Why the Dam Hurry? Biomass controversy sparks a kinder, gentler look at hydropower

May 30, 2010

Why the Dam Hurry? Biomass controversy sparks a kinder, gentler look at hydropower
By Anne Stanton
Fred Kiefer, an older gentleman from northern Indiana, walked down the
path of Lone Pine Trail off Keystone Road in Traverse City with his
wife, to a place they held dear in their memories. Hung around his
neck was a camera, ready to capture a picture of the blue herons,
swans, mergansers, and, if he was lucky, a pair of loons.
But the scene he remembered was no more. Instead he saw a river with
banks of bare dirt and the pond’s exposed bottomlands. He turned to a
trio of folks and remarked that water levels must have really dropped.
One of the men, a big guy, told him the county lowered the pond level
by 17 feet in 2007.
“Oh, this makes me sick,” said Kiefer. “I have a picture hanging in my
living room from the last time I was here. Fall colors, swans swimming
across there. It was gorgeous. This was a big ol’ lake, hundreds and
hundreds of birds. We watched an osprey. But it’s dried up. It’s gone.
This looks like a savannah.”
The big guy on the trail was Bruce Carpenter, a wood sculptor who uses
wildlife at Boardman Pond for artistic inspiration. He has spent the
better part of the last five years fighting the county and city, which
voted to remove three dams off the river a year ago.

DOLLARS & DAMS
Although their water levels have dropped, the dams still remain. It
will take more than $13 million to remove them, which includes the
cost of relocating tons of contaminated sludge from bottomlands.  An
archaeological survey will be extra (no cost estimate on that yet).
But in 2007, Grand Traverse County drew down the Boardman Pond.
Carpenter and his neighbors sued the county, alleging that it affected
their riparian rights and damaged wetlands.
The DEQ’s administrative law judge, who heard the case, said there
were no significant environmental effects, said Todd Kalish, fisheries
unit manager of the Department of Natural Resources and Environment
(DNRE).
An appeal was heard in Igham Circuit Court, which affirmed the ruling.
A leave for appeal has been filed with the state Court of Appeals.
Kalish said the area will heal over time. The removal of the three
dams will ultimately restore 253 acres of wetlands, 57 acres of
uplands, and 3.4 miles of river habitat.
“Those are wetlands that were present prior to the filling in of these
impoundments. That is majorly significant. That is, to my knowledge,
the largest and most comprehensive wetlands restoration project in the
history of Michigan,” Kalish said.
Carpenter doesn’t buy it — at least not with the Boardman Pond. “It’s
a devastation, not a re-creation. They destroyed the emergent wetlands
that were here. Look at it. There’s nothing! No life out here at all.
There were so many waterfowl out here you could walk on them to get to
the other side. And now. Nothing!”
Kalish said he doesn’t want to sound insensitive, but the birds can
relocate to one of the many other lakes in the Grand Traverse region.
Carpenter countered that minks and otters won’t have it quite so easy.

DRIVING FORCE
In the years-long controversy over whether to put the dams into
retirement or to repair them to generate electricity, the Department
of Natural Resources and the Department of Environmental Quality—now
combined as the DNRE—have been the driving force to dismantle them.
The DEQ has worked to remove dams throughout the state in order to
bring back rivers to their original cold-water state to improve fish
stocks for fly fishermen.
“Removing dams is a foregone bedrock principle of their agenda.
Restoring rivers to their unrestricted free flow,” said Charles
Peterson, the entrepreneur who wanted to take over operation of the
dams from Traverse City Light and Power.
When Traverse City Light and Power first applied to the department for
permission to improve the dam’s spillway (the part of the dam that
acts like a safety valve, releasing pent-up water in times of high
water), the DNR responded in a May 9, 2003 letter:
“The Division has a number of concerns …. In addition to the
environmental impacts of the construction, the cost is significant. We
encourage you to give some thought to retire the hydropower facility
and remove the dam as an option to building the new spillway.”
The DEQ’s vision was to restore the Boardman River to its natural,
free-flowing state so it could support a thriving steelhead fishery.
Under current plans, the three dams — Sabin, Boardman, and Brown
Bridge — will be removed. The Union Street Dam will stay, serving as a
barrier for PCB-laden salmon and sea lamprey, a jawless, eel-like
parasite. (The necessity to keep a dam was a disappointing reality for
environmentalists and the DNRE because it meant the Boardman River
won’t be the free-flowing river envisioned.)
Right now, the steelhead trout (also known as rainbow trout) can jump
the Union Street dam, which is located near the TC Post Office. Even
so, the DNRE still stocks the river with 15,000 fish every year. The
colder waters might facilitate natural procreation in the river and
avoid the task and expense of restocking, Kalish said.
Kalish, who heads the implementation team to remove the dams, said a
$2.9 million fish passage will be built at the Union dam, where four
months out of every year—in the spring and fall, a DNRE employee will
sort the fish to ensure that only desirable fish are allowed up the
river. Kids and adults will gather at the monitoring and research
station that might include an underwater viewing chamber.
Kalish also wants the Boardman River to get back to its original
curves between Sabin and South Airport Road. It was unnaturally
straightened when they put in the railroad tracks, which hurt the
suitability of habitat, he said.

NEW QUESTIONS
Ever since TCL&P proposed a 10 megawatt biomass plant earlier this
year, public opinion seems to have turned a kinder eye toward hydro
power. No pollution, no trees for burning required, just flowing water
to produce nearly resource-free electricity.
“The dams issue is not going to go away. Politics make unlikely
bedfellows. People are allying together that weren’t in the past —
simply because hydropower can be part of a solution that doesn’t
include biomass,” said Doug Burwell, an engineer.
The three dams would only provide 2.225 megawatts of power per
year—enough to supply electricity for about 1400 homes. TCL&P, which
has 13,000 ratepayers, has talked about building three biomass plants,
each at 10 megawatts apiece.
But the dams could provide a small and valuable piece of the renewable
energy puzzle, Burwood said.
Years of meetings left the general public with the impression that the
dams were ancient and on the verge of rupturing, in part, because they
heard the Boardman River dam was referred to as a “high hazard.” The
designation, in fact, meant that a lot of homes and businesses are
downriver of the dam, but it’s no reflection on the condition of the
dams, said Bill Stockhausen, who runs the Elk Rapids Village dam.
In fact, aging dams are operating all over the country and the three
structures weren’t in question. At issue were tightened federal
regulations over the spillway which passes water during times of high
flow. It gave many people the impression that the dam structures were
risky, when in fact the dam was never declared unsafe, Stockhausen
said.
The county and Traverse City justified removing the dams, saying they
didn’t make economic sense, based on a consultant’s evaluation and
Traverse City Light and Power’s assertion they had lost $5 million
when they operated the hydro dams.
The other compelling reason was environmental. Some environmentalists
want to restore the Boardman River so that fish could freely swim
upriver to spawn in the natural flow of nutrients and fast-flowing,
cold water. The movement to remove dams is national. In many rivers
out West, breaching dams became the best chance for the wild salmon
recovery.

NOT SO FAST
This week, the Express will look at whether the economic reasons still
hold true.The county and city hired ECT Consultants to do a financial
analysis. ECT, in turn, hired Veritas, which concluded that over 30
years, the dams would be a losing proposition.
Veritas estimated that it would cost anywhere from $8.2 million to $15
million to repair the dams and get the necessary licenses. But those
totals also included the price of a fish passage, estimated to cost
$5.5 to $7 million. The DNRE is seeking money to build a $2.9 million
fish passage at Union Street, obviously without the three hydro dams
in operation.
Also consider: the county and city asked the DNRE to completely remove
the dams. Kalish said the estimated cost is $13.2 million plus another
$2.9 million for the fish passage. It’s the same amount required to
restore the dams, said Norbert Tutlis, who has opposed dam removal
from the beginning, has compiled a dam history, and still religiously
attends all dam-related meetings.
“Todd will say he’s going to find the money to remove the dams through
private, state and federal grants, but it’s still going to be taxpayer
money,” he said.
Here’s another way to look at it. TCL&P wants to spend $30 million to
get 10 megawatts of energy. The three dams would cost $1.2 to $7
million for 2.225 megawatts. Even at the high end, the costs per
megawatt are comparable.
Recently Hydro Review Magazine, a trade publication, has run articles
on companies across the country taking advantage of incentives
available from the $787 billion economic stimulus package approved on
February 17, 2009.
“Requests to build small hydro projects, facilities with capacity of 5
megawatts or less, have been pouring into FERC, thanks to new tax
credits, grants, and initiatives to reduce greenhouse gas emissions,
wrote Russell Ray in an April 30, 2010, article.
But there was little discussion of these incentives when the county
and city met on April 9, 2009 to vote, and no mention of them in the
March 4, 2009 summary report by ECT, the hired consultant.
“ECT allowed for the fact there might be money available, but neither
they nor the implementation team or subcommittees ever explored this,”
Tutlis said, adding there are 11 foundations, three government
agencies and other groups that are entertaining applications for
grants, low cost loans, and expert advice.

EXPERT ANALYSIS:
Before taking a vote on the dams at the April meeting, the city and
county gave the consultant’s financial analysis to four different
utilities and asked them to weigh in as part of their “civic duty.”
Interestingly, they raised significant questions, which were included
in the April 9 meeting packet. Here they are:

• Tony Anderson of Cherryland Electric, who managed a small dam for
five years in Wisconsin, said the assumption of the electrical rate
the utility could charge was understated and flawed. Additionally, the
cost to generate electricity was more than double the Wisconsin dam.
Cherryland, he explained, didn’t buy the dam because it has to
purchase power from Wolverine. The licensing estimate, he believed,
was high, more than double what he spent in Wisconsin. He criticized
the wide range used to estimate the upgrade of the spillway—between $1
and $4 million. He also criticized the way calculations were presented
using the present value of expenses and revenues:   “I don’t think
your consultant did much to make the numbers understandable to you. ..
I get nervous when I pay money to a consultant that doesn’t keep
things simple and am glad the ultimate decision is in your hands …”

• Stockhausen, who runs the Elk Rapids dam, wrote that the consultant
should have assumed a much higher utility rate, thanks to pending
legislation that would guarantee higher rates for renewable energy. He
also criticized the consultant for using a forecasting technique that
put revenues and expenses at “present value”—essentially putting a 7%
annual interest rate on future money to determine its worth today. A
couple of points lower would mean a profitable enterprise, and there’s
no way to accurately determine the discount rate over that long a
period of time.
Stockhausen also stated that the dams are structurally sound. Removing
them was “doubly foolish” considering the high demand and need for
renewable energy and the liability presented if they were removed. He
explained to Express that removing dams could, in times of heavy rains
and snow melt in the Spring, also removes any possible flood control
that currently exists.

• Ed Rice of Traverse City Light and Power called the economic
analysis non-biased and reasonable, although it did not include costs
for changing FERC requirements or equipment failures. His estimated
loss of operating the dams was even greater than that estimated by
Veritas, which was $1.3 million over 30 years.

• Jim Bernier of Consumers Energy thought the licensing fee of
$600,000 to $750,000 was overstated, in part, because it might be
possible to get all three dams licensed under a single application as
FERC has done in the past with other dams.  (As a note, TCL&P were not
required to renew the FERC license for two of the three dams … ever.
The lifetime exemption was lost when it gave up operation without
public input.) The consultant failed to consider the “carrying cost”
of waiting for the license, which might take five years. He suggested
that the city and county pursue federal tax credits and subsidies for
renewable energy. These include Clean Renewable Energy Bonds, which
offer abnormally low financing costs. Bernier also thought the
electrical rate that could be charged should have been compared to
other renewable projects such as wind (TCL&P, for example, plans to
spend 10.5 cents per kilowatt on wind). Bernier questioned the energy
that would be produced by the dams. The consultant used an annual
figure of 8,976 megawatt-hours, yet a 1992 report by FERC stated an
average annual generation of 13,287 megawatt-hours. The difference at
7 cents per kilowatt-hour is $281,680. (In more recent history, the
average was 10,000 megawatt.

• Bernier also pointed out that the multi-million dollar fish
passage—by far, the highest price item in the analysis—is “highly
speculative at this juncture.  … I am not aware of any FERC licensing
cases in Michigan where fish passage has been required, either through
the FWS (Fish and Wildlife Service) prescription process or by the
FERC independently, where it wasn’t agreed to in advance by the
license applicant. However, I have not researched the issue and this
should be taken as a definitive overview of the subject.”

Only County Commissioner Beth Friend asked questions of Veritas. The
city and county commissioners voted 15 minutes after the consultant
arrived with little discussion. The dams would go.

Northern Express asked Don Tilton, the ERC consultant, about the
questions raised, but he did not respond by press time.


Dam Builder Denied
Charles Peterson seeks a chance to operate dams

By Anne Stanton

Entrepreneur Charles Peterson, who bought the dam equipment from Grand
Traverse County for $60,000, is confident that he could run the dams,
but his credentials have often been questioned. Ed Rice, director of
TCL&P, says that Peterson is a salvager, who has no experience running
a hydro dam, and that safety to the town was key. (The previous TCL&P
management supported Peterson).
Peterson, who buys and sells heavy and high-tech machinery, worked
with TCL&P previously, dismantling the coal-fired power plant on Grand
Traverse Bay and selling it to a city in Honduras. He holds a degree
in industrial and mechanical engineering from the Illinois Institute
of technology.
“I’ve been involved in machine retrofits, conversions, plant redesign,
plant redevelopment—there’s not an issue here of my credibility to
operate,” he said.
Peterson frustrated commissioners by refusing to publicly present a
detailed proposal, saying his information could be used by competitors
(if the hydro operation had been approved, then the county and city
were legally bound to open a bidding process for the management
contract). Peterson told the Express he would be willing to share
operational details in a closed session.
Bill Stockhausen, who runs the dam in Elk Rapids, said he believes the
dam on the Boardman is financially viable, and he’d be willing to take
it over in five years once his other work slows down — if Peterson
lost interest. Coincidentally, that’s the same time period it would
take to obtain a FERC license.

SEEKING CONCENSUS
The biggest problem any operator would face—the issue that’s turned
off potential players—is not the economic viability, but the fact that
there’s so much contention, Stockhausen said.
“It makes a difference when everyone is onboard,” said Stockhausen,
who said he and Antrim County, the Elk Rapids license holder, have
been fortunate to have the entire Elk Rapids and surrounding
communities behind them.
“They think it’s the right thing to do and they’ve helped us get
things done. The most important thing that we as a country have to
deal with right now is water and energy. From water and energy flow
prosperity, jobs, being able to take care of people so they’re not
homeless or hungry. Energy and water are interconnected,” he said.
Stockhausen said the dams are probably financially viable. If the
community united behind a common vision for the hydro, it could be
opened up to other interested parties, including Consumers Energy.
Is it too late for Grand Traverse County’s three hydro dams? County
Commissioner Beth Friend said it would require the county and city
reversing their decisions — a citizen or county-driven referendum
isn’t a legal option. And for either entity to reconsider the
decision, someone would have to put together a credible, detailed
analysis. Meanwhile, the implementation committee has already found $1
million to begin the environmental permit process for dam removal.
“There is some point along this process, we go beyond the point of no
return. With it being decided a year ago, we’re getting close,” Friend
said.
Kalish said that he has this advice for anyone questioning the dam
removal: “Look at the data, look at the studies. We involved 1,000
people, and hundreds dedicated their own time, and they were extremely
devoted. They were very attentive at being impartial.”
Tutlis said it comes down to this: “Do we want to save the dams or not?”

NEXT WEEK: An environmental dilemma: Do we want to open Boardman River
to PCB-carrying fish?