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 contacts Gov. Perdue regarding proposed takeover of Yadkin Project

The following letter was delivered to Gov. Perdue today.

April 9, 2009

Dear Governor Perdue:

Alcoa has been doing business in North Carolina for nearly 100 years. We planted roots here in 1915 and have invested our shareholders’ capital to build the hydroelectric dams on the Yadkin River. We continue to contribute millions to the Stanly County economy each year and remain the county’s largest taxpayer.

In light of that background, we are incredibly disappointed that you are pursuing a government takeover of our business in central North Carolina. While we fully respect the State’s right to ensure that high environmental standards are maintained in and around the Yadkin River, it is also important to recognize that the hydroelectric dams were built, maintained, and operated with private funds, not taxpayer money. We would have preferred to discuss this matter personally with you before your decision to seek to use taxpayer dollars to displace that private sector investment.

Over the past six years, we have worked in good faith with the State of North Carolina in the federal relicensing of the Yadkin Project. The State’s interests were well represented during the relicensing process by both the N.C. Department of Environment and Natural Resources and the N.C. Wildlife Resources Commission, both of which signed the relicensing agreement, along with 21 other stakeholders, including American Rivers, The Nature Conservancy and the Land Trust for Central North Carolina.

Alcoa has followed well established state and federal processes from the start, the same processes deployed by Duke Energy and Progress Energy in their relicensing efforts. Your intervention comes as the relicensing process is nearly complete and represents vastly different treatment for Alcoa.

We and our shareholders have invested hundreds of millions of dollars to build these dams without any funding from the State of North Carolina, and we have an obligation to our shareholders to protect that investment. The state has valid and considerable interests in the Yadkin River, and there are a myriad of state and federal laws in place to ensure that North Carolina will continue to control the water there.

As this process moves forward, we hope you will give us the opportunity to talk with you about our concerns. In addition, we hope that the N.C. Division of Water Quality will continue to evaluate our application for a water quality permit for the Yadkin Project based solely on its merits and the precedents previously established by the State. The Yadkin Project should not be held to a different standard than any other hydropower project in North Carolina.

We would appreciate the opportunity to meet with you to further discuss these issues at your earliest convenience and will call your office to seek an appointment. We look forward to discussing this important issue with you in the near future.

Sincerely,


Rick Bowen
President – Energy
Alcoa, Inc.

Cc: The Honorable J. Keith Crisco, Secretary, North Carolina Department of Commerce

The Honorable Dee Freeman, Secretary, North Carolina Department of Environment and Natural Resources

The Honorable Marc Basnight, President Pro Tempore, North Carolina Senate

The Honorable Joe Hackney, Speaker, North Carolina House of Representatives

APGI appeals Badin Lake fish advisory

Alcoa Power Generating Inc. (APGI) filed an appeal Thursday of a Fish Consumption Advisory issued in February by the N.C. Department of Health and Human Services on Badin Lake.  The advisory recommended limits on the amount of largemouth bass and catfish the public should eat from the Lake.

While APGI respects the Department of Health’s duty and desire to protect public health and inform the public of risks, it has appealed the advisory because the State changed its stated evaluation criteria after the study was complete and held Badin Lake to a different standard than other lakes and rivers in North Carolina. 

Specifically, the State has never before issued a fish advisory based on the findings in a single fish with slightly elevated levels, but that’s exactly what it did with largemouth bass in Badin Lake. And, the State has monitored similar levels of chemicals or contamination in fish tissue caught in other waterways in North Carolina, but has not issued a fish advisory in those instances.

The failure to use consistent evaluation criteria calls into question the confidence the public will place in fish advisories issued by the State.

High Point Enterprise: Gov. Perdue's takeover bid is "abuse of authority," represents move toward socialism

The following editorial, published Sunday in the High Point Enterprise, says an effort by Gov. Bev Perdue to take Alcoa's privately-owned hydro project on the Yadkin River is an “abuse of authority,” and represents a move toward socialism.  A government takeover of the dams could cost North Carolina taxpayers $500 million or more.        

High Point Enterprise Editorial | April 5, 2009   

Some among us believe the Obama administration has headed the nation toward socialism with its federal bailouts and takeovers. Move over, Mr. President, let North Carolina Gov. Bev Perdue show you how it's done.

Perdue has decided that the Federal Energy Regulatory Commission should deny a license for Alcoa Power Generating to operate High Rock Lake Dam in Davidson County and three other hydroelectric dams on the Yadkin River. Instead, the governor says, the feds should allow the state of North Carolina to run those hydroelectric plants.

“The waters of the Yadkin River belong to the people of North Carolina,” Perdue says, as she mimics the line that Alcoa's adversaries have been using in opposing renewal of the company's FERC permit.   What Perdue forgets – or ignores – is that while the Yadkin River is public water, the dams and beds of lakes along the Yadkin belong to Alcoa.  The company bought properties to create the lakes and built those dams decades ago. So what Perdue essentially is suggesting is that federal and state governments join forces to exert power and basically confiscate (perhaps the government might pay a pittance) property owned by a private business that produces $44 million worth of electricity annually and let the government operate it.
If this somehow falls short of the definition of socialism, then it surely is gubernatorial abuse of authority.

Certainly it can be argued that Alcoa should do more to clean up the remains of its aluminum smelting plant at Badin that closed a few years ago. It also is fair to require Alcoa to be regulated as any other electric power producer - if, as some Alcoa opponents claim, that is not the case. And it also is reasonable to require the company to work with shoreline property owners regarding lake levels, particularly at High Rock Lake.

But in no way is it proper for the state and federal government to essentially seize the property of this taxpaying business – or any private property – simply because the government thinks it can run it better. 

Alcoa responds to Gov. Perdue’s request to intervene in the federal relicensing of the Yadkin Project

Alcoa Power Generating Inc. issued the following statement in response to a motion filed by N.C. Gov. Bev Perdue today to intervene in the federal relicensing of the Yadkin Hydroelectric Project in central North Carolina: 

The State of North Carolina took an unprecedented step today by pursuing the takeover of a privately-owned business that has roots in North Carolina dating back to 1915.  It’s a move that could ultimately cost North Carolina taxpayers more than $500 million.

Alcoa does business in 34 countries around the world and it’s extremely rare to be faced with a situation where a state government wants to seize one of our businesses and operate it for its own benefit.  Every other business owner in North Carolina should be concerned about the dangerous precedent this action sets.  

Gov. Perdue’s motion to intervene in the federal relicensing of the Yadkin Hydroelectric Project comes more than six years after the federal relicensing process began.  Throughout this process, agencies representing the State of North Carolina have been actively involved and the State’s interests have been well protected.    

Alcoa has invested heavily in the Yadkin Project and will fight to ensure that it receives full value for its property if the State of North Carolina moves forward with this ill-conceived policy.

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