Court ruling could prompt decision on Klamath Dams

A Klamath River dam

Dam-removal enthusiasts took a blow July 16 when the Federal Energy Regulatory Commission (FERC) issued a relicensing decision on four major hydroelectric dams along the Klamath River.

The dams’ destruction would mark the largest in American history—but questions surrounding who will be held liable for potential damages to property and the environment seem to be getting in the way of the dam-removal proposal. FERC’s recent order requires PacifiCorp, the power utility that currently owns and operates the dams, to remain a “co-licensee” to the dams—which means PacifiCorp would still be held liable for damages.

Avoiding that liability has been a fundamental element of PacifiCorp’s willingness to pursue dam removal. In 2016, the utility had entered a settlement agreement with a coalition of dam-removal proponents. That agreement created a corporation, the Klamath River Renewal Corporation (KRRC), which would apply for the dams’ operating license. If granted the license by FERC, KRRC would have then applied to FERC to surrender the license and destroy the dams.

However, FERC’s order only allowed KRRC to become partial owner of the dams’ license—thereby keeping PacifiCorp on the hook should liabilities exceed KRRC’s ability to handle the costs.

Protecting ratepayers from the liabilities of dam removal, PacifiCorp said in a statement, was a “bedrock principle” when the utility entered the 2016 dam-removal settlement agreement. However, PacifiCorp noted in its statement, the recent FERC order “denies [PacifiCorp] customer protections” negotiated in that settlement agreement.

FERC’s reasoning

“We recognize that the intent of the parties to the [2016 settlement agreement] was for PacifiCorp to wholly relinquish its interest in the [dams] to [KRRC],” FERC said in its decision, “with PacifiCorp … having no responsibility or liability as a licensee.”

However, FERC explained, such an arrangement “would not be in the public interest” because of “the magnitude of the proposed decommissioning, the uncertainties attendant on final design and project execution, and the potential impacts of dam removal on public safety and the environment…”

Citing the “significant degree of uncertainty associated with the project,” FERC speculated that “[c]osts could escalate beyond the level anticipated and unexpected technical issues could arise. Were [KRRC] to be the sole licensee, it might ultimately be faced with matters that it is not equipped to handle.”

Pointing to KRRC’s “limited finances and no experience with hydropower dam operation or dam removal,” FERC reasoned, “We believe that the public interest requires that PacifiCorp remain a co-licensee, and we condition our approval of the transfer upon it doing so.”

“Moreover, as a matter of policy, we find that it would be inappropriate for PacifiCorp, which has been the licensee for the Klamath Project since 1988, to relieve itself of all liability associated with the proposed decommissioning should it be approved,” the FERC order stated.

Background

For two decades, the dams, which provide 169 megawatts of power for 70,000 residences in southern Oregon and northern California, have been targeted for removal by a coalition largely comprised of environmental groups, some of the area’s Native American leaders, and various state agencies of California and Oregon. This coalition claims the dams’ removal will increase and improve salmon habitat along the Klamath River by “restoring” it to a “free-flowing” river.

On the other hand, the two most-affected counties, Klamath and Siskiyou, are on record opposing the liabilities surrounding the dams’ removal—liabilities such as property damage and loss; environmental harm to the river and fish; increased utility rates; and overwhelming votes of opposition by residents.

For its part, PacifiCorp had at first hoped to relicense the dams and continue operating them after the 50-year operating license expired in 2006. However, federal and state agencies demanded upgrades for fish passage that would have been prohibitively expensive to PacifiCorp and its customers. Thus, PacifiCorp joined the dam removal coalition.

After multiple failed attempts to pass federal legislation to fund the dams’ removal, the aforementioned 2016 settlement agreement was entered by PacifiCorp, tribes, and several state and federal agencies. The agreement created KRRC, the “dam removal entity” that would first take on the operating license for the dams, then ask FERC’s approval to surrender the license and destroy the dams. The plan, however, hinged largely on FERC’s transferring of the operating license from PacifiCorp to KRRC.

Next steps

Now that “step one” of the settlement agreement appears to have been thwarted, the parties will be going back to the drawing board.

“PacifiCorp is continuing to fully examine the order and will consult with our settlement partners to assess its impact on continued implementation of the [2016 settlement agreement],” PacifiCorp said.

KRRC said in a statement Friday it was “pleased that FERC has identified a pathway for the project to move forward.”

“There is more work to be done, and we are working with our settlement partners on how to ensure a successful project,” KRRC said. “Our partners have indicated they remain committed to identifying a path to move forward.”

For the partial license transfer to move forward, PacifiCorp and KRRC must accept the co-licensing arrangement in the next six months. After that, should the parties still desire to move forward with dam destruction, FERC will enter a wholly separate decision-making process to determine whether such an action is in the public’s best interest.

“Although … [KRRC] was created for the purpose of removing the dams, that does not mean that our decision to partially transfer the license to [KRRC] is tantamount to our approval of the proposed surrender,” FERC said in its decision. “Indeed, prior to deciding to condition our approval of the transfer on PacifiCorp remaining as a co-licensee, we requested additional information from [KRRC] about how it would operate the Lower Klamath Project in the event surrender is denied.”

FERC’s approval of the license surrender would include a full review under the National Environmental Policy Act FERC said in its order. The order can be found at ferc.gov. — Theodora Johnson, WLJ correspondent

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