Box Canyon comes with a few strings

The Pend Oreille County Public Utility District’s long effort to relicense the Box Canyon Dam reached a milestone last week. A final environmental impact statement, one of the last steps towards completion of the relicensing process, was issued by the Federal Energy Regulatory Commission.

The impact statement includes staff recommendations for changes at the Pend Oreille River project, which provides PUD customers with some of the cheapest electricity in the nation, but also periodically floods land on the adjacent Kalispel Indian Reservation. The dam has caused other environmental harm, as do most others constructed during a period when there was little regard for such concerns.

Box Canyon’s relicensing earned some notoriety early on because agencies of the departments of Interior and Agriculture wanted modifications or additions that would have grossly increased the cost of operating the project. The conditions would have had potentially disastrous consequences for the PUD’s customers, many of whom are poor, and for the Ponderay Newsprint Co. plant at Usk and the newly reopened Pend Oreille Mine at Metaline Falls, two of the county’s economic mainstays.

The staff recommendations adopt many of the PUD’s proposals for Box Canyon. New turbines would be installed to increase generating capacity while mitigating damage to fish and fish habitat. Monitoring of a variety of environmental factors would be increased. Recreational resources – parks and boat launches, for example – would be enhanced.

In addition, the PUD would have to pay more attention to erosion and changes in water temperature caused by dam operations. Water quality on Calispell Creek, a particular concern of the Kalispel Tribe, would get more scrutiny.

Of course, none of this comes without a bill attached.

Operating Box Canyon now costs the PUD $5.7 million annually. Changes recommended by the PUD would raise costs to $8.2 million, but new generating capacity would offset some of that increase. FERC staff’s recommendation would increase costs to $8.7 million. Other alternatives could take costs up to $11.2 million — almost twice today’s — while eliminating most of the additional power output.

Depending on which of these proposals is adopted, Ponderay Newsprint faces power bills anywhere from 10.5 percent to 30.9 percent higher. With electricity costs representing more than 20 percent the cost of production, those increases can be the difference between profitability and closure for a producer in an extremely competitive industry like newsprint.

The implications for other PUD customers are more difficult to calculate.

Most Box Canyon power, with a cost of production of about 1.5 cents per kilowatt-hour, is purchased by the newsprint mill. The PUD’s residential customers get their electricity from the Boundary Dam, where production costs are one-third of a cent. Contracts between the PUD and Seattle City Light, the owner of Boundary Dam, stipulate that in the event the mill closes, the PUD must take the much more expensive Box Canyon power. PUD General Manager Bob Geddes says the result would be a “sky-high” rate increase.

And, he notes, the U.S. Forest Service may impose still more conditions, adding to the potential costs. Federal agencies have the authority to impose conditions on dam relicensees that FERC cannot overrule. Legislation to modify that authority was included by Sen. Larry Craig, R-Idaho in the Bush Administration’s energy bill. Although that legislation has gone nowhere, last week the U.S. Department of Interior published changes in its own rules that would respond to Craig’s concerns.

The PUD filed its relicense application almost five years ago, and has spent $10 million wading through the process. Allen Sanders, an attorney for the Kalispel Tribe, says the utility has intentionally dragged the process out in order to maintain low-cost operations at Box Canyon as long as possible. He predicts an appeal that will string things out still longer.

Geddes says he wants an outcome that will not snuff out vital industries in a county that desperately needs the jobs that go with them.

“We know we have a responsibility to put things in the environment back, and we’re willing to do it,” he says.

Relicensing does not have to be confrontational. Avista Utilities extended its right to operate the Cabinet Gorge and Noxon Rapids dams on the Clark Fork River by working closely with everyone who had a stake in the outcome. The cost, at $140 million over 40 years, was not cheap, but was something the company and its customers can live with. Avista is midway through a similar process for its Spokane River projects.

Without knowing how the Box Canyon relicensing will play out, one thing is clear: The process needs more predictability. Electricity dependent industries cannot wait years to make critical business decisions. The Northwest has already lost most of the cost advantage it could once offer such customers. Dam owners, no matter how enlightened, cannot unwind all the environmental harm done since the projects were constructed decades ago. And, as FERC’s staff notes, alternatives to the power generated at Box Canyon could be more obnoxious environmentally.

Geddes sees light at the end of the tunnel in the final Box Canyon environmental impact statement. It’s been too long a tunnel.