I am pleased to announce publication of my article entitled, "The Old West Meets The New: The Columbia River Treaty in the 21st Century." It is the cover story in this month's Northwest Public Power Association Bulletin.
If you prefer reading it here, I've inserted the text of the article. However, you'll see nice photos and graphics if you following the hotlink above.
Eric Christensen, Partner
Gordon Thomas Honeywell
The Columbia River is the flowing heart of the Pacific Northwest's economy. Power managers, in particular, understand the critical importance of anything that affects river operations and output of the hydroelectric system. Adding to this challenge is the fact that the Columbia flows for several hundred miles through Canada before entering the United States. For the last fifty years, the Columbia River Treaty ("CRT") has governed water storage, flood control, and power operations on the Columbia, with profound effects on both sides of the border. The process is now underway to determine whether the CRT should be terminated or renegotiated, a decision that will affect the Northwest public power agencies for decades to come.
The stakes at issue are enormous. To illustrate, for the period from August 2010 to July 2011, the benefits accorded to Canada under the CRT - the so-called "Canadian Entitlement" -- were 535.7 MW of annual average energy, delivered at rates up to 1,316 MW. The Canadian Entitlement is valued at between $250 million and $350 million annually.
The Treaty Is a Product of the Old West
The CRT is a product of the Old West. Not the mythological Hollywood Old West of John Wayne, but the real Old West of Franklin Roosevelt, J.D. Ross, and other Western pioneers of the public power movement. In the real Old West, rivers were viewed in utilitarian terms, and primacy was placed on development of rivers to maximize their hydroelectric capacity and navigation potential as a means to alleviate the plague of Depression-era poverty. The CRT, which was negotiated in the 1940s and 1950s, and finally ratified by Canada in 1964, is a product of its times, focusing almost exclusively on acre-feet of storage and megawatt-hours of power.
To 21st Century readers, the most striking feature of the CRT is its failure to even mention fisheries, wildlife, water quality, and the other environmental issues. With the rise of the modern environmental movement in the late 1960s and early 1970s, and the passage of landmark legislation such as the Endangered Species Act and Clean Water Act, the region for the last three decades has struggled to reconcile the enormous economic benefits provided by the regional hydropower system with requirements to recover endangered salmon and steelhead runs, improve water quality, and meet other mandates arising from modern environmental legislation.
For this reason, the CRT can be viewed as an anachronism which assumes a world of river operations that no longer exists. That is, the CRT assumes a level of electric production in the United States that can no longer be attained because of mandates related to river flow, ramping rates, and other limitations arising from environmental legislation. And, because the balance of benefits and burdens between the United States and Canada assumes such a lost world, the Treaty must be rebalanced to reflect the benefits that can actually be produced by the hydropower system subject to the constraints arising from environmental legislation, not the benefits that can be produced by a hypothetical river system not subject to such constraints.
The Fundamental Bargain of the Columbia River Treaty
The CRT addresses a basic fact of Columbia River geography: Storage on the River is concentrated in Canada, while hydropower production is concentrated in the United States. For this reason, flood control in the United States depends heavily on storage operations in Canada. Further, because Canadian and U.S. hydroelectric dams depend on the same river system, there is a strong interdependence between the projects. Hence, the CRT can best be understood as encapsulating two basic principles. First, Canada provides flood control benefits to the United States and the United States pays Canada for these benefits.
Second, the two nations coordinate operations of their dams to maximize benefits in a way that cannot be achieved without such coordination. Regulation of river flows by the Canadian dams enables six federal and five non-federal dams downstream in the United States to generate more usable energy than they would otherwise, creating significant downstream benefits. Under the Treaty, these downstream power benefits are shared equally between the two countries. Canada's portion of the downstream power benefits is known as the "Canadian Entitlement," and the United States is obligated to return this Canadian Entitlement to Canada. The amount of the Canadian Entitlement is generally calculated five years in advance and does not necessarily reflect actual benefits. In recent years, the annual Canadian Entitlement has been approximately 550 MW with a peak of 1440 MW.
Problems on the Horizon
Upon ratification of the CRT in 1964, the United States paid Canada $64.4 million for flood control benefits for sixty years, a period which ends in 2024. After 2024, Canada will still be required to provide flood control benefits under the CRT, but the obligation will be based upon ill-defined treaty provisions requiring flood control benefits to be provided when "called upon" by the United States. These provisions allow the United States to call upon Canada for flood control only if it cannot adequately control flooding using reservoirs on the American side of the border. Recent studies of the issue demonstrate the two sides interpret these "called upon" flood control provisions differently, and different assumptions about how these provisions are interpreted could have serious impacts on the operation of U.S. hydroelectric projects. For example, using a more restrictive assumption about when flood damage begins to occur on the Lower Columbia results in substantially greater drafting of U.S. flood control reservoirs, with concomitant impacts on power production.
While flood control under the CRT will change drastically in 2024, the same is not true of river coordination. Unless the CRT is terminated or renegotiated, coordinated river operations will continue much as they have under the Treaty to date. As noted above, this is problematic because the CRT assumes that the United States can produce more power from the U.S. hydro system than is possible if current environmental constraints on the river system are taken into account. In fact, a recent study conducted by BPA and the U.S. Army Corps of Engineers Northwestern Division (the "U.S. Entity" responsible for implementing the CRT for the U.S.) concluded that fish conservation requirements have reduced the output of the U.S. hydro system by 1520 to 1655 MW on an annual average.
The study also suggests that the benefits provided to Canada under the Treaty do not reflect these restrictions. The study concluded that terminating the Treaty, with the resulting loss of coordinated river operations, would reduce the output of the U.S. hydro system by about 90-94 MW on an annual average, when environmental constraints are accounted for. This represents less than one percent of the output of the U.S. system. By contrast, the study estimated the Canadian Entitlement in 2024 would be about 470 aMW. Accordingly, when balancing the loss of system efficiency against the gain created by the end of the Canadian Entitlement, the U.S. would experience a net gain of electric generation on the order of 380 MW on an annual average if the Treaty were terminated.
In addition, the Canadian Entitlement adds to transmission congestion on the American side of the border. The United States is obligated to provide transmission capacity to make this power delivery through the end of the Treaty until at least September 15, 2024, the earliest date the Treaty can be terminated. Return of the Canadian Entitlement has created serious issues on the U.S. transmission system. The CRT originally contemplated that a new cross-border transmission line would be built connecting eastern Washington with eastern British Columbia. However, those plans never came to fruition. Instead, the bulk of the Canadian Entitlement is delivered at the Ingledow substation, near Vancouver, B.C., on the west side of the Cascade Range. This Entitlement return contributed significantly to transmission congestion in the Puget Sound region. A group of Puget Sound utilities recently agreed to spend approximately $140 million to address these transmission concerns.
This is not to suggest that the United States should simply terminate the treaty, which would sacrifice undoubted benefits arising from flood control and coordinated river operations. But these facts do suggest that public power should pursue a rebalancing of the Canadian Entitlement that accurately reflects current and future conditions on the River, and the actual benefits received from coordinated operation of the River. Benefits under the CRT should not be based upon conditions that existed when the treaty was originally ratified sixty years ago but have long since vanished.
Influencing the Future of the Treaty
2014 will be a milestone for the CRT. The Treaty cannot be terminated until 2024 and it will be terminated only if one side or the other provides ten years advance notice of its intent to terminate. Hence, the first opportunity to provide notice of termination will occur in 2014. Each side is already gearing up to determine whether to provide notice of termination, to seek renegotiation, or to allow the CRT to remain in place. Fortunately, Northwest public power agencies will have greater ability to influence this decision than is ordinarily possible with international treaty negotiations. This is because the U.S. Department of State, which exclusively controls treaty negotiations with foreign nations, agreed to allow the U.S. Entity to take primary responsibility for developing the American position on the Treaty. BPA has, in turn, established a process to solicit input from affected entities, including members of the Northwest public power community.
It is also worth noting that many other entities with an interest in the river are already gearing up to participate in the Treaty process. For example, Indian Tribes in the U.S. and Canadian First Nations have already indicated they believe the failure of the CRT to address fisheries and environmental issues must be addressed before the Treaty is extended. Accordingly, it behooves public power to take an active role in the process of developing the United States position on CRT termination or renegotiation.
The upcoming opportunity to provide notice of termination under the CRT, and the process already underway to determine whether this opportunity should be taken, is literally a once-in-a-lifetime chance for public power to influence the future of the Columbia River. Because decisions made in the next few years concerning the CRT will influence operation of the Columbia River hydropower system for many years to come, public power should be fully engaged in the process to influence the United States position on Treaty termination or renegotiation. Public power should fully understand the implications of the CRT and should take advantage of this unique opportunity to advance the interests of public power consumers, both now and for decades into the future.