Over the past decade, proponents of an effort to remove four dams on the lower Klamath River have hit a series of roadblocks. The most recent came on July 16, 2020, when the Federal Energy Regulatory Commission (FERC) voted 3-0 to partially transfer the license for the four dams to the Klamath River Renewal Corporation (KRRC) but also required PacifiCorp, the current owner and operator of the dams, to remain a co-licensee. FERC determined that retaining PacifiCorp as co-licensee is in the public interest because of significant uncertainty regarding the proposed dam removal. FERC Order at p. 17. In light of FERC’s order, the fate of the dam removal proposal is unclear.
In 2010, numerous parties including the United States and the States of California and Oregon signed the Klamath Hydroelectric Settlement Agreement, which was intended to serve as a blueprint for the removal of the lower Klamath dams. The four dams along the lower Klamath River currently provide clean, renewable energy and numerous other benefits to the region. The motivation for the proposal to remove the dams along the lower Klamath River was that it would increase the amount of upstream habitat available to salmon that spawn in freshwater and then migrate out to the ocean where they mature to adulthood.
From the beginning, there was controversy about the principal justification for the proposed dam removal: providing salmon access to potential spawning habitat upstream of the four dams and downstream of the upper Klamath dams. Independent review panels recognized the potential benefits of dam removal in concept but also raised serious questions regarding the likelihood that the proposed dam removal would achieve the conservation goal of increasing the populations of Chinook salmon (Oncorhynchus tshawytscha) and Coho salmon (Oncorhynchus kisutch) in the Klamath River system.
Just as controversial were the plans to create a so-called dam removal entity to take ownership of the four dams and oversee their removal in order to ensure the project proponents, including PacifiCorp and the States of California and Oregon, that they could escape liability for any harm the project would cause to the people that live in the region or its wildlife. For a number of years the proponents pushed legislation in Congress that would actually amend the law to shield themselves from liability. After a number of failed attempts to move the legislation, the proponents abandoned the effort and created the KRRC in 2016 to serve as the dam removal entity. They then submitted applications to FERC to (1) transfer the license from PacifiCorp to KRRC and (2) (preemptively) to surrender the license.
The dam removal proponents submitted thousands of pages of documentation to FERC in support of the two, separate applications. In 2017, FERC determined that the two applications would be considered sequentially, and FERC requested additional information regarding the legal, technical, and financial capacity of the KRRC to accept the license if transferred. FERC Order at p. 3. In its recent decision, FERC noted that the KRRC “has limited finances and no experience with hydropower dam operation or dam removal.” Id. at pp. 17-18. FERC also noted that “[c]osts could escalate beyond the level anticipated and unexpected technical issues could arise.” Id.
Notably, FERC emphasized the KRRC’s lack of experience and the potential for a funding shortfall. FERC Order at pp. 17-18. KRRC was created by dam removal proponents in 2016 solely for the purpose of taking ownership of and removing the dams. It is reliant on consultants and contractors to provide legal, technical, and financial expertise. Further, while the Settlement Agreement provides that the KRRC will have $450 million to complete the proposed dam removal, the estimated costs of the proposed dam removal have increased steadily over time from $291 million in 2012 to $445 million in 2019. In light of the facts that large infrastructure projects frequently experience material cost overruns and the proposed dam removal is the largest and most complex in the United States, FERC made the logical determination that “PacifiCorp will not be shielded from liability for dam removal.” Id. at pp. 26.
PacifiCorp cannot be happy with the decision. It entered into the Settlement Agreement in order to limit its exposure associated with the proposed dam removal. Now it is in a position to absorb any costs and liabilities of dam removal that the KRRC cannot bear. While PacifiCorp may view this as inequitable, a greater injustice would have been authorizing the proposed dam removal to move ahead without adequate financing. In such case, the costs (akin to the orphan share of liability) would likely have fallen on those within the region most harmed by the proposed dam removal project and least able to address those harms. The proposed dam removal as conceived by the parties to the Settlement Agreement is no longer viable, but it remains to be seen whether dam removal itself remains viable.