Salish and Kootenai Tribes, Confederated Tribes of the Flathead Reservation -2011 Hydropower Project

Background

The Flathead Indian Reservation, homeland of the CSKT, was established by the Hellgate Treaty of 1855. The reservation comprises over 1.2 million acres or 2,050 square miles located in the Upper Columbia River Basin. The tribal headquarters are in Pablo, Montana.  CSKT was the first Indian tribal government to adopt a federally approved constitution pursuant to the Indian Reorganization Act of 1934. Since 1935, CSKT has been governed by an elected Tribal Council. Ten representatives from eight districts throughout the reservation comprise the Tribal Council.

The Kerr Project is a federally licensed hydropower project located on CSKT land within the boundaries of the Flathead Indian Reservation. Constructed at river-mile six of the Lower Flathead River near the outlet of Flathead Lake, it is a 200-foot-high by 381-foot-long concrete arch dam with three, 800-foot-long  penstocks; a powerhouse with three generating units rated at 187 megawatts total capacity; and an output  of more than 1.1 million megawatts per year on average.

The Rocky Mountain Power Company (RMPC) constructed the project infrastructure under permit by the Federal Energy Regulatory Commission (FERC). The construction took four years and was completed in 1934. In 1935 the FERC issued the RMPC License No. 5 for a 50-year period. Upon this license's expiration, the CSKT successfully negotiated, among several other things, co-licensee status for the second license period—1985 to 2035—with Montana Power Company (MPC), which subsumed the RMPC. The license calls for MPC to operate the facility until 2015 and allows for the tribes to acquire the interest of the current licensee starting September 5, 2015. MPC has since sold its interest in the Kerr Project to PPL Montana (PPLM). The tribes will acquire all of PPLM's interest in the Kerr Project in 2015 and will become the sole FERC-licensed owner/operator thereafter.

Under the terms of the license, CSKT has the unilateral and exclusive right to acquire the project assets in September 2015 by paying PPLM a project conveyance price equal to "original cost less depreciation."  The license also requires PPLM to train, over a five-year period (at its cost), up to 11 tribal employees to assume the operation and maintenance of the project in 2015.

Pursuant to the stipulations of the License, the tribes intend to acquire the Kerr Project and form a tribal corporation to operate it as a wholesale power generation asset by September 5, 2015. This will involve the implementation of multiple tasks to achieve objectives and goals simultaneously over the next 4.5 years. The primary elements of the tribes' overall strategy include strategic acquisition of the project, combined with building the corporation from a policy and staff perspective and supported by a sound financial plan. To this end, the tribes established the CSKT Department of Energy in May of 2010 and hired a director to refine and implement the acquisition plan and activities. The department assumed a contractual relationship with RW Beck, a business and engineering consulting firm, to conduct a feasibility assessment and is now engaged with RW Beck in continued detailed strategic planning and plan implementation.

Acquisition and successful management of the Kerr Project would be a major step forward for the tribes because it would ensure that the tribes:

• Own and operate a major wholesale power generator located on tribal land in the center of the Flathead Reservation;
• Gain full authority over the management of Flathead Lake and the Lower Flathead River for the first time in 80 years;
• Generate a number of highly skilled and specialized, high-paying tribal-member jobs;
• Develop a high level of tribal expertise in the areas of hydroelectric facility management, water  resource  management, and power marketing that will further advance the economic future and technical capabilities of the tribes and provide a resource for other  tribes;
• Have a stream  of income from the sale of electrical output  from the project for the next 20 years that will be used for tribal economic development and to promote tribal self-governance; and
• Have a platform for other energy development activities for the tribes.

In order for a smooth transition of operations from PPLM to the tribes, an organization needs to be fully staffed and capable of assuming operations by the conveyance date. To achieve this, the tribes have established and hired a director for the Tribal Department of Energy which is supported by the Tribal Legal Department and RW Beck. Additional CSKT staff needed to perform the essential functions will be added in 2011, 2012, 2013, and 2014. Key staff members needed in 2011 include a power marketing coordinator, a staff engineer, a business manager, and several dam operators. Additional outside expertise will also be acquired to support the full development of this staff, specifically in the areas of hydro-engineering and power marketing. In addition to providing technical support, these experts will assist in the training of tribal member staff to ensure a fully qualified organization at the time of conveyance.

Project Objectives

This project is aimed at supporting one key component of a major multi-step undertaking on the part of the CSKT: the acquisition of the Kerr Hydroelectric project and its subsequent operation as a wholesale power generation facility. This project will help the tribes kick-start the development of the organizational structure to acquire and operate the facility. It will enable the tribes to acquire critical expertise necessary for the acquisition by funding in part two key personnel for the first two years of the four-year organizational development process. These individuals will provide the tribes with expert knowledge in the highly specialized areas of resource balancing, power marketing, and hydro-engineering—essential prerequisites to the tribes' ability to build an organization for the operation of the Kerr Project and secure financial backing for the acquisition.

The project will help the tribes achieve their overall goals of:

• Acquiring the Kerr Project, pursuant to an efficient and economic conveyance process, and
• Establishing an efficient and effective tribal wholesale power generation corporation to manage the plant, balance the resources, and market the power from the Kerr Project.

This project, essential to the tribes' acquisition of the Kerr Hydroelectric facility, will help address poverty and unemployment among tribal members by generating a number of highly skilled and specialized, high-paying tribal member  jobs and providing a stream  of income from power sales that will be used for tribal economic development.

Specifically, the project will support the staff engineer and power marketing coordinator positions. They are the key to the tribes' successful acquisition and operation of the facility because they will enable to the tribes to gain the very specialized expertise required to operate a large wholesale power generation facility. Specific objectives include:

• Objective 1: Hire a power marketing coordinator to develop and coordinate the appropriate power marketing strategy for the sale of power generated by the operation of Kerr Dam.
• Objective 2: Hire a staff engineer.

Project Location

The Flathead Indian Reservation, comprising over 1.2 million acres, is home to the Confederated Salish and Kootenai Tribes. The tribes are a combination of the Salish, the Pend d'Oreille and the Kootenai. Of the 7,005 enrolled tribal members, about 4,500 live on or near the reservation. North of Interstate 90 between Missoula and Kalispell, the reservation is surrounded by the fertile valleys and towering mountain peaks of northwestern Montana.