[7] New Klamath Settlement Targets BuRec As Likely Removal Entity

Four dams operated by PacifiCorp on the upper Klamath River would be removed in the year 2020, according to a draft agreement announced Sept. 29.

Under the Klamath Hydroelectric Settlement Agreement (KHSA), the Secretary of the Interior will complete an investigation by March 31, 2012, to affirm a preliminary view that removal of the 169-MW project [FERC No. 2082] is in the public interest because the benefits outweigh the costs.

The Secretary will also make a determination designating a dam removal entity (DRE), which is likely to be the Bureau of Reclamation.

The KHSA is a follow-on to the November 2008 Agreement in Principle (AIP) signed by PacifiCorp, Interior, and the states of Oregon and California. They and 24 parties finalized the new agreement last week. However, a signing ceremony is not expected until late this year because the agreement must still be approved by the governing boards and councils of the other negotiating parties. These include three counties, three irrigation districts, four tribes and 10 nongovernmental organizations, although the draft agreement itself has signature lines for 50 entities.

After the governing boards review the deal, Interior will conduct a formal process enabling "the general public to help inform the secretarial review process and the related environmental review."

The agreement specifies that "public agency parties" will comply with all applicable federal laws, including NEPA, ESA, CWA, the Wild and Scenic Rivers Act, and California's CEQA.

The deal contemplates that the environmental reviews will get under way and be completed so that removal can commence in 2020 and be effectively completed by Dec. 31, 2020.

Until then, PacifiCorp will spend $500,000 a year implementing a range of interim measures to improve coho salmon habitat on the Klamath's California tributaries.

"At this junction, PacifiCorp believes that this hydropower agreement is in the best interests of customers, as opposed to the alternative of relicensing," said Dean Brockbank, vice president and general counsel for PacifiCorp Energy and lead negotiator for the company in the talks.

Brockbank said the new deal's biggest departure from the previous agreement is that the AIP precluded the federal government from serving as the DRE, while "in this, the federal government will likely serve as the DRE." That is still subject to a final decision, however, when the Secretary of the Interior makes a determination on whether dam removal is in the public interest. Under the settlement, the Secretary may designate Interior or a "non-federal entity" as the DRE.

Some parties are wary of the announced settlement.

"There's been no affirmative determination as to who is going to assume the liability of which PacifiCorp is relieved," said Tom Guarino, county counsel for Siskiyou County, where three of the dams are located. "And there's been no affirmative determination of who is liable for the removal activities."

The county also has doubts about the wisdom of a non-federal entity accepting liability.

The Hoopa Valley Tribe, which joined the negotiations in August, and Waterwatch, which was thrown out of an earlier round of talks, both complained the 10-year timeline is too long, risking the survival of endangered fish species.

Klamath Riverkeeper, which has not been involved in the talks but has pursued litigation against PacifiCorp and regulators over water quality problems in the river, acknowledged substantial improvements in the agreement. However, it said, there's no mention of who will pay for the clean-up of a stretch of the river below the nearby Keno Dam.

Under the KHSA, water quality issues at Keno--a separate project that would remain after the Klamath projects are removed--will be subject to a separate but concurrent study by the Secretary. But Klamath removal is contingent on negotiations to transfer Keno to Interior, another element that makes Riverkeeper and Siskiyou County nervous because the project needs work to meet Interior safety standards. The KHSA exempts PacifiCorp from paying those costs but doesn't say who will cover them instead.

Riverkeeper also said the deal doesn't address drought planning.

Pacific's Brockbank said he didn't think the new agreement changes PacifiCorp's liability exposure compared to the AIP, which provided immunity for past operations. As a practical matter, the statute of limitations only allows liability going back five or six years. He said the number of "off-ramps"--what the parties call "terminable events" allowing parties to pull out of the deal--has not substantially changed from the AIP.

The agreement does not finalize terms of the January 2008 Klamath Basin Restoration Agreement reached by many of the same parties to "rebuild fisheries, sustain agricultural communities, and resolve other longstanding disputes related to the allocation of water resources" in the basin. PacifiCorp is not a KBRA signatory, although dam removal is contemplated in provisions of the KBRA.

Many of the parties supporting release of the KHSA emphasized the import of turning now to the KBRA, including Interior Secretary Ken Salazar, who said he has directed federal negotiators "to immediately begin to finalize" the KBRA.

In a joint statement, the Klamath Water Users Association, Klamath Water and Power Agency and Upper Klamath Water Users Association said the new agreement "is not where the bulk of the irrigation parties' power interests are dealt with."

"We look forward to turning our full attention now to the KBRA and finalizing terms that combine federal power and renewable energy investment to provide affordable power for our members," said UKWUA's Becky Hyde.

In a separate statement, another group of the negotiating parties called the KHSA "a major step toward restoring the health" of the Klamath River, but added it "would be complemented by the implementation" of the basin restoration agreement, which "significantly increases water flows for fish, provides greater reliability of irrigation water delivery, undertakes Basin-scale habitat restoration, and makes critical economic investments to ensure the economic viability of Basin fishing and farming communities into the future."

The statement was signed by the Karuk Tribe, Klamath Tribes of Oregon, Yurok Tribe, American Rivers, Trout Unlimited, California Trout, Pacific Coast Federation of Fishermen's Associations, Salmon River Restoration Council, Northern California Council of the Federation of Fly Fishers, National Center for Conservation Science and Policy, and the Natural Heritage Institute.

Federal legislation will be required to authorize the Secretary's review and Interior's service as DRE, to provide PacifiCorp immunity from dam-related liability, and to make a half-billion dollars in new appropriations under the KBRA.

The 132-page KHSA includes 13 appendices on federal legislation, state legislation, interim measures, a timeline and study process guidelines.

Oregon has already passed legislation authorizing PacifiCorp to collect up to $200 million in rates to pay for the state's share of removal costs, along with PacifiCorp's undepreciated investment in the dams, its cost to operate the project prior to removal, and for replacement power.

The new agreement also includes an AIP provision calling on California to pass a bond measure for up to $250 million to cover any costs beyond those incurred by PacifiCorp. That money was reportedly folded into one of the bills that make up a $12-billion bond package aimed principally at water system improvements in the Sacramento-San Joaquin River Delta. It would require voter approval at a time when polls show it would likely not pass.

The bond package died in early September for lack of Republican support, and the session is now over. But a Rules Committee aide said the Legislature and governor are still negotiating, and there will likely be a move to bring the legislation back during an "interim session" later this month. The measure could possibly be split into separate ballots of $5.9 billion each, one in 2010 and 2014. -Ben Tansey

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