A Business Decision

Yahoo

26-03-2025

Anita Hofschneider and Jake Bittle Illustrations by Jackie FawnGrist
This story was produced by Grist and co-published with Underscore Native News.
PART II — A Business Decision
In the summer of 2004, water flowed through the 90-foot-wide gates of a hydropower dam along the Tummel River in Perthshire, Scotland. Salmon and sea trout swam safely past the turbines on their way upstream, wiggling up and down the fish ladders required by Scottish law.
The difference wasn't lost on Jeff Mitchell, who was visiting the dam for a press conference highlighting how ScottishPower's subsidiary, PacifiCorp, had refused to install those same fish ladders in their dams on the Klamath River.
As they toured Scotland demanding that the company remove its subsidiary's dams in Oregon and California, Mitchell and his allies from the Klamath River Basin were surprised to meet an outpouring of empathy and support. The Scottish people knew and loved salmon — so much so that Glasgow's coat of arms had two salmon on it. A local Green Party leader embraced their cause, filing a parliamentary motion criticizing ScottishPower for its hypocrisy. At one point, The Herald, Scotland's longest-running newspaper, even gave ScottishPower's CEO a nickname: 'Stops Salmon Leaping.'
'If it wasn't for these fish I wouldn't be here today. My people would have died off a long time ago,' Mitchell told reporters during their visit. 'We can't walk away from this and we will not walk away from this.'
The pressure campaign produced immediate results, with left-wing members of the Scottish Parliament calling on political leaders to intervene in favor of the tribes. After the tribes' visit in July, PacifiCorp's chief executive officer, Judi Johansen, had told news media that 'all options [were] on the table, including dam removal.'
But the momentum did not last. The following spring, ScottishPower executives decided to pivot back to a focus on United Kingdom energy markets and offload some of their assets. They sold PacifiCorp for $5.1 billion, washing their hands of the Klamath River crisis.
The new owner of the dams was a far more familiar face. The firm that now owned PacifiCorp was called MidAmerican Energy Holdings, and it was controlled by Berkshire Hathaway, the massive conglomerate owned by billionaire Warren Buffett.
Mitchell, Troy Fletcher, and their fellow tribal leaders knew at once that they had to adjust their strategy. During their campaign in Scotland, they had tried to stir up moral outrage over the death of the Klamath salmon, arguing to ScottishPower executives and Scottish citizens that the company needed to put the needs of the fish above its own profits. That argument didn't seem like the right fit for Buffett, whose reputation was that of American capitalism personified: He made his fortune riding the swings of the free market, and every year thousands of Berkshire shareholders converged on the company's Nebraska headquarters to get stock tips from the so-called 'Oracle of Omaha.'
After doing some digging, Craig Tucker, a spokesman for the Karuk Tribe, discovered that Buffett's family seemed to have an affinity for Indigenous people. Buffett's youngest son, Peter, was a composer who had written music for the 1990 film Dances With Wolves, plus an eight-hour documentary on Native Americans helmed by Kevin Costner. Tucker also discovered that Peter and his brother, Howard, had co-sponsored the Buffett Award for Indigenous Leadership, a cash prize recognizing Indigenous leaders.
In an attempt to get Buffett's attention, Tucker nominated Leaf Hillman for the award for his work restoring salmon on the Klamath. Hillman made it to the final round, but in the days leading up to the awards ceremony, Tucker got ahead of himself and told a few journalists that Hillman was being considered for the Buffett prize. The flurry of media attention scuttled Hillman's chances, Tucker said.
The tribes' strategy was multipronged, combining loud protests with quiet legal maneuvering. In 2007, Hillman and his son, Chook Chook Hillman, drove to Omaha to disrupt Berkshire's annual shareholders meeting. When they arrived, local police pulled their RV over and told them to behave. 'We'll be watching you,' Chook Chook recalled one officer saying. The Hillmans were required to stand in a designated 'free speech' spot for protestors down the road from the auditorium as Buffett fans walked by. 'Get a job!' one passerby shouted. Another woman spit on them.
The hostile response inspired Chook Chook to train with the Indigenous Peoples Power Project, which schooled Native activists in nonviolent protest, to strengthen his civil disobedience skills. The following year, he managed to address Buffett directly during Buffett's annual town hall before thousands of Berkshire shareholders, but the tycoon rebuffed Chook Chook and the other protestors, telling them the government and not Berkshire would determine the dams' fate. The protests in Omaha became so disruptive that Berkshire representatives flew to the Klamath Basin to ask Chook Chook and the other activists to stay away from Nebraska.
But Mitchell, Fletcher, and the others had discovered an argument that Buffet couldn't dismiss so easily. They'd spent years immersing themselves in the intimate details of how the dams operated, poring over company filings and utility commission reports. They found that by the turn of the 21st century, the dams had become, in Mitchell's phrasing, 'losers.' The dams generated at most around 163 megawatts of electricity during the wettest years, or enough to power 120,000 homes, far less than the average coal or gas plant. That was just a small percentage of the power that PacifiCorp generated across its six-state fleet — and even less in dry years, when the turbines couldn't run at full capacity. Even with recent renewable energy requirements in California and Oregon, the dams didn't really move the needle compared to the more powerful solar, wind, and natural gas assets the company was adding.
PacifiCorp's relicensing fight at the Federal Energy Regulatory Commission had been playing out for almost seven years. But tribal leaders were simultaneously pursuing another strategy: persuading federal fish agencies to impose new environmental rules on the company's license. This would make the dams even more expensive to operate, leading to thinner margins, and open up PacifiCorp to pressure from its utility customers to consider dam removal.
'If anything would change Berkshire Hathaway's mind,' said Mitchell, 'it would be a good business decision.'
Thanks to the dogged work of advocates like the late Ronnie Pierce, there were years of documentation of the devastating ecological effects of the Klamath dams, and state and federal governments had ample evidence that the dams had been in violation of the Endangered Species Act as well as the Clean Water Act. In early 2006, responding to the dire state of the river's fish population, the U.S. Fish and Wildlife Service and National Marine Fisheries Service mandated that PacifiCorp build fish ladders around the dams in order to avoid killing off the salmon altogether. California and Oregon then told the company that they would not grant it permits under the Clean Water Act unless it cleaned up its reservoirs, which were contaminated with toxic algae.
These decisions meant hundreds of millions of dollars of added costs for PacifiCorp — the bill for the fish ladders alone would exceed $300 million. The company contested them, leading to a lengthy FERC hearing that pitted almost a dozen tribes, government agencies, and environmental groups against the utility. During the hearing, PacifiCorp argued it could trap adult fish below the dams and transport them upstream on the river by truck instead of building fish ladders. The company also argued that salmon had never swam that far upstream before the dams existed.
The tribes believed that the company's proposals for handling the salmon were ludicrous, but they also knew they would need more than studies and statistics to persuade the judge in the FERC hearing to rule against the company. That summer, the tribal leaders took the hearing judge and executives from PacifiCorp on a boat ride up the river to give them a firsthand look at what the dams had done. The day was so hot that they almost cut the trip short, but Mike Belchik, the Yurok Tribe's biologist, insisted that the judge see the Williamson River, which drains into Klamath Lake, far upstream from the PacifiCorp's dams. When they arrived, the water in the undammed river was cool, and large trout were leaping in droves.
'Your Honor, this is where the salmon are going to. This is the prize right here,' Belchik remembers the group telling the judge. 'This place will sustain salmon.'
The judge in the FERC hearing ruled against PacifiCorp in September of 2006. The company would have to pay for the costly dam improvements, and the tribes now had the leverage they'd been working for. The company could keep operating the dams in the meantime with a series of one-year license extensions, but it had to fix the issues on the river if it wanted a new license.
'This is going to be the thing that really motivates PacifiCorp to negotiate,' said Craig Tucker, the Karuk Tribe's spokesman, in a statement at the time.
Faced with the mounting cost of running the dams and an onslaught of negative press, PacifiCorp brass deputized Andrea Kelly, a trusted company veteran and an expert in utility law, to find a solution. Company leaders tasked her with exploring potential settlements that would maximize revenue for PacifiCorp while minimizing the costs of regulatory paperwork, lawyers' fees, and public-image maintenance.
Kelly had read all the same paperwork as Fletcher, Mitchell, and Pierce, and after PacifiCorp's regulatory losses, she came to the same conclusion that the tribes had — it might be cheaper to remove the dams. But she didn't say so just yet. First, in late 2007, PacifiCorp commissioned a confidential study that compared the cost of dam removal to that of the fish ladders and river cleanup that the federal agencies were demanding. The analysis, which has never been made public in full, found that meeting the agencies' fish and water conditions would be significantly more expensive than the cost of removing the dams, provided the company didn't have to cover the whole removal bill.
The study also found that trying to relicense the dams was a massive financial risk. The tribes' campaign had made the dams so controversial that Oregon and California were almost certain to keep opposing the license. The inevitability of additional protests and litigation meant that PacifiCorp would likely need to spend hundreds of millions more to get through the FERC process. Even then, there was no guarantee it would get its new license.
To protect its customers and investors from the costs of a protracted fight over the Klamath, PacifiCorp's best option was no longer trying to keep the dams up, but figuring out how to get them down.
As the tribes worked to put PacifiCorp on defense, they were also trying to forge a truce with an aggressive adversary: the farmers of the Klamath Basin, who just years earlier had been on the brink of starting an all-out armed conflict with the tribes and the federal government to control the basin's scarce water.
Troy Fletcher, the Yurok Tribe executive director and longtime tribal leader, had spent decades fighting with farmers for the water the tribe needed — and was legally owed — to build up its struggling fisheries. But Fletcher was also amiable by nature, and as years of conflict passed, he realized that the animosity between the tribes and the farmers wasn't serving either of them. The tribes had spent millions of dollars on litigation and lobbying against the farmers' interests — and had blasted them in the news media for years — but had no more water to show for it.
'It didn't make any of us sleep any better, because the big issues were still out there, and we still had to resolve them,' he said.
In 2005, as the FERC dam relicensing process rolled on, Fletcher and other tribal leaders found themselves stuck in another series of meetings with farmers and ranchers from around the Klamath Basin. The Bush administration had brought the groups together in an effort to achieve a long-term resolution to the contentious water issues and avoid more violence. For once, tribal members and agricultural interests weren't meeting at protests or sparring in the press, but rather sitting across the table from one another in the same windowless conference rooms, eating the same bad food, and filling their coffees from the same pots.
During one meeting, in a room full of tribal leaders and farmers, Fletcher decided to propose a truce: Why didn't the two sides stop criticizing each other publicly, and start talking?
In the months that followed, Fletcher befriended veteran farm lobbyist Greg Addington, whom the Klamath farmers had hired after the 2001 water war to serve as their advocate. Addington had spent almost his entire career lobbying on behalf of farming interests, but he knew the farmers could not afford a repeat of their standoff with the government. He and Fletcher started talking over beers in the evening and playing golf. It wasn't long before Klamath water issues came up.
Farmers had gotten cheap power from the hydroelectric dams for decades, but now PacifiCorp, which wasn't making much money off the systems, was trying to raise their rates. Fletcher was getting pressure from his environmentalist friends to support the rate increase because it would hurt the farmers who were sapping the river, but he didn't like the idea of the farmers going bankrupt. He decided to strike out on his own: In private conversations with Addington, he vowed that the Yurok would support continued power subsidies for the farmers if Addington and the farmers supported the removal of the dams. PacifiCorp was screwing the tribes and the farmers, he told Addington — so why didn't the two join together?
'Nothing brings people together like a common enemy,' Fletcher said. 'We've been in the fight for ages, but we can't afford to litigate for decades and watch our fish continue to die.' The farmers began to back the tribes' campaign for dam removal, and in return the tribes backed them on the power-rate issue.
'I believed that Troy cared about the ag community in the Klamath Basin, and it made me really want to care about the tribal community,' Addington said.
The truce soon opened up a broader dialogue between the farmers, the tribes, environmentalists, and fish advocacy organizations on the Klamath. The stakeholders on the river had been trying to solve each of these crises on its own, suing each other whenever their interests came into conflict, but now they began to talk about a comprehensive settlement deal that would put an end to the litigation. Everyone would have to give up something, but everyone would get something they needed.
The final piece to the Klamath puzzle was the Bush administration, which controlled Klamath irrigation through a canal system run by the Bureau of Reclamation and would play a key role in any water settlement. Both farmers and Indigenous nations had come to detest the administration — the farmers for the 2001 water shutoff and the tribes for the subsequent fish kill caused by Vice President Dick Cheney's emergency diversion of water to the farmers.
The crisis was a stain on the administration's record in the water-stressed West, and Bush was desperate to resolve the tensions in the Klamath. The president directed Dirk Kempthorne, a compromise-oriented Idaho governor brought in to run the Interior Department during Bush's second term, to defuse the Klamath conflict — even if it meant departing from the traditional Republican line on water issues, which was unconditional support for dams and agriculture.
Kempthorne and his deputies flew to the Klamath Basin to join the settlement talks, but they got a frosty reception. Despite Fletcher and Addington's breakthroughs, the alliance was still fragile.
In early 2008, Fletcher, Mitchell, and Hillman met with senior Interior officials at Klamath Falls, near the headquarters of the Klamath Tribes. John Bezdek, a senior Interior Department lawyer, asked for tribal leaders' thoughts on a long list of items in the proposed settlement, including water deliveries to farmers and ecosystem restoration.
But Fletcher wanted something more from them. Staring at the Interior bureaucrats from across the table, he laid it out for them straight. The negotiations had made progress, he said, but without a guaranteed agreement to remove the dams, a larger water settlement was impossible. Somebody would need to force PacifiCorp's hand.
'You guys need to get this done for us,' Fletcher told the two Bush administration officials.
Bezdek said he would try. He and another Interior bureaucrat, Michael Bogert, flew to Portland to visit Robert Lasich, the president of PacifiCorp and the boss of the company's Klamath czar, Andrea Kelly. The two government officials felt like they had momentum: With federal agencies insisting that the company provide fish passage, and the once-rebellious farmers now calling for dam removal as well, it seemed like the company would have to acquiesce.
But as soon as they entered Lasich's office, the PacifiCorp executive rebuffed them, saying the utility would never abandon the dams unless Interior came up with a deal that worked for the company.
'You're asking us to voluntarily walk away from revenue-generating assets,' he told them, Bezdek recalled. 'If you want this to happen, you two need to man up and put something real on the table.' Bogert later made Bezdek a T-shirt that said, 'MAN UP.'
In a last-ditch effort to work out a deal, Bezdek called a meeting with PacifiCorp's Andrea Kelly and representatives from the two states at a federal conservation training center in Shepherdstown, West Virginia — a site so remote that negotiators had to walk 15 minutes to a bridge and stand on its railing to get cell service.
Bezdek also invited three lawyers representing the Yurok Tribe and a few conservation groups, but they didn't get to join the settlement talks until the last day, when most points had already been decided. PacifiCorp's Kelly was the only woman there, and there were no tribal leaders present, a fact for which Fletcher, of the Yurok Tribe, would later upbraid Bezdek and the Interior bureaucrats.
Behind closed doors in Shepherdstown, Kelly reiterated the company's conditions for dam removal. The company did not want to spend more than $200 million, she said. It also wanted full protection from any legal liability that resulted from the dam removal project, which would detonate dynamite on century-old structures and release millions of tons of sediment and algae into a fragile river ecosystem.
For three days, Bezdek and Kelly hashed out how dam removal would work. The solution to the money problem came from California Governor Arnold Schwarzenegger, who agreed to issue a state bond that would raise $250 million. That money, combined with $200 million PacifiCorp would get from its customers in Oregon, would cover the costs. The liability problem was harder: PacifiCorp refused to conduct the dam removal itself. In order to appease the company, the parties ended up settling on the idea that the federal Bureau of Reclamation itself would remove the dams and assume the risk.
After days of exhausting talks, the parties brought the framework to Interior Secretary Kempthorne, who secured Bush's blessing to approve it. This was a stunning reversal from six years earlier, when Cheney had caused the fish kill to protect the interests of Klamath farmers. The Bush administration and the states were able to tout the deal as a solid business decision — Oregon's governor called the deal 'a model … of how the federal and state governments and private industry can work together.'
'President Bush made clear to me that we were there to solve problems,' said Kempthorne. 'We never took a position other than to say that we supported a business decision.' At the Bush administration's final White House Christmas party in December of 2008, the president shook hands with Michael Bogert, one of the senior Interior officials who had worked on the negotiations.
'It's a good deal,' Bush told Bogert.
The 2008 accord represented a triumph of diplomacy and compromise in a region that just a few years earlier had been on the verge of war. The settlement, finalized across two legal agreements, not only promised to remove all four PacifiCorp dams from the Klamath River, but also called for a billion dollars in federal funding to restore the decaying parts of the river ecosystem, undoing a century of damage.
The deal guaranteed water deliveries to the Oregon farmers during all but the driest periods, laid out a plan to protect salmon and suckerfish during droughts, and returned 90,000 acres of forest land to the Klamath Tribes. The basin tribes, environmental nonprofits, commercial fishing groups, and irrigators all endorsed it. The state governments of California and Oregon gave it their blessing in a matter of months as well.
But not everyone was happy: The residents of conservative Siskiyou County, California, which was home to three of the dams, were angry that PacifiCorp was going to drain the reservoirs that gave them lakefront property and a place to water ski. Some farmers around Upper Klamath Lake hadn't received the water guarantees they were seeking. And the Hoopa Tribe, a nation that had also campaigned for dam removal, walked away from the settlement talks, frustrated that PacifiCorp would not have to bear the whole cost of dam removal.
Mitchell, too, had reservations about the company walking away with its hands clean, and about the fact that the deal had come together with no tribal leaders present. But in his eyes, the benefits far outweighed the costs.
'This gave us the pathway of getting these dams out and restoring this watershed more quickly than fighting a much longer battle where fish may not survive,' he said. 'If it took us another 10, 15 years to do this, we may lose those fish completely.'
The only step left was to get Congress' approval for the settlement deal, which would unlock a billion-dollar infusion of restoration funding. After so many years of hard-fought negotiations, the campaigners, assured by their federal allies, thought that passing a settlement bill through Congress would be straightforward by comparison.
They had no idea what lay ahead.
This is Part II of a five part series. This story was first published in Grist