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Federal regulators didn’t review the finances of Boyce Hydro Power before it acquired the now-collapsed Edenville Dam because the structure was purchased out of a foreclosure, a top agency official told a U.S. House panel.

The regulators also never levied fines against the dam owner — despite its being out of compliance with regulations and orders for a decade — because the company indicated it did not have the money needed for the fixes the Federal Energy Regulatory Commission was requiring. 

"Given this, staff did not believe that assessing penalties would be effective in bringing Boyce Hydro into compliance," FERC Chairman Neil Chatterjee wrote in a letter this month to U.S. Rep. Debbie Dingell, D-Dearborn.

The Edenville and Sanford dams on the Tittabawassee River breached May 19 after heavy rains and winds, emptying Wixom Lake and flooding parts of the Midland area. More than 10,000 people were evacuated, and the flooding caused an estimated $245 million in damage in five counties. 

Dingell serves on the U.S. House Committee on Energy & Commerce, which in a letter this month pressed the commission on why it had not come down harder on the Edenville Dam owner or its predecessors if FERC was aware of deficiencies in spillway capacity at the facility since at least 1999.

Chatterjee said commission staff had made "every effort" to bring the Edenville project into compliance, and that Boyce Hydro "consistently" said it was working on plans to address the issue, including proposing 10 plans and schedules to build the auxiliary spillways.

But Boyce Hydro "repeatedly" missed its deadlines, leading the commission to ultimately issue an order to cease power generation in 2017 and revoking its hydroelectric license the following year, Chatterjee noted. State regulators then took on oversight responsibility for the dam.

Boyce Hydro had claimed that it lacked the financing for the spillway improvements. The U.S. House committee asked FERC whether it had assessed the company's financial capacity to make the repairs before approving the transfer of the dam's license. 

Chatterjee responded that there's an "exception" to the Federal Power Act requirement for a financial check for cases in which the project is acquired through a foreclosure sale, which is how Boyce Hydro (then known as Michigan Synex LLC) obtained the facility from Wolverine Power Corp. in June 2004. 

"Nothing in the record at the time of the transfer cast doubt on Boyce Hydro's ability to fulfill its regulatory and financial obligations," Chatterjee wrote.

"It was not until four years after the transfer that Boyce Hydro indicated that it did not have the finances to complete plans it had put forth for addressing spillway capacity." 

Michael L. Pitt, a Royal Oak attorney who represents flooding victims in a lawsuit, was surprised that FERC hadn't vetted Boyce Hydro before the license transfer, saying regulations "clearly" require the license transferee to be evaluated on the same basis as the original license holder.

He urged the commission to identify the legal authority for Chatterjee's position. 

"The regulations require FERC to deny a license to a proposed operator who is not competent or financially unfit for the task at hand," Pitt said.

"Synex/Boyce was neither competent nor financially fit to maintain 90-year-old dams or to operate them competently." 

A lawyer for Boyce Hydro told The Detroit News this week that the company's inability to fulfill FERC's mandate was due to cost, saying each of the two spillways that regulators had required since before Boyce acquired the dam cost "several" million dollars. 

"FERC had no solution as to how Boyce could obtain financing to construct those auxiliary spillways since the regulatory system did not at all provide for the funding of private owner-operators of hydroelectric dams," attorney Lawrence Kogan said. 

"You had to be either a public corporation with deep pockets that had access to capital markets through its issuance of stocks or bonds, or you had to be a governmental or quasi-governmental entity or public-private partnership to be eligible for both federal and state financing and grant money."

Kogan also said FERC was wrongly "obsessed" for 10 years or more with the risk that the Edenville Dam could be overtopped in a serious flood due to its spillway capacity. 

Instead, what happened last month at Edenville was a breach of an embankment wall — whose stability FERC had approved in its last inspection report, Kogan said. 

"FERC looked at the wrong mark when it came to dam safety," he said. "It was a totally different issue than what FERC had harassed Boyce about."

mburke@detroitnews.com

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