Tuesday, February 5, 2013

The KHSA's fatal flaw: will a little discussed provision frustrate dam removal?

Regular readers of this blog will know that, in order for it to be implemented, the deal known as the Klamath Hydroelectric Settlement Agreement or KHSA must be authorized by federal legislation. Enacting federal legislation is necessary because the KHSA abandons the normal legal process by which hydroelectric dams and related powerhouses are licensed, relicensed or decommissioned (removed or breached).
Promoters argue that the KHSA is the swiftest, surest and best path to dam removal; others reason that the normal process under the Federal Power Act – a decommissioning deal supervised by the Federal Energy Regulatory Commission (FERC) - is the best path to removal.

While it is impossible to know with absolute assurance which path to decommissioning would prove quickest, surest and best, one thing is clear: a decommissioning agreement ordered and overseen by FERC could not include the costly and controversial water deal known as the Klamath Basin Restoration Agreement or KBRA.

Absent inclusion in KHSA authorizing legislation, the KBRA would have to go it alone in Congress and would likely face even greater hurdles in the quest to become law. That's because most KBRA money provisions – including multi-million dollar funding for federal irrigation interests – will likely be seen in Congress as subsidies for special interests. With a huge federal deficit and myriad corporate, farm and other interests vying to maintain existing subsidies, prospects for securing new taxpayer-funded subsidies appear slim at best.

Even the KBRA's restoration funding qualifies as a subsidy because the KBRA directs that funding toward projects and locations favored by those who signed the agreement. As has been proven time and again (including in the Everglades, Great Lakes, Chesapeake Bay and the in the former Klamath restoration effort), allocating restoration funding based on political rather than scientific criteria is a recipe for restoration failure.

What if?

What if, however, legislation to authorize and fund the KHSA overcomes all obstacles and becomes federal law? Would that legislation lead to speedy dam removal? KlamBlog thinks not and here's why:

Legislating the KHSA Dam Deal would absolve PacifiCorp and its shareholders from responsibility for removing or decommissioning the dams and powerhouses it owns. KHSA legislation would also absolve the Corporation from liability for toxic legacies. But the KHSA does not name the organization or government agency which would take over the task of facilities removal and assume legal responsibility for toxic legacies.

One of PacifiCorp's aging Klamath Powerhouses

Instead, the Agreement calls for a “Dam Removal Entity” or DRE which would presumably step forward once authorizing legislation becomes law. That begs two questions:
  • What sort of organization or government agency would be willing and able to take on dam removal and to accept legal responsibility for PacifiCorp's toxic legacies?
  • Even if a willing company, tribe or agency could be found, would that DRE be able to obtain bonding and insurance while accepting full responsibilities for dam removal and unassessed toxic legacies?
KlamBlog suspects obtaining bonding and insurance under those conditions would prove problematic. Bonding agencies and insurance companies are not in the habit of bonding and insuring unassessed liability; if they do it, the cost would likely be astronomical.

The DRE of last resort

What happens if KHSA-KBRA authorizing legislation passes but a capable, bondable and insurable Dam Removal Entity can't be found? In the absence of a capable DRE, the federal government is the Dam Removal Entity of last resort. It would be necessary to go back to Congress seeking authorization for the federal government to become the KHSA's “Dam Removal Entity”.

A federal DRE would mean a higher price tag for dam removal and powerhouse decommissioning; cleaning up toxic legacies lurking around 100 year old powerhouses could prove particularly expensive. Taxpayers would bear those costs. Avoiding potentially significant costs to decommission their dams and powerhouses is likely a prime reason PacifiCorp wanted a deal outside the FERC process.

As KlamBlog editor Felice Pace pointed out in a recent editorial, turning over toxic legacies to taxpayers is nothing new in the American West:
Walking away from toxic legacies is, of course, an old corporate trick. In Northern California and throughout the west, timber companies 'donated' old mill sites to local governments which later found that the fine print had absolved the company from liability for toxic legacies. Taxpayers had to pick up the bill for cleaning up those toxics.

KlamBlog suspects the KHSA's creators – including PacifiCorp – realize it is unlikely a non-federal DRE capable of decommissioning PacifiCorp's Klamath dams and powerhouses could be found. Have promoters intentionally obscured the likely federal role in dam removal if the KHSA is authorized by Congress?

Will promoters explain?

KlamBlog invites promoters of the KHSA Dam Deal - and especially PacifiCorp's Klamath spokesperson VP Dean Brockbank – to explain on this blog why their plan to have an unnamed “Dam Removal Entity” remove the dams, decommission the powerhouses and accept responsibility for toxic legacies is realistic. We offer to publish that explanation here on KlamBlog.

What do you think? If the KHSA is authorized by Congress will a Dam Removal Entity be found and, if found, would such an entity be able to secure insurance and bonding? Would the federal government be required to step forward as the DRE of last resort? And was that what KHSA promoters had in mind all along?

Leave a comment below. Let the debate begin and stay tuned!

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