Destructive Ends: Transfers of Wealth via Federal Infrastructure

© 2023 Concerned Citizens of Western Montana

While we cannot know the true motives of the three government parties to the Flathead Water Compact, we do know that all of the unexplainable concessions made to the US / CSKT by Montana in the compact, and the state’s ongoing acquiescence to the massive transfer of state resources and wealth that is currently playing out in front of us, can easily be attributed to a collusive and shared strategy. 

In past articles we’ve touched on the massive transfer of wealth taking place under the guise of Indian Self-Determination federal funding grants and questionable “contracts,” and also the transfer of state natural resources and land through the compact as well as the ongoing land acquisition and conservation easement feeding frenzy, bought and paid for courtesy of the federal government, and environmental groups that are also funded by our totally out of control federal government.

In a recent article we discussed the collapse of local government as a necessary outcome of the goal to restore western Montana back to the United States CSKT.

See:  Politicizing Our Water for Destructive Ends.

This article covers yet another insidious transfer of wealth taking place right under our noses:  The transfer of wealth related to the use, control and / or granting of ownership of Federal Infrastructure to the tribes.

Kerr Dam

In 2014-2015, the media was abuzz with news of the CSKT acquisition of Kerr Dam.

Kerr Dam is the largest dam in the state of Montana.  Power produced by it serves the Flathead Irrigation Project, all residents of the Flathead Indian Reservation, Lake, Sanders and Ravalli Counties, as well as other customers. You could also call it a gateway to the waters of the Columbia River Basin.

The Kerr project was Congressionally authorized in 1928 by an appropriation that authorized the Federal Power Commission to issue licenses “for the development of power sites on the Flathead Reservation and of water rights reserved or appropriated [by the United States] for the irrigation projects”.

The 1930 Flathead Power Development report for the Kerr Project contemplated that the water resources reserved or appropriated for irrigation would also be used to generate power and perfect the hydropower water right.

Importantly, the Flathead Power Development report identified that four interests were to be served by the Kerr Project, including the Tribes, the general public, the irrigation project composed of Indians and settlers, and the company. These four interests have guided the management and operation of Kerr Dam since its inception.

The federal government reserved for itself the right to recapture the project at some future time for these continued purposes.

Since the issuance of the first license by the Federal Power Commission, and despite expressed Tribal consent, the Tribes have continuously sought to undermine the historic, legal, and financial foundations of the Kerr Project.

Numerous legal claims submitted before the Indians Claims Commission, the Court of Claims, and the FERC have failed on the merits, or lack of merit in the Tribes’ arguments.

For example, despite the Tribes consent to the terms and conditions of the first license for the Kerr Project and a subsequent Congressional act in 1948, including the amount of the Indian rental and the furnishing of power at special rents to the irrigation project, the Tribes have continued to challenge and change these rulings in whatever forums it can up to the present day.

On June 1, 1976, Montana Power Company applied in Project No. 5-004 for renewal of its license. On July 2, 1976, the Tribes filed a competing application (Project No. 2776-000) for a new license. On November 18, 1980, the Commission issued public notice of the applications. No other entity applied within the time allowed; nor did any federal agency recommend recapture of the Project under Section 14 of the Federal Power Act. 16 U.S.C. S 807.

After nine years of negotiating, the CSKT reached a settlement with Montana Power Company to receive $9.5 million per year for land rental payment (adjusted annually for inflation), and the opportunity to acquire the facility at the original cost of construction, less depreciation for the last 20 years of the license. 

By the time the dam was transferred to the CSKT in 2015, the inflation adjusted annual rental payments were in the neighborhood of  $20 million per year. In 2015 the dam was purchased by the tribe for $18.3 million dollars, less than one year’s worth of CSKT rental receipt payments from PPL Montana.

Inquiring minds would like to know why the United States failed to recapture Kerr Dam when it had the opportunity to do so in 1980? Was it negligence, malfeasance, or part of a strategic plan?

Mission Valley Power: Separating the Power Division from the Flathead Irrigation and Power Project

The Flathead Irrigation and Power Project (FIPP) is an integrated irrigation and power project and was initially designed that way.  The Newel Tunnel became Kerr Dam.  The water rights of the irrigators were used to generate power, and in return the irrigation project received a low cost block of power–15 MW at the ‘cost of production’– from Kerr Dam.

In 1948, Congress enacted a law (62 Stat. 270, 271) that allocated the net power revenue from the low-cost block of power to the liquidation of costs associated with the construction of the irrigation and power system and to assist with the annual operation and maintenance costs of the Project:

“All net revenues hereafter accumulated from the power system shall be applied annually to six purposes, in the following order of priority:

1. To liquidate all matured installments of the schedule of repayments for construction costs of the power system;
2. To liquidate all matured installments of the schedule of repayments for construction costs of the irrigation system of each division, on an equal per acre basis for all irrigable lands within the division;
3. To liquidate unmatured installments of the schedule of repayments for construction costs of the power system which will mature at a date not later than the maturity of any unliquidated installment of irrigation system construction costs;
4. To liquidate unmatured installments of the schedule of repayments for construction costs of the irrigation system of each division which will mature at a date prior to the maturity of any unliquidated installment of power system construction costs, on an equal per acre basis for all irrigable lands within the division;
5. To liquidate construction costs chargeable against Indian owned lands the collection of which is deferred under the Act of July 1, 1932 (47 Stat. 564; 25 U. S. C., Sec. 386a); and
6. To liquidate the annual operation and maintenance costs of the irrigation system.”

Tribal Attacks on the Low-Cost Block of Power

In 1951, the CSKT filed a lawsuit (Docket 50233) with the Court of Claims related to its ceded lands within reservation boundaries and other issues.  Their complaint included a petition asking the court to subvert the low cost block of power provisions in federal law that were intended for the benefit of project maintenance, and instead award this monetary benefit to the tribes:  

By granting preferential low power rates to the FIP, defendant deprived plaintiff of the full and fair value of its power. By such action defendant appropriated property of plaintiff.

The Court of Claims took the following actions concerning this complaint referred to by the Court as Paragraph 13 (of the complaint):

In December 1967, the tribe’s motion for summary judgment denied and case remanded for trial or other appropriate further proceedings.

In December 1969, a second trial was ordered to allow the defendant’s to prove damages

In October 1972 the tribe’s petition related to the low-cost block of power was dismissed WITH PREJUDICE, the court citing this:

“The evidence does not establish that the defendant breached its fiduciary obligations to plaintiffs with respect to the negotiation for and the establishment of the presently relevant terms of License No.5, Montana. (e) The evidence does not establish “what, if anything”, plaintiffs have lost in consequence of the presently relevant provisions of License No.5, Montana.

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiffs are not entitled to recover on the claim stated in Paragraph 13 of the petition and as to that claim the petition is dismissed.”

Undeterred by their failure, and to show just how vengeful the tribe really is, they were able to get Montana to agree to give ½ of the low-cost block of power to the tribes in the Flathead Water Compact, which will result in even higher O&M fees for irrigators, and further plundering of the project for what rightfully was meant to be used for project maintenance for the benefit of everyone. 

BIA Illegally Separates Flathead Project Irrigation and Power Divisions

In 1985 the Bureau of Indian Affairs (BIA) arbitrarily divided the irrigation and power division, and contracted with the Tribes to manage the power division, which included by law the requirements of the 1948 Act.  The BIA unlawfully contracted the power division with the Tribes under a under a self-determination (638) contract, as a 638 contract allows the government to contract with the Tribes for a government project built for them because of their status as tribes.  The FIP was built on an open reservation for everyone, not just the Tribes.

Since 1985, the net power revenues have not been delivered to the irrigation division or spent on irrigation purposes as required by law. This has resulted in serious maintenance deficits to the irrigation project and a back-breaking escalation of per acre costs to individual irrigators.  But the field evidence reveals miles of canals and structures needing repair.

So where is all that money going? 

In 2019 irrigators submitted an audit request to Steve Daines, asking for an audit of both the Irrigation and Power divisions of the project. Handed into the trust of one of our United States Senators, it mysteriously went nowhere, and was never acted upon. 

One can easily see that the federal government has been complicit in hiding the tribe’s non-irrigation uses of project money that by law are required to be spent on the maintenance of the irrigation project.  Instead of a self-sufficient project, irrigators have been forced to pay the highest Operations and Maintenance (O&M) fees of any irrigation project in the state, yet arguably it is in very poor condition under the control of the tribe via the Bureau of Indian Affairs.

The Audit Request is attached here.  Take a look and see what has been going on for the last thirty years!  

Having been contracted for management of Mission Valley Power, the CSKT are paid in the neighborhood of $26 million per year in management fees from the federal government.  The trible also has complete control over its assets, and how its money is spent. 

It becomes a simple manipulation of expenditures to ensure there are no net power revenues to apply against the costs for maintenance per the federally stated purposes as noted above.

Having unfettered control over the finances of Mission Valley Power has the full effect of ownership of this important project infrastructure. 

We would not be surprised to find out in the future that the transfer of ownership has already taken place, or that a future promise of such action has been assured to the tribes, without the knowledge of the irrigators, and in violation of the law.

After all, unconstitutional and unaccountable federal agencies such as the BIA are intended by Congress to do the dirty work that our “representatives” don’t want to be bothered with.

Flathead Project Irrigation Division

With all of this history, we have to ask how long it will be before the irrigation division of the Flathead Irrigation Project is also given over to the tribe? 

Considering the fact that the Compact gives the tribe bare legal title to 100% of project water, and metes out a miniscule amount of water to irrigators, is it possible that the compact has already taken care of that?

Using the 1940 Walker report, it is estimated that historic deliveries of water to irrigator lands will be reduced by 20-74% in the compact, dependant upon the assigned duty of water and location of irrigated property within the project.

Frankly it seems there will be just enough of the tribe’s water delivered to irrigator lands to ensure that farm and ranch businesses in the Mission Valley will endure slow and painful deaths.

Water for Fish, but not for (Some) Irrigators

Is this simply coincidence, or is it just how the game is played? 

Does the Flathead Irrigation and Power Project now identify itself as a fishery, when 2,500 irrigators are anxiously awaiting water?

Lest we not forget, Hungry Horse Dam and the Kootenai and Clark Fork Rivers are all part of the compact claims. 

Is it at all possible that their associated dams could be next significant pieces of infrastructure to be compromised in this high stakes strategy for the ownership and control of western Montana?

We are not sure who covets western Montana the most. 

Is it the United States because of western Montana’s amazing abundance of water that they can’t wait to get their greedy Waters Of the United States (WOTUS) hands on, or the CSKT because of their apparent lust to exert revenge upon those of us who dare to live within the tribes CEDED and paid for territory?

And then of course there’s the foolish state of Montana, in the midst of it all, eagerly trying its best to cede us to the United States / CSKT, as though we are pawns in a chess game.