Erie Boulevard Hydropower, L.P. v. State

• Decision Date: 16 May 2012
• Docket Number: No. 117565.,117565.
• Parties: ERIE BOULEVARD HYDROPOWER, L.P., Claimant, v. The STATE of New York, The New York State Canal Corporation, and The New York State Thruway Authority, Defendants.
• Court: New York Court of Claims

37 Misc.3d 319

948 N.Y.S.2d 874

2012 N.Y. Slip Op. 22157

ERIE BOULEVARD HYDROPOWER, L.P., Claimant,

v.The STATE of New York, The New York State Canal Corporation, and The New York State Thruway Authority, Defendants.

No. 117565.

Court of Claims of New York.

May 16, 2012.

Hiscock & Barclay, LLP, by Douglas J. Nash, Esquire and John M. Nichols, Esquire, for Claimant.

Honorable Eric T. Schneiderman, Attorney General, by Timo, for Defendants.

FRANCIS T. COLLINS, J.

Claimant, Erie Boulevard Hydropower, L.P. (“Erie”), moves pursuant to CPLR 3212 for partial summary judgment on the issue of defendants' liability for breach of a 1921 agreement governing the release of water from the Hinckley Reservoir for use in its hydroelectric facilities. Defendants ¹ cross-move for summary judgment dismissing the claim.

The 1921 agreement at issue resolved claims by Utica Gas & Electric Company (“Utica”), Erie's predecessor in interest, against the State arising from its appropriation of certain lands and riparian rights owned by Utica “for the purpose of impounding and storing water flowing in West Canada Creek at that point, and thereby providing a water supply for the improved Erie Canal” (claimant's Exhibit 3, 1921 Agreement, p. 2). As a result of the appropriation of its property and riparian rights, Utica filed a total of twenty-three claims seeking an aggregate amount of $1,119,425.00 in the Court of Claims ( see claimant's Exhibit 3, 1921 Agreement, p. 2). In consideration of Utica's release of its claims, the State agreed to pay the sum of $100,000.00 and to maintain the Hinckley Reservoir:

“so far as practicable and consistent with the dominant use of the same for canal purposes and to discharge the water impounded therein into the natural channel of West Canada Creek below said Hinckley State Reservoir, and above the riparian lands of [Utica] situated on the West Canada Creek below said reservoir in the manner set forth in the operating diagram hereto attached ...” (claimant's Exhibit 3, 1921 Agreement, p. 3).

A quit claim deed reflecting Utica's rights to the release of water from the Hinckley Reservoir was to be executed and delivered to Utica in the form attached to the agreement. The deed reflects the rights of the parties as set forth in the 1921 agreement.

Erie alleges in its claim that between September 24, 2007 and October 23, 2007 releases from the Hinckley Reservoir should have been at or between 370 cubic feet per second and 400 cubic feet per second pursuant to the operating diagram specifically incorporated into the 1921 agreement. Erie contends further that during the above period defendants reduced releases from the reservoir to levels below those required by the operating diagram for reasons unrelated to the operation of the canal. In particular, claimant argues that the 1921 agreement allows for deviations from the operating diagram only for (i) purposes related to operation of the canal or (ii) to allow repairs and/or maintenance of the Hinckley Reservoir dam. Erie argues the unauthorized deviation from the terms of the operating diagram constituted a breach of the parties' 1921 agreement, which forced it to reduce or discontinue hydroelectric power generation at its downstream facilities resulting in a loss of revenue for which it seeks compensation.

The Mohawk Valley Water Authority (“MVWA”) is a public authority which uses the Hinckley Reservoir to supply drinking water to the City of Utica and several other municipalities in the Mohawk Valley region. Erie contends the defendants' deviated from the operating diagram and reduced the amount of water released to its downstream facilities as the result of pressure brought to bear by MVWA and others concerned that the combination of severe drought and reduced water levels in the reservoir threatened MVWA's ability to deliver water to its customers. According to Erie, such a deviation from the operating diagram for purposes other than “canal uses” or the repair of the dam constitutes a breach of contract warranting judgment in its favor on the issue of liability as a matter of law.²

In addition to the contract and various extrinsic evidence, claimant supports its motion with an acknowledgment by counsel for the State in MVWA's declaratory judgment action in the Supreme Court, that the 1921 agreement did not make provision for the rights of MVWA or its predecessor in interest. In that case, MVWA sought a declaration that it “has an absolute and unconditional right to use up to 75 c.f.s. [cubic feet per second] of water from the West Canada Creek at Hinckley [R]eservoir” and that to the extent its rights may be restricted by its 1917 agreement with the State to provide a compensating reservoir, no such restrictions may be enforced against it ( see Mohawk Val. Water Auth. v. State of New York, 78 A.D.3d 1513, 1514, 910 N.Y.S.2d 780 [2010],lv. denied17 N.Y.3d 702, 2011 WL 2237140 [2011] ).³ In opposition to MVWA's motion for summary judgment and in support of its cross motion on its counterclaim alleging breach of MVWA's 1917 agreement to provide a compensating reservoir, defense counsel stated “there is no provision in the 1921 Stipulation Agreement which permits the State or the Canal Corporation to reduce the downstream releases from Hinckley below the rate called for by the 1920 Operating Diagram in order to maintain a specific reservoir level associated with the Water Authority's use of the reservoir ...” (claimant's Exhibit 7, affirmation of Roger B. Williams, ¶ 23). Erie contends counsel's statement is an admission which supports summary judgment on the issue of liability in its favor.

Also submitted in support of claimant's motion are excerpts from the examination before trial of the State's hydrologist, Howard M. Goebel, and various reports and correspondence relating to MVWA's use of the reservoir. Mr. Goebel testified that he did not recommend deviating from the operating diagram to alleviate MVWA's concerns regarding the 2007 drought because, in his opinion, no such deviation was necessary (claimant's Exhibit 8, examination before trial testimony of Howard M. Goebel, p. 60). Mr. Goebel explained that “[t]he one beauty of the 1920 Operating Diagram is the self-correcting nature, and that if reservoir levels would continue to fall, with time, the corresponding release would also decrease” ( Id. at 70–71). In this way, according to Mr. Goebel, reservoir levels could be maintained “for canal navigation” for a longer period of time ( Id. at 71). Moreover, MVWA's intake pipe for its water supply was the lowest in the Hinckley Reservoir and it was, therefore, unlikely that reservoir water levels could impact MVWA's water supply ( Id. at p. 72).

Mr. Goebel was of the view that although Hinckley Reservoir is utilized by several downstream entities, it was constructed for the “sole purpose” of providing water to the barge canal (claimant's Exhibit 13, memorandum from Howard Goebel dated April 27, 2004, ¶ 2). According to Mr. Goebel, “[t]he 1920 Operating Diagram does not account for [MVWA's] water supply withdrawals from Hinckley Reservoir since the upstream compensating reservoirs, required by the 1917 Agreement, were intended to result in a no net impact of water supply withdrawals on Hinckley Reservoir. As of 2002, there are no upstream compensating reservoirs” (claimant's Exhibit 14, memorandum from Howard Goebel dated September 29, 2004). Although Mr. Goebel acknowledged that without the compensating reservoir required by the 1917 agreement, the supply of water may be inadequate to meet MVWA's needs in a drought, he opined based upon his familiarity with the contractual relationship of the parties that “[t]he remedy for expansion of MVWA's utilization of Hinckley Reservoir is provided in the 1917 agreement through construction of additional compensating reservoirs ...” (claimant's Exhibit 13, memorandum from Howard M. Goebel dated April 27, 2004, ¶ 6).

Defendants' cross move for summary judgment dismissing the claim, first on the ground that it did not breach the 1921 agreement in issue because the agreement permitted deviation from the operating diagram in a drought. Defendants contend that the State has a paramount interest in protecting the municipal water supplies as reflected in Environmental Conservation Law § 15–0105[5]. Read together with the contract provision permitting deviations from the operating diagram during a drought, defendants argue that summary dismissal of the claim is warranted (defendant's Memorandum of Law, p. 10). Sworn statements from Mr. Goebel and Michael Fleischer, Executive Director of the New York State Thruway Authority and New York State Canal Corporation, were submitted in support of this contention. Mr. Goebel avers that although he was of the opinion that the 2007 deviations from the operating diagram were unnecessary to safeguard MVWA's water supply, he “fully support[s] the Canal Corporation's authority to [deviate from the operating diagram] as well as the underlying policies associated with the actions taken, regardless of whether [his] technical perspective may have differed from the views presented by other interested parties ...” (affidavit of Howard M. Goebel, ¶ 31). Mr. Goebel indicates that Mr. Fleischer's decision to reduce water releases “based upon policy concerns regarding the threat to the public drinking water supply of the Utica area during the drought conditions experienced in 2007 were reasonable and justified” (affidavit of Howard M. Goebel, ¶ 33).

Mr. Fleischer indicates in his affirmation that the determination to deviate from the operating diagram was made after consultation with representatives from MVWA, the Oneida County Health Department, the New York State Emergency Management Office and the Department of Environmental Conservation. He states his belief that he was statutorily obligated “to give top priority to the storage of water in Hinckley Reservoir for domestic...