N.C. Senate approves takeover bill that could cost taxpayers more than $500 million

The N.C. Senate voted today to support an unprecedented bid to take Alcoa’s privately-owned hydroelectric business on the Yadkin River.  The takeover effort could ultimately cost North Carolina taxpayers more than $500 million.

The passage of Senate Bill 967, introduced by Sen. Fletcher Hartsell, approves the creation of a Yadkin River Trust with the authority to seize the Yadkin Hydroelectric Project, a private business owned and operated by Alcoa Power Generating Inc., a subsidiary of Alcoa.  The N.C. House has yet to consider the bill.

“We continue to be shocked that a historically business-friendly state like North Carolina is pursuing a costly government takeover of a privately-owned business, especially at a time when many taxpayers are struggling to make ends meet.  It sets a bad precedent and sends a bad message to individuals and business owners about North Carolina’s priorities,” said Rick Bowen, president of Alcoa’s energy operations.  “I hope the leaders in the N.C. House will take a closer look at the negative impact this bill will have on the state and its taxpayers.” 

Beginning in 1915, Alcoa purchased more than 38,000 acres of land along the Yadkin River and developed a private hydropower business that generates clean, renewable energy from water that flows down the river.  While advocates claim that a takeover is necessary to regain control of the water, existing state and federal laws protect North Carolina’s water interests and ensure that it maintains authority over who can withdraw water from the Yadkin River.

Takeover effort based on false premise and outdated cost estimates

Proponents of a state takeover claim that the Federal Power Act allows North Carolina to take the Yadkin Project for as little as $24 million.  But that figure is misleading and inaccurate because it is based on a faulty interpretation of the Federal Power Act, and North Carolina’s ability to pursue a takeover under it.

The deadline to pursue a federal takeover under the Federal Power Act expired in June 2006 – nearly three years ago – and FERC staff has said a takeover will not be given any further consideration.  That leaves the State with only one option: to condemn the Yadkin Project and pay fair market value, which has beencalculated at more than $500 million.

“It’s unfortunate that legislators are being misled about the true cost to North Carolina taxpayers. 

A government takeover could cost taxpayers more than $500 million – money that could be spent more wisely during this budget shortfall,” Bowen said. 

Even if a federal takeover were possible, it would still cost North Carolina taxpayers much more than $24 million.  Alcoa has incurred additional capital costs related to the Yadkin Project since the $24 million figure was calculated and that figure would need to be adjusted for inflation to reflect investments made by the company over time and as far back as 1915.

In addition, under the takeover clause in the Federal Power Act, Alcoa is entitled to “severance damages” in addition to other costs.  Alcoa believes that the severance damages inflicted by a takeover of the Yadkin Project could cost hundreds of millions of dollars.

And if the State of North Carolina takes over the Yadkin Project it will assume some significant financial responsibilities that would require it to spend nearly $200 million over the next several years to upgrade the dams and power generation facilities.