On 25 November 1997, the Federal Energy Regulatory Commission (FERC) in the US made the historic decision to order removal of the Edwards dam on the Kennebec river. This decision, which aims to restore fish species to the river, has left unanswered questions in its wake – who pays for the dam removal and mitigation, and what right has FERC to take a company’s property? Mark Isaacson*, vice president of Edwards Manufacturing Company which owns the dam, puts this debate into a historical perspective

In 1834, the Maine legislature evaluated a proposal to construct a dam at the head of tide across the Kennebec River at Augusta. The legislature heard arguments for development, commerce, and industry and arguments against the dam in favour of fish preservation. The legislature elected to compromise. The charter for what became the Edwards Manufacturing Company (EMC) authorised the construction of the dam but required a fish passage facility for three of nine migratory species in the river system. This compromise did not work out well for any interest — the fish passage proved to be ineffective, and the dam itself failed several times between 1834 and 1870. In 1870 a new consortium rebuilt the dam and this is essentially the one that exists in the river today. Reports state that the 1870 dam did not include any fishway provisions, and the fishway requirement was subsequently repealed by the legislature in 1895. As river clean-up began to occur in the 1960s and ‘70s the absence of a fishway became increasingly objectionable to the anti-development interests, and they began a renewed push to reinstate the compromise of 1834 — requiring fish passage for three fish species. In the mid 1980s EMC responded to this demand by forming what is now known as the Kennebec Hydro Developers Group (KHDG), whose purpose was rapidly to implement fish restoration in the Kennebec basin at reduced cost through a ‘trap and truck’ programme. The upstream dam owners entered the KHDG and proposed that they would supply the truck and that EMC should supply the trap – a state-of-the-art fishway. Maine resource agencies agreed with this approach but, as it burdened EMC with a cost at least ten times that of any other participant, the company withdrew from the KHDG. Fishery restoration advocates responded by characterising EMC as the obstruction to fish restoration in the Kennebec basin.

Personal preference

In 1989 the fish restoration interests switched strategies. They abandoned the compromise of 1834 and entered the proceeding before the Federal Energy Regulatory Commission (FERC) in which Edwards was seeking renewal of its licence. The fish restoration interests sought an order for removal of the dam. EMC responded by adopting the compromise of 1834 and proposed to use modern technology to create a successful passage for the three fish species.

Both EMC and its opponents have good reason to believe that EMC can implement the compromise of 1834. Since 1988, EMC has been operating an interim fish passage facility targeted for one species of anadromous fish. In recent years this programme has met with steadily increasing success. The programme is now at the point where it captures more fish than are required for the restoration in the Kennebec basin. Surplus fish captured by the facility are being transported to enhance restoration in other basins.

The Edwards interim fishway is currently the most successful fish passage facility in Maine. Anti-development forces have opposed the construction of fish passage facilities at the Edwards dam and have demanded unobstructed passage for all nine species and a return of the habitat upstream of the dam to a riverine condition, which can only be achieved through dam removal.

Where any individual stands in this debate is almost exclusively a matter of personal preference and emotion. The mountains of engineering and scientific data that have been produced by both sides in the last ten years have not served to change the opinion of any participant. Proponents of dam removal argue that the conditions of 1834 would be recreated simply by removing the dam. The licensees argue that the world has changed dramatically since 1834, and that the removal of the Edwards dam would have only a small and insignificant effect on recreating conditions of 1834. This controversy seems to be one where almost everyone with an interest in the issue has a strongly held fixed position. People hear what they want to hear and believe what they want to believe.

In November 1997 FERC decided in favour of dam removal. This decision marks a dramatic shift in previous FERC policy. From the beginning of the Federal Power Commission in 1920, all federal licences have at least paid lip service to the concept of mixed developmental and non-developmental uses. The Maine legislature’s compromise of 1834 is an example of a mixed use concept that FERC might have endorsed under its traditional approach. The November 1997 FERC decision exclusively favours non-development. EMC believes that FERC’s decision is based upon emotion and is a bad policy decision. However, EMC also believes that as a matter of law FERC has the right to make bad policy.

Dam removal

In its decision last year FERC appears to place the cost of dam removal upon the existing licensees (EMC and its co-licensee, the City of Augusta). While FERC has the right to make bad policy, it has no right, either moral or legal, to impose the costs of that policy decision on the existing licensees. FERC’s assertion of this authority is based upon the notion that because the Federal Power Act empowers it to issue licences, the act also implies the authority not to issue a licence, the implied authority not to issue a licence also implies the authority to order removal, the implied authority to order removal implies the authority to order mitigation for that removal, and that implied authority to order mitigation implies the authority to order long term monitoring of that mitigation.

This implied chain of authority is in direct contradiction with the basic rules for exchange of resources in a civilised society, the Constitution of the United States, and the specific language of the Federal Power Act.

We could all think of many desirable uses for someone else’s property if we did not have to pay for it. It is a basic premise of civilised society that individuals do not take property from each other by force. It is a further principle of democratic societies that governments live by this same rule. According to the Fifth Amendment to the Constitution of the United States: ‘private property may not be taken for public purpose without just compensation’. In recent years the Supreme Court has wrestled with the precise meaning of this phrase, and has generally come to the conclusion that if more than a certain percentage of the value of one’s property is taken, then a Fifth Amendment taking has occurred and compensation is required.

In the Edwards case the demand is not just the taking of 100% of the property, but also a demand for removal cost, mitigation for removal, and long term monitoring of removal impacts. These additional costs are likely to exceed 100% of the value of the property for a net taking in excess of 200% of value. (Estimates for dam removal range from US$2-6.4M).

The Federal Power Act which is supposed to govern the actions of FERC recognises that hydro projects present a special case because they make use of a recognised public resource — rivers. The act spells out in detail what FERC’s options are at the termination of an existing hydro licence: •Issue a new licence to the existing licensee upon reasonable terms.

•Issue a new licence to a new licensee with compensation (net investment) to the existing licensee.

•Federal takeover of the project with compensation to the displaced owner.

•Or issuance of a non-power licence to a new licensee with compensation to the former owner.

When a licensee accepts a new licence, he accepts a bargain which recognises that at the end of the licence term he may receive compensation instead of a new licence. In issuing the licence, FERC also accepts this bargain. However, FERC and its anti-development allies have elected to ignore their legal options in the Edwards case because they wish to escape from their side of the bargain: they seek to avoid paying compensation and to force additional costs onto the existing licensees.

This case has a certain Alice in Wonderland quality to it. FERC’s order of 25 November 1997, reads very much like many orders the Commission has issued in recent years. The order directs the licensees to do many things that would be normal in a relicensing. The order directs the licensees to consult with agencies, to formulate a plan, to seek Commission approval for that plan, and to implement the plan. However, the removal of a dam is very different from directives in other relicensing orders. Dam removal will not be well served by a moving party whose economic interests are enhanced by the delay and ultimate failure of the undertaking FERC has directed it to pursue.

In order to accomplish its objective, FERC will have to rely on compulsion. With rare exception, the Commission achieves its objectives through the voluntary compliance of its licensees. FERC has never been involved in an undertaking on this scale upon a compulsory basis.

If FERC believes that dam removal is in the public interest, then it must either recommend a federal takeover or issue a non-power licence to a new licensee for the purpose of dam removal. Either of these options would provide both compensation to the existing licensee as well as a party willing and able to accomplish the objective of dam removal.

The Commission has avoided these alternatives because no party has come forward willing to pay the cost, and because the dam removal activists are seeking the precedent of forcing licensees to pay the cost.

Compulsory authority

This struggle is no longer about fish but is now about the taking of property without compensation and about the limits of FERC’s authority. If the case proceeds along its current course it is likely soon to be about the limits and exercise of FERC’s compulsory authority. These are issues of absolute and fundamental importance, which is the reason that the entire hydro industry in the US has intervened in this case.

Ultimately, what is at issue is whether the threat of a dam removal order may be used as a club to extract concessions in future relicensings.

In December 1997, Edwards Manufacturing Company asked FERC for a rehearing of the case. FERC has agreed to this although no further details have yet been issued. EMC is expecting to receive more information before 22 November 1998 – when plans for dam removal have to be filed with the Commission.

FERC’s decision:

In ordering removal of the Edwards dam, FERC cited ‘compelling environmental’ considerations. The Commission said its actions were based on the following key considerations: •Power produced at the dam can be easily replaced by existing resources in the region.
•Removal will provide nine species of fish with continuous access to 15 miles of spawning habitat.
•Removal will provide four species of fish that do not use fishways, with access to their entire historic range within the Kennebec river.
•Wetland habitats, recreational boating and fishing will benefit.
•There will be no major environmental or social drawbacks.
The course taken by the Commission was advocated by, among others, the Governor of Maine, the Maine Departments of Marine Resources and of Inland Fisheries and Wildlife, the State Planning Office, the US Department of the Interior, the Environmental Protection Agency, the National Marine Fisheries Service and the Kennebec Coalition.
Commission chairman James J Hoecker said: ‘The order reflects a balanced view of environmental as well as social and economic considerations. I want to emphasise one point, however: hydroelectric power will remain a valuable part of the nation’s energy mix, especially in the light of its implications for clean air. Our order in this case pertains to some very special facts.’