Water Resource Committee votes against government takeover

Great news: The House Water Resource and Infrastructure Committee just voted 8-6 against allowing Senate Bill 967 to move forward. Thanks to everyone who helped make it happen. More to come soon...

Report from the NC General Assembly

I was back at the N.C. General Assembly again this week for another meeting of the N.C. House Water Resources Committee on Tuesday. The meeting was designed to give committee members an opportunity to ask questions about Senate Bill 967, a bill that would authorize North Carolina to take over Alcoa’s privately-owned hydroelectric business along the Yadkin River.

A couple of highlights worth sharing:

1. Faison Hicks, a lawyer with the N.C. Attorney General’s office who has been involved in Gov. Perdue’s push for a government takeover, acknowledged that it is impossible to know what a government takeover of the Yadkin Project would cost. Alcoa believes a takeover will cost North Carolina more than $500 million.

2. When pressed about why the legislature needed to pass Senate Bill 967 this year – without knowing the potential price tag associated with it – Mr. Hicks said it wasn’t necessary to pass this legislation for the state to continue its pursuit of a takeover. He said the state can continue its efforts at the federal level regardless of whether this bill is approved or not.

3. Richard Whisnant, a professor with the UNC School of Government who has extensively studied water issues in North Carolina, acknowledged that control of the water in the Yadkin River will still be subject to federal regulation even if North Carolina succeeds in taking over the Yadkin Project.

Committee members asked a lot of thoughtful and probing questions that underscore the complexity and uncertainty of a government takeover and the associated cost for North Carolina.

One member asked whether a takeover of the Yadkin Project would be a pilot project that could ultimately lead to a state takeover of other privately-owned hydro projects, such as those operated by Duke Energy and Progress Energy. “I don’t know,” Mr. Hicks said.

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.

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.

Alcoa vows to fight efforts to seize privately-owned business

I wanted to share with you the following press release that was was issued this morning:

Alcoa vows to fight efforts to seize privately-owned business

Proposed bill in the N.C. General Assembly would forcibly seize hydropower business along the Yadkin River, costing taxpayers hundreds of millions of dollars

BADIN, NC (MARCH 26, 2009) – Alcoa Power Generating Inc. (APGI) said today that efforts by elected officials in North Carolina to forcibly seize its privately-owned hydropower business would cost North Carolina taxpayers hundreds of millions of dollars and harm the state’s “business friendly” reputation.

Sen. Fletcher L. Hartsell, Jr. introduced a bill (SB 967) Wednesday that sets up a State Trust that would allow the State of North Carolina to take the Yadkin Hydroelectric Project, a privately-owned business along the Yadkin River in central North Carolina that generates clean, renewable energy.  Taking the Yadkin Project would cost North Carolina taxpayers hundreds of millions of dollars, including $240 million in required expenses to improve water quality and maintain and upgrade the dams and powerhouses. 

“This has absolutely nothing to do with protecting North Carolina’s water.  It has everything to do with the government trying to take a privately-owned business for its own benefit,” said Gene Ellis, licensing and property manager for APGI.  “It’s a bad idea and sets a dangerous precedent for other North Carolina businesses.  We will fight it.”   

Beginning in 1915, Alcoa invested $80 million in private money to purchase more than 38,000 acres of land along the Yadkin River and develop four dams and powerhouses without any government aid or assistance.  The project led to the development of four reservoirs, including Badin Lake and High Rock Lake, that have been a strong economic asset to the region.  APGI has operated the Yadkin Project under a federal license since 1958; that license is now up for renewal.

“There are established state and federal processes for relicensing hydroelectric projects and Alcoa has played by the rules,” Ellis explained.  “Since 2002, we have pursued a new hydropower license through proper channels and with the active involvement of state agencies, local governments and the residents who live in nearby communities.  There are 22 privately-owned hydropower projects in North Carolina and this project should not be treated any differently – or held to a different standard – than other business in this state.”

A public opinion poll conducted by McLaughlin & Associates last year found that 71 percent of North Carolina voters oppose the idea of spending taxpayer money to take the Yadkin Project.  Only 10% favored spending millions to take over the business. By a 2-to-1 margin, voters believed that a government takeover is a violation of private property rights.

Sen. Hartsell previously said that he had no interest in taking the Yadkin Project under any circumstances.  While discussing a proposed study bill related to the Yadkin Project relicensing in a House Judiciary committee meeting on July 15, 2008, Sen. Hartsell said: “I want to say upfront and unequivocally that this bill is not, never was and is never intended to be a taking of any sort under any circumstances for anything. Period.”

The introduction of SB 967 represents a dramatic departure from Sen. Hartsell’s earlier comments. 

Albemarle Mayor Whit Whitley and others are concerned that efforts to take control of a private business is bad for North Carolina’s “business friendly” reputation and may make it more difficult to recruit companies who are thinking about doing business here.

“Why is this issue even on the table?” Mayor Whitley wrote in a March 2 letter to Gov. Perdue. “The only true consideration is greed, and I am appalled that the state of North Carolina is buying into this type of thinking.” 

“Greed for the ownership of Alcoa's land around the lakes and greed for the revenue that the dams produce are not in the long-term best interest of the county or the state and certainly not in the best interest of the free enterprise system.”

North Carolina already controls water rights in the Yadkin River

APGI does not control access to the water in the Yadkin River, and 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.  This ensures that North Carolina will always have access to water from the Yadkin River.

Established North Carolina law provides riparian water rights that ensure property owners along a river have a legal right to access and use the water running across their property.  APGI owns more than 38,000 acres along the Yadkin River and uses the water that runs across its property to generate clean, renewable energy – without consuming the water as it flows downs the river. 

North Carolina state agencies were actively involved in the Yadkin Project relicensing

North Carolina’s interests have been well represented during the relicensing process and will be well protected when APGI receives a new license.  The N.C. Dept. of Environment & Natural Resources and the N.C. Wildlife Resources Commission have been actively involved in the relicensing process since 2002.  Both agencies helped negotiate a relicensing agreement that will improve water quality in the Yadkin River, allow for increased water withdrawals by local municipalities, better protect the water supply during drought, provide for long-term land protection and create new recreation opportunities for North Carolina residents. 

Widespread support for Alcoa Power Generating Inc.

There is widespread support for issuing a new federal hydropower license for the Yadkin Project.  The relicensing agreement has been signed by 23 organizations, including two municipalities in Stanly County.  The City of Albemarle is the largest municipality in Stanly County and one of the largest water users along the Yadkin River, and the Town of Badin is home to the Yadkin Project and represents the community most impacted by curtailment of the Badin Works plant.  Both municipalities strongly support the relicensing.  

Other supporters include state and federal agencies, environmental interest groups, and local homeowners, business groups and recreational users.

Additional Background Information

Learn more about the Yadkin Hydroelectric Project at www.alcoafacts.com and http://yadkinproject.blogspot.com.