High Point Enterprise criticizes N.C. Senate vote, says bill amounts to "forced takeover of private property by state government"

The High Point Enterprise published an editorial today criticizing the N.C. Senate’s vote last week to approve a bill that would pave the way for a government takeover of Alcoa’s privately-owned hydro business along the Yadkin River.  The editorial harshly criticizes the “forced takeover of private property by state government in order to reap financial benefits of that company's business.”

The entire editorial is posted below:

State government takeover of hydroelectric power generating property along the Yadkin River moved a step closer to a disappointing reality last week as the N.C. Senate voted 44-4 to approve a bill creating the Yadkin River Trust.

If approved by the House and signed into law, that innocently enough sounding entity would move to take over Yadkin River dams and lakes owned by Alcoa Power Generating Inc. Alcoa, however, prefers to continue owning and operating the plants to produce electricity as it has for more than 70 years.

Unfortunately, all of our area state senators supported this bill, which amounts to a forced takeover of private property by state government in order to reap financial benefits of that company's business.  We've heard it said many times that the citizens of the state own their water resources, such as the Yadkin River, and this is true.  But this argument over the federal relicensing of Alcoa Power Generating has become a move by state government to take over that business and its assets to grab the tens of millions of dollars worth of electricity that Alcoa generates each year.

Certainly, there are issues with Alcoa that still need to be addressed during the permitting process, particularly cleanup of the company's abandoned aluminum plant at Badin Lake in Stanley County. There also are unresolved issues related to High Rock Lake in Davidson County, including agreements on lake levels throughout the year. And then there's the question of how much Alcoa should pay federal, state and local governments under terms of a new permit, if granted.

But none of these issues rise to levels that justify a state government takeover/buyout of private property and a private business - especially one that is producing huge amounts of clean energy - just because the state sees potential profit there. 

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.

One day after Gov. Perdue announces furloughs, N.C. Senate considers spending $500 million to take Alcoa's private property

I spent Wednesday afternoon down at the N.C. General Assembly, where the Senate Finance Committee approved legislation that would pave the way for the State of North Carolina to take our privately-owned dams along the Yadkin River.

Many of the Senators asked good questions.  Fundamental questions like “Why do we need to do this?” and specific questions about how the state would operate a hydropower plant. 

But no one raised the obvious question: How can our state legislators even contemplate spending $500 million of taxpayer money to take a privately-owned business ... just one day after Gov. Perdue announced mandatory unpaid furloughs for all state employees and school teachers?

North Carolina is facing a $3.2 billion budget shortfall and the pain is being felt by families across North Carolina.  Our school teachers are being forced to sacrifice a portion of their salary… healthcare and education spending is being slashed … new taxes are being proposed.  And yet no one seems to be overly concerned about the potential price tag that comes with a government takeover of Alcoa's dams.

Granted, there are a lot of different opinions about what a government takeover will really cost. Alcoa is confident that the cost would exceed $500 million, but even the conservative estimate offered in a draft fiscal note prepared by Senate staff pegged the likely cost at almost $200 million, not including the cost of required upgrades that could add another $200 million to the price.

What sort of message does this send to North Carolina families who are tightening their belts to make ends meet?  As people struggle with financial challenges – whether it’s cutting back on vacations and summer camps for their kids, or dipping into their 401k savings to pay the mortgage – the politicians in Raleigh don’t seem to have any hesitation about spending half a billion dollars to take over a few privately-owned dams.  

It just doesn't make sense.

State Senate should consider the facts before moving forward with takeover bill

A bill introduced by Sen. Fletcher Hartsell to establish a trust with the authority to seize control of our privately-owned hydropower business along the Yadkin River was approved by a state Senate committee today and now moves to a state Senate Finance committee for further consideration. 

The proponents of a state government takeover claim:

•     The State of North Carolina will lose control of its waters if APGI gets a license and the citizens of the state may not get access to drinking water.

•     Because Alcoa no longer has jobs at its smelter, it doesn’t deserve to keep the dams – that its “lease” is up, and the State can acquire this Project for $25 million.

•     Alcoa has polluted the lands it owns, and the State needs to own the Project so it can protect the land.

Before North Carolina takes the historic step toward seizing the private property of a company doing business in the state, it should consider these facts:

CONTROL OF THE WATER

Fact: No one owns the water in the Yadkin River. Under North Carolina law, property owners along a river have the legal right to make reasonable use of the water running through their property. By virtue of the 38,000 acres it owns along the Yadkin River and the dams and generating equipment it built with private capital, Alcoa Power Generating Inc. (APGI) makes a reasonable use of the water which crosses its property.

Fact: APGI does not consume the water. The water simply passes through the turbines to generate clean, renewable energy.

Fact: APGI does not decide who can and cannot withdraw water from the Yadkin River.  That is the federal government’s responsibility.  All water withdrawals in excess of one million gallons per day require FERC approval, regardless of who owns or operates the Yadkin Project.   So even if the State of North Carolina took control of the Yadkin Project, it would be subject to the FERC’s rules and regulations just like it is now.

Fact: The relicensing of the Yadkin Project will not limit the State of North Carolina’s ability in any way to withdraw water from the Yadkin River.  State law gives North Carolina the authority to regulate water use within the Yadkin River, including the right to issue new water withdrawal permits. The State has already issued an interbasin transfer permit to Concord-Kannapolis for 10 million gallons per day. And the State of North Carolina can go straight to FERC for any request to withdraw water – it does not need APGI’s consent to do so. This ensures that North Carolina will always have access to water from the Yadkin River regardless of who owns and operates the project.

Fact: Ownership of the project has no bearing on the State’s control over the waters of the Yadkin.  Proponents of the bill have asked what will happen if the Chinese take over the Yadkin Project via ownership of Alcoa. “Any” owner is subject to the laws of North Carolina and the United States.

Fact: The State Trust bill includes a list of benefits that are, in fact, a recitation of enhancements that APGI has already outlined in the Relicensing Settlement Agreement.  Stronger drought protection, improved water quality and these other issues are already guaranteed by the settlement agreement.

RECAPTURE ISSUES

Fact: Despite claims to the contrary, the original license for the Yadkin Project was not granted to Alcoa in exchange for a promise of jobs.  Although there were comments in the Hearing Examiner’s report from the 1958 license that referenced the jobs as it related to the length of the license, there was no requirement for jobs in the 1958 license.

Fact: Proponents of this bill claim they can acquire the Yadkin Project through “recapture” at a cost of $25 million to the state.  The State cannot recapture the Yadkin Project, period, because the deadline has passed.  Under federal law, the time for “recapture” passed nearly three years ago.

Fact: After a comprehensive and lengthy environmental review process, a Final Environmental Impact Statement (EIS) for the Yadkin Project was issued in April 2008 by FERC.  FERC staff concluded in the Final EIS that a federal takeover of the Yadkin Project was not a reasonable alternative and said it would not be considered further. 

Fact: No project regulated by FERC has been taken over by FERC in the 89-year history of the Federal Power Act.

Fact: Even if recapture were still an option, it would cost much more than $25 million.  The Federal Power Act specifically calls for reimbursement to APGI for net investment, plus severance damages. Since a recapture has never occurred before, there is no precedent for what those severance damages would include, but APGI believes the severance damages inflicted by a takeover to be significant. What we do know is that that the state would need to invest $200 million to upgrade and modernize the dams, as well as the cost of a takeover. 

Fact: Given the capital cost expenditures required to make the required upgrades and modernization for the project, the State of North Carolina would operate at a negative cash flow for many years into the future, meaning it would have to borrow additional funds to pay operating and maintenance expenses during those years.

Fact: We believe the only way for the State of North Carolina to acquire the Yadkin Project today is through condemnation – a taking. That would require the State to pay Fair Market Value, which APGI estimates at more than $500 million. And it sets a precedent that North Carolina should never consider – that if the State sees a benefit in your business, it will take it for its own use.

Fact: Should the State take over APGI’s hydroelectric generation process, it will find itself involved in a highly complex engineering and business operation, including the daily trading of electricity for which it is not prepared.

ENVIRONMENTAL FACTS

Fact: Twenty-three stakeholders, including environmental groups such as American Rivers, The Nature Conservancy and the Land Trust of Central North Carolina support the relicensing of the Project to APGI. The bill’s claims that the State can better provide for the environmental protections of the river than APGI are not valid.

Fact: This State Trust bill says it will “Conduct environmental testing and assessment of all properties located in Stanly County currently or formerly owned and operated by Alcoa Power Generating Inc., or Alcoa Inc., and its subsidiaries, in order to evaluate danger to public health or the environment.”  Alcoa has been working alongside state and federal officials since the 1980s to identify, investigate and remediate waste sites associated with its Badin Works plant.  This work is being done under the close supervision of the N.C. Department of Environmental and Natural Resources, Division of Waste Management.  Studies show — and the State of North Carolina has agreed — that there is no threat to human health or the environment and that no further action is necessary for these sites at this time.  A plan for additional remediation and/or ongoing monitoring is currently being reviewed by state officials. 

Fact: Alcoa has a permanent legal responsibility to responsibly manage all waste associated with the Badin Works plant.  Neither Stanly County nor the State will ever have to spend a dime if further remediation is needed.  

Fact: Stanly County has speculated that additional waste sites may exist.  Alcoa has investigated every suspected waste site provided by Stanly County in conjunction with State or County officials.  In each instance, the sites had already been identified and were being managed; no evidence of waste was found; or issues associated with the site were resolved.  Data on all waste sites has been provided to the N.C. Department of Environment & Natural Resources.

Fact: This Trust bill sets a standard for Alcoa that is higher than what the State asks of every other company in North Carolina managing waste sites. It asks that these sites be “remediated to levels over and above the level that would be required under current law.”   If the state wants to see remediation levels changed, it should change its laws for the entire state – not single out one company.