States of California and Oregon, Dam Owner PacifiCorp, Karuk and Yurok Tribes and KRRC Update Terms for Klamath Dam Removal
The Amended KHSA was signed by 23 parties in 2016 to set the terms for the removal of four hydroelectric dams on the Klamath River and related restoration activities. These parties included the Federal Government, the States of Oregon and California, Native American Tribes, local government, and various non-governmental entities. The KHSA called for ownership of the dams – and any liability associated with dam removal – to be transferred from PacifiCorp to KRRC prior to dam removal.
The Federal Energy Regulatory Commission (FERC) is charged with oversight of hydroelectric dams in the United States. Therefore, implementation of the KHSA requires approval from FERC for the ownership transfer of the dams and separate FERC approval of the plan to decommission and remove the dams and related facilities.
In response to a KRRC and PacifiCorp filing, on July 16, 2020 FERC approved the partial transfer of the license to KRRC but required PacifiCorp to stay on as co-licensee. In its decision, FERC noted that “ . . . it would not be in the public interest for the entire burden of these efforts to rest with the Renewal Corporation … Were the Renewal Corporation to be the sole licensee, it might ultimately be faced with matters that it is not equipped to handle.”
Importantly, FERC found in its Order that KRRC had the technical and legal capacity to perform dam removal and that KRRC funds were likely sufficient to complete the project. The Order concluded KRRC’s extensive due diligence that accounted for input from an independent Board of Consultants required by FERC adequately responded to the Commission’s information requests across many technical aspects of the project. However, the FERC Order required PacifiCorp to remain a co-licensee to serve as a financial backstop for any unexpected costs that might exceed the $450 million available for the project under the KHSA.
PacifiCorp viewed the terms set by FERC in its July 16, 2020 Order as inconsistent with the KHSA and immediately entered into discussions with other signatories to the KHSA. PacifiCorp has long viewed transfer of ownership prior to removal as important to protect its customers from any potential liability arising from dam removal and considers those protections a core benefit of the settlement agreement. In response, the states, tribes, and KRRC worked with PacifiCorp and PacifiCorp’s parent company Berkshire Hathaway Energy to create terms that would work for the utility while still allowing the river restoration project to move forward without unnecessary delay.
The November 2020 MOA among PacifiCorp, the States of Oregon and California, the Karuk and Yurok Tribes, and KRRC describes how the parties will implement the Amended KHSA and address FERC’s concern for additional protection against potential cost overruns, while respecting PacifiCorp’s commitment to transferring ownership before dam removal begins. The MOA calls for Oregon and California to serve as co-licensees with KRRC, allowing PacifiCorp to transfer ownership and responsibility for dam removal to the “dam removal entity” as called for in the KHSA.
- Confirms that KRRC will remain the dam removal entity for the project.
- Seeks to remove PacifiCorp from the license and add the States of California and Oregon as co-licensees prior to the beginning of demolition.
- Resumes all planning and permitting processes immediately for dam removal.
- Nearly doubles contingency fund held by KRRC and contractors to further address FERC’s concern for additional protection against potential cost overruns.
- Calls for the immediate filing of the “Amended License Surrender Application” with FERC. (The Surrender Application is KRRC’s detailed plan to remove the dams and implement related restoration activities.)
- Fully commits all parties to support removing the Klamath dams, thus returning the Klamath River to a free-flowing condition and allowing salmon and steelhead to regain access to more than 400 miles of historical habitat.
With the MOA now in place, the parties will submit an Amended License Surrender Application to FERC. The KRRC project will be the largest dam removal and river restoration project in US History.
Does FERC need to approve the MOA for it to go into effect?
No. The MOA is an agreement between the States, tribes, dam owner, and KRRC as the dam removal entity. FERC’s approval is not required for the MOA to take effect.
What approvals are still required by FERC?
FERC must still approve the terms under which the license for the Lower Klamath Project is transferred from PacifiCorp to the States and KRRC as well as the specifics of the plan to remove the dams and complete associated restoration activities. Therefore, the parties will submit two updated applications to FERC in the wake of this agreement: 1) an Amended License Surrender Application and 2) a new License Transfer Application.
What happens if the project costs exceed funds available, even with the larger contingency fund in place?
First, the July 16, 2020 FERC Order found that the funds for the project ($450M) were likely sufficient to complete the project. In the unlikely event project costs exceed those funds, several protections exist. KRRC has negotiated a “guaranteed maximum price” with Kiewit, the design/build contractor, and RES, the restoration contractor. KRRC also developed a robust insurance package that reduces the risk of such overruns significantly. And, under this new MOA, PacifiCorp and the States of California and Oregon believe the addition of $45 million on top of existing contingency funds will address FERC’s concern for additional protection against potential cost overruns. But the parties have also agreed to cover any costs beyond the expanded contingency fund in the very unlikely event that further funds are required.
When will dam removal take place?
With the MOA now in place, it is likely that personnel and equipment will be deployed in 2022 and pre-removal construction activities will commence. We expect dam removal and the return of the river to a free-flowing condition in 2023. Restoration activities will immediately follow dam removal and continue for several years.
What about the notice of a potential KHSA termination event that PacifiCorp filed on July 23, 2020?
PacifiCorp has already rescinded its July 23, 2020 notice of a potential termination event under the KHSA. PacifiCorp and KRRC have also filed an Amended License Surrender Application with FERC.