In an order dated May 20, 2021, the Federal Energy Regulatory Commission (FERC, or the Commission) terminated the hydropower licenses for three projects located on the Tittabawasee River in Michigan—the Secord (P-10809), Smallwood (P-10810) and Sanford (P-2785) dams. The termination by implied surrender follows a May 2020 breach at the Sanford dam and the breach and failure of the upstream Edenville dam, which was also operated by the same licensee before the Commission revoked the Edenville license in 2018 due to the licensee’s repeated noncompliance with FERC dam safety orders. The resultant floods caused significant damage in the communities surrounding the dams and have been estimated by the State of Michigan to have caused economic harm exceeding $190 million.
In the year that has passed since the dam breaches, the licensee failed to adequately respond or comply with numerous FERC orders to address the damage from the failures, declared bankruptcy on July 31, 2020, lost the projects through condemnation by Midland and Gladwin Counties in December 2020, and was assessed an unprecedented civil penalty of $15 million by the Commission in April 2021. The dams are now owned and operated by the Four Lakes Task Force, as agent to the counties, and are no longer operated for hydropower generation. The Task Force has consulted with both FERC and the Michigan Department of the Environment, Great Lakes, and Energy (EGLE) to begin restoring the reservoirs to a safe condition.
In its May 20, 2021 order, FERC explained that termination of a hydropower license by implied surrender is required under both Section 6 of the Federal Power Act and the license itself in cases where a licensee, by either action or inaction, has clearly indicated its intent to abandon a project and has not filed a surrender application with the Commission. FERC found implied surrender was appropriate in this case because the licensee is bankrupt and no longer has ownership of the properties, the new owner has already begun rehabilitation work at the dams, and Michigan EGLE, the agency responsible for dam safety in Michigan, supports the termination of the license.
FERC used the order terminating the license to express its “great disfavor” for the licensee’s” “deliberate abandonment of these projects following extensive harm…caused to the public.” FERC also made clear that it was willing to terminate the license by implied surrender only due to the unique situation presented, in which a local entity had already acquired the projects and was implementing plans to correct the licensee’s deficiencies and had no intent to generate hydropower, and where the state regulator had expressed support for the action.
FERC indicated that it was terminating the licenses by implied surrender “with some reluctance” and cautioned licensees that there was “no guarantee” that it would choose a similar resolution in future cases. FERC also took the opportunity, as it did in its April 2021 order assessing the $15 million civil penalty, to remind the public of its January 2021 Notice of Inquiry seeking public comment on the future imposition of financial assurance requirements on hydropower licensee, noting that the “financial viability of hydropower licensees, which can have significant impacts on the public and the environment, is a matter of great concern to us.”