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NW Fishletter #257, February 9, 2009

[8] Tacoma, Skokomish And Agencies Settle Cushman Disputes

Tacoma Power, the Skokomish Tribal Nation and a number of resource agencies signed a set of agreements Jan. 12 resolving the tribe's $5.8 billion damage and trespass claims over the city's 131-MW Cushman Hydroelectric Project and establishing new, 40-year terms for the Cushman license, which has been in litigation since it was issued in July 1998.

Compensation to the tribe will include: 1) two, one-time cash payments--$6 million for damages and another $5 million for damages and the mitigation of impacts of flooding on the tribe and its members; 2) land transfers valued at $23 million including Camp Cushman on Lake Cushman, the 500-acre Nalley Ranch and Saltwater Park on Hood Canal; and 3) a 7.5 percent annual share of the net value of the electric production from Cushman's No. 2 powerhouse. The share is capped at not less than $300,000 nor more than $500,000 over the first 20 years; and $625,000 and $900,000, respectively, for the following 20 years, with the maximum subject to an inflation escalator.

Although it is subject to some variation, Tacoma estimates the overall present cost to implement the package over 40 years will be $40 million, although that does not include the value of lost generation.

About 100 people attended a signing ceremony in Tacoma Jan. 12, where a half dozen speakers talked of a "new start" for the two adversaries.

Rep. Norm Dicks called the settlement a "victory" for both the city and the tribe, and noted that neither former Governor Booth Gardner nor then-state Ecology director Christine Gregoire were able to find the path to a settlement. But ultimately, "the numbers were so staggering, there had to be a compromise."

Dicks stressed another part of the package in connection with the Army Corps' ongoing "general investigation" to determine what measures should be taken to restore the ecosystem and prevent flood damage in the wider Skokomish watershed. Under the agreement, Tacoma is committed to contribute up to $1.2 million towards the study and to actively lobby Congress for additional funding. If within 15 years Congress does not authorize funds for measures identified in the study, Tacoma has agreed to contribute at a rate of $600,000 every five years.

NMFS regional administrator Bob Lohn also spoke. He praised the settlement, saying "there is great soundness in what we've worked out."

Besides the tribe, Tacoma and NMFS, the parties include US Fish & Wildlife, US Forest Service and the Washington Departments of Ecology and Fish and Wildlife. They've been negotiating since January 2007 pursuant to the 9th Circuit's mediation program.

Negotiations ensued after the parties reached a kind of legal stalemate. The tribe lost several appeals of its $5.6 billion damage claim alleging harm done by the project, but, at the behest of the 9th Circuit, was eligible to pursue the action in US Court of Federal Claims. Meantime, the 9th Circuit, in a case brought by the US against Tacoma on behalf of the tribe, affirmed a District Court ruling that Tacoma's condemnation of five parcels was invalid, whereupon the tribe asserted damages.

Challenges to the Cushman license proceeded separately; the DC Circuit remanded to FERC after rejecting Tacoma's claims the new license terms would render the project uneconomic. FERC has already modified the new Cushman license three times since it was issued. It still must approve the new settlement and modify the license accordingly.

William Gaines, Tacoma Public Utilities director, said there were two key elements that enabled the settlement: "dissipation" of the Tribe's legal claims and emergence of the notion that the tribe "wanted the lands back." He said the revenue stream for the tribe is similar to terms found in recent settlements involving Grant and Douglas PUDs, and will help to align the tribe's interest with the city's.

Tacoma frequently stated that under the terms approved by FERC, Cushman would not be economically viable. But Gaines said under the new proposed terms, the project would be viable. He did not have a figure for the cost of power, but said it would be competitive with Tacoma's other resources. Tacoma generation manager Pat McCarty said the key difference in the settlement as compared to the license with the terms required by NMFS and the Forest Service is "the certainty of the flushing flow component." The license included a term calling for an increased instream flow level of 240 cfs or inflow, which was manageable, but the provision also allowed the tribe and agencies to vary other flows. "That was the difficult thing." The settlement adopts a complex, three-part flow plan that includes a set of provisions for "base flows," channel formation flows and mainstem flush flows that are biologically-based but within established constraints, McCarty said. The settlement adopts terms that will replace the 240 cfs minimum flow requirement.

Joseph Pavel, Skokomish Tribal Nation Council Chair, said he did not feel the settlement was equal to the tribe's damages, but said it was time "to get a settlement on the ground" instead of pursuing the controversy in the courts. He said return of the lands, as well as the new flow regime, were substantial factors in his decision to sign, while the promise of revenue sharing was an important trade-off, along with the city's commitment to help lobby Congress to fund the watershed improvements. He said the tribe's biggest sacrifice was forgiving past damages. "We can't pursue claims, notwithstanding new information."

Delores Gleason, 71, of the Skokomish Tribe's Allen Family, said the settlement will help clean the river and Hood Canal "and enhance things to make it joyful and pure again."

A significant development that got the parties to the negotiating table was when the DC Circuit Court of Appeals ruled Tacoma must meet its legal responsibilities to both the environment and the tribe as expressed in the federal agencies' mandatory licensing terms, regardless of the economic impact on the project, said tribal attorney Mason Morisset.

Tacoma's obligation to implement the mandatory conditions set out by the federal agencies, along with the damage ruling, is "what got us before the mediator." He agreed the tribe's biggest concession was "not receiving major compensation for 80 years" of damages, instead settling for a "modest" sum. But he said Tacoma also made major concessions, especially with respect to increased flows and putting millions of dollars into fish passage and enhancement. -Ben Tansey

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