Another Power Struggle for Klamath

These are bumper crop times in the battle-weary Klamath Basin. Potatoes are fetching top prices; silos are flush with a bonanza of wheat. A modicum of calm has returned after 2001 saw the basin riven by a fierce fight over water and endangered species.

Now a new threat looms for the 212,000-acre agricultural patchwork on the California-Oregon border: the price of electricity.

Klamath farmers say they expect in the next few years to lose an energy deal that has given them one of the lowest rates in the nation. It has helped keep Klamath agriculture alive in tough times by providing cheap power to pump water and pressurize irrigation sprinklers for fields lush with peppermint and alfalfa, potatoes and onions.

If the power deal runs out as expected in 2006, farmers say, electricity costs could surge by 10 or 15 times. They worry that the higher rates will send at least some of the basin’s 1,200 family farms -- already weakened by the disastrous 2001 growing season -- cartwheeling toward bankruptcy.

Last year saw “chaos in this basin,” said Bill Heiney, a third-generation farmer near Tulelake, Calif. But big electricity hikes could wipe out 80% of the basin’s profit margin, he said, adding, “It could cause a whole new level of pain.”

While farmers fret, environmentalists see the coming electricity crisis as an opportunity.

They say it might be wiser to buy out the weakest operators right now, before the electricity crisis hits. Downsizing agriculture would not only save farmers from bankruptcy, but also accomplish something environmental activists have been advocating for years: a drop in agriculture’s water needs, freeing more for Upper Klamath Lake and the Klamath River, home to endangered sucker fish and salmon.

“You know some of these farmers are going to get mowed down, so give them a golden parachute,” said Jim McCarthy of the Oregon Natural Resources Council. “It just seems crazy not to let them get out with their shirts on their backs.”

McCarthy argues that the demise of the current power deal also would be good for ratepayers of PacifiCorp, the Portland, Ore.-based power provider that serves Klamath.

In a 17-page report for the Oregon environmental group, McCarthy contends that PacifiCorp’s customer base has been subsidizing the Klamath farmers -- along with the U.S. Bureau of Reclamation, which runs the massive system of canals, gates and pumps that deliver water to the basin -- at a rate of nearly $10 million annually for the last five years.

Klamath’s electricity prices are roughly half a cent per kilowatt-hour, McCarthy said; other customers in Oregon and California pay about five cents.

Aside from low-cost power, the farmers and federal irrigation project that undergirds them are guaranteed free construction of utility lines to reach fields and pumps and canals, McCarthy said. In addition, they avoid fees that are normally placed on agricultural pumps.

Prices Stable for 85 Years

Klamath Basin farmers, McCarthy said, have not seen an electricity rate hike in 85 years.

The Bureau of Reclamation likewise has a lot at stake, McCarthy said. To keep Tulelake from flooding, one big pumping station uses electric motors totaling 3,540 horsepower to push water through a one-mile tunnel in a volcanic ridge west of town. The 11 million kilowatt-hours of electricity used each year costs $40,000. If rates rise much, McCarthy predicts, the cost could soar to more than $600,000 a year.

Klamath’s power contract dates to 1917, when PacifiCorp’s predecessor -- the California and Oregon Power Co. -- crafted a deal with the federal government to build a dam at the outlet of Upper Klamath Lake, headwaters to the Klamath River. The power company essentially got the run of the river for hydropower; the government in exchange got cheap electricity for its budding Klamath irrigation project.

PacifiCorp and the federal government negotiated the current 50-year deal in 1956. Over the next few years, the power company built several hydroelectric dams to fully tap the river’s muscle.

Problems began for PacifiCorp when two species of sucker fish were declared endangered in Upper Klamath Lake in 1992. Soon after, the Klamath River coho salmon hit the endangered list. Suddenly, river flows -- traditionally increased during hot summer days to generate more kilowatts -- were being dictated not by power needs, but by the needs of the fish.

The ability to generate peak power has today “largely gone away,” said Dave Kvamme, a PacifiCorp spokesman. “There’s always a tension about providing water for one species or another.”

He said company officials don’t envision sitting down at the bargaining table soon. When they do, Kvamme said, “We’re going to be looking at what value there is in this for the rest of our customers.”

Jeff McCracken, a Bureau of Reclamation spokesman, declined to speculate on where it could all be headed, saying it would be akin to “predicting which car you’re going to buy in 2006.” He said the energy contract might be “looped” into the federal government’s negotiations with PacifiCorp over relicensing of its dams on the Klamath.

Kvamme said the dam relicensing is a separate issue. But farmers argue that the power company is fully aware of the support the growers and Bureau of Reclamation can provide in the relicensing process.

“There’s a little back scratching that has to go on between both sides,” said Monte Seus, a Klamath farmer.

Rates Certain to Rise

Even if a deal with PacifiCorp is crafted, Seus and others say it’s a virtual certainty that Klamath’s rates will rise. In the aftermath of last year’s energy crisis across the Western U.S., public utility commissions in California and Oregon are unlikely to approve a preferential deal. “At this point, PacifiCorp is selling to us cheap,” Seus said. “They’re businesspeople, and if they can send that power to Los Angeles and make more, that’s what they’ll do.”

Facing that reality, the Klamath Water Users Assn. and various irrigation districts in the basin have been mulling solutions.

Possible new energy sources being reviewed include wind generation (the basin is often hit by stiff breezes) and biomass energy. Fuel could come from excess straw and the juniper trees that are proliferating across eastern Oregon.

“Over the next two years, we’re going to be making a very concerted effort to prepare for 2006,” said Dan Keppen, executive director of the Klamath Water Users Assn. “If some of our foes think an electrical rate increase is going to be the end of us, they’re sadly mistaken.”

Farm Towns Threatened

Leaders among the Klamath farmers balk at the idea of retiring farmland from active agricultural use. They contend that a shrinking agricultural pool would be the death of farm towns like Tulelake and Merrill, Ore. Without a critical mass of farmland in active production, agricultural support industries -- from tractor dealers to grain silos -- couldn’t afford to stay open.

“We’ve seen that sort of thing in other areas, picking off farms one or two or three at a time,” said Bob Gasser, a Merrill fertilizer dealer. “It guts the community from the inside out.”

Some farmers already are beginning to prepare for what they consider the inevitable.

Seus sees no other way. If electricity rates climb 15 times what they are now, his current costs of about $25,000 a year would jump to $400,000 annually, he said.

“There isn’t $400,000 extra profit in my farm to do that,” he said.

He already has begun leveling his fields to pool-table flatness to improve the spread of water. Seus, one of the nation’s largest producers of horseradish, also has started installing low-pressure sprinkler nozzles that use less energy. He hopes to cut his power use in half.

The Bush administration, always eager to help out a bedrock rural constituency, has for the last two years made the plight of the Klamath farmers a top priority.

Environmentalists say there remains the possibility that the administration and the Republican Congress could push financing relief for the coming power crisis, though the federal budget’s brimming red ink might nix that approach.

Instead of “propping up a broken system,” McCarthy said, the Bush administration and Congress should craft a deal to help the weakest farmers before they go belly-up. The resulting surge of water for the fish would be a bonus. “We’re a wealthy country,” he said. “We can correct our mistakes in a humane and equitable way.”