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A federal appellate court decision issued on January 25, 2019 will affect the relicensing of hydroelectric dams on the Klamath River and efforts to accomplish dam removal under an existing settlement agreement.  In Hoopa Valley Tribe v. Federal Energy Regulatory Commission, No. 14-1271 (D.C. Cir., Jan. 25, 2019), the United States Court of Appeals for the D.C. Circuit (Circuit Court) determined that the Federal Energy Regulatory Commission (FERC) must proceed with consideration of a 2004 application to relicense the dams because the states of Oregon and California have waived the exercise of authorities (water quality certification) otherwise necessary for FERC to proceed.  A copy of the decision is available here.  The ultimate implications of the decision are uncertain, but it will inevitably have consequences for PacifiCorp, its customers, and the ongoing processes to pursue removal of the dams under the Amended Klamath Hydroelectric Settlement Agreement (AKHSA) that has been in effect since 2016.

Background

PacifiCorp, an investor-owned utility, owns and operates FERC Project No. 2082, which consists of several features including four hydroelectric dams on the mainstem Klamath River.  One is in Oregon and the remaining three are in California.  The dams operate under a FERC license that was issued in 1954 and became effective in 1956.  The license expired in 2006, but under the Federal Power Act, 16 U.S.C. §§ 791-828C (1920), based on PacifiCorp’s timely submittal of a renewal application, the original license automatically renews, for one year at a time, until FERC completes its consideration of the renewal application.

FERC may not take action on a renewal application until, among other things, the relevant state or states have certified that the activity under consideration will not result in a violation of the state(s)’ water quality standards, as provided in section 401 of the Clean Water Act (CWA).  Often states’ water quality certification includes terms and conditions that the state finds necessary to ensure that water quality standards will not be violated.  CWA section 401 also provides that if states fail to act on a request for water quality certification within one year of an application, the state certification requirements “shall be waived.”

PacifiCorp made a timely application for renewal of its FERC license and also filed applications for state water quality certifications to support relicensing.  In the meantime, a number of parties opposed the relicensing, or sought conditions related to their specific interests.  There were extensive settlement negotiations, conducted in parallel with other parties’ negotiations, over resolution of other Klamath basin water and environmental issues.  As related to the FERC license renewal, these negotiations produced the Klamath Hydroelectric Settlement Agreement, signed in 2010, which provided a pathway for potential removal of the four mainstem Klamath River dams.  For reasons not directly related to the court’s decision, that agreement was overhauled in 2016, resulting in the AKHSA.  Major parties to the AKHSA include the United States, the states of Oregon and California, the Yurok Tribe, the Karuk Tribe, numerous conservation groups, and others.

The AKHSA contemplated that the FERC license for Project No. 2082 be split into two distinct licenses, one covering the four mainstem Klamath River dams proposed for removal and the other covering facilities that would be retained by PacifiCorp (e.g., a facility on a tributary that is not targeted for renewal).  The new license for the four dams would be transferred to the newly-formed Klamath River Renewal Corporation (KRRC), which would conditionally surrender the license and obtain other regulatory approvals for removal of the dams (e.g., dredge and fill permits under section 404 of the CWA), with off-ramps to return its license to PacifiCorp for PacifiCorp’s original re-licensing process if dam removal could not be accomplished.  To date, FERC has approved the creation of a new, distinct license for the four mainstem dams (now designated Project No. 14803), but has not approved transfer of the license for the facilities to the KRRC.  Under the AKHSA, funding for dam removal would come from surcharges to PacifiCorp customers based on specific Oregon legislation and the determination of the states’ public utilities commissions that the surcharge is a prudent use of customer funds (adding up to $200 million), and a California water bond (Proposition 1A) that authorizes funding the original settlement for up to an additional $250 million.

Among the terms of the original settlement and AKHSA are that, until all necessary approvals and funding for dam removal were secured, PacifiCorp would, prior to the expiration of each one-year “deadline” for state certification in CWA section 401, withdraw its original section 401 requests in order to prevent denial of the application or state waiver, then re-submit the requests to “start the clock” anew.  This “withdrawal and resubmission” approach is not uncommon, but it ultimately was important to the Circuit Court that the states had expressly agreed to participate in a process “to avoid the certifications being deemed waived during the Interim Period.”

The Litigation

The Hoopa Valley Tribe did not sign or support the original settlement or AKSHA.  In 2012, it filed a petition with FERC requesting that FERC order that California and Oregon waived their authority under CWA section 401 and that PacifiCorp had failed to pursue diligently its original license application, and that the original license application should therefore be denied.  The ultimately-sought outcome was that PacifiCorp be obliged to de‑commission the dams, although not under the terms of the applicable settlements.  FERC denied the petition, and in 2014 the Hoopa Valley Tribe sought review in the Circuit Court.  The case was held in abeyance for a period of time, but ultimately removed from abeyance.  The Circuit Court issued its decision on January 25, 2019.

The Circuit Court determined that, under the facts presented, the states had waived their section 401 CWA certification authority.  It ordered that FERC proceed with its review and licensing determination for Project No. 2082.

The Hoopa Valley Tribe intends that the FERC determination will necessarily result in a denial of the original license application and the need for PacifiCorp to submit a de‑commissioning plan.  Various parties to the AKHSA are presumably concerned as to whether this is realistic, the time that would be required, and whether or when available funding approved for the settlement would be available for a different approach.  It is also possible that parties who oppose the concept of dam removal may identify new avenues to prevent or delay removal.

For additional information please contact Paul Simmons at psimmons@somachlaw.com.

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