A River of Opportunity: How the Yadkin River Can Provide Wealth and Jobs for North Carolina

This report, by Michael H. Shuman, was prepared by Central Park NC under award 04-8806648 from Economic Development Administration, U.S. Department of Commerce.  The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.

The Z. Smith Reynolds Foundation and the Uwharrie Regional Resources Commission provided additional funding. 

Executive Summary 

In 1958 the Federal Energy Regulatory Commission (FERC) granted a 50-year license to Alcoa to operate four dams and related electrical generation and transmission facilities on the Yadkin River in North Carolina.  This license expired in 2008 but is being renewed annually until a new long-term license is issued.  The Alcoa subsidiary that currently holds the license for the Yadkin Project, Alcoa Power Generating Inc. (APGI), wants to secure such a license but the State of North Carolina has been opposed.  In 2009 Governor Beverly Perdue asked FERC to recommend to Congress federal “recapture” of the license and reissuance to North Carolina.  Another option might be for FERC to reopen its licensing process, and for North Carolina to bid for the license. This paper aims to quantify the potential benefits in job creation and local revenues for the state if it ultimately obtains the Yadkin Project license and facilities.

A conservative assessment of the annual revenue currently collected by APGI shows that 58% -- about $18 million – is spent outside North Carolina.  This is what economists call “leakage,” because dollars that could generate economic-multiplier benefits are instead flowing out of the state economy.  Leakage represents lost jobs, wages, and taxes for North Carolinians. The main benefit of State management is that it would keep 100% of the project revenue multiplying throughout the state economy.

If the price of electricity stays constant, a State-held FERC license would result in $747 million additional dollars (undiscounted) remaining in the state over 50 years.  If the price of electricity rises at the same rate it has for the last decade, additional money coming into the state could grow to $1,214 million.  Refocusing sales on peak demand could enlarge the State’s benefits substantially.

Using public data and a standard economic-development model, IMPLAN, this analysis conservatively shows how transfer of the FERC license to the State of North Carolina would result in 353 to 557 more permanent jobs, $17-28 million in additional labor income each year, and $17-30 million in additional value-added each year.

State management also would allow North Carolina to use the Yadkin Project’s low-cost electricity as an incentive for outside companies to move to North Carolina or local companies to expand production leading to increased job creation in the state, as other states have done.  APGI provides 15 direct jobs in North Carolina under its current FERC license. Were North Carolina to match the track record of New York State Power Authority’s nine incentive programs, the State could create another 14,000-75,000 jobs.  But even if it doesn’t match this record, the State would be able to accomplish more for economic development than APGI would under its more limited purpose of just running the hydroelectric facilities for its own corporate profit. 

The paper suggests additional benefits from State management, though they are difficult to quantify, if it can modify electricity-generation schedules in times of water shortage.  As water becomes increasingly valuable – some call it “tomorrow’s oil” – the State will enjoy more economic and environmental benefits by periodically shifting the Yadkin River from electricity to water-supply purposes. 

The paper concludes by suggesting that the “damages” that the federal government would be obligated to pay APGI in the event of “recapture,” and the reasonable price North Carolina should be expected to pay for the new license to compensate the federal government, should not exceed $25 million.  This is substantially smaller than the sum Alcoa has publicly claimed, because it takes into account the huge expenditures needed to bring the Yadkin Project up to federal and state environmental standards. 

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