Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 02:30 PM

The Honorable Jerry Krambeck


United States Senate
Committee on Energy and Natural Resources
Water and Power Subcommittee Hearing 
Thursday, March 30, 2006

S. 1577
To Facilitate the Transfer of Spearfish Hydroelectric Plant Number 1 to
the City of Spearfish, South Dakota, and for Other Purposes

Testimony of Jerry Krambeck
Mayor, City of Spearfish, South Dakota

Chairwoman Murkowski and Members of the Committee:

My name is Jerry Krambeck.  For the past six years, I have served as Mayor of the City of Spearfish, South Dakota, a municipality of approximately 9,000 people located in the heart of South Dakota’s Black Hills.  I am here today to testify in support of S. 1577, a bill to facilitate the transfer of Spearfish Hydroelectric Plant Number 1 to the City of Spearfish.    I would like to submit for the record, letters from the elected officials, public agencies and water user groups in South Dakota that support this legislation being championed by Senators Johnson and Thune.

When visiting our City, one cannot help but appreciate three fundamental values that capture both the essence of our community today and our rich history.  First is the scenic beauty of Spearfish Canyon.  Although Spearfish Canyon is associated with many great Western historical figures, including Teddy Roosevelt, John Muir, Calamity Jane and Lakota religious leader Black Elk.  Frank Lloyd Wright said it best during his 1935 visit of Spearfish Canyon when he declared that it is “the” most magnificent canyon in the West.  We are proud of this heritage and we take seriously our responsibility to preserve it for future generations to enjoy and appreciate.

The City is located at the base of Spearfish Canyon, and our City Park is located right at its mouth, immediately adjacent to the D.C. Booth National Historic Fish Hatchery, which dates back to 1898. Spearfish Creek, which originates in the Canyon and runs through our City Park serves as the lifeblood to the City’s second fundamental value—agriculture.  Farmers have been irrigating fields for nearly 150 years in Spearfish, with some water rights—perfected through the doctrine of prior appropriation—dating back to the mid-nineteenth century.  Finally, our community has a rich mining history.  For years, many citizens in our community were employed by, or worked in association with, the Homestake Mine in Lead, South Dakota.

It is because of these values that our City, in 2004, decided to purchase the small, 4,000 kilowatt Spearfish Hydroelectric Plant Number 1 from Homestake Mining Company.  At that time, Homestake was in the process of closing its gold mine in Lead and no longer needed the power generated at the facility for its operations.   The hydro facility had been in continuous operation since 1912, and had been meticulously maintained and preserved.  The City saw an opportunity to preserve this historical landmark – one of only a handful of antique hydroelectric facilities in the country.  This facility stands as a constant reminder of the resilience, ingenuity and perseverance that was required of those early settlers in the West. 

This hydro facility is important for more than its historical value.  In a very real way, this facility supports these deeply held values of our community.  For example, the hydro facility bypasses a significant “sinkhole” in Spearfish Creek, where surface waters are lost to the underlying aquifer.  By diverting water around this sinkhole, the facility provides additional water for recreation, irrigation, fire protection, and the D.C. Booth Fish Hatchery.  Under natural conditions, this additional water would be lost.  Since acquiring the hydro facility, the City has been able to develop an agreement with the Spearfish Canyon Owners Association that provides for additional waters to be left in Spearfish Creek for aesthetic and environmental benefit.

The reason I am here today is that the multiple benefits provided by this facility are in danger of being forever lost.  In a series of orders issued in 2001 and 2002, the Federal Energy Regulatory Commission ruled that this hydroelectric facility—which at the time had been operating for about 80 years—falls under its mandatory licensing jurisdiction under the Federal Power Act—a statute that was enacted about a decade after Homestake started generating electricity at the facility.  FERC justified its claim of jurisdiction over the project by finding that certain rights-of-way grants issued by federal government for the project in the early twentieth century—again, years before Congress’s enactment of the Federal Power Act—had expired.  FERC issued its rulings without ever even consulting with the United States Forest Service.  And in fact, the Forest Service is on record that the rights-of-way grants continue to be valid, even after the hydro facility was conveyed from Homestake to the City.  Nonetheless, FERC—despite the urging of the entire South Dakota Congressional delegation—has refused to back away from its jurisdictional rulings.

The City does not oppose the goals and policies of the Federal Power Act of making sure that our Nation’s waterways are best managed for multiple public interests such as power development, energy conservation, the protection of fish and wildlife resources, recreation, and flood control.  Indeed, we believe that we have already accomplished that on Spearfish Creek.  Our objection is that FERC’s licensing of this facility would be an unnecessary exercise at a tremendous cost.  As this Committee well knows, the FERC licensing process is an enormous undertaking.  Studies conducted by FERC find that even small projects like this one can take over 6 years to license at a cost that could approach millions of dollars.  Costs of this magnitude alone would require that the City mothball the project and shut it down.  The City does not believe that policies and goals of the Federal Power Act support this result—the stifling a source of clean, renewable energy that is already operated in a manner that best balances public interest considerations, through the sheer imposition of overwhelming administrative costs.

There are other sound reasons for S. 1577.  For example, there are a few isolated individuals who hope to use the FERC licensing of this hydroelectric facility to advocate that FERC should mandate elevated in-steam flows as a condition of any license issued.  While the City recognizes FERC’s broad authority under the Federal Power Act, it believes that the unique circumstances of this facility—the presence of the “sinkhole” in the bypassed reach—present a difficult, and perhaps irreconcilable, conflict between federal and state jurisdiction.  Should FERC impose elevated in-stream flows, such requirement would likely require the abrogation of downstream senior water rights.  Such abrogation could, in turn, require the City to exercise eminent domain over senior water rights and apply those rights to a different—and consumptive—use that was neither intended nor authorized by the South Dakota Department of Environment and Natural Resources, which granted these rights.  Such action may well violate Section 27 of the FPA, which specifically saves to the States the adjudication of water rights.  The City believes it would be prudent for Congress to avoid such difficult issues by confirming that the State of South Dakota, not FERC, is responsible for establishing rights and flow regimes in Spearfish Creek.

Thank you for the opportunity to present this testimony.