By Robert Mullin

A Northern California Native American tribe scored a key victory Friday after a federal appeals court ruled that FERC must act on a long-delayed licensing review for a series of aging hydroelectric dams that straddle the California-Oregon border (14-1271).

The D.C. Circuit Court of Appeals ruling in favor of the Hoopa Valley Tribe could force PacifiCorp to proceed with plans to decommission four of the seven dams that make up its 169-MW Klamath Hydroelectric Project before the utility is in a position to transfer the assets to a new owner.

In 2012, the Hoopa petitioned for a declaratory order asking FERC to find that PacifiCorp had “failed to diligently pursue relicensing” of the Klamath project. The tribe asked the commission to dismiss the utility’s relicense application and direct it to file a plan for decommissioning.

FERC rejected that petition in June 2014 and denied a request for rehearing a month later (P-2082-058).

The D.C. Circuit’s Jan. 25 ruling vacated both 2014 orders and remanded the issue back to the commission.

“FERC shall proceed with its review of, and licensing determination for, the Klamath Hydroelectric Project,” the court ordered.

In Limbo

The four dams at issue in the dispute are slated for removal in 2020, pending FERC approval. But a complex set of developments over the last decade has prompted the commission to postpone any action on relicensing the facility until a consortium of interested parties in the region can hash out more details about the decommissioning.

PacifiCorp decided to remove the four dams 15 years ago following a long-running dispute over water rights and the health of salmon runs in the Klamath Basin.

Two years before the project’s license was set to expire in 2006, the utility filed a proposal with FERC to relicense the three upper dams while decommissioning four lower dams deemed too costly to modernize. Since then, the project has been operating under a series of annual interim licenses while approval of the broader license sits in limbo, largely because of PacifiCorp’s own efforts.

The cause for that delay is embedded in the 2010 Klamath Hydroelectric Settlement Agreement (KHSA) reached by the consortium, which includes California, Oregon, area tribes, farmers, ranchers, fisherman, environmental groups and PacifiCorp.

The KHSA imposed a set of interim environmental measures and funding obligations on PacifiCorp ahead of the targeted 2020 decommissioning date. It also contained a provision that California, Oregon and PacifiCorp would agree to sidestep the one-year statutory limit for states to issue water quality certifications under Section 401 of the federal Clean Water Act (CWA) — a prerequisite for FERC’s licensing review — until decommissioning details were worked out.

To circumvent the CWA’s requirement that a state waive its certification authority if it fails to respond within a year (allowing FERC to proceed with relicensing without certification), PacifiCorp has annually withdrawn and resubmitted its certification requests. That measure was intended to provide cover for California and Oregon over its response time requirements while also buying the company time to secure federal funding to remove the dams before having to obtain new licenses from them.

After the funding effort fell through, a subset of the KHSA parties in 2016 signed an amended agreement that would transfer the licenses for the four dams to a newly formed Klamath River Renewal Corp. (KRRC). FERC last March approved PacifiCorp’s request to split the lower dams into a separate license, but it declined to rule on transferring the license until the KRRC could prove that it was capable of managing decommissioning (P-2082-062).

“Transferring a project to a newly formed entity for the sole purpose of decommissioning and dam removal raises unique public interest concerns, specifically whether the transferee will have the legal, technical and financial capacity to safely remove project facilities and adequately restore project lands,” FERC said in the ruling.

Single Issue

The Hoopa tribe, which lives downstream from the dams, was never a party to the KHSA. Instead, it petitioned FERC for the declaratory order in 2012 in an effort to jump-start the process of restoring the salmon that have traditionally fed its people. After the FERC’s rejections of its petition and rehearing request, the tribe asked for a review by the D.C. Circuit.

The court said its Jan. 25 ruling pivoted on a single issue: “whether a state waives its Section 401 authority when, pursuant to an agreement between the state and applicant, an applicant repeatedly withdraws and resubmits its request for water quality certification over a period of time greater than one year.”

The judges authoring the decision found the language of Section 401 clearly demonstrates that states must make their water quality determinations within “reasonable time” not to exceed one year.

“The pendency of the requests for state certification in this case has far exceeded the one-year maximum,” the court said. “PacifiCorp first filed its requests with the California Water Resources Control Board and the Oregon Department of Environmental Quality in 2006. Now, more than a decade later, the states still have not rendered certification decisions.”

The court said PacifiCorp entered into an agreement with the reviewing states to delay certification and never intended to submit a “new request” each year.

“Indeed, as agreed, before each calendar year had passed, PacifiCorp sent a letter indicating withdrawal of its water quality certification request and resubmission of the very same … in the same one-page letter … for more than a decade,” the court said. “Such an arrangement does not exploit a statutory loophole; it serves to circumvent a congressionally granted authority over the licensing, conditioning and developing of a hydropower project.”

The court pointed out that while the CWA does not define “failure to act” or “refusal to act,” the states’ actions as directed by the KHSA “constitute such failure and refusal within the plain meaning of these phrases.”

“Thus, if allowed, the withdrawal-and-resubmission scheme could be used to indefinitely delay federal licensing proceedings and undermine FERC’s jurisdiction to regulate such matters,” the court found.

Seat at the Table

The court also rebuffed FERC’s contention that finding the states had waived their review rights would set off a cycle of “futility,” requiring the commission to deny PacifiCorp’s license, which would force the utility to file a decommissioning plan subject to its own set of “oft-delayed” state certifications.

“However, such practical concerns do not trump express statutory directives. … Had FERC properly interpreted Section 401 and found waiver when it first manifested more than a decade ago, decommissioning of the project might very well be underway,” the court said.

The judges also pointed to FERC’s “critical role” in protecting the public interest with respect to hydropower projects, including soliciting input from affected parties and performing in an “advisory role” in settlement discussions for the development or decommissioning of hydro projects.

“Here, it did neither,” the court found. “Hoopa’s interests are not protected directly as it is not a party to the KHSA or amended KHSA, nor are its interests protected indirectly through any participation by FERC in those same settlement agreements. Therefore, we disagree that a finding of waiver is futile because, at a minimum, it provides Hoopa and FERC an opportunity to rejoin the bargaining table.”

PacifiCorp spokesman Bob Gravely told RTO Insider that the company is still reviewing the D.C. Circuit ruling to “fully understand its implications.”

“In the meantime, we’re continuing to operate under the settlement agreement that is in place,” he said.