Kerr Dam nearing tribal ownership

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Taking over ownership and operations of Kerr Dam, expected in two years, will be both a historic and legal triumph for the Flathead Reservation, according to a lawyer who has shepherded the deal through 10 tribal councils.

“The Salish and Kootenai tribes are really at the forefront for asserting their authority over natural resources on their lands,” Joe Hovenkotter told audience members at the University of Montana School of Law’s Public Land Law Conference last Wednesday. 

Hovenkotter was legal adviser for the Confederated Salish and Kootenai Tribes for 20 years before becoming general counsel to the reservation’s energy company in December.

But the ability to reach that point went all the way back to the Hellgate Treaty of 1854 that created the Flathead Reservation, Hovenkotter said. It also demonstrated the tribal community’s own maturity as an organization that could operate a major hydropower dam, market its electricity, address its environmental impacts and deal with both governmental and private energy sectors.

“There are other tribes positioning themselves to try something like this,” said Sarah Bates of UM’s Center for Natural Resources and Environmental Policy. “This is the model for the rest of the country. They’ve had a remarkable vision for restoring what was lost over all those years.”

Kerr Dam sits on the Flathead River, five miles below the foot of Flathead Lake. It possesses many unusual qualities compared to other hydropower dams. For instance, it doesn’t change the historic levels of Flathead Lake like the way Hungry Horse Dam drains and refills its reservoir.

And because Flathead Lake catches most of its sediment and provides a nearly constant level of water pressure year-round, Kerr Dam has the ability to speed up or slow down its electricity generation. That made it extremely profitable because it could sell power at the peaks and valleys of daily electricity usage.

But that variable water flow damaged the habitat of the Flathead River for miles below the dam. In 1987, the tribes won the argument to switch the dam to a base-load format, meaning it produces a constant amount of power each day. That reduced the income it could generate but also made a huge improvement to the riverside habitat in the reservation.

For decades after the dam’s construction in 1939, the tribes got little of the money it produced. While they’ve been lately receiving $19 million a year in rent, the dam has generated between $20 million and $60 million a year, depending on energy prices. It is capable of lighting 95,000 homes with its 1.1 million megawatt-hour turbines.

Hovenkotter said the Hellgate Treaty was important because unlike many other tribal treaties in Montana, this one gave the Flathead Reservation members rights to access and use waterways outside their homeland. That made the tribes players in decisions affecting the entire Columbia River system.

The tribes recently used this authority to get a seat at the table on the Streamside Tailings Consent Decree that created a multimillion-dollar account to repair mining damage to the Clark Fork River. The tribes received $18.3 million in that settlement, $13.5 million of which went to recover land and habitat lost when large chunks of the reservation were sold to outsiders in the 1904.

About the same time Kerr Dam was being built, Hovenkotter said the Salish and Kootenai became the first American Indian tribes to set up their own constitutional government. That gave them the theoretical power to take over the dam, although it took decades of legal wrangling to work that out.

The biggest challenge, he said, was setting up a way for the tribes to work with private utility companies in the United States. As a sovereign nation, it didn’t want to simply hand over its authority to the U.S. court system. But that also scared away private business partners, who couldn’t be sure under whose legal framework any disputes might get decided.

The creation of Energy Keepers LLC has fixed that by presenting a tribally owned business that operates in the U.S. framework. The tribes expect to buy Kerr Dam from its owner, PPL Montana, in 2015. It then wants to get a new 50-year license to operate as a power provider.

There’s still the matter of the price of the dam, Hovenkotter said. PPL has valued it at about $51.5 million. But the tribes argue that $34 million of that would pay back investments that PPL’s ratepayers have already paid, so the price should be closer to $16 million.

Either way, the tribal council has already capitalized its energy business with enough money to cover the low and high price. Hovenkotter said it was a demonstration of the reservation’s commitment to taking on the dam and all its responsibilities. They expect to close the deal in 2015.

“We’ve always talked about this date coming,” said Indian law attorney Daniel Belcourt. “Now it’s here.”

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