What is NorthWestern Energy’s liability for river and wildfire damages?

This story originally ran on montanafreepress.org.

By Amanda Eggert MONTANA FREE PRESS

Nov. 30 just might go down as one of NorthWestern Energy’s worst days since it took over Montana Power Co.’s electricity generation and transmission assets in 2002. The day marked the start of the West Wind Fire, which burned 25 homes and six commercial buildings in Denton, a small agricultural community southeast of Great Falls, and the onset of a dam malfunction that rapidly dewatered one of the state’s most popular fisheries for nearly 48 hours.

NorthWestern, the South-Dakota based utility company that serves two-thirds of Montana’s energy consumers, has said one of its power lines may have started the West Wind Fire, and it operates Hebgen Dam on the Madison River, where a gate malfunction drove streamflows well below record lows, leading to concerns about short- and long-term ecological and economic repercussions.

Though it will be months and possibly years before the full impact of those events is understood, now that the West Wind Fire has been contained and near-seasonal flows have been restored to the Madison, attention is turning to next steps.

NEXT STEPS FOR REGULATORY AGENCIES

Whether NorthWestern will be subject to fines or other penalties levied by state and federal agencies for the failure of Hebgen Dam is an open question, but the broad outlines of government response should start coming into focus in the coming weeks.

One of the key agencies is the Federal Energy Regulatory Commission, which oversees the administration of more than 2,500 hydroelectric dams nationwide, including the nine dams NorthWestern operates under its license for the Missouri-Madison Hydro Project.

That license stipulates that Hebgen Dam must be operated to maintain flows of at least 150 cubic feet per second as measured at the U.S. Geological Survey gauge directly below the dam, and 600 cfs at the next downstream gauge, which is located at Kirby Ranch. During the dewatering, NorthWestern remained in compliance with the former stipulation, but not the latter, according to USGS streamflow gauge readings and the terms of Northwestern’s license. The company was also out of compliance with a license provision that requires it to limit changes in outflow from the dam to 10 percent per day.

Jeremy Clotfelter, NorthWestern’s director of hydro operations, said in an email to Montana Free Press the week of Dec. 13 that the company will be filing reports focused on dam safety and license compliance, and that it will continue working with Montana Fish, Wildlife and Parks to develop a plan to assess the impact on the fishery.

According to FERC’s Hydropower Primer, companies that violate the terms of their license can be subject to fines of up to $21,563 per violation per day. If warranted, the fines would be assessed by FERC staff working in the commission’s Office of Energy Projects and Office of Enforcement. The company would have an opportunity to respond to any proposed fines. 

FERC could also require an environmental inspection to review whether the physical and operational features of Hebgen Dam have kept NorthWestern Energy in compliance with its license terms and conditions related to fish and wildlife, recreation, cultural resources and public safety.

NorthWestern filed an initial report with FERC Dec. 9 outlining the general nature of the dam malfunction and the timeline between the outflow gate’s failure and restoration of streamflow to the Madison. FERC spokesperson Celeste Miller said in an email that once FERC has reviewed the report, it will determine next steps.

The state’s role in investigating the dam malfunction, assessing ecological impacts and potentially developing mitigation measures is still very much in the early stages. 

“Our top priority is mitigating harm to the Madison River, and we are supporting the response on the ground,” Gov. Greg Gianforte said in a Dec. 1 tweet, referencing efforts to relocate stranded fish to deeper water to bolster their likelihood of survival. “Once flows are restored, a full investigation will take place and appropriate action taken.”

The Montana Department of Environmental Quality, the state agency charged with protecting water quality, isn’t currently planning to bring fines or penalties in connection with the malfunction, according to spokesperson Moira Davin.

Since DEQ deals more with water quality than water quantity, there isn’t a natural fit for enforcement action against NorthWestern Energy, she said.

“We currently don’t see a violation of statute or rules that DEQ administers, but that may change if different information comes to light,” Davin said.

FWP spokesperson Greg Lemon said his agency is still assessing possible actions regarding the fishery. Lemon said FWP will have an opportunity to comment on the incident report NorthWestern Energy is required to file with FERC, and that the department is in the early stages of considering potential mitigation measures.

Lemon said it could be two or three years before the agency is able to fully assess how fish populations may have been affected by the river’s rapid dewatering, which killed an unknown number of sculpin, trout and whitefish, and threatened the viability of at least some of the river’s brown trout eggs. 

Lemon also said FWP has generally enjoyed a good working relationship with the utility company.

“NorthWestern Energy is a pretty important partner of ours. We work with them on a lot of different things — we work with them a lot on the Madison,” he said. “That is something that we expect to continue.”

Environmental nonprofit Upper Missouri Waterkeeper has expressed more skepticism about the incident and is calling on the governor and state agencies to lead a transparent process to make the river and its downstream communities “whole again.” Executive Director Guy Alsentzer said he wants NorthWestern’s response to the malfunction put under a “magnifying lens,” and expressed particular concern about how long it took the company to detect and correct the issue. The malfunction occurred at 2 a.m. Nov. 30, but wasn’t identified by NorthWestern personnel until “mid-to-late morning” the next day, according to the company’s statement at a Dec. 1 press conference.

“This is the bird-dog opportunity,” Alsentzer told MTFP. “Will the governor’s office make good on their statement to ensure that there’s accountability?” 

CIVIL LIABILITY 

Government regulation is just part of the picture. Individuals, businesses and even state agencies may have grounds to bring civil lawsuits against NorthWestern as more information comes to light.

Michelle Bryan, a professor of natural resource law at the University of Montana’s Alexander Blewett III School of Law, said state law is “murky” about whether statutory protections shield hydroelectric dam operators like NorthWestern from civil lawsuits. The state’s Dam Safety Act contains a liability provision for the actions of an owner “incident to its ownership or operation” of a dam, including “damages resulting from leakage or overflow of water or floods caused by the failure of the dam or reservoir.” On the other hand, the same Dam Safety Act exempts FERC-licensed dams from the liability provision. 

Bryan said the state act leaves unanswered whether, in the absence of statutory liability, injured parties may still have common law claims against the company for natural resource damages or lost income. (Common law centers on legal concepts such as negligence, whereas statutory law deals with laws passed by lawmakers and codified in statute.)

Bryan also pointed out that the Montana Constitution protects Montanans’ right to a clean and healthful environment and requires restoration of environmental damage.

“NorthWestern Energy may have an argument that it has statutory protections from liability, but those statutes could also be held ambiguous and allow for other claims,” she wrote by email. “It is likely a question that would end up before a court. A court could interpret the law as allowing [a legal claim based on] at least those rights protected by our state constitution, since the constitution preempts any statutes that conflict with it.”

Bozeman attorney and Western Justice Law founder Jory Ruggiero said he’s already spoken with a half-dozen outfitters about a potential negligence claim against NorthWestern. He said the outfitters are concerned about economic impacts stemming from damage to the fishery, which is a cornerstone of Madison County’s economy and generates tens of millions of dollars annually in outfitter revenue from nonresidents alone. 

Ruggiero said a common law reading of the situation raises questions including whether NorthWestern had a duty and if actions taken or not taken by the company caused harm. Questions addressing NorthWestern’s responsibility for the event could include whether it had adequate detection systems and sufficiently robust redundancies in place.

Ruggiero said another potential scenario is that the state could bring a natural resource damage claim against NorthWestern. Montana has a recent history with that type of lawsuit, having earlier this year agreed to a $2 million settlement with Bridger Pipeline for damages stemming from a 2015 pipeline rupture that spilled more than 700 barrels of crude oil into the Yellowstone River near Glendive. Among other things, the settlement provided for a restoration plan to aid the recovery of the aquatic ecosystem and improve recreational sites along the river corridor.

Chapman University law professor Denis Binder, who has decades of experience with dam safety law, said it’s highly unusual to see a case like this one. Usually, the concern is too much water flow causing issues for downstream communities, rather than too little. He also said NorthWestern Energy’s failure to detect the loss of flow goes to the heart of any potential liability as he understands it. 

“The failure to notice [the loss of flow] should create the presumption of negligence in some respect,” he said. “That outflow [change] is pretty dramatic, and it didn’t set off any alarm bells? … If nobody’s there looking at the monitors, then there has to be some system that sends off a warning.”

In its initial report to FERC, NorthWestern provided more detail about the part of the dam that failed: a coupling on the gate stem that allowed the outflow gate to fall into a more closed position. 

“The gate was originally around 18 inches open and fell to only 6 inches open, which resulted in a decrease in flows,” NorthWestern’s letter says. The letter also outlines how the company’s monitoring instrumentation was set up and why it didn’t register the gate’s shifted position: because “the location of the failure was below the instrumentation and essentially disconnected the gate from monitoring equipment.”

The company’s letter pledged to produce “a root cause analysis” and “identify corrective actions to prevent recurrence of the failure mode and to ensure improved notification of a rapid drop in river flows.” It also committed to evaluating impacts on the fishery.

NEXT CHAPTER FOR THE MADISON

Fishing Outfitters Association of Montana Executive Director Mike Bias said he isn’t aware of any outfitters exploring legal action against the company, but he said that could change.

“I’m not looking for any kind of dogpile [on NorthWestern], but, I don’t know, it depends on what comes out,” Bias said. “If we find out there was some sort of long-term resource damage, then we could look at that accordingly.”

Bias added that it could be tough to tease out ecosystem impacts that can be directly attributed to the dam malfunction as distinct from other factors, like the drought that suppressed streamflows on the Madison through most of the year and a recent decline in brown trout populations in southwest Montana that’s still being studied.

Bias, who holds a Ph.D. in wildland resource science, added that a lack of recent surveys of redds and fry — nests and young fish — in the upper Madison will make it challenging to understand how the dewatering affected brown trout population dynamics in the near term. Bias said there are some recently completed studies, like a macroinvertebrate survey funded by NorthWestern following its 2017 repair of Hebgen Dam, that could be used to help establish a pre-malfunction baseline for the river. 

“That’s probably the best indicator of river health out there, because what do fish eat? Fish eat bugs — even little tiny fish eat tiny bugs. Back it down a couple trophic levels and you can look at what predators like trout eat.”

Bob Gresswell, a professor emeritus at Montana State University’s Department of Ecology, said he has reason to hope the river will rebound.

“Trout have evolved not to be successful big-time all of the time, and there are good years and bad years. This will just go down as a really, really bad one,” he told MTFP. “If there’s not another issue, my guess is that the system will, within a couple of years, recover.”

WHO PAYS FOR LOSSES FROM THE WEST WIND FIRE?

Ruggiero, with Western Justice Law, said similar legal questions about duty, causation and harm could apply to Denton residents who suffered losses from the West Wind Fire, one of the state’s most destructive wildfires this season.

“While the cause of the fire is under investigation, it appears to have originated from a high wind event involving a NorthWestern Energy power line southwest of Denton,” according to a Dec. 2 press release from the company.

Ruggiero said the question of harm is pretty clear-cut in the West Wind case: “People look at pictures of Denton and there’s no question it hurt people — their houses are burned down.” He said the more complicated analysis centers on how NorthWestern’s actions may have contributed to the fire, or if it’s more accurately categorized as a freak event no one could have anticipated.

Ruggiero said he expects fire investigators will be called in to analyze the fire’s origin, and that NorthWestern Energy will deploy insurance adjusters to talk to affected property owners. 

“Those people are trained not only to make people feel like they’re taken care of, even if they’re not, but also [to get] as much information out of them that could be used to argue against liability [or] their total damages,” he said.

Energy attorney Monica Tranel has submitted a letter to Montana Consumer Counsel, the Public Service Commission, Attorney General Austin Knudsen, the state Department of Natural Resources and Conservation and NorthWestern Energy requesting that the company preserve evidence related to both the West Wind Fire and the Hebgen Dam malfunction.

The letter seeks the preservation of transmission infrastructure that may have been involved in the fire and asks that NorthWestern produce maintenance and installation records for poles and other equipment that might be implicated.

“We also request that you retain an independent and competent investigator to ensure that there is a complete and accurate investigation of these incidences, appropriately trained to investigate the specific issues that are involved, and to provide a report that will protect the interests of the ratepayers of Montana,” the letter says.

In a conversation with MTFP, Tranel said she’s concerned about who will absorb the costs of the two events, including costs like potential increases in the company’s insurance premiums.

Montana Consumer Counsel appears to share those concerns. Consumer Counsel attorney Jason Brown issued a response on Dec. 10 acknowledging receipt of Tranel’s letter and saying, “Our office is closely monitoring these events and how they may impact Montana ratepayers. At the appropriate time, our office will seek to participate in relevant proceedings as an advocate for ratepayers.”

Regardless of whether NorthWestern is sued for damages stemming from the fire, many Denton residents who lost their homes or suffered other property damage from the fire will be speaking with their insurance companies, if they haven’t already. 

Sharon Richetti, bureau chief of the policyholder division of the Montana Securities and Insurance Office, said neither track precludes the other — it’s possible that affected residents could bring legal action against NorthWestern Energy and still receive reimbursement for property damages from their private insurance company.

“A dozen different scenarios” could play out in regards to how losses from the West Wind Fire are compensated, Richetti said, adding that much of that discussion will hinge on whether NorthWestern admits to a measure of fault for the fire.

Richetti said property owners with private insurance will probably find it more expedient to work directly with their insurance agents for now, and that could end up being a better deal for them. She said individual policyholders are more likely to get full replacement value for their homes, whereas any eventual compensation from NorthWestern would likely be based on actual cash value — a depreciated amount, essentially.

If a property owner files a claim with their insurance provider and NorthWestern later assumes partial or full fault for the fire, the respective insurance companies representing property owners and the company would hash it out in a process called subrogation. Policyholders generally aren’t involved in those negotiations.

Though details of the insurance claim process may be muddy right now, the Securities and Insurance Office does have some simple advice that applies to anyone who lost property in the West Wind Fire: Keep track of receipts for expenses incurred while you’re unhomed, get in contact with your insurance company if you haven’t already, and prepare an inventory of items damaged by the fire while it’s still fresh in your mind. Richetti also said the Securities and Insurance Office is available to field questions and advise Montanans who may run into snags with their insurance company.

For its part, NorthWestern Energy has set up and distributed a dedicated helpline for residents impacted by the Denton fire. In an emailed statement, NorthWestern spokesperson Jo Dee Black said the company is “committed to supporting residents displaced by the West Wind Fire and those who have suffered property losses.” Black also said the company is “working directly with local authorities and the citizens of Denton to provide support and assistance.”

While a wildfire of such destruction stemming from a power line is rare in Montana — Richetti said she doesn’t recall another incident quite like it in her 18 years with the commissioner’s office — other western states have more experience with destructive wildfires started by power lines.

In California, for example, power lines have been responsible for a disproportionate number of large, damaging blazes, including the Camp Fire, which killed 85 people and effectively leveled the town of Paradise three years ago. Last year, Pacific Gas and Electric settled a case brought by tens of thousands of wildfire victims for $13.5 billion after its power lines started wildfires in 2017 and 2018 that destroyed more than 25,000 homes and killed more than 100 people. That scale of loss has helped motivate PG&E to begin burying its powerlines, an estimated $20 billion undertaking. 

Anyone who wants to assist the Denton community immediately can help in a number of ways, including donating to a Denton Wildfire Relief Fund opened by Opportunity Bank of Montana and contributing to a GoFundMe page set up last week.

Billings native Amanda Eggert covers environmental issues for MTFP. Amanda is a graduate of the University of Montana School of Journalism who has written for Outside magazine and Outlaw Partners. At Outlaw Partners she led coverage for the biweekly newspaper Explore Big Sky. Contact Amanda at aeggert@montanafreepress.org.