|May 16, 2013
The twists and turns of acquiring Kerr Dam
As part of ongoing coverage, Char-Koosta news will be publishing regular articles over the next several months to provide more information to the Tribal community about the Kerr Dam acquisition process and activities of the Tribal corporation SX?NQ?E?ELS L SUW?EC?M / KSUKZIZMUMAZ gAdJAZMUKWAGITS, Inc., which does business as Energy Keepers, Inc.
The following article includes a historical overview of Kerr Dam, in addition to some steps the Confederated Salish and Kootenai Tribes have taken to begin building capacity for the conveyance and operation of Kerr Dam in 2015.
Editor's note: The translation from the Salish and Kooteni fonts did not transfer correctly from print to web; the names of the organization are not as they appear on this web page. We apologize for the inconvenience.
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Kerr Dam nearing completion. (courtesy photo)
Today the Salish, Pend d’Oreille and Kootenai Tribes stand on the verge of acquiring the Kerr Hydroelectric Project, otherwise known as Kerr Dam. The dam, located about five miles southwest of Polson, is a three-unit hydroelectric plant with the capacity to generate 188 megawatts of electricity. Considering that one megawatt can satisfy the average energy needs of about 750 households, Kerr Dam is an important part of the infrastructure in the region.
When the Tribes exercise their option to acquire the dam in 2015, they will become the first Tribes in the nation to own and operate a major hydropower facility, not to mention they will become the only local entity in Montana to own one of the state’s large hydroelectric facilities. Ultimately, owning and operating Kerr Dam will be a milestone for the Tribes as they continue to maintain and manage important natural resources within the Flathead Reservation.
It is a story that spans many years, with many twists and turns.
Though the Hellgate Treaty of 1855 established the Flathead Reservation for the “exclusive use and benefit of the Tribes,” in 1904, the Flathead Allotment Act would open up the reservation to non-Indian homesteaders, many of which would come to the area and stake claim to lands deemed “surplus” by the federal government.
To accommodate a larger number of allotments and thus allow for more homesteads for non-tribal members, the Flathead Indian Irrigation Project (FIIP) was constructed - a complex system of engineered dams, reservoirs and canals which dramatically altered the natural systems of the reservation.
In addition to changing the natural flow of water on the reservation, FIIP also required electricity for the pumping of water from the lower Flathead River to assure seasonal refill of Pablo Reservoir, one of the many reservoirs needed for the project. To provide this electricity construction of a run-of-the-river hydro power facility was initiated. This development later became the site of Kerr Dam.
The need for electricity for copper mining activities in Butte, Mont. and smeltering activities in Anaconda, Mont. were the driving force behind the Montana Power Company’s proposal to expand the original power development at the site to what would become Kerr Dam. The federal government saw the interest of Montana Power Company as a way to cover the costs of construction of the irrigation project and thus a mutually beneficial relationship was established.
View of the Lower Flathead River prior to the construction of Kerr Dam. (courtesy photo)
The Tribes were not consulted on the proposal for building a dam, and ultimately protested construction of a dam at the falls, in consideration of the cultural importance at the site.
The income from the sale of the electricity at the dam was subject to regulation by the Federal Energy Regulatory Commission. The majority of the income was directed to Montana Power Company to pay its cost of construction and operation, and to pay a profit for its shareholders. Additionally, a block of electricity was provided to FIIP at the cost of production, the use and sale of this electricity designated to three purposes: to pay for the indebted irrigation project; to provide power to non-Indian water users; and to provide power to the Bureau of Indian Affairs.
Initially, the Salish, Pend d’Oreille and Kootenai Tribes would not benefit financially from the deal. But after much protest and litigation, ultimately the Tribes would successfully negotiate a share of the proceeds, whereby Montana Power Company had to pay an annual charge for the use and occupancy of the Tribes’ lands that underlie the dam’s location on Flathead River and the reservoir’s location on Flathead Lake.
Construction of Kerr Dam began on May 23, 1930, by Rocky Mountain Power, a subsidiary of Montana Power Company. After a time, the economy of the Great Depression would stall construction of the dam. Though, during the height of construction, around 1200 men were employed, with the higher skilled workers earning a couple of dollars per hour, and lower skilled workers earning only forty to fifty cents an hour. Tragically, several Tribal Members would lose their lives in the midst of performing some of the most perilous and difficult tasks of the construction.
By 1939, the facility began producing power, with the first transmission lines running to the mining operations of southwestern Montana and to the construction site of what was to become Hungry Horse Dam.
Named after Frank Kerr, the president of Montana Power at the time of the dam’s completion, today Kerr Dam is regulated by the Federal Energy Regulatory Commission. Licenses for power production are commonly granted in 50-year periods. The most recent license for Kerr was issued in 1985, and at which time CSKT became a co-licensee with the Montana Power Company. PPL Montana, the current owner of Kerr Dam, acquired the dam from Montana Power Company in 1999 when Montana Power Company sold all of its generating assets upon deregulation of the power industry in the state.
View of the south shore of the construction site at Kerr Dam. (courtesy photo)
Critical points during the 1985 negotiation include CSKT agreeing to take a reduced payment for the use and occupancy of the lands where the dam sits, in exchange for taking an exclusive option to acquire the dam in 2015. In 2013, this annual land use payment is approximately $19 million. Additionally, PPL Montana’s selling price is set by a formula that includes the original cost of construction, less depreciation—in essence the regulated book value of the assets, an amount that is considerably less than the deregulated market value of the assets. When the Tribes exercise their option to acquire the dam in 2015, there will be twenty years remaining on the license which expires in 2035.
Kerr Dam is a concrete arch dam 381 feet in length and 200 feet high. It controls the elevation of the top ten feet of Flathead Lake, and has an average production of 1.1 million megawatt hours of energy per year, it is a valuable asset that the Tribes intend to acquire at their earliest opportunity in September of 2015.
In preparation for the conveyance of Kerr Dam to the Confederated Salish and Kootenai Tribes, the Tribes have begun implementing a systematic strategy to ensure readiness and success and to limit risks. One important action the Tribes have taken to accomplish this is the creation of a tribally owned corporation, SX?NQ?E?ELS L SUW?EC?M / KSUKZIZMUMAZ gAdJAZMUKWAGITS, Inc., which does business as Energy Keepers, Inc.
Under section 17 of the Indian Reorganization Act, in September of 2012, the Federal Charter of Incorporation was formally approved. Today Energy Keepers, Inc. is charged with the management of the acquisition process, and ultimately with management of the operations of the dam upon acquisition.
Since revenue from the land use payment has been a major component of the annual Tribal budget, and will continue to be even after acquisition, the bylaws for the Tribally owned corporation are unique in that there is no allowance for Energy Keepers, Inc. to retain the earnings from the sale of the power from Kerr Dam. Additionally, there are provisions for the company to meet with the shareholders’ representatives (i.e. Tribal Council) at least twice a year to accommodate the presentation and ratification of an annual operations plan and annual performance report.
An upstream view of the installation of the spillway gates on the concrete arch portion of Kerr Dam. There are 14 gates in total and operate by gravity to allow water to spill over the dam. (courtesy photo)
The corporation is run by a Board of Directors that includes five members appointed by the Tribal Council. Because of the complex nature of the power industry, the unprecedented nature of the Kerr Dam conveyance process, and the challenging nature of management of a major hydropower facility, the Tribes established more specific qualifications for the Board of Directors of Energy Keepers, Inc. than for its other corporations. Three Directors are expected to be enrolled members of CSKT, with expertise in the field of energy or related matters. The remaining two Directors are expected to have knowledge and experience necessary to develop, manage, and maintain an energy-related business enterprise and/or the financial aspects of the business enterprise as a result of having attained the educational and professional background necessary to accomplish demonstrable success and leadership within the energy industry.
Currently, all five Board of Directors positions are filled. The Directors and a brief description of each Board Member’s professional experience and/or other pertinent qualifications are as follows:
Thomas J. Farrell, CSKT Tribal Member and Board Chairman
• Term expires: 12-31-2015
• Certified Public Accountant
• Executive Manager at Reliant Energy/Centerpoint Energy (managed accountants and programmers in the IT Department for multi-billion dollar corporation)
• Comptroller at Houston Industries Energy (managed accounting and tax functions dealing with the acquisition and development of foreign power assets)
• Manager of Financial Reporting at Houston Industries Inc. (managed accountants responsible for consolidated general ledger)
• Accounting Manager at Houston Lighting & Power Company (managed accountants responsible for financial management reporting, SEC reporting, rate filings)
Daniel F. Decker, CSKT Tribal Member and Board Vice Chairman
• Term expires: 12-31-2013
• Attorney, Juris Doctorate from the University of Montana
• Partner Attorney at the Law Office of Decker & Desjarlais (specializing in federal Indian law on behalf of Tribes and/or Tribal businesses)
• Managing Attorney of CSKT Tribal Legal Department
• Partner at Monteau, Guenther and Decker law firm
Robert Gauthier, CSKT Tribal Member and Board Secretary
• Term expires: 12-31-2014
• Owner of Ahoy Leasing & Development (real estate and property management firm specializing in providing training and technical assistance in the area of Indian housing management and economic development)
• Managing Broker/Owner of Gauthier Agency (includes six licensed real estate sales associates as well an Information Office agreement with AMERIND Risk Management)
• Owner/Operator of Gauthier’s Steak and Seafood (fine dining establishment near Polson)
• Executive Director at Salish Kootenai Housing Authority (managed all activities of the Housing Authority)
• Director of the Consumer Credit Counseling Office for CSKT (created and staffed a consumer credit counseling office sponsored by the tribal government and funded by the Administration for Native American grant)
• General Agent and Broker for Gauthier-Walters Agency (operated personal lines/pension insurance in addition to real estate listings and sales)
The first of three penstocks constructed to bring water from the upstream side of the dam to the generators located in the powerhouse on the downstream side of the dam. Each penstock is 23.33 feet in diameter and vary in length from 765 - 865 feet in length. (courtesy photo)
Thomas A. Babineau, Board Member
• Term expires: 12-31-2014
• Senior Vice President of Business Development at Rypos, Inc. (focused on business development, sales and marketing for Rypos, Inc. which specializes in on site and distributed power generation environmental emissions control systems)
• President at Core Motion, Inc. (focused on proprietary electric motor platform technology)
• General Manager at Zurn Industries (a multi-national conglomerate operating in the Combined Cycle Power industry in addition to mechanical power transmission markets)
Lon Topaz, Board Member
• Term expires: 12-31-2015
• Energy Resource Manager at REC Silicon (responsible for all energy matters for the company whose electric load was over 130 megawatts; in addition to all the natural gas purchases and all legislative and governmental affairs statewide and federally)
• Manager of Industrial and Conservation Services for Grant County Public Utility District in Wash. (responsible for all industrial relations, new industry recruitment and energy conservation services)
• Director of Resource Management at Grant County Public Utility District in Wash. (responsible for management of fish/wildlife issues; hydroelectric relicensing efforts; power management; river dispatch and all the trading business of the PUD)
• Integrated Resource Manager for the City of Anaheim Public Utilities Department in Anaheim, Calif. (including power management; control of the city’s electric generation facilities; negotiations with other utilities; energy trading; planning for new resources and all water and electric conservation efforts)
• Assistant General Manager for the Sacramento Municipal Utility District in Sacramento, Calif. (including conservation, energy planning; governmental relations; power management; permitting and construction of new power plants and all rate making for the utility)
• Founding General Manager at Emerald People’s Utility District in Eugene, Ore. (ran the enterprise, handled the effort to obtain the utility territory for PacifCorp)
• Each member will be eligible for reappointment of three-year terms after the expiration of their initial term.
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Up next: Naming SX?NQ?E?ELS L SUW?EC?M / KSUKZIZMUMAZ gAdJAZMUKWAGITS, Inc., a wholly owned corporation of the Confederated Salish and Kootenai Tribes, which does business as Energy Keepers, Inc.; and a deeper look at the personnel capacity and preparations for managing Kerr Dam.
SX?NQE?ELS L SUWEC?M /KSUKZIZMUMAZ gAdJAZMUKWAGITS, INCORPORATED is built on the traditional values of the Sqelix? / gAqzsmaknij
• Excellence in performing our given task,
• Accountability and commitment to provide for the future of the Confederated Salish and Kootenai Tribes, and Honor and respect for the sacred nature of the resources we are asked to manage and preserve for our future generations.
• Energy Keepers, Incorporated is committed to a path of sustainability whereby we track and measure our performance against the goal of achieving the following four objectives in a balanced way;
• Our environmental objective; to minimize and manage impacts from our operations, through environmental stewardship and planning for sustainable future operations.
• Our safety objective; to ensure a safe working environment and the safe operation of our facilities.
• Our economic objective; to maximize our economic return by being innovative, efficient, productive, and responsible in the ways in which we conduct our business.
• Our social objective; to be a responsible and valued corporate citizen of our community by considering its needs, the needs of our customers and the needs of the Flathead Reservation.