Friday, September 23, 2011

War of Words #1: Congressman McClintock and the Karuk Tribe on the "Klamath Facilities Removal Draft EIS/EIR"

This is the first in a series. In the weeks ahead we will publish statements about the Dam and Water Deal EIS/EIR from a wide variety of sources and perspectives. KlamBlog invites you to submit an opinion as well. Submissions should be sent to 

Map of the Klamath River Basin showing location of dams slated for removal; a fifth PacifiCorp dam - Keno - (not labeled) would not be removed. Under the proposed Secretarial Decision, Keno would be transferred to the US Bureau of Reclamation and operated to serve irrigation interests.  

from RedState ~

House Floor Remarks
Congressman Tom McClintock
September 22, 2011
Mr. Speaker:

  This generation is facing spiraling electricity prices and increasingly scarce supplies.  Californians have had to cut back to the point that their per capita electricity consumption is now lower than that of Guam, Luxembourg and Aruba. 
What is the administration’s solution?

Interior Secretary Ken Salazar announced yesterday that the administration is moving forward with a plan to destroy four perfectly good hydroelectric dams on the Klamath River capable of producing 155,000 megawatts of the cleanest and cheapest electricity on the planet – enough for 155,000 homes.
Why would the administration pursue such a ludicrous policy?

They say it’s is necessary to help increase the salmon population.  We did that a long time ago by building the Iron Gate Fish Hatchery.  The Iron Gate Fish Hatchery produces five million salmon smolts each year – 17,000 of which return annually as fully grown adults to spawn.  The problem is, they don’t include them in the population count!

And to add insult to insanity, when they tear down the Iron Gate Dam, we will lose the Iron Gate Fish Hatchery and the five million salmon smolts it produces every year.

Declining salmon runs are not unique to the Klamath.  We have seen them up and down the Northwest Pacific Coast over the last ten years as the result of the naturally occurring Pacific Decadal Oscillation – cold water currents that fluctuate over a ten year cycle between the Pacific Northwest and Alaska.  During the same decade that salmon runs have declined in the Pacific Northwest, they have exploded in Alaska.  We’re at the end of that cycle.

The cost of this madness is currently pegged at a staggering $290 million – all at the expense of ratepayers and taxpayers.  But that’s just the cost of removing the dams.  Consumers will face permanently higher prices for replacement power, which, we’re told, will be wind and solar.
Not only are wind and solar some three times more expensive, but wind and solar require equal amounts of reliable stand-by power – which is precisely what the dams provide.

We’re told that yes, this is expensive, but it will cost less than retro-fitting the dams to meet cost-prohibitive environmental requirements.  If that is the case, then maybe we should re-think those requirements, not squander more than a quarter billion dollars to destroy existing hydro-electric dams.  Or here’s a modest suggestion to address the salmon population: count the hatchery fish!

We’re told this is the result of a local agreement between farmers and other stakeholders.  Mr. Speaker, everybody knows that the Klamath Agreement was the result of local farmers succumbing to extortion by environmental groups that threatened lawsuits to shut off their water.  And obviously the so-called stakeholders don’t include the ratepayers and taxpayers who would pay dearly for the loss of these dams.  Indeed, local voters have repeatedly and overwhelmingly repudiated the agreement and the politicians responsible it.  The locally-elected Siskiyou Board of Supervisors vigorously opposes it.

Finally, the administration boasts of 1,400 short-term jobs that will be created to tear down these dams.  Just imagine how many jobs we could create if we tore down the Hoover Dam.  Or Duluth, Minnesota.  

Mr. Speaker, amidst a spending spree that threatens to bankrupt this nation, amidst spiraling electricity prices and chronic electricity shortages – to tear down four perfectly good hydro-electric dams at enormous cost is insane.  And to claim that this is good for the economy gives us chilling insight into the breathtakingly bad judgment that is misguiding our nation from the White House.

The President was right about one thing when he spoke here several weeks ago.  Fourteen months is a long time to wait to correct the problem.

Fortunately, the President will need congressional approval to move forward with this lunacy, and that will require action by this House.  Earlier this year, the House voted to put a stop to this nonsense.  I trust it will exercise that same good judgment as this administration proceeds with its folly.

# # #

Iron Gate - one of four PacifiCorp dams slated for removal

from YubaNet ~

Klamath Stakeholders Seize Momentum on Heels of Salazar Comments, Study Results
Restoration plans jumpstarts major economic benefits adding 4600 jobs to regional economy

By: Karuk Tribe

SACRAMENTO, Sept. 21, 2011 - Today, a diverse group of organizations working to balance water use in the Klamath River basin reacted to the positive findings in a Draft Environmental Impact Statement (DEIS) released by the Department of Interior, and to comments made earlier this week by Interior Secretary Salazar. The Secretary will use this DEIS to make his final determination in March of 2012 as to whether or not removal of four Klamath River dams in accordance with the Klamath Restoration Agreements are in the public interest.

"This news comes on top of recent official findings by both the Oregon and California Public Utility Commissions (PUCs) that dam removal under the Klamath Settlement Agreement is not only in the public interest but far less costly for utility customers than relicensing. Implementing the Settlement Agreement is the obvious next step in building a sound recovery for both the Klamath agricultural and fisheries based economies and restoring thousands of regional jobs," said Glen Spain of Pacific Coast Federation of Fishermen's Associations (PCFFA).

In a thorough review comparing the impacts of river restoration to current conditions, the DEIS shows that implementation of the Agreements would provide significant economic, environmental, social and cultural benefits to Northern California and Southern Oregon. One of the key findings stakeholders applauded is that the projected cost of removing four dams on the Klamath River falls well within the range of the budget agreed to by Tribes, irrigators, fishermen, and dam owner PacifiCorp.

"It's important to understand that this is about more than dam removal. This effort will restore fisheries while creating and protecting thousands of jobs in both fishing and agricultural communities. We have the diverse grassroots support that should spur congress to act," said Jeff Mitchell, Councilman for the Klamath Tribes.

The Klamath Agreements were signed in February 2010 by over 40 stakeholder organizations from a broad-based coalition that includes irrigators, Tribes, fishermen, conservation groups, state and local governments – all groups seek to get beyond the endless litigation and fighting that preceded the Settlement Agreements.

Key features of the Agreements include reintroducing salmon to over 400 miles of historic habitat, increasing water storage and flood control by expanding Upper Klamath Lake, and improved water security for 1400 farm families on the Klamath Irrigation Project.

"What interests us most is that Basin agriculture will receive increased certainty of water deliveries, which helps protect an industry that is vital to all of the local communities in the Klamath Basin, " said Klamath basin farmer Steve Kandra. "We believe that implementing these Agreements will benefit agriculture even more than the federal studies indicate. Our research shows that agricultural production in Klamath County and Tulelake Irrigation District contributes more than $600 million to the Klamath economy annually and 4,890 direct and indirect jobs are supported each year in Oregon and California. These jobs will be at risk if the Agreements fall through."

The DEIS makes several key findings that proponents of the Agreements hope will prompt Congress to pass the legislation necessary for implementation. Stakeholders emphasize the economic and health benefits, cost savings, and jobs creation that the restoration plan includes:

The most probable estimate for dam removal and associated mitigations is $290 million (in 2020 dollars). Partial removal would cost $247 million, this assumes leaving some structures in place such as old powerhouses and selected abutment structures. Note that $200 million would come from ratepayers (who would otherwise foot the $500 million plus price tag for dam relicensing) and the balance would come from California.

The one-year dam removal project is estimated to result in 1,400 jobs during the year of construction.

Commercial fishing jobs were estimated in five Management Zones. Estimated jobs stemming from improved fishing conditions range from 11 average annual jobs in the KMZ-OR Management Area to 218 average annual jobs in the San Francisco Management Area.

- Dam removal would immediately alleviate massive blooms of toxic algae that plague the river each summer and pose health risks

Salmon dependent Tribes would benefit from increased abundance of salmon and improved water quality.

Klamath Basin National Wildlife Refuges would receive additional water and for the first time in more than 100 years, receive a certainty of water delivery. This water supply could improve hunting and wildlife viewing, which could attract more visitors to the refuges. There would be an estimated additional 193,830 fall waterfowl and 3,634 hunting trips over the 50-year period of analysis.

Combined, the Settlement Agreements invest over $700 million in the Klamath Basin over the next 15 years, and proponents stress that the restoration plan protects and enhance a regional natural resources economy that is worth over $750 million each year when healthy.


For more on the most recent federal and state dam removal environmental analysis and federal and state decision-making process, see:

All the four Klamath hydropower dams combined have generated only a very small amount of power – only about 82 Megawatts (MW) on average over the past fifty years. According to estimates by the Federal Energy Regulatory Commission (FERC), the federal agency that licenses dams, after expensive retrofitting to meet modern standards, these dams would then only generate about 62 MW of power on average, or about 27% less than they do today. FERC itself estimated in its 2007 Final Environmental Impact Statement (FEIS) on relicensing that even if fully FERC relicensed, the required retrofitting would be so expensive that these dams would then operate at more than a $20 million/year net loss (see FERC FEIS, Table 4-3 on pg. 4-2). The November 2007 FERC Final EIS is available online at:

It can also be found by a FERC docket search at through their eLibrary, Docket No. P-2082-027 posted November 16, 2007, Doc. No. 20071116-4001.

# # # 

Who's being robbed? - The proposed Secretarial Decision will place private irrigators who get subsidized water courtesy of US Taxpayers first in line for Klamath River water ahead of salmon and the majority of Klamath River Basin irrigators who get shafted in the proposed Secretarial Decision. 

KlamBlog's Comments:

KlamBlog agrees that relicensed PacifiCorp dams would be money losers: "FERC itself estimated in its 2007 Final Environmental Impact Statement (FEIS) on relicensing that even if fully FERC relicensed, the required retrofitting would be so expensive that these dams would then operate at more than a $20 million/year net loss (see FERC FEIS, Table 4-3 on pg. 4-2)." That means the dams will be removed one way or another; that's a done thing . The two big questions which will be answered in the weeks and months ahead are:
  •  Who will pay for dam removal? We don;t agree with the Karuk Tribe that the ratepayers (PacifiCorp electricity customers) would bear the full cost if dam removal were pursued through FERC. We think it is likely that the PUC would order that PacifiCorp shareholders would have to come up with some of the facilities removal funds. After all, those shareholders have been pocketing profits from operating those facilities for many, many years.  

  • What other subsidies, benefits and other provisions will get a ride on a dam removal train that will lead to dam removal? Federal Agencies, the Irrigation Elite and those federal tribes which have signed the agreement - the Yurok, Karuk and Klamath Tribes - all stand to gain if the KBRA Water Deal is included - as is - in Klamath Dam Removal Legislation and the Secretarial Decision. Those who stand to stand to lose include the majority of private Klamath River Basin irrigators, the Hoopa, Quartz Valley and Resighini Tribes and - we would argue - prospects for restoration of the Klamath River and the recovery of Klamath Salmon. 


Glen Spain said...

Dear Klamblog..

There is a fundamental error in your analysis, to wit:

"We think it is likely that the PUC would order that PacifiCorp shareholders would have to come up with some of the facilities removal funds. After all, those shareholders have been pocketing profits from operating those facilities for many, many years."

This is a common misconception, but shows a complete misunderstanding of how public utilities are organized and function. It took me a while to wrap my head around the different between regular corporations and public utilities too. They are PASS THROUGH organizations, not like regular corporations.... thus they (and their shareholders)make no "profit" as such. They are not allowed to, by law!

Shareholders are entitled to ONLY a legally fixed (but guratanteed) rate of return on their investment... not a share of "profits." There ARE no "profits" in the usual sense for a public utility. Every extra dollar that in a normal corporation could be "profit" must instead be refunded back to the utility's ratepayers through reduced rates, all regulated by the PUCs.

And it is the ratepayers -- NEVER the shareholders -- who fund, through their rates, the construction, operation and eventually decommissioning and replacement of the company's physical faciliites. That is how utilities always work!

The KHSA is one of the very very rare exceptions, and that will need special Congressional approval to achieve.

Publicly regulated utilities operate this way to provide power grid stability, and to attract investors, who take on none of the risks in a utility as they would in any ordinary corporation, and cannot pocket the profits -- but do get stable and GUARANTEED rates of return, so investment is risk-free. Utilities are regulated monopolies, not regular corporations.

So there is virtually ZERO chance that the PUC would EVER require PacifiCorp shareholders to foot ANY of the bill for relicensing and/or decommissioning. These would be, as it always is and always has been, financed by revenues from the one product the company sells -- electrical power -- collected through its ratepayers.

Sorry, this is fundamental... and totally invalidates much of your analysis.

-- Glen Spain, PCFFA

Felice Pace said...

There is an old saying that goes: "a little knowledge is a dangerous thing!"

That's true of Glen Spain's rudimentary knowledge of how PUC's operate. In fact, PUC's have ordered shareholders to pay some of the cost of removing dams and powerhouses that power companies no longer want to operate because they are obsolete and non-performing assets.

All behavior has a reason. If Glen Spain wants us to believe he knows what he's talking about he needs to explain to us why PacifiCorp chose not to decommission the project via FERC but instead took the more difficult road of making deals that require federal legislation and that are likely to be challenged in court.

I believe that - like just about every other corporation - PacifiCorp managers did what they did because it will save the shareholders money. In fact PacifiCorp managers have a duty to do just that.

Glen, If saving their shareholders money was not the motivation for the Dam Deal, then what was the motivation?

Glen Spain said...


To respond directly to your question, PacifiCorp management wants to save its RATEPAYERS money, and is obligated to do so by PUC oversight. The KHSA does that.

It also wants to reduced to as close to zero as possible the Company's risks in getting out of the basin totally by getting out of the dam removal business entirely, giving that responsibility over to a third party. The KHSA does that.

It also wants to escape gracefully from potential relicensing obligations at least 2.5 times (i.e., $500+ million) the cost at which its customer contribution is capped for dam removal ($200 million max) in the KHSA.

All together these are good business decisions that serve its ratepayers by reducing their current rate shock and future financial exposure. These are the sort of good decisons corporate managers get promoted for.

And to reiterate: Only in the most OUTRAGEOUS of circumstances, such as the deliberate fraud by shareholders in the ENRON-PGE swindle, will PUCs assess ANY direct and personal contributions by public utility shareholders to the kitty of a public utility. Neither I nor the experts I have consulted know of any such instance, ever, with regard to powerplant decommissionings, which are considered routine and normal operations ALWAYS funded solely by ratepayers.

If you know, as you say, a counterexample in which this actually occurred with respect to normal operations such as powerplant decommissioning, please specifically cite it and reference your documentation in this comment space. We can discuss it then in more detail instead of in the abstract. Until then I remain unconvinced and my analysis stands.


Felice Pace said...

Glen Spain thinks that PacifiCorp is a special type of corporation which considers and cares for its customers more than its shareholders. I don't think that passes the laugh test.

As Glen should know, corporations have a fiduciary responsibility to maximize return to investors.

Glen does get it right on the liability question: PacifiCorp cut a deal that - if it stands - will get them out of ALL liability - including for any toxic legacies which could be hidden and forgotten around those 100 year old powerhouses.

That provision is one reason I think Glen and others who negotiated the Dam Deal are not very good negotiators. PacifiCorp took y'all to the cleaners!

Unfortunately, it's the taxpayers who will suffer as a result.

Glen is correct that utilities regulated by the PUCs are "pass through organizations" - they pass through the costs of operating powerplants to electricity customers and get to collect 9% profit from those customers as well. But that is the rule for generating and selling electricity; not for removing an asset that has outlived its productivity. For that there are few precedents..about 10 to be exact.

In the case of the Edwards Dam removal in Maine, "the funds were provided by Bath Iron Works and the Kennebec Hydro Developers Group, which were dam owners upstream." (see:
In the case of a dam on the Raritan River in NJ the corporate owner paid (see:

Three lawyers who represent utilities apparently think there is a risk that dam owners will have to pay for removal. They published a journal article arguing that such an order would be a breach of contract and a regulatory taking (see:

And even Spain's fellow Klamath deal-maker - American Rivers - believes getting private owners to pay for dam removal is feasible. They devoted a whole section of their "PAYING FOR DAM REMOVAL: A Guide to Selected Funding Sources" to private funding including from dam owners. They also provide pie charts which say that when dams have been decommissioned owning companies have paid 30 to 40% of the costs. (see:

Unlike Klamath Ratepayers, other ratepayers have not kept quiet when companies have tried to get them to bear the full cost of dam decommissioning. (see:

All this suggests that Glen is a bit confused and/or misinformed. I'd recommend doing a little more homework and not just accepting everything PacifiCorp tells you as gospel.

Glen Spain said...


Thank you for the references. I will check them out, as should your readers.

But remember, "the company" DOES pay for fronting many costs and so it is commonly said that "the company pays," especially in the popular media where finer distinctions are often lost -- but the question is, are these charges ultimately charged BACK to the shareholders alone? Or are they ultimately charged solely to the ratepayers, as "rate recoverable?"

I would bet that in several of the cases you cite, probably all, it was NOT the shareholders but the ratepayers who ULTIMATELY bore the costs of producing their own electricity. In other words, those normal operational costs were "rate recoverable." But I too invite your readers of this blog to check these references out, with that in mind -- who ULTIMATELY paid?

In regulated utilities, shareholders generally get a guaranted rate of return in exchange for a guarantee that they will not be later dunned for prudent and reasonable costs. Such costs are, instead, divvyed up among ratepayers. That IS the general rule. If these are exception, such exceptions are very rare indeed.

These are my last comments to this posting.