Looting: The Pattern Behind the Failure of the Edenville and Sanford Dams
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Authors
Stephanie Rauch
Issue Date
2026
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Language
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Abstract
In 2020, the Edenville and Sanford Dams failed, flooding significant portions of land in Midland County. The spillway deficiencies that caused the Edenville dam to fail had been documented since 1999, but the dam’s owner, Boyce Hydro, repeatedly delayed essential repairs while continuing to operate the generating facilities. Boyce Hydropower was found liable for refusing to comply with regulations, but filed bankruptcy and did not pay the $120 million in damages from the failure. The residents of downstream communities were left to shoulder a total cost of over $200 million and continue to pay assessments for the dam repair.
Private dam owners bear a social responsibility to mitigate risk, but unless forced to by a regulatory body, they often have little motivation to do so. Individuals and communities should not be forced to take on avoidable risk or hefty flood insurance premiums to prevent losses from a dam whose owner is profiting from risky cost-cutting behavior. Regulatory oversight is too often reactionary, while the economic incentives to maintain safety standards are lacking. Private ownership of aging civil infrastructure is vulnerable to a risky business strategy coined by Akerlof and Romer (1998) as “looting”. This model describes the intentional draining of a firm’s resources, increasing stakeholder risk in exchange for short-term financial gain. The looting model was originally developed for the financial industry, but in this case, it is useful for highlighting the gap between economic incentives and safety regulations. This project will describe the issue and prescribe a general rule based in business, environmental, and economic principles. This rule will be applied to the cases of private dam ownership in Michigan, specifically examining the failure of the Edenville and Sanford dams.
This project assesses management failures, evaluates stakeholder costs and benefit, and shows why the failures were predictable given the economic incentives. The project concludes with policy recommendations for the state of Michigan and an assessment of potential problems.