show the width of the buffer zone and the location of project-related features (discussed below) to be included in the project boundary. 54. The final EA recommended and Condition No. 5 of Appendix A requires FPL Energy to provide various recreational enhancements. Three facilities are located outside the current Flagstaff Project boundary: (a) a portage trail around the south side of Poplar Hill Falls; (b) day-parking at the Bog Brook Road boat launch; and (c) emergency vehicle access near the confluence of Enchanted Stream and the Dead River during the whitewater recreational season. In addition, FPL Energy proposes to improve the existing foot path to the Dead River near Enchanted Stream. The final EA recommended and Article 409 requires additional enhancements, including provisions for FPL Energy to maintain public access for anglers and whitewater boaters to the Spencer Stream put-in and the Dead River near its confluence with Enchanted Stream19; these enhancements are, also, outside the current project boundary. 55. The Commissions policy is that project lands include only those lands necessary for project purposes, such as operation and maintenance, flowage, recreation, public access, protection of environmental resources, and shoreline control (including protection of shoreline aesthetic values), 11 FERC 61,162 (1980). Therefore, Article 301 requires Contour intervals on the USGS topographic maps do not provide sufficient detail to further discern widths. The idea of a 200-foot buffer zone was established by Commission Order No. 313, pursuant to the Commissions responsibilities under Section 10(a) of the Federal Power Act. See 34 FPC 1546 (1965). East Bay Municipal Utility Dist., 64 FERC & 61,043 at p. 61,366 (footnote omitted) (1993), 18 C.F.R. 4.51(h) (2); Great Northern Paper, Inc., 77 FERC & 61,068 (1996), rehearing denied 85 FERC & 61,316 (1998).18 17 16

By letter dated March 28, 1995, Central Maine Power indicated that it had obtained rights for at least some of the lands for which public access is required in this license. Due to these transactions, staff are unable to quantify the current costs for providing this public access.

19

FPL Energy to submit revised Exhibit G drawings to reflect the change in project boundary to include and clearly identify the portage trail around the south side of Poplar Hill Falls, day-parking at the Bog Brook Road boat launch, the access road near the confluence of Enchanted Stream and the Dead River, including the foot path, and the access road to the Spencer Stream put-in, in addition to any other lands needed within the project boundary as identified in the approved Comprehensive Recreation and Land Management Plan (Article 409) along with a written statement clarifying the precise acreages involved. 56. The licensee currently provides recreation facilities within the project boundary. Article 409 requires FPL Energys Comprehensive Recreation and Land Management Plan to include provisions to ensure continued operation and maintenance of these facilities and to ensure continued public access to them for the duration of the license. Article 409, also, requires FPL Energy to include in its recreation plan provisions for posting known angler access sites near the Dead River with warning notices about water level increases, basic information on wading angler safety, and the annual whitewater release schedule. 57. The Commissions regulations at 18 CFR 2.7 allow a licensee to charge a reasonable fee to users of recreation facilities to help defray the cost of constructing, operating and maintaining such facilities. Article 409 requires FPL Energy to provide in the Comprehensive Recreation and Land Management Plan an assessment of any fees charged for public use and justification of those fees, as well as the cost for operation and maintenance for all recreation facilities. 58. Article 410 requires FPL Energy to monitor recreation use at the Flagstaff Project area to determine whether existing recreation facilities are meeting recreation needs and to file reports concurrent with filing FERC Form 80. This license contains the necessary provisions to protect and enhance the recreation and land use resources at the Flagstaff Project. J. Whitewater boating flows 59. In the Dead River, downstream of its confluence with Spencer Stream, is a 16mile reach of stream that represents the longest reach of Class II to Class IV whitewater in Maine. This reach supports the activities of 26 commercial rafting outfitters. Historically, FPL Energy voluntarily released whitewater boating flows ranging from about 1,300 to 7,500 cfs on 18 to 20 days a year, including 5 days of releases over 5,000 cfs. FPL Energy sets the schedule annually in consultation with whitewater boating interests and the Maine DIFW. In the final EA, staff recommended that FPL Energy continue this practice, and Condition. No. 2 of Appendix A and Article 401 require FPL

Energy to submit a plan for annually consulting and scheduling whitewater boating flows in the same duration, frequency, and magnitude as was done historically. K. Historic Properties 60. On August 6, 1998, the Maine State Historic Preservation Officer, the Advisory Council on Historic Preservation, and the Commission staff executed a Programmatic Agreement (PA) for managing historic properties that may be affected by relicensing of the Flagstaff Project. FPL Energy signed the PA as a concurring party. Article 411 requires FPL Energy to implement the PA, including a Cultural Resources Management Plan. This provides protection for all existing and future cultural sites located within the project boundary, and satisfies the Commission's responsibilities under Section 106 of the National Historic Preservation Act, 16 U.S.C. ' 470f. L. Use and Occupancy of Project Lands and Waters 61. Requiring a licensee to obtain prior Commission approval for every use or occupancy of project land would be unduly burdensome. Therefore, Article 412 allows the licensee to grant permission, without prior Commission approval, for the use and occupancy of project lands for such minor activities as landscape planting. Such uses must be consistent with the purpose of protecting and enhancing the scenic, recreational, and environmental values of the project. STATE AND FEDERAL COMPREHENSIVE PLANS 62. Section 10(a)(2) of the FPA, 16 U.S.C. ' 803(a)(2)(A), requires the Commission to consider the extent to which a project is consistent with federal or state comprehensive plans for improving, developing, or conserving a waterway or waterways affected by the project.20 Of the 18 comprehensive plans filed with the Commission by federal and state agencies, staff identified and reviewed 10 plans relevant to the project.21 No20

Comprehensive plans for this purpose are defined at 18 C.F.R. 2.19.

North American waterfowl management plan, May 1986, Fish and Wildlife Service, Canadian Wildlife Service; Final environmental impact statement C restoration of Atlantic salmon to New England rivers, 1989, Fish and Wildlife Service; Fisheries USA: the recreational fisheries policy of the U.S. Fish and Wildlife Service, Undated, Fish and Wildlife Service; The nationwide rivers inventory, January 1982, National Park Service; Strategic plan for the management of Atlantic Salmon in the State of Maine, July 1984, Maine Atlantic Sea Run Salmon Commission; Maine rivers study C final report, May 1982, Maine Department of Conservation; State of Maine comprehensive rivers

21

inconsistencies were found. ADDITIONAL INTERVENOR ISSUES 63. The Kennebec Valley Chapter of Trout Unlimited and Conservation Intervenors request that the Commission hold an adjudicatory trial-type hearing. The request broadly asserts that there are issues of material fact but fails to specify evidence they would present at a trial type hearing, and why the matters at issue cannot be resolved on the basis of the pleadings and evidence in the record before us. I find that the information in the record develops the facts adequately, and that there are no significant disputes regarding any material facts that cannot be resolved on the basis of a written record. Therefore, I deny the request for an adjudicatory hearing. APPLICANTS PLANS AND CAPABILITIES 64. In accordance with Sections 10(a)(2)(C) and 15(a) of the FPA, 16 U.S.C. '' 803(a) (2)(C) and 808(a), the staff evaluated FPL Energy's record as a licensee with respect to the following: (A) conservation efforts; (B) compliance history and ability to comply with the new licenses; (C) safe management, operation, and maintenance of the project; (D) ability to provide efficient and reliable electric service; (E) need for power; (F) transmission service; (G) cost effectiveness of plans; and (H) actions affecting the public. I concur with staffs findings in each of the following areas. A. Conservation Efforts 65. FPL Energy does not generate or sell electric power from the Flagstaff Project, and, therefore, has no programs for, or records of, energy consumption efficiency. B. Compliance History and Ability to Comply with the New License 66. Pursuant to FPA Section 15(a)(2)(A), staff reviewed FPL Energys compliance with the terms and conditions of the existing license. FPL Energys overall record of making timely filings and compliance with its license is satisfactory. Therefore, FPL Energy can satisfy the conditions of a new license. management plan, May 1987, Maine State Planning Office; Hydrology of floods C Kennebec River Basin, Maine, October 1985, New England Division Corps of Engineers; Hydrology of floods C Kennebec River Basin, Maine, Part II, 1988, New England Division Corps of Engineers; Water resources study C Kennebec River Basin, Maine (reconnaissance report), 1989, New England Division, Corps of Engineers.

C. Safe Management, Operation, and Maintenance of the Project 67. The staff reviewed the record of management, operation, and maintenance of the Flagstaff Project pursuant to project safety. The staff concludes that the dam and other project works are safe, and that there is no reason not to believe that FPL Energy will safely manage, operate, and maintain these facilities under a new license. D. Ability to Provide Efficient and Reliable Electric Service 68. Although the Flagstaff Project has no generation facilities, FPL Energy has been operating and maintaining the project in a manner that contributes to efficient and reliable electric service by downstream hydropower generators which benefit from the storage provided by Flagstaff Lake and is likely to continue to do so under a new license. E. Need for Power 69. The project is located in the New England Power Pool (NEPOOL) area of the North American Electric Reliability Council (NERC). NERC makes 10-year national and regional forecasts of electrical supply and demand as part of their annual Reliability Assessment.22 NERCs current forecast for the New England system (ISO New England, Inc.) is that summer peak demand will increase from 25,120 MW in 2003 to 28,710 MW in 2012 (1.4 percent average annual growth rate), while installed generating capacity will increase from 32,100 MW to 33,800 MW over the same period (0.5 percent average annual growth rate). This corresponds to a decline in the installed generation reserve from about 28 percent in 2003 to 18 percent in 2012. The installed generation reserves are expected to be sufficient to meet required reserve levels. The margins include firm capacity purchases of approximately 890 MW per year. The forecast assumes no retirements and new generation totaling 6,053 MW, expected to be on line by 2008. 70. Even though the Flagstaff Project does not generate power, it is an integral part of the Kennebec River storage system. Along with the two other storage reservoirs, Moosehead Project and Brassua Project in the Kennebec River upper basin, the Flagstaff Project helps to regulate and augment flows and to control flood storage. The project provides consistent flows that result in increased generation at the downstream hydroelectric projects. This additional generation contributes to meeting the overall regional need for power. The generation would also continue to displace non-renewable fossil-fueled power generation used by some of the facilities in the NEPOOL, thereby reducing emissions and yielding an environmental benefit. 2003 Long-Term Reliability Assessment: The Reliability of Bulk Electric Systems in North America, NERC, December 2003.22

71. The staff concludes that the past use of the Flagstaff Project, its continuing ability to contribute to efficient use of other projects downstream, and its role in reducing fossil fuel emissions and fostering a diverse generation base demonstrate that the project can help meet a need for power in the NEPOOL area. F. Transmission Service

72. Because the Flagstaff Project does not generate electricity, there are no existing or planned transmission services. G. Cost Effectiveness of Plans 73. FPL Energy does not propose any additional project modifications other than environmental enhancements. The staff concludes that the project, as presently constructed and as FPL Energy proposes to operate it as conditioned herein, contributes significantly to the full development and economical use of the hydropower potential of eight downstream hydroelectric projects. H. Actions Affecting the Public 74. Environmental measures, recreation improvements, and new safety measures included in the license will protect and enhance environmental quality, particularly aquatic and wildlife resources, and will have a beneficial effect on public use of project facilities for recreational purposes. COMPREHENSIVE DEVELOPMENT 75. Sections 4(e) and 10(a)(1) of the FPA, 16 U.S.C. '' 797(e) and 803(a)(1), require the Commission, in acting on applications for license, to give equal consideration to the power and development purposes and to the purposes of energy conservation, the protection, mitigation, and enhancement of fish and wildlife, the protection of recreation opportunities, and the preservation of other aspects of environmental quality. Any license issued shall be such as in the Commission's judgment will be best adapted to a comprehensive plan for improving or developing a waterway or waterways for all beneficial public uses. The decision to relicense this project, and the terms and conditions included herein, reflect such consideration. 76. The final EA analyzed the effects associated with the issuance of the new license for the Flagstaff Project. It recommends a number of measures to protect and enhance

environmental resources, which we adopt, as discussed herein. This license provides minimum flows; limits reservoir drawdowns; addresses potential mercury levels in local biota; provides for whitewater boating flows; and requires development and implementation of management plans to protect and enhance fish and wildlife, recreation, and cultural resources. 77. In determining whether a proposed project will be best adapted to a comprehensive plan for developing a waterway for beneficial public purposes, pursuant to Section 10(a)(1) of the FPA, the Commission considers a number of public interest factors, including the economic benefits of project power. Economic Benefits of Project Power 78. Under the Commissions approach to evaluating the economics of hydropower projects, as articulated in Mead Corp., 72 FERC & 61,027 (1995), we employ an analysis that uses current costs to compare the costs of the project and likely alternative power, with no forecasts concerning potential future inflation, escalation, or deflation beyond the license issuance date. Our economic analysis provides a general estimate of the potential power benefits and costs of a project and reasonable alternatives to project power. The estimate helps to support an informed decision concerning what is in the public interest with respect to a proposed license. In making our decision, we consider the project power benefits, both with the applicants proposed mitigation and enhancement measures and with our modifications and additions to the applicants proposal. 79. Under the no-action alternative, the existing incremental generation attributable to the Flagstaff Project storage by downstream hydroelectric projects is about 62.5 GWh of energy annually. The annual power value would be $2,814,000 (45.0 mills/kWh) and total annual cost would be $1,939,000 (31.0 mills/kWh). This results in a net annual benefit of $875,000 (14.0 mills/kWh). 80. As proposed by FPL Energy, the generation attributable to the Flagstaff Project storage by downstream hydroelectric projects is about 61.9 GWh of energy annually. The annual power value would be $2,786,000 (45.0 mills/kWh) and total annual cost would be $2,015,000 (32.5 mills/kWh). This results in a net annual benefit of $771,000 (12.5 mills/kWh). 81. As proposed by FPL Energy and with additional staff-recommended measures, the generation attributable to the Flagstaff Project storage by downstream hydroelectric projects is about 61.4 GWh of energy annually. The project would have an annual power value of $2,763,000 (45.0 mills/kWh) and a total annual cost of $2,049,000 (33.4

mills/kWh). This results in a net annual benefit of $714,000 (11.6 mills/kWh). LICENSE TERM 82. Section 15(e) of the FPA, 16 U.S.C. ' 808(e), specifies that any license issued be for a term which the Commission determines to be in the public interest, but the term may not be less than 30 years nor more than 50 years. The Commission's policy establishes 30-year terms for projects with little or no redevelopment, new construction, new capacity, or environmental protection, mitigation, and enhancement measures; 40year terms for projects with a moderate amount thereof; and 50-year terms for projects with an extensive amount thereof.23 83. The new license for this project requires little or no redevelopment and minor enhancements. Were we to follow our standard policy, the license would expire in 30 years. 84. In the Commissions policy statement on cumulative impacts and license reopeners, we state that we would endeavor to coordinate the expiration dates of licenses for projects located in the same river basin to the maximum extent feasible, consistent with our commitment to considering the cumulative impacts of projects in the same river basin collectively at relicensing.24 Concurrent expiration dates for project licenses in the Kennebec River Basin will enable the Commission to ensure that the licenses could be coordinated. In licensing five projects in the Kennebec River Basin, 81 61,254 (1997), the Commission coordinated the terms of licenses to expire simultaneously in the year 2036. By granting a 32-year license to FPL Energy, I am ensuring that the Flagstaff Project license will expire in year 2036, the same year as several other projects in the basin.2523

See Consumers Power Company, 68 FERC & 61,077 at pp. 61,383-84 (1994).

Use of Reserved Authority in Hydropower Licenses to Ameliorate Cumulative Impacts, 59 Fed. Reg. 66718 (December 28, 1994), FERC Statutes and Regulations & 31,010 at p. 31,219 (1994). This policy is codified at 18 C.F.R. ' 2.23 (1996). See also Central Maine Power Company, 73 FERC & 61,149 at p. 61,422 (1995); Duke Power Company, 73 FERC & 61,335 at p. 61,940 (1995). Other Kennebec Basin project licenses expiring in 2036 are the Moosehead Project No. 2671, Indian Pond Project No. 2142, Wyman Project No. 2329, Sandy River Project No. 11433, Weston Project No. 2325, and Hydro-Kennebec Project No. 2611. In addition, the license for the Benton Falls Project No. 5073 expires in 2034, and the Lockwood Project No. 2574 is currently undergoing a relicensing proceeding. An25

24

SUMMARY OF FINDINGS 85. The final EA for the Flagstaff Project contains background information, analysis of effects, support for related license articles, and the basis for a finding that licensing the project would not constitute a major federal action significantly affecting the human environment. The design of this project is consistent with the engineering standards governing dam safety. The project will be safe if operated and maintained in accordance with the requirements of this license. 86. Based on review of the agency and public comments, recommendations, and/or mandatory conditions filed on this project, review of the environmental and economic effects of the proposed project, and its alternatives, and analysis pursuant to Sections 4(e) and 10(a) of the FPA, I conclude that issuing a new license for the Flagstaff Project as proposed, with the water quality certification conditions, the staffs additional protection and enhancement measures, and other special license conditions will be best adapted to the comprehensive development of the Dead and Kennebec Rivers for beneficial public uses. ORDERING PARAGRAPHS AND PROJECT DESCRIPTION The Director Orders: (A) This license is issued to FPL Energy (licensee) to operate and maintain the Flagstaff Project, for a period of 32 years, effective the first day of the month in which this order is issued. This license is subject to the terms and conditions of the Federal Power Act (FPA), which is incorporated by reference as part of this license, and subject to the regulations the Commission issues under the provisions of the FPA.

(B) The project consists of: (1) All lands, to the extent of the licensee's interests in those lands, enclosed by the project boundary shown by Exhibit G, filed on December 22, 1995:

Exhibit G Sheet G-1 Sheet G-2 Sheet G-3 Sheet G-4 Sheet G-5

FERC Drawing No. 26121003 1004 1005 1006 1007

Showing Detail Map - Reservoir Detail Map - Reservoir Detail Map - Reservoir Detail Map - Reservoir Detail Map - Reservoir

(2) The project works consisting of: (a) the 1,339-foot-long, 45-foot-high Long Falls dam containing: (i) a 450-foot-long concrete spillway section topped with 2-foot-high flashboards; (ii) a 125-foot-long concrete section containing five, 20-foot-wide Taintor gates; (iii) a 70-foot-long concrete section containing two Broome gates, a fishway, and a log sluice; and (iv) a 694-foot-long earthen dike topped with a 2-foot-high wave barrier; (b) a 17,950-acre reservoir having a length of about 23 miles, a width of about 6 miles at the widest point, and a storage capacity of about 275,482 acre-feet at full pond elevation of 1,146.0 feet USGS datum; and (c) appurtenant facilities. (3) The project works generally described above are more specifically shown and described by those portions of Exhibits A and F shown below. Exhibit A - The following sections of Exhibit A filed December 22, 1995: The project description on pages A-1 to A-6; and table A-1, Summary Description of the Project, on page A-7. Exhibit F - The following Exhibit F drawings filed on December 22, 1995:

Exhibit F Sheet F-1

FERC Drawing No. 26121001

Description Plan Upstream Elevation and Spillway Sections

Exhibit F Sheet F-2

FERC Drawing No. 26121002

Description Sections-Earth DamFishway-Log Sluice-Intake & Taintor Gate

(4) All of the structures, fixtures, equipment or facilities used to operate or maintain the project and located within the project boundary, all portable property that may be employed in connection with the project, and all riparian or other rights that are necessary or appropriate in the operation or maintenance of the project. (C) The Exhibits A, F, and G as designated in ordering paragraph (B) above, are approved and made part of this license. (D) This license is subject to the conditions of the water quality certification issued by the Department of Environmental Protection on November 14, 2003, and filed with the Commission on November 15, 2003, under Section 401 of the Clean Water Act, as set forth in Appendix A to this order. (E) This license is subject to the articles set forth in Form L-3 (revised October 1975), entitled "Terms and Conditions of License for Constructed Major Project Affecting Navigable Waters of the United States" and the following additional articles: Article 201. Annual Charges. The licensee shall pay the United States an annual charge, effective the first day of the month in which this license is issued, for the purpose of reimbursing the United States for the cost of administration of Part I of the Federal Power Act, as determined by the Commission. The authorized installed capacity for that purpose is 0 horsepower. Article 202. Amortization Reserves. Pursuant to Section 10(d) of the Federal Power Act, a specified reasonable rate of return upon the net investment in the project shall be used for determining surplus earnings of the project for the establishment and maintenance of amortization reserves. The licensee shall set aside in a project amortization reserve account at the end of each fiscal year one half of the project surplus earnings, if any, in excess of the specified rate of return per annum on the net investment. To the extent that there is a deficiency of project earnings below the specified rate of return per annum for any fiscal year, the license shall deduct the amount of that deficiency from the amount of any surplus earnings subsequently accumulated, until

absorbed. The licensee shall set aside one-half of the remaining surplus earnings, if any, cumulatively computed, in the project amortization reserve account. The licensee shall maintain the amounts established in the project amortization reserve account until further order of the Commission. The specified reasonable rate of return used in computing amortization reserves shall be calculated annually based on current capital ratios developed from an average of 13 monthly balances of amounts properly included in the licensee's long-term debt and proprietary capital accounts as listed in the Commission's Uniform System of Accounts. The cost rate for such ratios shall be the weighted average cost of long-term debt and preferred stock for the year, and the cost of common equity shall be the interest rate on 10-year government bonds (reported as the Treasury Department's 10-year constant maturity series) computed on the monthly average for the year in question plus four percentage points (400 basis points). Article 203. Headwater Benefits. If the project is directly benefited by the construction work of another licensee, a permittee, or the United States on a storage reservoir or other headwater improvement during the term of the original license (including extensions of that term by annual licenses), and if those headwater benefits were not previously assessed and reimbursed to the owner of the headwater improvement, the licensee shall reimburse the owner of the headwater improvement for those benefits, at such time as they are assessed, in the same manner as for benefits received during the term of this new license. Article 204. Exhibit Drawings. Within 45 days of the date of issuance of this license, the licensee shall file the approved exhibit drawings in aperture card and electronic file formats. (a) Three sets of the approved exhibit drawings shall be reproduced on silver or gelatin 35mm microfilm. All microfilm shall be mounted on type D (3-1/4" X 7-3/8") aperture cards. Prior to microfilming, the FERC Drawing Number (e.g., P-2612-1001 through P-2612-1007) shall be shown in the margin below the title block of the approved drawing. After mounting, the FERC Drawing Number shall be typed on the upper right corner of each aperture card. Additionally, the Project Number, FERC Exhibit (e.g., F-1, G-1, etc.), Drawing Title, and date of this license shall be typed on the upper left corner of each aperture card. Two of the sets of aperture cards shall be filed with the Secretary of the Commission, ATTN: OEP/DHAC. The third set shall be filed with the Commission's Division of Dam Safety and Inspections New York Regional Office.

(b) The licensee shall file two separate sets of exhibit drawings in electronic format with the Secretary of the Commission, ATTN: OEP/DHAC. A third set shall be filed with the Commission's Division of Dam Safety and Inspections New York Regional Office. The drawings must be identified as (CEII) material under 18 CFR 388.113(c). Each drawing must be a separate electronic file, and the file name shall include: FERC Drawing Number, FERC Exhibit, Drawing Title, date of this license, and file extension [e.g., P-2612-1001, G-1, Project Boundary, MM-DD-YYYY.TIF]. Electronic drawings shall meet the following format specification: IMAGERY - black & white raster file FILE TYPE Tagged Image File Format, (TIFF) CCITT Group 4 RESOLUTION 300 dpi desired, (200 dpi min) DRAWING SIZE FORMAT 24 X 36 (min), 28 X 40 (max) FILE SIZE less than 1 MB (c) The licensee shall file three separate sets of the project boundary data in a georeferenced electronic file format (such as ArcView shape files, GeoMedia files, MapInfo files, or any similar format) with the Secretary of the Commission, ATTN: OEP/DHAC. The file name shall include: FERC Project Number, data description, date of this license, and file extension [e.g., P-2612, boundary vector data, ##-##-####.SHP]. The georeferenced electronic boundary data file must be positionally accurate to 40 feet in order to comply with National Map Accuracy Standards for maps at a 1:24,000 scale. A single electronic boundary data file is preferred and must contain all reference points shown on the individual project boundary drawings. The latitude and longitude coordinates, or state plane coordinates of each reference point must be shown. The data must be accompanied by a separate text file describing the map projection used (i.e., UTM, State Plane, Decimal Degrees, etc), the map datum (i.e., North American 27, North American 83, etc.), and the units of measurement (i.e., feet, meters, miles, etc.). The text file name shall include: FERC Project Number, data description, date of this license, and file extension [e.g., P-2612, boundary metadata, MM-DD-YYYY.TXT]. Article 301. Revised Exhibits. Within 180 days of the approval of any new facilities and/or modifications required by Article 409, the licensee shall submit revised Exhibit A, F, and G drawings, as appropriate, with the Commission for approval. The exhibits shall show any existing, new and/or modified project facilities, the project boundary, and the delineation and acreage of the shoreline buffer zone. The revised project boundary shall include the portage trail around the south side of Poplar Hill Falls, day-parking at the Bog Brook Road boat launch, access road near the confluence of Enchanted Stream and the Dead River, including the foot path, and a public access road to the Spencer Stream put-in near the confluence of Spencer Stream and the Dead River, as well as any other lands the Commission deems necessary to be included in the

Commission-approved Comprehensive Recreation and Land Management Plan, as required by Article 409. Along with the drawings, the licensee shall include a written statement clarifying the precise acreages associated with each recreation facility. The exhibits shall have sufficient detail to adequately delineate the width of the buffer zone and the relative location of project features. The licensee shall submit six copies to the Commission, one copy to the Commissions Regional Director, and one to the Director, Division of Project Compliance and Administration. Article 401. Whitewater Boating Plan. Within six months of the date of issuance of this license, the licensee shall file with the Commission, for approval, after consultation with the U.S. Fish and Wildlife Service (FWS), the National Park Service (NPS), and the entities specified in Condition No. 2 of Appendix A, a whitewater boating plan for providing and monitoring whitewater boating flows and reporting the results of the monitoring, as required by Condition No. 2 of Appendix A. The licensee shall include with the plan documentation of consultation, copies of comments and recommendations on the completed plan after it has been prepared and provided to the consulted entities, and a description of how the entities comments are accommodated by the plan. The licensee shall allow a minimum of 30 days for the consulted entities to comment and to make recommendations prior to filing the plan with the Commission. If the licensee does not adopt a recommendation, the filing shall include the licensees reasons, based on project-specific information. The Commission reserves the right to require changes to the plan. The plan shall not be implemented until the licensee is notified by the Commission that the plan is approved. Upon Commission approval, the licensee shall implement the plan, including any changes required by the Commission. Article 402. Summer and Early Fall Lake Levels. In addition to general conformance with the long-term average operating curve, as required by Condition No. 3 of Appendix A, 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 full pond elevation of 1,146 feet U.S. Geological Survey datum. Temporary exceptions may occur as provided in a Commission-approved Lake Management Plan as required by Article 404 or for approved maintenance activities; extreme hydrologic conditions as defined in Condition No. 3.B. in Appendix A; emergency electrical system conditions as defined in Condition No. 3.C. in Appendix A; or by agreement between the licensee and appropriate state and/or federal agencies, as required in Appendix A. Article 403. Lake Level Evaluation. Within nine months from the date of

issuance of this license, the licensee shall file with the Commission, for approval, a report on the results of an evaluation of alternatives to address the effects of a lake drawdown on the recreational use and aesthetic values of Flagstaff Lake in the vicinity of the Town of Eustis. The report shall include any proposed project modification based upon this evaluation. The report shall consider modifications to the lake drawdown limits required by Article 403, or other project modifications, that would: (1) further improve the recreational use and aesthetic values in the vicinity of the Town of Eustis; (2) be consistent with the conditions in Appendix A; and (3) be consistent with the beneficial purposes of the project. The report shall include an estimated implementation cost and an analysis of the effects of the alternatives on other beneficial uses of the project, including recreational use, flood control, power development, downstream industrial and municipal water supplies, and wastewater assimilation capacity. The report shall include an analysis of the effects of the alternatives on cultural resources in accordance with the requirements of the Cultural Resources Management Plan required by Article 411. The licensee shall ensure that any operational modifications approved by the Commission under this article shall be consistent with the Lake Management Plan required by Article 404. The licensee shall prepare the report in consultation with the Maine Department of Environmental Protection, U.S. Fish and Wildlife Service, Maine State Planning Office, Maine State Historic Preservation Office, and Maine Department of Inland Fish and Wildlife, in addition to the Town of Eustis. The licensee shall include with the report documentation of consultation, copies of comments and recommendations on the completed report after it has been prepared and provided to the consulted entities, and a description of how the entities comments are accommodated by the report. The licensee shall allow a minimum of 30 days for the consulted entities to comment and to make recommendations before filing the report with the Commission. If the licensee does not adopt a recommendation, the filing shall include the licensee's reasons, based on sitespecific conditions. The Commission reserves the right to require changes to the report or any alternative recommended for implementation. No alternative shall be implemented until the licensee is notified by the Commission that it is approved. Upon Commission approval, the licensee shall implement the alternative, including any changes required by the Commission. Article 404. Lake Management Plan. Within nine months of the date of issuance of this license, the licensee shall file with the Commission for approval, a Lake Management Plan to ensure reservoir levels and flow releases required by Article 402 and Condition Nos. 1, 2, and 3 of Appendix A, are met in normal and dry water years. The plan shall also provide for temporary modifications of such reservoir levels and/or

flow releases that may be needed to respond to unplanned maintenance requirements; drought, or other extreme hydrologic conditions; emergency electrical system conditions; or other conditions included in Condition Nos. 1, 2, and 3 of Appendix A. The plan shall include, but need not be limited to: (1) a description of the operational rules covering the refilling of Flagstaff Lake; (2) a description of the methods for releasing minimum flows and whitewater boating flows; (3) a definition of normal water year as used in the plan; (4) a definition of dry water year as used in the plan; (5) a schedule for implementation of the plan; and (6) an analysis of the operations effects on recreational and environmental resources in Flagstaff Lake and downstream of Long Falls when the lake levels and flow releases required by Article 402 and Appendix A would not be met. The licensee shall prepare the plan in consultation with the Maine Department of Environmental Protection, U.S. Fish and Wildlife Service, Maine State Planning Office, and Maine Department of Inland Fish and Wildlife. The licensee shall include with the plan, documentation of consultation, copies of comments and recommendations on the completed plan after it has been prepared and provided to the agencies, and specific descriptions of how the agencies' comments are accommodated by the plan. The licensee shall allow a minimum of 30 days for the consulted agencies to comment and to make recommendations before filing the plan with the Commission. If the licensee does not adopt a recommendation, the filing shall include the licensee's reasons, based on sitespecific conditions. The Commission reserves the right to require changes to the plan. The plan shall not be implemented until the licensee is notified by the Commission that the plan is approved. Upon Commission approval, the licensee shall implement the Lake Management Plan, including any changes required by the Commission. If the minimum flows and/or lake levels as required by this license are modified for any reason, the licensee shall notify the Commission as soon as possible, but no later than 10 days after each such incident. Article 405. Streamflow and Lake Level Monitoring. Within one year of the date of issuance of this license, licensee shall file with the Commission, for approval, after consultation with the Maine Department of Environmental Protection, the U.S. Geological Survey, the U.S. Fish and Wildlife Service, and the Maine Department of Inland Fisheries and Wildlife, a plan to install, operate, and maintain all equipment necessary: (1) to monitor and record compliance with the minimum flows and impoundment water level elevations required by Condition Nos. 1 and 3 of Appendix A and Article 402; (2) for the staff gages required by Condition No. 5.A of Appendix A; and (3) to monitor and record compliance with any alternative proposed as a result of the Lake Level Evaluation required by Article 403 and the Lake Management Plan required by 404. Compliance with the minimum flows in the Dead River immediately

downstream of its confluence with Spencer Stream shall be recorded at least every 15 minutes. The plan shall include, but need not be limited to: (1) the method of collecting and recording data; (2) a schedule for installing the monitoring equipment; (3) the proposed location, design, and calibration of the monitoring equipment; (4) design drawings of the devices, including any pertinent hydraulic calculations, technical specifications of proposed instrumentation, and erosion and sediment control measures, as appropriate; and (5) a provision for providing recorded data to the consulted agencies within 30 days from the date of an agency's request for the data. The licensee shall include with the plan documentation of agency consultation, copies of comments and recommendations on the completed plan after it has been prepared and provided to the consulted agencies, and specific descriptions of how the consulted agencies comments are accommodated by the plan. The licensee shall allow a minimum of 30 days for the consulted agencies to comment and to make recommendations prior to filing the plan for Commission approval. If the licensee does not adopt a recommendation, the filing shall include the licensees reasons based on project-specific information. The Commission reserves the right to require changes to the plan. The plan shall not be implemented until the licensee is notified by the Commission that the plan is approved. Upon Commission approval, the licensee shall implement the Streamflow and Lake Level Monitoring Plan, including any changes required by the Commission. Article 406. Fishway Reservation. Authority is reserved to the Commission to require the licensee to construct, operate, and maintain, or to provide for the construction, operation, and maintenance of, such fishways as may be prescribed by the Secretary of the Interior, pursuant to Section 18 of the Federal Power Act. Article 407. Mercury Analysis. Within one year of the date of issuance of this license, the licensee shall file, for Commission approval, after consultation with the Maine Department of Environmental Protection, U.S. Fish and Wildlife Service, Maine Department of Inland Fisheries and Wildlife, and U.S. Environmental Protection Agency, a Mercury Evaluation Plan as required by Condition No. 4 of Appendix A. In addition to mercury analysis for fish and the common loon (Gavia immer) required by such condition, the analysis shall also consider the potential effects of mercury levels at the Flagstaff Project on the federally-listed bald eagle (Haliaeetus leucocephalus). The plan shall include, but need not be limited to: (1) the methods of collecting, recording, and analyzing data; (2) the species of mercury to be analyzed; (3) a schedule

for implementing the plan; (4) a provision for submitting a report to the consulted agencies and the Commission to include the methodology, data, analysis and discussion, including project-related effects, if any, conclusions, and any recommendation and proposal based on the analysis; (5) a provision for providing data to the consulted agencies within 30 days from the date of an agency's request for the data; and (6) a provision for mercury analysis throughout the term of the license. The licensee shall include with the plan documentation of consultation, copies of comments and recommendations on the completed plan after it has been prepared and provided to the consulted agencies, and specific descriptions of how the consulted agencies comments are accommodated by the plan. The licensee shall allow a minimum of 30 days for the consulted agencies to comment and to make recommendations prior to filing the plan for Commission approval. If the licensee does not adopt a recommendation, the filing shall include the licensees reasons based on project-specific information. The Commission reserves the right to require changes to the plan. The plan shall not be implemented until the licensee is notified by the Commission that the plan is approved. Upon Commission approval, the licensee shall implement the Mercury Evaluation Plan, including any changes required by the Commission. Article 408. Loon Management Plan. Within one year of the date of issuance of this license, the licensee shall file, for Commission approval, after consultation with the Maine Department of Inland Fisheries and Wildlife (Maine DIFW), Maine Department of Environmental Protection (Maine DEP), and the U.S. Fish and Wildlife Service (FWS), a Loon Management Plan for Flagstaff Lake required by Condition No. 6 of Appendix A. The purpose of the plan shall be to develop, implement, and evaluate measures to enhance common loon (Gavia immer) productivity at Flagstaff Lake. The plan shall include, but need not be limited to: (1) proposed enhancement measures; (2) a target goal for the plan; (3) the method of collecting, recording, and analyzing data; (4) a schedule for implementing the plan; (5) a provision to meet with Maine DIFW, Maine DEP, and the FWS annually to review loon management efforts at the Flagstaff Project; and (6) a provision to review the Loon Management Plan, in consultation with the consulted agencies, every five years and submit a progress report based on the first five years of surveys to the consulted agencies and the Commission, for approval, including a recommendation as to whether the plan shall be modified, if necessary, to improve the effectiveness of the plan. The licensee shall include with the plan documentation of consultation, copies of comments and recommendations on the completed plan after it has been prepared and

provided to the consulted agencies, and specific descriptions of how the consulted agencies comments are accommodated by the plan. The licensee shall allow a minimum of 30 days for the consulted agencies to comment and to make recommendations prior to filing the plan for Commission approval. If the licensee does not adopt a recommendation, the filing shall include the licensees reasons based on project-specific information. The Commission reserves the right to require changes to the plan. The plan shall not be implemented until the licensee is notified by the Commission that the plan is approved. Upon Commission approval, the licensee shall implement the Loon Management Plan, including any changes required by the Commission. The Commission may require additional measures to enhance the common loon population based upon the analysis filed with the Commission. Article 409. Comprehensive Recreation and Land Management Plan. Within one year of the date of license issuance, the licensee shall file for Commission approval, after consultation with the U.S. Fish and Wildlife Service (FWS), Maine Department of Inland Fisheries and Wildlife (Maine DIFW), Maine Department of Environmental Protection (Maine DEP), Maine Department of Conservation (Maine DOC), National Park Service (NPS), and the Maine State Historic Preservation Office, a Comprehensive Recreation and Land Management Plan to protect and enhance terrestrial resources, including the federally-listed bald eagle (Haliaeetus leucocephalus), and to enhance recreation resources. The plan shall include the following land management elements: (1) a provision for retaining the existing Flagstaff Project boundary up to an elevation of 1,150 feet U.S. Geological Survey datum to protect riparian habitat; (2) a proposal for including in the project boundary any additional lands needed for any recreational facilities required by this license; (3) identification of acceptable uses, such as timber harvest management and public access, for the buffer zone; (4) site-specific erosion and sediment control measures to be implemented during and after construction to minimize loss of the area's natural vegetation and provide for revegetation, stabilization, and landscaping of new construction areas and slopes affected by erosion; (5) measures to control project-induced shoreline erosion at Stratton Brook and the north and south branches of the Dead River at the Town of Eustis; and (6) a provision for monitoring and updating bald eagle nest site locations on project land map(s) and notifying the FWS, Maine DIFW, Maine DEP, Maine DOC, and NPS of such locations. The plan shall include the following recreation elements: (7) whitewater boating flows and recreation provisions as required by Condition Nos. 2 and 5, respectively, Appendix A; (8) a provision for improving and maintaining foot access to Enchanted

Stream from the existing foot path; (9) provisions for posting known angler access sites near the Dead River with notices to warn the public of water level increases, providing basic information on wading angler safety, and posting the annual whitewater release schedule; (10) provisions for public access to the Spencer Stream put-in near the confluence of the Dead River and Spencer Stream; (11) provisions to ensure continuation of public access to project recreation facilities for the duration of the license; (12) a construction schedule, and associated costs, for any recreational enhancements required by this license; (13) provisions for operation and maintenance of existing and new project recreation facilities and assessment of associated costs, including any maintenance agreements, and fees charged for public use; (14) a discussion of how the needs of the disabled were considered in the planning and design of the recreation facilities; and (15) detailed site plans for existing recreational facilities and preliminary site plans for recreational enhancements, including delineation of location relative to the project boundary. The licensee shall include with the plan an implementation schedule, documentation of consultation, copies of comments and recommendations on the completed plan after it has been prepared and provided to the consulted agencies, and specific descriptions of how the consulted agencies comments are accommodated by the plan. The licensee shall allow a minimum of 30 days for the consulted agencies to comment and to make recommendations prior to filing the plan for Commission approval. If the licensee does not adopt a recommendation, the filing shall include the licensees reasons based on project-specific information. The Commission reserves the right to make changes to the plan. The plan shall not be implemented until the licensee is notified by the Commission that the plan is approved. Upon Commission approval, the licensee shall implement the plan, including any changes required by the Commission. Article 410. Recreation Monitoring. The licensee shall, after consultation with the U.S. Fish and Wildlife Service, Maine Department of Conservation, Maine Department of Inland Fisheries and Wildlife, and National Park Service, monitor recreation use at the Flagstaff Project area to determine whether existing recreation facilities meet recreation needs. During the term of the license, concurrent with the filing of FERC Form 80, required by Section 8 of the Commission's Regulations (18 CFR 8.11), the licensee shall file a report with the Commission on the monitoring results. The report shall include: (1) recreational use figures; (2) a discussion of the adequacy of the licensees recreation facilities at the project site to meet recreation demand; (3) a description of the methodology used to collect all study data; (4) if there is a need for additional facilities,

measures proposed by the licensee to accommodate recreation needs in the project area; (5) documentation of agency consultation and agency comments on the report after it has been prepared and provided to the agencies; and (6) specific descriptions of how the agencies comments are accommodated by the