Emails: State, Boyce Hydro haggled over mussel lawsuit since January

Michigan officials warned the owners of the Edenville Dam as early as Jan. 21 that they were facing a lawsuit for up to $300 million in damages to compensate for the deaths of freshwater mussels during illegal drawdowns of Wixom Lake in 2018 and 2019.

The warning and the subsequent weeks of negotiations between Boyce Hydro and the state occurred as the Michigan Department of Environment, Great Lakes and Energy sought to verify preliminary reports that the dam didn't meet the state's flood capacity standards — a suspicion the state was working to confirm since early 2019, a new state record suggests. 

Both parties ultimately filed competing suits over the snuffbox mussels, an endangered species. On May 19, while the lawsuits waited in court, the Edenville Dam broke and sent a surge of water down the Tittabawassee River and into Midland area streets and homes. 

Boyce Hydro has portrayed the negotiations with the state as a sign of alleged extortion and purported proof of the pressure the company was under to raise Wixom Lake water levels in April at the expense of safety. The company filed the emails Monday in the Western U.S. District Court of Michigan, revealing what was supposed to be confidential settlement negotiations among the parties. 

“This is evidence of the fact that for the 2019 spring, why the water levels of the lake were raised, partially because of the pressure from the state and partially from the pressure of the residents along the lake,” Boyce Hydro lawyer Lawrence Kogan said. 

The state has consistently rejected the idea that it prioritized mussel litigation over known safety deficiencies of the dam, arguing it was working to research and finalize long-term improvements with the dam's eventual buyers, Four Lakes Task Force, while it was pursuing the mussel restitution. 

Four Lakes Task Force, a two-county authority, had already committed to repairing and upgrading the Edenville Dam and the state's settlement negotiations over mussels would not have affected the repair plans, said Ryan Jarvi, a spokesman for Attorney General Dana Nessel's office.

"And during the same period, the state entered into an agreement with the Four Lakes Task Force waiving any claims for the temporary drawdowns against the Task Force to avoid interfering with its effort to obtain financing to perform the repairs," Jarvi said. 

The state also has repeatedly denied pressuring Boyce Hydro to raise levels in April, noting its lawsuits related specifically to unauthorized drawdowns in the 2018 and 2019 winters in compliance with court-ordered water levels. 

"The negotiations focused only on the past damages, as shown by the fact that the State filed its lawsuit after Boyce had already restored the lake levels as they had always planned to do, and the suit only sought damages for the past, temporary winter drawdowns," Jarvi said.

The contract negotiations revealed in Kogan's Monday filing were supposed to be confidential and are inadmissible in court, Jarvi said. But Kogan defended the public filing, noting the emails were only protected from disclosure if both parties entered into negotiations in good faith. 

“The state didn’t enter into those negotiations with good faith, they never did,” Kogan said. “It was an effort at extortion.”

Boyce Hydro has argued it lowered levels in 2018 and 2019 because it could not conduct the maintenance needed to keep the structure safe during the winter. The state has argued Boyce made the unauthorized drawdowns to save money on higher winter maintenance costs. 

Assistant Attorney General Nathan Gambill wrote to Kogan Jan. 21 to give him the “courtesy of a heads up” regarding civil litigation over the company’s drawdown of waters on Wixom Lake, launching weeks of negotiation in which the state argued the damages to local mussels amounted to roughly $300 million, according to the emails. 

“The State will seek natural resource damages, an order to restore the mussel populations and otherwise repair the environmental harms the drawdowns have caused, and an injunction against any future unauthorized drawdowns," Gambill wrote Jan. 21. 

The emails, about which all parties appeared to have signed a non-disclosure agreement, reveal weeks of haggling over an agreeable settlement with the dam’s potential buyers, Four Lakes Task Force, at one point offering to pay $900,000 of a $1 million fine with money obtained through a local assessment. 

But Gambill rejected the proposal, noting “it is very unlikely that the state would agree to a resolution in which the assessment payers bear the financial burden of resolving the mussel kills caused by the drawdowns.”

Gambill rejected $1 million as unreasonable compared with the $300 million in damages and instead argued for $5.5 million, calling it a “significant concession.” 

He also refused to lower a separate $200,000 civil fine for lowering the water levels, despite Boyce’s contention that it was mandated in 2018 by the Federal Energy Regulatory Commission. He argued on April 22 – a week before Boyce filed its suit against the state -- that a judge would no doubt order a fine larger than either the $200,000 or $5.5 million.

“…this is essentially a business decision for the State — why settle for $200,000 if it can collect substantially more than that by getting a judgment, even taking the costs of litigation into account,” Gambill said. “Boyce really needs to get into seven figures if it wants to get the state’s attention.”

State suspected dam issues in January 2019

The negotiations between the state and Boyce stakeholders took place amid an ongoing investigation into whether the dam could meet state flood capacity standards, which require dams be capable of handling 50% of the largest possible floor for the area.

Michigan environmental officials questioned whether the Edenville Dam met state flood capacity standards as early as January 2019 — 16 months before the structure was breached.

A Monday letter from state Department of Environment, Great Lakes and Energy Director Liesl Clark to the U.S. House Committee on Energy and Commerce — which is investigating the failure of the dam in Gladwin and Midland counties — indicates state officials had received a report from the dam owner's consultants Jan. 4, 2019 indicating the dam met state standards. 

The actual memo from Purkeypile Consultng suggested the dam could handle 54% of the probable max flood event. 

But, Clark wrote, "the analysis provided did not contain enough detail for the state to verify the calculations, so additional details were requested starting on Feb. 8, 2019."

The state worked to confirm the initial report with the dam's consultants through August 2019, when a second consulting group working with the dam buyers, Four Lakes Task Force, told the state that Boyce Hydro's consultant was using the wrong assumptions in its calculations and the dam likely didn't meet state standards. 

The state performed another preliminary hydraulic analysis and, when it shared those results early this year with Spicer Group, both parties agreed the dam didn't meet state spillway capacity requirements. But the state still waited for a full report from Spicer Group that would reconcile the determination with federal statements indicating the dam did meet state standards.

The report indicating Edenville Dam didn't meet state capacity requirements was submitted June 4, roughly two weeks after the Edenville Dam broke. 

The development comes after the Four Lakes Task Force said last week that its engineers told state regulators in September 2019 that the dam did not meet state standards. 

EGLE officials have long maintained that they needed to confirm suspicions that Edenville Dam didn't meet state spillway requirements since an initial January inspection. A state environmental department spokesman noted last week that the Four Lakes Task Force said it "does not believe” the dam met the state’s dam safety requirements.

eleblanc@detroitnews.com