Exelon Agrees to $200 Million Settlement for Impact of Conowingo Dam

The owner of Conowingo Dam has struck a deal with Maryland to resolve a dispute over the hydropower facility's role in polluting the Chesapeake Bay and how much, if any, it should be required to pay to help with the cleanup.

In a settlement announced Tuesday, Exelon Generation Co. has agreed to spend more than $200 million over the next 50 years on projects intended to rebuild eel, mussel and migratory fish populations in the Susquehanna River and to reduce nutrient and sediment pollution flowing down the river into the Upper Bay.

The 91-year-old dam straddles the lower Susquehanna in Maryland, about 10 miles from the mouth of the Bay. The 94-foot high structure has blocked migratory fish and eels from getting upriver. It's also complicated Bay restoration efforts because the 14-mile reservoir it creates has reached its capacity to trap sediment from upstream sources that flow down the river.

As a result, nutrients associated with that sediment from farm runoff, municipal wastewater and stormwater now flow into the Chesapeake, where they can spur algae blooms and contribute to other water quality woes.

Among other things, the deal calls for Exelon to underwrite a $25 million effort to restore water-filtering freshwater mussels in the river, including donating land on which to build a hatchery for propagating them.

The pact also calls for adjusting the flow of water from behind the dam to improve conditions for fish; upgrade efforts to boost upriver passage of American eels, American shad and herring; and provide $47 million to plant underwater grasses, stabilize eroding shorelines and restore oysters and clams in the Bay.

Moreover, Exelon pledged to step up efforts to keep trash and debris from flowing over the dam and into the Bay—a major source of public outcry among boaters during last year's post-storm flood conditions.

The amount agreed upon for dealing with nutrient and sediment pollution is miniscule, though, compared with what state officials had initially wanted the Chicago-based power company to pay in order to be allowed to keep generating electricity at the dam.

The state had told Exelon in April 2018 that to get Maryland to certify that the dam would have no impact on local water quality, the company would have to pay up to $172 million a year to reduce nutrient and sediment pollution flowing through the dam.

The 86-page document made public Tuesday calls for Exelon to spend a total of $19 million over the 50-year license term on projects specifically intended to improve water quality in the Susquehanna and Upper Bay. The funds would go toward planting cover crops, forest buffers and other measures in either Maryland or upriver in Pennsylvania to reduce runoff of sediment- and nutrient-laden runoff, especially from farmland.

Maryland Gov. Larry Hogan, who has long insisted that sediment and nutrient pollution built up behind Conowingo is a major threat to the Bay restoration, issued a press release hailing the deal as a "significant and positive step in the right direction."

But several environmental groups, while praising some aspects of the agreement, suggested the state settled for far less than what Exelon could have afforded to pay.

"It's a fraction of what they're capable of," said Alison Prost, the Chesapeake Bay Foundation's Maryland executive director. She contended that the projects outlined in the settlement, and the roughly $4 million a year committed by Exelon, were insufficient to offset the harmful impacts to water quality caused by the dam.

A study commissioned by the foundation and The Nature Conservancy had concluded that Exelon could afford to pay $27 million to $44 million a year toward pollution reductions and still earn a profit from the dam. Exelon disputed those estimates. In a statement issued Tuesday, the company said it would pay for the commitments made in the settlement out of earnings from selling electricity that the hydro facility generates.

Ben Grumbles, secretary of the Maryland Department of the Environment, defended the settlement, saying that, in addition to the direct payments for agricultural runoff controls, the $47 million Exelon had pledged for shoreline stabilization, underwater grasses and shellfish restoration would also help reduce nutrient and sediment pollution.

The funding Exelon has promised won't come close to paying for what's needed to curb nutrient pollution coming down the Susquehanna, which drains a huge swath of central Pennsylvania and reaches all the way to Cooperstown, NY. In Pennsylvania, a laggard in the six-state cleanup effort, officials have estimated they'll need to boost spending by more than $300 million to close the gap the state has in meeting its obligations to help improve the Bay's water quality.

Grumbles said the Exelon settlement secures funding for some upstream priorities but acknowledged the states and federal government would continue to pursue other means of achieving pollution reductions up the watershed. But he said that "this was too good an opportunity not to seize and get real action, as opposed to costly litigation and delay that could have dragged out for years."

Legal leverage in question

Maryland struck a deal at a time when it faced a real possibility of losing the right to force Exelon to pay anything because of a recent court ruling.

Under the federal Clean Water Act, Maryland had significant leverage over Exelon. To get a federal license to keep operating Conowingo, the law says the company needs a certification from the state that the dam's operation meets state water quality standards.

Last year, Maryland regulators approved Conowingo's water quality certification, but with a set of costly conditions requiring Exelon to shoulder much of the burden of reducing nutrient and sediment pollution coming down the Susquehanna to the Bay.

State officials argued that Exelon should share responsibility with upriver communities and states for the nutrients and sediment flowing past the dam. They also contended the company needed to mitigate the way in which the hydro facility's operation alters the natural flow of the river.

Exelon argued that the sources of pollution lay upriver and not with the dam itself. For many years after its completion in 1928, Conowingo actually improved water quality in the lower Susquehanna and Upper Bay by trapping sediment and nutrients as they flowed downriver.

But over the decades, the reservoir filled with sediment, some of which now flows past the dam and carries nutrients with it. Studies found that large pollution reductions will be needed to offset the impacts and still meet the Bay's 2025 cleanup goals.

Exelon objected to the state's conditions, calling them "unprecedented" and illegal. It filed suit in state and federal courts. Those cases are still pending but will be withdrawn as part of the settlement.

Exelon's case against the state had begun to look stronger in the wake of a federal court

decision early this year on another hydro project. The U.S. Court of Appeals for the DC Circuit declared unanimously that the states of California and Oregon had waived their authority over a dam on the Klamath River because they had failed to rule on its water quality impacts within a year of when they were asked to issue a certification.

The Clean Water Act specifies that states must issue such certifications within 12 months of receiving an application. For many years, courts and agencies interpreted that time limit liberally, but with the Klamath case the appellate court declared there could be no extensions for any reason.

In the Conowingo case, Exelon originally applied for a water quality certification in 2014 but withdrew it after state officials said they didn't have enough information on the water quality impacts of the dam. The company agreed to pay $3.5 million for a study and resubmitted its application in 2017. The state acted just as the 12-month limit on the reapplication was about to run out.

Citing the DC Circuit decision, Exelon petitioned the Federal Energy Regulatory Commission earlier this year to waive Maryland's authority over the Conowingo license because it had taken more than a year to decide on the water quality certification. The commission has yet to act on that petition.

Adding to the uncertainty, the Trump administration has proposed new regulations that would drastically narrow states' authority to review water quality impacts of energy projects. Maryland has joined many other states in objecting to those proposed rules.

In light of those developments, Grumbles said, "We understand the value of striking a great deal for the Bay as soon as possible, particularly when there are strong political headwinds or court decisions that could reduce leverage for the state."

Pat Parenteau, a professor at Vermont Law School and senior counsel for its Institute for Energy and the Environment, said Maryland had reason to be nervous. FERC had overruled states' denials of at least two other energy project licenses this year because they had taken more than a year to act.

Less clear, he said, is why Exelon settled when the legal winds appeared to be blowing its way.

"If I were Conowingo, I wouldn't sign anything," he said.

He did note, though, that the states on the losing end in the Klamath case have asked the Supreme Court to review the DC Circuit's decision. As a result, both Exelon and Maryland, Parenteau said, faced at least some risk court action could go against them.

How good is the deal?

In a statement released Tuesday, Exelon president and CEO Chris Crane called the settlement "a victory for clean energy" as well as for "the long-term preservation of the Chesapeake Bay."

The company statement also declared that "the continued production of carbon-free energy from the dam" is a vital component of a push by Maryland's Gov. Hogan to get the state using 100% clean electricity by 2040. The Clean and Renewable Energy Standard that Hogan announced in March would include "supporting hydropower" while "maintaining environmental stewardship."

Details of the governor's clean-energy plan have yet to be disclosed, but Grumbles said last week, before the settlement announcement, that there was no link between Hogan's support of hydropower and the negotiations with Exelon over conditions put on Conowingo's relicensing.

Reaction from environmental groups to the settlement was mixed. Joel Dunn, president and CEO of the Chesapeake Conservancy, praised the deal's provision for some pollution reductions upriver from the dam. MDE spokesman Jay Apperson said the Exelon funds could be spent either in Maryland or Pennsylvania.

Others liked the investments in mussel restoration and fish passages. But in addition to questioning the amount Exelon had agreed to spend, they complained the agreement lacked detail in places and assurances that Exelon would be held to its commitments.

The Lower Susquehanna Riverkeeper Association and Waterkeepers Chesapeake had contended that even the conditions originally imposed by the MDE didn't go far enough to address the dam's impacts.

Lower Susquehanna Riverkeeper Ted Evgeniadis said the groups had appealed the state's conditions with hopes of getting more done to address the buildup of sediment behind the dam, which they feared could have devastating impacts if flushed over the dam by major floods. They had asked that Exelon be required to excavate at least 4 million cubic yards of sediment each year to reduce the buildup and offset the amount flowing through the dam each year.

But the agreement proposes just two projects that directly address that problem: a $500,000 study to determine options for managing dredged sediment and $250,000 annually to combat sediment scoured out from behind the dam during high flows. The state has separately launched a pilot project to dredge a small amount of sediment—1,000 cubic yards—and test the feasibility of reusing it.

The two groups' leaders welcomed the $25 million commitment to restoring eastern elliptio mussels in the Susquehanna. Once the river's most common mussel, its numbers have dwindled since the dam was finished—a decline that's believed to be linked to the inability of American eels to get upriver past the dam. The mussel larvae attach themselves to eels before dropping off and growing.

The mussels are prodigious filter feeders, noted Betsy Nicholas, executive director of Waterkeepers Chesapeake, so their decline has hurt water quality.

"When you have a healthy mussel population, you have that filtration," Nicholas said.

But Nicholas and Evgeniadis said they are concerned that many of the commitments in the settlement aren't being written into the federal license and will only be enforced under the contract between the MDE and Exelon. Those actions include the $25 million mussel restoration project in the lower Susquehanna and $1 million toward eel passages and related research. "We'd just like to lock down that uncertainty more," Nicholas added, "and make sure the commitment to do these things actually happens."

Grumbles said state officials hope that FERC will incorporate portions of the settlement into the dam's operating license. But even if they don't, he said, "we have an enforceable agreement with Exelon."

Timothy B. Wheeler is the Bay Journal's associate editor and senior writer. He has more than two decades of experience covering the environment for The Baltimore Sun and other media outlets. Jeremy Cox is a staff writer for the Chesapeake Bay Journal based in Salisbury, MD.