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October 20, 2008

Water buddies | How a conservation group, a utility company and a tribe got past their differences and got down to saving some salmon

By Seth Harkness

As its name would suggest, Pennsylvania Power and Light is in the business of selling electricity, not dams.

Yet a consortium of environmental groups announced in August that it intended to purchase three of PPL’s eight hydropower dams on the lower Penobscot River for $25 million. As part of a landmark agreement to restore habitat for a dozen species of sea-run fish in Maine’s second largest river, the Penobscot River Restoration Trust plans to tear down two of these dams and decommission the third within the next few years, provided it can raise another $25 million to do so.

The Penobscot Agreement, reached in 2003 after several years of negotiations, has been lauded as a model of cooperative conservation. It established common ground between the publicly-traded utility and more than a dozen partners, many of whom had been embroiled in decades of acrimonious disagreement with the previous owner of the dams regarding fish passage on the Penobscot.

The origins of the agreement are no less remarkable because PPL voluntarily initiated the talks that eventually led to the deal. Though the company never set out to part with any of its dams, years of negotiations resulted in a plan that was agreeable to the company’s shareholders and greatly beneficial to the river’s fish populations. The crux of this plan is a compromise permitting the utility to raise power production levels at other hydropower facilities to offset the 17 megawatts of capacity it would lose by selling the Veazie, Howland and Great Works dams.

“PPL should get a lot of credit,” said Andrew Goode, vice president of U.S. programs at the Atlantic Salmon Federation, whose U.S. operations are based in Brunswick. Goode took part in the Penobscot River talks. “They didn’t have to do this but they found a way where it made sense for their business and their shareholders.”

The Penobscot Agreement has naturally attracted interest from people looking for solutions to similar conflicts on other rivers around the world. How did the utility and the conservationists break through a log jam of opposing interests? What concessions did each side make to reach a mutually acceptable solution? And why would PPL initiate talks that led to placing some of its assets on the negotiating table?

Those who took part in the negotiations leading up to the deal said many of the factors that made the Penobscot Agreement possible are unique to the particular geography and history of the river. But, after years of unproductive discussions regarding fish and the dams on the Penobscot River, participants in the recent negotiations said they have also learned something about what does and does not work in terms of trying to reach agreements on thorny environmental issues involving a major industry and multiple stakeholders.

Scott Hall, the manager of environmental services for Milford-based PPL Maine who represented the utility throughout the talks, said the foundation of the successful negotiations was a commitment by each party to understand the basic goals of the others.

“Everybody had a handle on each other’s perspective,” he said. “Whether you agreed with it or not you had to understand it. If you disagreed, you set it aside and worked on what you could agree on.”

One fight at a time

Before there was any sign of consensus on how to strike a balance between the interests of conservationists and industry on the Penobscot River, there were decades of bitter disagreement. Throughout the 1980s and 1990s, conservationists and the then-owner of the dams, Bangor Hydro, clashed whenever the utility sought to renew an operating license for one of its dams on the Penobscot. Conservationists sought to protect one of the last natural Atlantic salmon runs in the United States, a run that has shrunk to approximately 2,000 fish per year, or two percent of its historical levels. The utility fought to continue to produce power from dams that, in some configuration, had been in place for two centuries.

These battles may have reached their fiercest pitch when Bangor Hydro proposed building a new dam in the late 1980s, the 38-megawatt Basin Mills project at the confluence of the Stillwater and Penobscot rivers. The proposal was ultimately denied by the Federal Energy Regulatory Commission, but the contentious hearings preceding that decision defined the relationship between the hydropower industry and conservationists on the Penobscot for years to come.

“What it basically did was crystallize positions on all sides,” said Laura Rose Day, executive director of the Penobscot River Restoration Trust.

This hardening of positions produced a stalemate between the utility and conservationists that left both sides without any assurance of how their interests would be protected the next time a dam came up for re-licensing.

“That did not create a lasting solution to re-balancing energy and fisheries,” Day said. “Hydropower had a very uncertain future and so did the fishing.”

But deregulation of the power industry in the late 1990s helped bring about a change. Under deregulation, Bangor Hydro had to divest itself of certain assets and larger, out-of-state utilities were permitted to buy these properties.

In May of 1999, PPL, an energy holding company based in Allentown, Pa., with over 11,000 employees, acquired eight dams on the Penobscot River from Bangor Hydro with 33 megawatts of generating capacity. The $89 million deal also included access to transmission lines and another dam on the Union River in Ellsworth.

At the same time, PPL, which reported 2007 revenue of $6.5 billion, purchased the only other dam on the lower Penobscot that wasn’t part of Bangor Hydro’s holdings, the eight-megawatt Great Works dam belonging to Georgia Pacific. For the first time, PPL’s acquisitions placed all the dams in the Penobscot Basin under a single owner, and made it possible to hold a comprehensive discussion about the management of the river with a single company.

“What we had done in the past was look at one dam at a time, one fight at a time,” Goode said.

Hall, who worked for Bangor Hydro before joining PPL, said the utility was well aware that it had purchased a set of management challenges as well as a collection of dams. But he said the company also saw a chance to move beyond past antagonisms.

“With that purchase we recognized there was an opportunity to start somewhat fresh,” Hall said.

With two of the company’s dams due for federal re-licensing, PPL invited numerous interested parties, a group that eventually included six conservation organizations, seven federal and state agencies, and the Penobscot Indian Nation, to join the dam owner in a broad discussion about how to manage the river with consideration for the fisheries and power production.

Any agreement had to make financial sense for the company, Hall said, but reaching consensus itself was also in the utility’s business interest. If the company could reach a general agreement with conservationists, it would specify the utility’s obligations in terms of installing expensive fish passages. An agreement would also wipe clean numerous appeals attached to the company’s federal operating licenses at each of its dams. These licenses extend 30 to 50 years, so striking a deal would help clarify the company’s costs and budgeting process for generations.

The other parties to the discussion had a similar desire to achieve some sort of stability on the river. “I think the issue of certainty for the future was a large issue for people on both sides of the table,” said John Banks, natural resource director for the Penobscot Indian Nation. “PPL was looking to give shareholders some comfort in terms of the future. We were also wanting a more certain future for the Penobscot River rather than battling out each and every project on an individual basis.”

New approach

The bitterness of the earlier years may have contributed to the new tone being struck on both sides of the negotiating table. Goode said he’s not certain the agreement would have been possible without this history.

“All the scorched Earth, it did lead the way,” he said. “All sides had had enough and it made it easier to leap into a more cooperative approach.”

Nevertheless, the balance envisioned by conservationists and that put forth by the company were initially far apart. Hall said the company never anticipated making a deal that would ultimately result in the sale of the first three dams encountered by a fish swimming up the Penobscot River. Conservationists could no more have imagined endorsing the utility’s effort to revive a dormant dam and increase power production at several other facilities.

The talks continued for five years. There were times when the parties met an impasse and broke off discussions for a few months, but they always returned to the table. Over time, participants gradually built mutual trust and understanding that helped them arrive at the final agreement.

The agreement allows the Penobscot River Restoration Trust to open 1,000 miles of river habitat to migratory fish, provided the group can raise $25 million over the next few years to remove the dams. The reconfiguration of the river would have profound ecological benefits, potentially resurrecting the only natural run of Atlantic salmon in the United States. It would also allow shad, herring, sturgeon and other species to return to waters they historically inhabited. With the restoration of the fish, members of the Penobscot Indian Nation, whose ancestors have lived along the river for 10,000 years, expect to once again be able to exercise their sustenance fishing rights.

In exchange, conservation groups agreed to support PPL in a plan to remove turbines from these dams and install them at the company’s other hydropower facilities, thereby ensuring no net loss in power production for the utility. The plan also involves re-activating a hydro plant in Orono that has been dormant for 12 years, an action that would likely have been politically impossible outside of the larger agreement.

From PPL’s standpoint, Hall said the plan is actually better than a break-even proposition. The deal allows PPL to use its capital more efficiently and to operate in a stable environment where regulations and costs are more predictable. It has also generated a great deal of positive publicity for the utility.

As uncertain as it may have been, Hall said he had no regrets about the course PPL charted.

“I thought we could come up with a better agreement than to agree to disagree,” he said.

Seth Harkness, a writer in Portland, can be reached at editorial@mainebiz.biz.

 

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