Last week, federal wildlife officials issued an ultimatum to PacifiCorp. They insisted that the energy company that operates hydropower plants in Oregon and California restore the Klamath River, one of the nation's premier salmon rivers. That move could precipitate the largest dam removal in U.S. history. It would also resolve one of the region's most contentious environmental battles. The U.S. Fish & Wildlife Service and the National Oceanic & Atmospheric Administration's (NOAA) Fisheries Service ordered PacifiCorp to install fish passages at the company's four largest Klamath River hydroelectric dams in Northern California and southern Oregon in order to relicense the 151 MW project. The message was as obvious as PacifiCorp's colossal 173-foot-high Iron Gate Dam: Restoring salmon and steelhead to the Klamath is more valuable to the region than the power generated by the dams. The Klamath hydro dams yield just 1.7 percent of PacifiCorp's total power supply of more than 8,000 MW and serve only 70,000 customers. But they have blocked 350 miles of spawning habitat in the Upper Klamath Basin for nearly a century, preventing salmon and steelhead from swimming upstream. The agencies acted after fisheries officials last year closed commercial salmon fishing for 700 miles off the California and Oregon coasts to protect decimated coho and chinook salmon stocks on the Klamath. Once the West's third-most-productive salmon river, the Klamath hosted 1.2 million spawning salmon and steelhead each year before the dams were constructed beginning in 1918, creating impenetrable barriers for migrating fish. Today, coho salmon are listed as a threatened species under the federal Endangered Species Act, mandating federal protection. The fall and spring chinook Klamath runs have dwindled to a fraction of their historical numbers. The closure of the chinook fishery last year resulted in an estimated $150 million loss to coastal economies. PacifiCorp, which was acquired by billionaire Warren Buffet's Berkshire Hathaway Inc. last year, has run out of options and is quickly running out of time. A federal judge in September sided with the wildlife agencies and rejected the company's less costly proposal to trap spawning salmon and steelhead and haul them around the towering Klamath dams. Under the Federal Power Act, PacifiCorp must comply with the agencies' prescriptions to receive a new 50-year operating license from the Federal Energy Regulatory Commission. PacifiCorp's license for its Klamath River Hydroelectric Project expired last April, and FERC is not expected to issue a new license until late next year. While the agencies have no authority to compel PacifiCorp to remove the dams, NOAA Fisheries, the California Department of Fish and Game, and the California Resources Agency all agree that decommissioning is the best option to restore the Klamath. It is also the cheapest alternative, by far. Installing fish ladders at the Klamath dams and screens to protect juvenile salmonids from being sucked up in the spinning turbines as prescribed by the federal agencies would cost PacifiCorp about $300 million. That's $101 million more than the California Energy Commission and the U.S. Department of the Interior estimated it would cost to remove the hydro dams and restore the Klamath. The agencies also estimated that removing the dams and buying replacement power would save PacifiCorp ratepayers up to $285 million over a 30-year period. PacifiCorp officials are weighing the cost-effectiveness of installing the mandatory fish passages against decommissioning the Klamath dams. In a February 7 statement, Bill Fehrman, president of PacifiCorp Energy, said the company will comply with the agencies' prescriptions if settlement negotiations over relicensing the Klamath project are not successful. The Klamath hydro project is valuable to PacifiCorp's portfolio as a reliable renewable energy resource that emits zero greenhouse gases and can be ramped up quickly to meet customer demand, he added. However, PacifiCorp is not averse to removing the dams if its 1.6 million customers in six Western states don't have to foot the entire bill. "It's one thing to say you can pull out the dams for $100 million. It's another thing saying you must also shoulder the costs of decommissioning," said PacifiCorp spokesperson Dave Kvamme. The Energy Commission forecast didn't include the costs of removing up to 20 million cubic yards of sediment that has accumulated behind the four reservoirs, he argued. "It's not just costs, it's risks." PacifiCorp agreed to remove three other hydroelectric dams, including the 130-foot-tall Lewis River Hydro Project on the White Salmon River in southwest Washington. But the Klamath is a much larger hydroelectric generating project with vastly more complex environmental issues. "Nothing on this scale has ever been attempted before," Kvamme stressed. PacifiCorp would seek to recover the costs of either installing the fish passages or decommissioning the Klamath dams from its ratepayers in higher energy prices, Kvamme acknowledged. Since the California and Oregon public utility commissions would have to approve higher power rates, they could pressure PacifiCorp to adopt the less expensive option of removing the Klamath dams. The federal mandate has breathed a renewed urgency into settlement talks with PacifiCorp, Klamath Basin tribes, fishing interests, farmers, environmentalists, and government agencies. The 28 parties have been haggling over a stew of conflicting interests in the Klamath Basin for the past two and a half years in a protracted effort to reach an agreement to submit to FERC for PacifiCorp's Klamath relicensing application. "We have hope that the folks who rely on this river will be working together. It's a very complicated set of issues," said David Diamond, an analyst with the Department of the Interior in Yreka. Along with the hydroelectric dams and reservoirs, water in the Upper Klamath has been polluted by irrigation diversions, agricultural runoff, logging sedimentation, and cattle grazing. Farmers, tribes, commercial and sports fishers, environmentalists, and loggers have been feuding for years over their competing demands for a limited resource. Still, the parties are hopeful that they will reach a consensus since for the first time in years they have been listening to each other's concerns. "We're very close to getting people to agree to a plan that will remove the dams and net a benefit to the economy," said Craig Tucker, Klamath River coordinator for the Karuk tribe, one of four Klamath Basin tribes involved in the settlement negotiations. For example, the tribes have agreed to help Klamath Basin irrigators secure cheaper power rates in return for their support in removing the dams. If the irrigators have affordable power, they will use more efficient irrigation methods and consume less water, leaving more in the river for salmon and steelhead, Tucker explained. "For the first time we're making peace with these guys," he said. Oregon governor Ted Kulongoski and California governor Arnold Schwarzenegger plan to convene a Klamath Summit next month to brainstorm public funding sources for Klamath restoration. "We're actively engaged with all parties, including PacifiCorp, to come to a resolution of all Klamath Basin issues," including fisheries, tribal rights, and land-use issues, said Sandy Cooney of the California Resources Agency. "All the parties are sitting down and talking. And those discussions have been extremely productive." Senator Patricia Wiggins (R-Eureka) is considering legislation that would direct royalties that oil companies pay the state for leases in the publicly owned California Tidelands toward Klamath restoration projects. Other funding for the Klamath could come from Proposition 84, the $5 billion natural resources bond passed by California voters in November, said Brett Williams, Wiggins's legislative aide. "There's money available for Klamath restoration," Cooney stressed. "Is all the money available? No. It's very expensive. Will we eventually get there? Sure."