By Austin C. Cho and Meredith Nikkel
A recent ruling by the Federal Energy Regulatory Commission (FERC) has inserted a new condition on a longstanding plan to demolish four hydroelectric dams on the Klamath River in northern California and southern Oregon. Despite the terms of a settlement agreement that called for PacifiCorp, the dams’ current owner and operator, to sever ties—and liability—by transferring its operating license to the group that would oversee the demolition, FERC’s approval of the transfer includes a condition that PacifiCorp remain a co-licensee.
Background
For decades, the Klamath River Basin (Basin) has been an epicenter for disputes over water and other natural resources among farmers, tribes, fishermen, environmentalists, and state and federal authorities. The Basin spans over 16,000 square miles in Oregon and California, consisting of agricultural, forest, and refuge lands. The four hydroelectric dams proposed for demolition were built between 1908 and 1962, along the Lower Klamath River. The placement of the dams interrupts access to hundreds of miles of historical spawning and rearing habitats in the Upper Klamath for migratory chinook and coho salmon.
In 2004, PacifiCorp sought FERC approval to re-license its operation of the dams for another 30 to 50 years. In response, a 2004 economic study by the California Energy Commission and the U.S. Department of the Interior found that decommissioning the dams instead could actually saving PacifiCorp ratepayers up to $285 million over a thirty-year period. A settlement group comprised of representatives from PacifiCorp, Klamath Basin tribes, state and federal agencies, counties, farmers, fishermen and conservation groups, was formed in 2005 to potentially resolve the years of disputes and litigation over habitat, fishery, and water quality concerns surrounding the four contested dams.
The 2010 Klamath Hydroelectric Settlement Agreement, amended in 2016 to incorporate delayed state legislative approvals, finally brought the parties to terms on the decommission and demolition of the four Lower Klamath dams. Under a key provision of the Settlement Agreement, PacifiCorp would request to transfer its ownership of the dam facilities and FERC operator’s license and contribute $200 million collected through utility bill surcharges towards the $450 million removal effort. In exchange, PacifiCorp would be protected from all liability for potential damages caused by the ensuing dam removal process.
FERC Grants Partial Transfer of PacifiCorp’s License
On July 16, 2020, four years after the transfer application was submitted, FERC’s 31-page Order Approving Partial Transfer of License, Lifting Stay of Order Amending License, and Denying Motion for Clarification and Motion to Dismiss, 172 FERC ¶ 61,062 (FERC Order) granted only a partial transfer of PacifiCorp’s license to the Klamath River Renewal Corporation (KRRC), a nonprofit organization formed to carry out the decommission and removal of the dams.
In requiring that PacifiCorp and KRRC accept their status as co-licensees, FERC pointed to the discrepancy between KRRC’s limited finances and lack of experience with hydropower dam operation and removal, and PacifiCorp’s additional financial resources and 32 years of experience in operating the Lower Klamath facilities. (FERC Order, pp. 17-18.) While the Settlement Agreement contemplated a budget of $450 million that would fully fund the removal project, FERC cautioned that “[c]osts could escalate beyond the level anticipated and unexpected technical issues could arise.” (Id. at p. 17.)
Out of concern for the “uncertainties attendant on final design and project execution, and the potential impacts of dam removal on public safety and the environment,” FERC determined it would not be in the public interest for KRRC to bear all responsibility and liability on its own, despite the express intent of the settling parties. (Id. at 17-18.) Thus, FERC’s approval of the transfer is conditioned on PacifiCorp remaining on the license.
Despite the significant change to the parties’ proposal, FERC suggests PacifiCorp’s status as co-licensee may not ultimately affect the final results. In the event KRRC has access to sufficient funding and no unforeseen issues arise in the removal process, PacifiCorp would not bear additional burdens. (Id. at p. 18.) FERC also suggested that the parties may further amend the Settlement Agreement so that KRRC agrees to indemnify PacifiCorp for any expenses or damages that may result from the shared licensing obligation. (Id.)
Conclusion and Implications
While the Federal Energy Regulatory Commission Order provides a pathway forward to the next milestone, it may take more time before the plan to demolish the four Lower Klamath dams can be realized. Consistent with FERC’s recommendation, it can be expected that PacifiCorp, KRRC, and the other stakeholders to the Settlement Agreement will coordinate to develop satisfactory terms to account for this latest snag in an already drawn-out process.
The July 16, 2020 FERC Order is available at: http://www.klamathrenewal.org/wp-content/uploads/2020/07/FERC-Order-20_0716.pdf
