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Deal reached to fund Klamath River dam removals without Congress

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Deal reached to fund Klamath River dam removals without Congress

Federal,state and other officials on April 6 signed amended agreements to remove fourhydroelectric dams on the Klamath River by 2020 and restore the river basin,basically repeating actions the parties took more than six years ago.

The U.S.Department of the Interior, U.S. Department of Commerce, , the states of Oregon andCalifornia and other parties signed the agreements for one of the largest riverrestoration efforts in the nation, the Interior Department said in a . The parties onFeb. 2 announced they had reachedan agreement in principle for removal of the dams without approval from Congress.

Thatis important because Congress has repeatedly refused to fund the effort. The parties had to go backto the negotiating table to agree that federal legislation is not necessary tocarry out the dams' removal settlement.

Inearly 2010, stakeholders signedthe Klamath Basin Restoration Agreement and the Klamath HydroelectricSettlement Agreement followed by the Upper Klamath Basin ComprehensiveAgreement in 2014. Yet the California and Oregon congressional delegationscould not get legislation passed to fund the terms of the agreements. The basinrestoration agreement expired at the end of 2015 due to the lack of timelyfederal authorizing legislation.

SNL Image

The J.C. Boyle Dam Spillway and Ladder

Source: U.S. Fish and Wildlife Service

Thenewly amended dam removal agreementuses nonfederal funding, but it follows the same timeline as the originalagreement on the dam removals. Up to $200 million is being from a surcharge on PacifiCorp'selectricity customers in Oregon and California, according to the settlementagreement.

Thecustomer contribution per kilowatt hour must not exceed 2% of PacifiCorp'sannual revenue requirement in the utility's last Oregon rate case before 2010,the settlement states. The surcharge began in 2010 and is to end by Dec. 31,2019.

Alsothe settlement states that up to $250 million will come from a water bond fromthe state of California. The original agreement called for up to $450 millionfor the removal project from the surcharge and bonds.

TheOregon and California public utility commissions found that the original dams'removal agreement was a prudent alternative for PacifiCorp's customers,Interior said.

Theparties agreed to work jointly to identify potential partnerships to supplementfunds generated pursuant to the settlement to acquire generation facilitiesthat can be used to replace the output of the hydro dams.

Stakeholderswill follow a process administered by FERC to remove PacifiCorp's 18.8-MW IronGate, 98-MW John C Boyle, 28-MW Copco 1 and 34-MW Copco 2 dams. The dams werebuilt in 1962, 1958, 1918 and 1925, respectively. Interior said the agreementwill be filed with FERC about July 1.

"These agreements will enable the largest dam removalproject in the nation," said Kathryn Sullivan, administrator of theNational Oceanic and Atmospheric Administration. "While more work liesahead, these agreements support efforts to recover fisheries, sustain theregion's farming and ranching interests, and benefit the environment and thecommunities who rely upon the Klamath River."

Stateand federal officials also signed a separate with irrigation interests andother parties known as the 2016 Klamath Power and Facilities Agreement. Thisagreement will help Klamath Basin irrigators avoid adverse financial andregulatory impacts and sustain the region's farming and ranching, Interior said.

Thatassumes the efforts ever get funded. The basin restoration costs in 2010 wereestimated to requireabout $1 billion from the federal government.

Thereturn of fish runs to the Upper Klamath Basin is expected after the dams areremoved. Additional work is necessary to fully restore the Klamath Basin, helprecovery of fisheries and uphold trust responsibilities to tribes, Interiorsaid.

SNL Image

The Copco No. 1 Powerhouse

Source: U.S. Fish and Wildlife Service

Manyof these efforts will require congressional action, but the basin restorationagreement commits the signatories to cooperate with Congress, tribes, farmersand other basin stakeholders to develop additional agreements over the nextyear to address these issues.

PacifiCorphas agreed to transfer its license to operate the Klamath River dams to aprivate company known as the Klamath River Renewal Corp., which will overseethe dam removals. PacifiCorp will continue to operate the dams until they aredecommissioned.

PacifiCorpwould have had to renew hydropower operating licenses to keep the dams, butenvironmental laws require dams to be retrofitted to provide fish passage forsalmon and other fish. Because of that expense, Oregon and California utilityregulators found the dams' removal was a prudent alternative for PacifiCorp'scustomers.

Whilethe agreement signings were a repeat exercise and the dam removals and otherprojects are still years in the future, the governors of California and Oregon,the Interior secretary, and many other dignitaries met at the mouth of theKlamath River on the Urok Indian Reservation to sign documents similar to whatin most cases their predecessors had signed years before.

PacifiCorpis a subsidiary of BerkshireHathaway Energy.