Letter of Response for water and power subcommittee - Congressional Record

Representative Grace F. Napolitano, Chairwoman
Representative Tom McClintock, Ranking Member
Subcommittee Water and Power,
Committee on Natural Resources
1324 Longworth Building
United States House of Representatives
Washington, D.C. 20515

Original delivered by facsimile

July 29, 2010

Re: Supplement and Response to Record of the Subcommittee on Water and Power Oversight Hearing on “The Bureau of Reclamation and the American Recovery and Reinvestment Act: A Progress Report and Planning for the Future,” July 15, 2010.

Chairwoman Napolitano and Ranking Member McClintock:

The signatories to this letter represent Tribal nations, farmers, ranchers, water suppliers, commercial fishermen, local, state, and national conservation and environmental organizations, and PacifiCorp, a regulated utility. Each of the undersigned is a party to the Klamath Basin Restoration Agreement, the Klamath Hydroelectric Settlement Agreement (Klamath Agreements), or both. We write pursuant to Subcommittee Rule 4H to supplement the Record of the Subcommittee hearing on July 15, 2010 and respond to certain new issues raised during the hearing.

We thank you and the Subcommittee for fair dealing and the commitment to a search for truth. We appreciate that many stakeholders care deeply about the Klamath River Basin.

We would be surprised if there were not so many passionate and diverse opinions about the Klamath because it is such a special place worth caring about. But we seek common- ground solutions that avoid yet again every major faction in this basin returning to war with each other over the minimum necessary to preserve positions in the courtroom.

The purpose of this supplemental letter is simple and direct — to respectfully provide objective answers to several issues raised during the hearing. We thank you for your time in consideration of this input and we look forward to working with you, the other Subcommittee Members, staff, as well as all stakeholders to implement solutions in this river system that do not pit our communities against each other any longer.

In the Hearing Statement:

We recognize that the July 15 hearing was not expressly about the Klamath Basin Restoration Agreement (KBRA) and the Klamath Hydroelectric Settlement Agreement (KHSA). However, based on our review of the hearing record, these Agreements were in

fact substantially discussed. Here we respond to each new issue raised during the hearing.

Issue 1: The KBRA-KHSA will “eradicate long-term jobs.”

This statement is incorrect. The KBRA and KHSA will not eradicate long-term jobs. In fact, the parties to the Agreements intend quite the opposite result. For example, the first section of the KHSA states that the underlying basis of the Agreement and the purposes of the parties are to:

address issues pertaining to the resolution of certain litigation and other controversies in the Klamath Basin, including a path forward for possible Facilities Removal;
minimize adverse impacts of dam removal on affected communities, local property values and businesses and to specify substantive rights, obligations, procedures, timetables, agency and legislative actions and other steps for Facilities Removal;
ensure that the interests of Indian tribes, environmental organizations, fishermen, water users and local communities were addressed; and,
serve as an important part of the resolution of long-standing, complex and intractable conflicts over resources in the Klamath Basin.

The parties set out in Section 1.3 of the KBRA their goals: to restore and sustain natural production and provide for full participation in harvest opportunities of fish species throughout the Klamath Basin; establish reliable water and power supplies that sustain agricultural uses and communities and National Wildlife Refuges; and, contribute to the public welfare and the sustainability of all Klamath Basin communities. Indeed, the full title of the KBRA is “Klamath Basin Restoration Agreement for the Sustainability of Public and Trust Resources and Affected Communities.”

It has been our collective experience in this river basin that it is often easier to campaign against solutions than it is to stand up for them. We, the parties to KBRA and KHSA, stand for solutions. We have attempted to resolve litigation risk and differences in interest through negotiation and compromise that will save jobs in traditional industries, including farming and ranching, while supporting renewed opportunities in fisheries, alternative energy development and recreation, among others.

Without the Agreements, there is every reason to expect continued catastrophes and job losses in Basin agriculture and Klamath River fisheries.

Make no mistake: ensuring local community sustainability, building rural economies, and restoring this river will not be easy. But the simple fact is, like it or not, we are all in this effort together, which is why we are pleased to be working in such a diverse coalition across historical political lines and perspectives to produce local solutions to the many problems we face.

Issue 2: The KHSA will subsidize Warren Buffet.

This statement is incorrect. There is no subsidy involved or promised under KHSA for PacifiCorp or any of its shareholders, including Mr. Buffet. In fact, shareholders will be less well-off than they are now. The KHSA makes good-business sense because the settlement terms and conditions outlined in the KHSA are considerably more preferable than relicensing from a cost and risk standpoint for PacifiCorp’s customers. Under the relicensing scenario, the company estimates the capital costs alone to be in excess of $400 million and the required operations and maintenance costs to be in excess of $60 million over a 40-year license term. These mandatory costs, under Federal Energy Regulatory Commission (FERC) relicensing terms and conditions, primarily include: fish passage (i.e., fish screens and ladders) on each of the four major Klamath dams; protection, mitigation, and enhancement (PM&E) measures; and water quality improvements. Additionally, relicensing would require at least an approximately 20-percent reduction in electricity generation from the facilities because of requirements to provide more water to bypass reaches of the Klamath River, thus reducing flows available for energy production.

These considerable costs are simply estimates of known requirements. Other costs in the absence of the KBRA/KHSA cannot all be known and therefore cannot be capped and controlled for the ratepayers the way the KHSA caps such ratepayer exposure. Among the potential additional cost impacts customers would face under a relicensing scenario are: (a) an increase in the scope and costs of the required PM&E measures; (b) additional required PM&E measures; and, (c) costs related to Clean Water Act and Endangered Species Act compliance and permitting. These potential additional costs cannot be accurately measured at this time, but are likely to be substantial. PacifiCorp has presented these arguments to Oregon Public Utilities Commission, which has implemented the customer surcharge pending a final hearing and determination that the customers are better off under the settlement bargain than under the risk of relicensing with its unlimited exposure to cost increases.

PacifiCorp is a state-regulated utility, thus its Klamath-related customer charges, tariffs and earnings are regulated, controlled and approved by the Oregon and California Public Utility Commissions (PUC). A rate base is the value of property, on which PacifiCorp is permitted to earn a specified rate of return, in accordance with rules set by the PUC. In general, the rate base consists of the value of property, as used by the utility in providing service. On the Klamath Hydroelectric Project, the costs of the required PM&E measures, if approved by the PUC, would increase the value of the property investment held by PacifiCorp and increase the returns to shareholders by $175 Million by 2020. Under the settlement, this additional revenue to shareholders will be forgone. So, instead of being subsidized, the shareholders will earn less than under traditional relicensing. But again, customers will be better off. To be very clear, PacifiCorp is making an informed and thoughtful decision. In fact, this decision-making process is exactly how hydropower project owners and operators proceed through the Federal Power Act, FERC relicensing and state PUC processes.

Issue 3: The KBRA-KHSA promotes “radical environmental agendas” to put “farmers and ranchers out of business.”

This statement is incorrect. The KHSA and KBRA are not the products of a radical agenda, but the work of honest and even-handed negotiations involving a Republican and a Democratic Governor, two federal Administrations (one Republican and one Democratic), 17 irrigation districts or organizations representing irrigated agriculture, six non-governmental organizations, four State agencies, three private companies, three Tribes and a regulated utility as parties committed to working together to solve the Basin’s many problems. We value collaboration and constructive dialogue. We simply do not see how the activities that need to be accomplished in this basin can be realistically achieved if success is defined as beating the “other side.”

A close examination of the KHSA shows that on the plain terms of the Agreements these parties seek to carefully study the “potential benefits for fisheries, water and other resources of removing the Facilities” and whether those benefits “outweigh the potential costs, risks, liabilities or other adverse consequences of such removal” and whether “that decommissioning and removal of the Facilities will help restore Basin natural resources, including anadromous fish, fisheries and water quality.” We believe such studies should be done in an open and transparent process. This approach is closer to common sense than radical and the only agenda is fair play, certainty and constructive problem-solving.

There is no factual basis for the proposition that the KHSA and KBRA will lead to the end of an American Way of Life of farming and ranching in the West and bring on a collapse of the Upper Klamath Basin economy. We respectfully disagree with any such suggestion. If this suggestion were true, none of the signatories to this letter would be parties to the Agreements.

Instead, the KBRA is the most comprehensive plan that has ever been developed by actual stakeholders to, among other things, fortify and add certainty for the farming and ranching community of the Upper Klamath Basin. None of the four dams under consideration stores water used for irrigation or domestic use, and none provides significant flood protection.

The Klamath Project and off-project areas in the Upper Klamath River watershed contribute approximately 4,500 jobs and $600 million to local economies. Those jobs and economies benefit from the KBRA. That is our goal. Surely, anyone who has observed the conflict and turmoil among and within communities of the Klamath Basin would see the status quo as undesirable and is shedding jobs as resource instability undermines our economy. To take but one example, the support for the Agreements by organizations such as the Klamath County Chamber of Commerce strongly suggests that the decimation of the local economy is not an intended or probable outcome of the Agreements.

In Oral Statement and Answers to Questions on July 15, 2010

Issue 4: Local Support

Again, we acknowledge that the Klamath River Basin is a complex basin geographically, socially and politically. We have always understood and represented that there are some who disagree with the proposed locally-based solutions of the KHSA and KBRA. It is true that in these negotiations at various times, the negotiating parties rejected the requests of a Tribe and certain advocacy groups to join the talks, because these organizations either would not agree to suspend on-going litigation against other negotiating parties or would not agree to the confidentiality agreements and protocols that all the other entities had agreed upon to become negotiating parties. But it is equally true that the implementation process for the Agreements, including environmental review, is open, public and transparent.

We respectfully disagree with the view that there are “misconceptions” that Basin restoration and dam removal have strong support. In fact, the Agreements have strong bi-partisan, multi-lateral support in Washington, D.C., California and Oregon. No other coalition of so many people from so many diverse perspectives has ever even proposed, let alone produced, such a comprehensive approach for solutions. A review of the list of signatories to the two Agreements proves this point.

Obviously, there are members of the local community as well as Members of Congress who oppose the KBRA and the KHSA, and others have serious concerns about various aspects of the Agreements. No one who participated in years of negotiations in the Klamath River Basin believed or believes that support for these or any agreement would be unanimous. In fact, some forces inside and outside the Basin are certain to litigate almost any outcome.

We stand for civil discourse and interest-based discussions whereby we come together to solve our problems in our rural communities to ensure that all of our interests, not just one or a few, have a chance at sustainability.

Issue 5: Fairness

Our signatures on this supplement letter indicate that many local interests involved in trying to solve the Basin’s problems collaboratively believe that a fair and transparent process exists to determine whether dam removal is in the public interest. A careful reading of KHSA section 3 shows that extensive deliberation occurred to ensure compliance with all federal and state environmental review. That process is underway and fully open to all public input.

Moreover, the Department of the Interior has been quite responsive in seeking the views not only of signatory parties, but also of those who disagree with our effort. It is true that never before have those in the local community had the opportunity to be involved at such a grassroots level in the discussions and negotiations over possible solutions to long-standing water and other disputes in the Klamath Basin. That is an honest and just way to develop solutions to problems.

We also understand that fairness is an issue raised with regards to resolving the long-standing water allocation issues in the Basin. As the Subcommittee knows, water rights settlements are standard practice around the West, and are equitable and efficient mechanisms within the prior appropriation and water law systems of states to allocate water among multiple beneficial uses. It is unclear to us why opposition may exist against the use of this common tool. It is likely those who oppose such negotiated outcomes in the KBRA have in fact themselves been party to settlements of water rights claims in the adjudication.

We disagree with any suggestion that water litigation should never be settled. It would surprise us immensely if that were the view of a majority of water users or environmental or conservation interests anywhere in the western United States. The KBRA does not and cannot make anyone forego a water entitlement or a day in court to vindicate their legal claims. It continues to be within an individual’s power to exercise their free choice to either voluntarily settle or continue to pursue an entitlement through the adjudication process which continues unfettered. Many irrigation water users, including irrigation districts representing nearly 170,000 acres in the Klamath Reclamation Project, have concluded that the exchange of promises in the Agreements will provide greatly improved water security and stability for the agricultural sector. In fact, the water user community has clearly seen immediate benefit from its participation in and execution of the Agreements.

The KBRA is a reflection of the common practice of water rights settlements. For example, Section 16 of the KBRA offers voluntary opportunities for off-project water users to participate in potential water settlements with the Klamath Tribes and the Bureau of Indian Affairs, Department of the Interior. The operative word in that section of the Agreement is “voluntary”. Individual landowners may elect to participate in the settlement pathway, or reject it and utilize other means to seek water security. In sum, we are aware of no contemplated changes in the adjudication process resulting from either Agreement. Those who see the benefits of the Agreements differently will have the right to litigate water right issues because all legal forums remain available to them.

Issue 6: Other Clarifications

Based on our review of the record and attendance at the July 15 hearing, certain additional issues deserve clarification. First, the KBRA and KHSA are locally-driven efforts to resolve long-standing conflicts.

Next, it is important to clarify these facts:

Pursuant to the KHSA, dam removal costs are covered by the States and utility customers, not federal taxpayers.
The hydro project currently provides enough power for approximately 70,000 homes, not the significantly higher number discussed during the hearing.

Both the date for dam removal and the KHSA itself are designed to provide time and flexibility for the company to secure replacement power.

Next, there was discussion regarding the relationship between the Department of the Interior and FERC. Under the KHSA, the hydroproject remains under FERC’s jurisdiction until several conditions precedent have occurred, including the identification of a Dam Removal Entity and approval of the physical performance of removal.

Next, there was discussion whether FERC would consider dam removal. The KHSA is a negotiated outcome in a disputed FERC proceeding. For PacifiCorp’s basis for accepting a dam-removal settlement in lieu of relicensing, please refer to the Letter of April 1, 2010 from PacifiCorp to Rep. Wally Herger, entered into the Record at the July 15, 2010 hearing.

Finally, we welcome continued dialogue in the Basin, here in Washington, and before this Subcommittee with all concerned parties. Our commitment is also to provide a full and fair debate about the merits of the KBRA and KHSA. We will not take a position of opposition to others speaking their views here or at home.

To ensure the correct foundation for such a full and fair debate, we close with several simple facts.

On February 18, 2010, we joined Secretary of the Interior Ken Salazar, Governors Arnold Schwarzenegger and Ted Kulongoski, Dr. Jane Lubchenco of the National Marine Fisheries Service, Assistant Attorney General Ignacio Moreno, and others at the Oregon Capitol building to execute the Klamath Agreements at a signing ceremony that drew more than 500 people.
The Klamath River was once the third most productive salmon river on the west coast, behind the Columbia-Snake and Sacramento River systems, and is home to one of the oldest Reclamation Projects and an important agricultural community. It is currently producing fish runs so weak as to require significant closures of the Pacific fishery and loss of countless jobs.
Despite its strengths, the Klamath Basin has been mired for decades in continual crisis marked by decimated salmon runs, water curtailments, financial hardship for local communities, job loss and endless litigation.
The Bureau is using approximately $11 million in American Recovery and Reinvestment Act funds for environmental review and studies related to dam removal consistent with the Klamath Agreements.
We support use of federal funds for this purpose, because we collectively stand for fair, open, transparent and objective science to guide decision-making in this Basin.

We think dam removal, if it proves to be in the public interest, should be based on sound science and compliance with applicable environmental laws and reviews.
We think a comprehensive analysis of dam removal, consistent with the Agreements and in compliance with the National Environmental Policy Act, is good policy, not a bad one.

We thank the Subcommittee for its commitment to hearing from the diverse perspectives in the Klamath Basin. We hope that everyone involved stays true to the facts and refrains from attacking the character of the parties that negotiated the KHSA and KBRA or of those that may disagree with our efforts. This standard is the one we will strive to hold for our coalition.

As we have said before, we choose farms and fish; a healthy environment and sustainable rural communities. We can do both. Thank you for your time in consideration of this letter.

We stand ready to provide additional input to the subcommittee on any matters related to the Klamath Basin. We look forward to working with you, your staff, and all Members of the Subcommittee in ending the perpetual conflict in the Klamath Basin and implementing the practical solutions that we propose in the Klamath Agreements.

Please do not hesitate to contact any of the signatories to this letter with additional questions.

Sincerely yours,

Charlton H. Bonham Steve Rothert
Trout Unlimited American Rivers

Curtis Knight Craig Tucker
California Trout Karuk Tribe

Troy Fletcher Carl Ullman
Yurok Tribe Klamath Tribes

Greg Addington                              Matthew Walter
Klamath Water Users                     Upper Klamath Water
Association                                     Users Association

Glen Spain                                      Mark Rockwell
Pacific Coast Federation              Northern California Council,
Of Fishermen’s Associations        Federation of Fly Fishers

Petey Brucker Dean Brockbank
Salmon River Restoration PacifiCorp
Council

(Permission to post from Klamath Water Users Association)