by Joyce Deaton
The future management of the Yadkin-Pee Dee lakes chain is starting to look as muddy as the river itself after a hard rain.
On May 13, the N.C. Senate voted 44-4 to create creating the Yadkin River Trust, authorized to acquire and operate dams on the river now operated by Alcoa Power Generating Inc. If the measure also passes the House, the state would authorize the trust to sell some of the electric power, dedicate some to economic development initiatives and clean up the Alcoa smelter site in Badin beyond what the company has been required to do.
It’s the latest wrinkle in the contentious process that has emerged following Alcoa’s application for relicensing of its hydropower plants along a 38-mile stretch of the Yadkin-Pee Dee. North Carolina’s second-largest watershed, it controls Badin, High Rock, Tuckertown and Falls lakes.
Licenses to operate hydroelectric plants on the nation’s rivers are granted by the Federal Energy Regulatory Commission (FERC) under the Federal Power Act passed in the 1930s. The law says that America’s rivers belong to the people and can’t be privately owned. In evaluating a company’s request for licensing, FERC evaluates the public benefit of each project. Alcoa’s original license was granted in 1958, when the company needed electric power for its aluminum smelting operation in the town of Badin. In its glory days, the smelter employed more than 900 people, including half the residents of Badin. Those jobs were the company’s chief evidence of providing a public benefit.
As economic conditions changed, Alcoa found the relatively small Badin plant unable to produce the necessary economies of scale to be profitable and closed it in 2002. The company continues to produce electricity, selling it on the wholesale market for approximately $44 million a year and using the revenues to offset energy costs at its other aluminum plants across the U.S. It employs about 30 people along the Yadkin to operate and maintain its four dams. Now that Alcoa’s original 50-year license is expiring, it has applied to FERC for relicensing.
Enter the state of North Carolina, led by Gov. Bev Perdue. Since Alcoa no longer provides significant employment, the state contends, its license should not be renewed. Instead FERC should allow the state to take over the hydropower project and operate it for the benefit of North Carolina citizens. “Today the smelter and the jobs are gone—and so is the reason for the license. I’m asking FERC to enable the recapture of the license so it can be used once again to help create jobs and economic opportunity for the region,” Perdue says in the motion.
It’s an unprecedented step. FERC licenses are typically renewed; only one has ever been refused. No state has ever asked to take over a hydropower license, and the move uncovers several thorny issues that have Alcoa, the state, local governments, interest groups and ordinary citizens lining up to trumpet their positions.
Alcoa says it’s a clear-cut case of private property rights—that it owns the land along and under the lakes as well as the dams themselves—and the state has no right to confiscate private property. Gene Ellis, licensing and property manager for Alcoa, has frequently stated that the only other place the company has faced this situation is in Venezuela under its socialist president Hugo Chavez. As evidence of public benefit, the company touts its plans to spend $240 million to upgrade its facilities to improve water flow and quality and to introduce a different system for drought management. It points to the certificate recently received from the N.C. Department of Water Quality as evidence that its performance merits relicensing, and it promises to create more recreational opportunities and land conservation set-asides.
Lining up on Alcoa’s side are a number of vocal leaders, organizations and ordinary residents. Jim Harrison, mayor of Badin and a former Alcoa employee, endorses the company’s management of the lakes, which has limited development and provided free fishing and swimming areas.
Beth Livingston, managing member of Golden WEB properties in Davidson County, says the delay in approving Alcoa’s license hurts the county’s economy because the company’s proposal to allow private piers on pre-1987 lots with 50-foot frontage and six feet of water depth “will create millions of dollars of sellable property” along High Rock Lake.
Though Badin Lake has few such undeveloped lots, Libby Saunders, owner of Badin Lake Realty, supports Alcoa as well. “I’ve lived here since ’79, and I think Alcoa does a fantastic job,” she says. “The past five years or so we’ve had horrible droughts, and the lake has been down to five feet a couple of times, but that was an act of God, not Alcoa.” Local counties also would miss Alcoa’s property taxes, adds Saunders.
The governor’s office, meanwhile, contends that language in the FERC licensing process clearly states that land and equipment for the hydro project do not belong to Alcoa, but go with the license. Therefore FERC has the right to “recapture” the project and designate the state to operate it. Under this scenario, Alcoa would be reimbursed for the project’s net present value, plus severance damages, but the formula for such a settlement is also in dispute.
Taking sides with the state are the Yadkin Riverkeeper, seven county governments, the North Carolina Water Rights Committee and the Centralina Council of Governments, a regional planning organization for nine central N.C. counties.
The Yadkin Riverkeeper, Dean Naujoks, says his organization will challenge the Department of Water Quality’s permit for Alcoa and request a stay of the relicensing process. He points out that the department took the highly unusual step of requiring a surety bond (the $240 million Alcoa has earmarked) for making improvements in equipment that will improve dissolved oxygen levels in discharges at the dams’ turbines.
Naujoks says known contaminants in at least six sites around the Alcoa plant in Badin include cyanide, fluoride, PCBs, solvents, metals, hydrocarbons, benzene, naphthalene and methane. “This includes PCBs in swimming areas,” he adds. “This company has made millions of dollars in profits over the years, but they won’t reinvest the money required to make this right.”
Buddy Parks, owner of Chunker’s Central Carolina Fishing Guide Service, takes issue with Alcoa’s lake management as well. “They pull the water sometimes when they shouldn’t, and every year there’s a decline in the number and quality of fish,” he says. “At Tuckertown the algae and grass have has gotten so bad you can’t fish any more.”
Where will the controversy lead? Several outcomes are possible. FERC could follow its own precedent and renew Alcoa’s license. It could recapture the project and turn it over to the state (although Alcoa contends the legal time limit for this option has passed). Or it could condemn the project and allow the state to buy Alcoa’s stake at its net present value, which the state estimates at $24.1 million rather than Alcoa’s $500 million estimate. The state contends it could pay for the project with revenue bonds that would be paid back through expected power generation revenues at no cost to taxpayers.
Whoever gets the nod from FERC, the opposing party has the right to appeal the decision in the courts. The governor’s office has asked FERC for a three-month delay in the next round of hearings, making Alcoa’s stated hope for a decision this summer look unlikely. Lake dwellers, stay tuned.