Feds fine former Midland dams owner $15 million over safety violations

Sept. 13: Report: Shoddy construction, ignored threats led to Edenville Dam collapse

Federal regulators have fined the former owner of the failed Midland area dams $15 million for safety violations tied to the disaster, but it’s unclear whether the agency will ever see a cent.

The Federal Energy Regulatory Commission, which regulates the country’s hydropower-generating dams, announced Thursday it assessed the penalty against Boyce Hydro Power LLC for “numerous dam safety violations” at three dams the company formerly operated in Michigan: the Secord, Smallwood and Sanford dams.

Rather than addressing Boyce’s history of ignoring safety concerns in the years leading up to the dam failures, the FERC penalty deals with Boyce’s actions after disaster struck.

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It’s unclear why FERC’s order only covers Boyce’s actions after the failures, but experts have previously said that federal regulators frequently hesitate to punish dam operators for safety violations before disaster strikes. 

Specifically, FERC found that Boyce failed to start a forensic study after the dam failures, and “ignored staff’s orders” to do safety studies to make sure properties surrounding the company’s dams were not at risk following the floods.

The Edenville Dam — which failed amid heavy rainfall May 19, triggering a second failure at the Sanford Dam — was not among those cited in the FERC penalty. That’s because the dam was no longer under federal oversight by the time it failed. 

FERC had yanked the dam’s federal hydropower license in September 2018 after warning Boyce and its predecessors for decades that the dam could not handle major flooding. That handed authority over to the state of Michigan, where flood safety standards for high-hazard dams like Edenville are half as stringent.

In a statement Thursday, FERC Chair Rich Glick said the fine “sends a clear message” to other federally-regulated dam operators.

“It is imperative that they comply with the safety requirements of their licenses,” Glick said. “Public safety is a top priority at these facilities, and we will do whatever we can to protect communities.” 

But the fine may be purely symbolic. Boyce has declared bankruptcy and a host of parties are lined up to collect money from the company. Bridge Michigan could not immediately reach a trustee Thursday overseeing the Boyce bankruptcy.

The FERC release noted that the federal agency will get in line behind area residents who are seeking compensation for damage caused by widespread flooding after the Edenville and Sanford dams failed.

A group representing area residents has since taken ownership of all four of the formerly Boyce-owned mid-Michigan dams. That group, the Four Lakes Task Force, hopes to repair the dams and restore the lakes behind them.

All told, the May flooding caused $200 million in damage to more than 2,500 buildings.

The disaster prompted a host of lawsuits seeking targeting Boyce and its leaders, as well as state and federal regulators. Those suits are still working their way through the courts. 

Lawsuits tied to the disaster include a state claim against Boyce, Mueller and others tied to the company. The suit is pending in the U.S. District Court for the Western District of Michigan, but a spokesperson for Michigan Attorney General Dana Nessel said the case has been placed on hold while bankruptcy proceedings wrap up.

Lawrence Kogan, a lawyer for Boyce trustee Lee Mueller, said his client maintains his innocence. Kogan no longer represents Boyce itself. 

“The state of Michigan precipitated a series of events that resulted in the dam breach,” Kogan said, referring to the state’s disputes with Boyce over water levels behind the dam in the weeks leading up to the failure and a “a lack of financial wherewithal, and human resources wherewithal” to regulate the dam.

Michael Pitt, a lawyer representing area residents in lawsuits against Boyce as well as against the state and FERC, said he was “glad to see that FERC is paying attention.”

Pitt and his clients maintain that FERC shares blame for the disaster. In a lawsuit, they allege the agency showed “gross incompetenc(e) and deliberate indifference” by giving Boyce permission to generate power without first making sure the company could safely operate the dam.

Pitt said he expects the U.S. Department of Justice to respond to his clients’ claims against FERC next month.

The results of an independent forensic investigation into what caused the dam failure are expected by this fall.

A state task force that examined Michigan’s dam safety regime in the wake of the failure has recommended a host of regulatory, legal and funding fixes to prevent future disasters. Michigan’s aging dams need “immediate attention” to prevent another failure, the task force noted in its February report.

So far, the Michigan Legislature has not taken up any of the group’s suggestions.