New Lessons from Oroville

Climate Change Creates Evolving Risks for Dam and Reservoir Systems

Two years ago this month, communities along California’s Feather River braced for the worst when the primary spillway at the Oroville Dam failed, and rising waters in the Oroville Reservoir overtopped the dam’s emergency spillway. Catastrophic failure was averted, but in the wake of that crisis, my colleague Dan Millea and other experts urged that the near miss should be a wake-up call about the need to inspect other dams to detect risks of similar failures. At the same time, climatologists speculated about how climate change may have contributed to the incident. Two years later, there is still no precise answer to that question, but experts agree that climate change is altering the environmental stresses for which dams have been designed in the past. Today we urge insurers to consider how climate change creates new and evolving risks to dams and reservoir systems, and the potential impact on the risks they insure.
Oroville Dam Spillway, February 27, 2017

In September 2018, a team of Swiss and Spanish scientists explained that the historical approach to designing and managing dams has assumed that the climate conditions affecting them, including the frequency and magnitude of extreme weather events, are constant. But as the globe warms, extreme weather events are becoming more extreme and more frequent, and the risks they pose to dams must be reassessed, not only by the engineers who design them, but also by those who manage them. For insurers who cover properties downstream from dams and reservoirs – which is every property insurer – the evolving risk caused by climate change means the assessment of risk for such properties is a moving target. With approximately 90,000 dams in the United States alone, and hundreds of thousands more around the world, the potential exposure is enormous for insurers who cover flood damage – and even for those that don’t.

One way in which climate change affects the safety of dam and reservoir systems is by introducing greater extremes in one of Mother Nature’s own systems of regulating water flows: cold mountain temperatures. In mountain ranges throughout the world, winter snow creates massive frozen reservoirs that melt slowly in the warmer months, providing naturally regulated flows to streams and rivers. When seasonal flows follow predictable patterns, dam managers draw reservoir levels up or down as needed to regulate downstream flows while preserving reservoir capacity for expected inflows. But the snowpack in the Sierra Nevada mountains, for example, has varied wildly in the last few years due to prolonged drought followed by extremely wet conditions. According to surveys by the California Department of Water Resources, the snowpack in the Sierras is at 100 percent of the average this year. But last year at this time, some of the survey locations were at only 14 percent of the average. Snowpack levels become even more unpredictable when warmer temperatures cause some winter precipitation to fall as rain. Rain not only flows into streams and rivers immediately, without seasonal regulation, but also increases the flow by melting existing snow, which then flows downstream earlier than it otherwise would.

Breached earthen dam in South Carolina, October 2015
(National Geographic)
Of course, extreme weather doesn’t just threaten dams in areas fed by melting snow. During one week in October of 2015, torrential rains in South Carolina caused 19 deaths and billions of dollars in property damage. The disaster was exacerbated by the failure of 18 earthen dams that were overtopped by flood waters, their saturated walls quickly eroded by rushing water. This particularly vulnerable type of dam is also the most common worldwide, and many older earthen dams lack the sophisticated and expensive spillways that made it possible to save the earthen Oroville Dam from catastrophe.

While catastrophic failure is the most dramatic risk, a dam does not have to fail to cause widespread economic losses. The mere threat of failure can lead to widespread economic losses caused by evacuation orders. Holders of property insurance policies with evacuation coverage may be entitled to recover extra living expenses incurred because of the evacuation order. In the case of homeowners’ policies, these costs are likely to be relatively modest. But for institutional insureds, such as hospitals and nursing homes, the costs can be enormous, and coverage may include the cost of medical care for patients during the evacuation period. Furthermore, evacuations leave property unattended, often during severe weather, such that minor damage that could have been mitigated by the policyholder can grow to major proportions because the policyholder has been evacuated and is not able to protect the property. In the 2015 South Carolina floods, dozens of communities were subject to mandatory evacuation orders. During the Oroville crisis, almost 200,000 Californians were ordered to evacuate from the downstream danger zone along the Feather River.

In the wake of the Oroville crisis, investigators found no evidence of a comprehensive review of the dam’s construction and design in the 40 years since it had been built. One year ago, that sobering finding helped motivate California legislators to pass a bill requiring annual inspections of most dams in the state. This year, repairs to the dam’s spillways are complete, at a cost of over $1 billion. Whether future designs will adequately account for the impact of climate change remains to be seen. Property insurers should stay ahead of the curve by factoring the long-term effects of climate change on dams and reservoirs into their risk assessments.

Dennis Anderson is a Senior Associate in Zelle LLP’s Minneapolis office.