Renowned Economist, Michael Shuman concludes that if the state received the standard 50-year federal license to operate hydroelectric facilities on the river, and implemented proper oversight of them, the setup can result in more than $1.2 billion in additional state revenues, and the creation and addition of 14,000-75,000 jobs.
That prediction has enormous promise for North Carolina. If fulfilled, it can transform the region into an economic powerhouse by allowing citizens to capture water rights to the Yadkin that have been denied them for more than a half century.
Back in 1958, Alcoa received a free, exclusive license granted by FERC to operate and profit from operation of hydroelectric facilities on the Yadkin River. In return for monopolizing the water rights, Alcoa promised aluminum manufacturing jobs for Stanly County for years to come from a smelting operation headquartered in Stanly County, NC.
But when the license came up for renewal in 2008, that smelter had been closed, and there had been many complaints about the water quality from the operation of what was now known as the Yadkin Hydroelectric Project. Yet, Alcoa proceeded to try to renew its license for the Project by obtaining the needed 401 Water Quality Certification through a review by the North Carolina Department of Environment and Natural Resources (NCDENR).
Yadkin Riverkeeper and Stanly County Commissioners challenged Alcoa’s Water Quality Certification and in stunning reversal, NC DENR revoked Alcoa’s 401 Water Quality Certification. During litigation, internal Alcoa documents were uncovered in discovery and presented into evidence, detailing Alcoa’s intentions to withhold information in Alcoa’s 401 Water Quality Certification and its non-compliance with dissolved oxygen standards, critical to the rivers health. The national organization, River Network, ranked YRK’s courtroom battle and ultimate court victory as one of the top national river victories in 2010. Alcoa appealed the decision but after two years, the company recently dropped its appeal allowing proponents to continue the fight for public recapture. Alcoa has since reapplied for another 401 Water Quality Certification (with no penalty for falsifying Dissolved Oxygen Data on its last 401), it needs to receive the 50 year license.
As the standoff continued, Central Park NC wanted to specifically quantify the key benefits for North Carolina should the state recapture the river’s water rights as part of its arguments to support this process. To accomplish that goal, it enlisted Shuman, who serves as the director for research and development for the Business Alliance for Local Living Economies (BALLE), the director of research for Cutting Edge Capital and a fellow of the Post Carbon Institute. He has led several community-based economic-development efforts nationwide. His study cited the many economic advantages North Carolina will receive it the state and not Alcoa capture the Yadkin’s water rights.
“The main benefit of state management is that it would keep 100 percent of the project revenue circulating in the state economy,” Shuman writes. According to the report, currently 58 cents of every dollar Alcoa generates in revenue through the Yadkin River leaves North Carolina. Based on that figure, under state management, North Carolina could gain approximately $18 million in net revenue per year by recapturing the Yadkin Hydroelectric Project.
Looking at the long view, Shuman claims that “Over the 50-year lifetime of a new license, North Carolina would retain $905 million by recapture that otherwise would have been lost under Alcoa.” That means an additional $734 million will be remaining in the state’s economy. If the price of electricity rises at the same rate it has during the last decade, additional money remaining in the state could grow to more than $1.2 billion, under Shuman’s estimates which are based entirely on Alcoa’s data.
Shuman adds that state management could serve as an incentive for companies to move to North Carolina or expand operations within the state. He compared what has been accomplished in New York, which has recaptured its water rights and created the New York Power Authority (NYPA) to oversee its hydroelectric production, and the economic development programs that resulted from the low-cost electricity it offers. “If North Carolina could replicate NYPA’s success rate at generating jobs, another 14,000 to 75,000 jobs would be possible,” he writes.
This has major implications for North Carolina. “As of July 2012, the state had the sixth highest unemployment rate in the country, and the region’s unemployment rate was above the state average,” Shuman writes. The influx of expected jobs from recapture would provide a notable effect on lessening that situation.
As for potential environmental benefits, Shuman notes that “While these cannot be easily monetized, we believe that the benefits from greater state influence over the flow of the Yadkin River are significant. Some have called water ‘tomorrow’s oil’ and claimed that scarce water supplies might be more valuable to society in the future than electricity generated from the same water.”
Should Alcoa retain the license for operations of the hydroelectric project, Shuman notes, “The most significant economic disadvantage to North Carolina is that the situation effectively maximizes economic leakage out of the state. That is, except for the relatively small expenditure of $350,000 for community donations (from Alcoa), it is hard to imagine another management alternative that would remove more money and potential economic-multiplier benefits for the state.”
As long as the Yadkin Hydroelectric Project remains in the hands of Alcoa, the use of its power for state-directed economic development purposes and guarantee that the river will serve the water needs of the state rather than be diverted for the company’s cannot occur. Shuman finds the latter element of control particularly disturbing. “Why should the public have to pay a private company to buy back its own water when, if it holds the license, it can make these diversions for free?” he asks.
Shuman concludes that the decision of who should own water rights to the Yadkin favor the state of North Carolina based on current data. “There may be countervailing reasons why FERC believes North Carolina is unqualified to assume the license, but only in a full, open relicensing can these be critically evaluated,” he writes. “For now, the evidence at hand convincingly shows that it would clearly be in the interest of North Carolina’s residents for FERC to recommend recapture of the Yadkin River license to Congress, as requested by former Governor Beverley Perdue.”