The Yadkin, the state's
second largest river (only the Cape Fear is bigger), is a gentle giant as it
traverses the northwest foothills from Wilkesboro to Elkin to Pilot Mountain
State Park in Surry County. From there, it turns south toward Salisbury,
gathering size and force from its various tributaries until, passing the
Uwharrie mountain range, it's squeezed from 1,000 feet wide to less than 100
feet in the gorge known as "the Narrows." Over a 38-mile stretch from above High
Rock Mountain to just below the Narrows, the Yadkin falls almost 400 feet in
elevation, further concentrating its power.
"The Yadkin is enormous," says Dean Naujoks, the Yadkin Riverkeeper. "It is
unbelievable what a resource it is, and nobody's ever paid much attention to it.
I call it the forgotten river."
The reason it's forgotten is that the Yadkin's powerundefinedthe power of its falling
waterundefinedwas tied up almost a century ago by Alcoa, then called the Aluminum
Company of America. Alcoa built three dams in the early 20th century, and a
fourth in 1962, and used them to generate electricity for a massive aluminum
smelting plant in the little Stanly County town of Badin. (See "Timeline: Alcoa on the Yadkin")
The Yadkin's power, Alcoa's critics say, could have been used to supply
electricity to 170,000 homes or to small manufacturers that might've come to the
area if Alcoa's smelter hadn't. Instead, all the power went to a single plant
that once employed about a thousand workers but recently had a workforce of just
400 to 500.
And today, even that one plant sits empty: Alcoa closed it in 2007
("curtailed it," the company says), sending its jobs to newer facilities abroad.
Indeed, the name Alcoa is no longer an acronym for an American company. It is
instead a global brand for a firm that makes aluminum in Iceland, Brazil or
wherever it's most efficient to do so. But not in North Carolina.
Nonetheless, Alcoa retains control of the Yadkin and is seeking a 50-year
renewal of its operating license, which expired last year. With its smelter shut
down, it sells the electricity to wholesalers or "the grid." Most of the power
ends up in other states, the company reports. The revenues, minus payroll for a
skeletal workforce of about three dozen in North Carolina, belong to an Alcoa
power subsidiary based in Tennessee. The profits are distributed worldwide.
Click for larger image • Alcoa mothballed the giant
smelting plant in Badin two years ago, but it continues to run four
hydroelectric dams on the Yadkin under a federal license that may not be
renewed.
Photo by D.L. Anderson
|
Stanly County's leaders think there's something wrong with that picture. They
want the Yadkin, a public resource, to work for the region, not Alcoa. Over the
last year, they've persuaded top state officials, including Gov. Bev Perdue,
that Alcoa should go.
A key ally in their battle is Keith Crisco, who owned a manufacturing
business in Asheboro and was a leader in the anti-Alcoa movement before Perdue
appointed him secretary of commerce this year. Now Crisco heads up the state's
campaign to block Alcoa's relicensing, saying the company has stiffed the local
economy and dragged its feet on environmental issues.
"Not only does APGI [the Alcoa subsidiary] not offer the benefits that were a
quid pro quo for the state's support of its initial license," Crisco says in the
Perdue administration's 21st Century Plan for the Yadkin, "but it produces harm
in that it does virtually nothing to address the water quality needs or the
economic or recreational needs of the region."
"It's almost as if it's Venezuela," Alcoa spokesman Kevin Lowery retorts. The
company maintains that the license is Alcoa's property, and the state's effort
to take it is akin to President Hugo Chavez nationalizing his country's oil
industry.
Yadkin Riverkeeper Naujoks is on Stanly County's side. He accuses Alcoa of
exploiting the Yadkin for profit while leaving the region with "a toxic legacy"
of cancer-causing PCBsundefinedpolychlorinated biphenylsundefinedand other contaminants from the
smelter. The extent of the damage is not yet understood, he maintains, because
neither Alcoa nor state environmental regulators have thoroughly investigated
it.
Naujoks likens the situation in Badin to the investigation of PCB pollution
in Wake County's Crabtree Creek, with which he was involved when he was the
Upper Neuse Riverkeeper. Those contaminants originated miles away, at the old
Ward Transformer plant. "Once they started digging, they just kept finding more
and more problems farther and farther out," Naujoks says.
Click for larger image • Yadkin Riverkeeper Dean
Naujoks, on a boat at Badin Lake, is among Alcoa's biggest
critics.
Photo by D.L. Anderson
|
On a damp October day, Naujoks has come to Badin for a ride on Jimmy Dick's
pontoon boat and to help him make the case against relicensing Alcoa. Dick, a
university professor who grew up near Badin and returned after his retirement,
is a more vociferous critic of Alcoa than even Naujoks. He vies for the title of
biggest Alcoa critic with his brother, Roger Dick, president of a community bank
company and the force behind the anti-Alcoa campaign, who thinks the Yadkin is
worth billions to the local economy as a source of cheap hydroelectric power,
and even more to the state as a future source of drinking water.
Steering his boat on Badin Lake in front of the hulking smelter, Jimmy Dick
recounts how in 1958, when Alcoa last came up for license renewal, the company
argued that it needed the maximum allowable term of 50 years to ensure it could
recoup its planned investments in a fourth dam and in doubling the smelter's
capacity. In a legal brief, the company noted that the license was subject to
"recapture" when it expired, at which point "the management of Carolina Aluminum
could not rely on any assured source of power" for the plant.
The point, Jimmy Dick says angrily, is that Alcoa knew half a century ago
that its licenseundefinedwhich he terms a contract, not "property"undefinedwas for a limited
time. Alcoa also knew that it could make big bucks in Badin before the contract
was up. But now, as local leaders try to reclaim the license, he says, Alcoa
acts like it owns the river and should be allowed to stay there forever.
As for the pollution issues, Dick worked at the plant when he was young, as
did his father and grandfather. Everyone saw the dumping, only no one knew of
the environmental consequences. Regardless of the pollution, he says, if the
plant were still operating, "no one would be challenging the license." But when
Alcoa gave up on the plant, Dick says, it gave up its rights on the river.
"It was a contract," Dick shouts over the wind and his pontoon's engine.
"They got their 50 years with our public resource, and the benefit to the public
was the jobs. But now the jobs are gone, and the contract's finished, and we
want our resource back. So, Alcoa, get the hell out."
If it sounds like Alcoa's done for, however,
it isn't. Because under the Federal Power Act, the decision about who controls
the Yadkin isn't up to the state but the five-member Federal Energy Regulatory
Commission (FERC) in Washington. And ultimately, it's up to Congress.
According to a FERC spokesman, not once since the act became law in 1920 has
the commission done what the state is asking it to do: reject a license holder's
renewal application while also recommendingundefinedas the law requiresundefinedthat Congress
pass a bill to allow FERC to award the license to someone elseundefinedin this case, a
state water authority that doesn't exist yet.
Recapture, as this process is called, is a cumbersome process. Deliberately
so, historians say, since many in the 1920 Congress wanted to bestow control of
the nation's rivers to private companies, with no strings attached. Still,
recapture is in the law to assure that the license holder, among all contenders,
is best able to achieve a river's various "beneficial public uses."
Crisco argues that recapture is justified in Alcoa's case. In a Sept. 8
filing to FERC, he says the state doesn't relish fighting with a major
corporation and remains "business-friendly." But Alcoa's "failure to contribute
in any manner to the economic health and well-being of North Carolina" leaves
the state no choice but to step in and try to redirect the profits from the
Yadkin to the region's economic development and water quality needs.
In a heated response filed with FERC Oct. 9, Alcoa's Washington lawyer called
the Perdue administration's challenge "an amalgamation of factual misstatements
and legal arguments that are inventive in the extreme."
The lawyer, David Poe, asked FERC to dismiss it and immediately renew Alcoa's
license without offering Gov. Perdue a chance to appear before the commission,
as Perdue requested.
Perdue's aides say they don't expect any action from FERC until next year,
after a dispute over whether Alcoa qualifies for a clean water certificate from
the state is settled. Until FERC rules, Alcoa can operate with a temporary
license. (See "The long and circuitous path to license renewal")
While those battles continue, Alcoa is in Raleigh battling a bill in the
General Assembly (Senate Bill 967) that would create a Yadkin River Trust
Authority to assume Alcoa's license. The bill sailed through the Senate this
year with bipartisan support, but failed in the House just before the session
ended, when Alcoa's team of lobbyists went on the attack, convincing
conservative legislators and some progressives that Alcoa's property rights were
under assault.
The bill remains alive for the 2010 short session, however, and Crisco is
confident it will pass.
The five lobbyists Alcoa sent to the House only hinted at the huge amount of
money at stake for the company and, on the other side, for the Yadkin region.
Together, Alcoa's dams, powerhouses and generators can produce 215 megawatts of
electricity, the equivalent of a small coal-burning plant or about one-fourth
the power of the 900-megawatt Shearon Harris nuclear reactor in Wake County. The
Yadkin Project, as it's known, annually produces about one-seventh of the power
of Shearon Harris, according to public records.
In short, Alcoa's dams are worth hundreds of millions, if not billions, of
dollars (estimates of the cost for another nuclear reactor at Shearon Harris
start at $8 billion), far more than they cost to build and maintain over the
years. That's because a hydropower plant, unlike a coal or nuclear facility, is
cheap to install, easy to operate, and the "fuel"undefinedthe water from the Yadkinundefinedis
essentially free.
Once the dams are constructed, the water behind them is dropped down
passageways onto turbines that power the generatorsundefinedwith the amount of generated
power dependent on how far the water falls.
Under the Federal Power Act, if Alcoa lost its license, it would be entitled
to compensation for its property but not the "fair market value" if it were to
sell, for example, to a public utility like Duke Energy. Instead, the law
requires compensation to be calculated using a formula based on a company's net
investment: the cost to build, minus depreciation. Until recently, when Alcoa
started spending money on turbine upgrades, its net investment in the Yadkin
Project was just $24 million, according to FERC records.
In a small administrative building next to the idled smelting plant, Gene
Ellis, who is leading Alcoa's relicensing efforts, says that anything less than
full market value as compensation would amount to an unconstitutional "taking"
of Alcoa's property, notwithstanding the formula in the license agreement.
Ellis says that with the turbine upgrades, Alcoa's net investment is now $91
million. But he maintains that in a recapture, the company would also be
entitled to "severance payments" based on the amount of its lost future
earnings, which could amount to hundreds of millions of dollars more.
Severance, he concedes, isn't defined in the law; nor is it part of the
compensation formula. The state doesn't buy Ellis' severance definition, and it
estimates in its filings to FERC that the license can be recaptured for $150
million tops, including the cost of deferred maintenance that Alcoa didn't
count.
The state estimates that the Yadkin River Trust would earn at least $20
million a year on the power plantsundefinedat current revenue levels of about $40
million annuallyundefinedand more when acquisition costs are repaid.
And if electricity rates increase, so would the profits.
To Ellis, the debate over compensation is moot since he believes that APGI
(the Alcoa subsidiary) is entitled to a new license, regardless of the state's
objections.
Alcoa's license to generate power on the Yadkin was never predicated on
keeping the smelting plant running, he says. Rather, it was given and should be
renewed based on Alcoa's ability to keep the power plants operating, while also
being "a good steward" of the river. That it's done, he maintains, by creating
some 23,000 acres of recreational lakes and reservoirs (mainly the sprawling
High Rock Lake and Badin Lake, the small but very deep (almost 200 feet)
impoundment behind the Narrows Dam) and by donating land to various parks,
including Morrow Mountain State Park and the Uwharrie National Forest.
Alcoa owns an additional 15,000 acres of timberland, Ellis says. As part of
its relicensing application, it negotiated with local stakeholders for their
support, pledging to donate 1,442 acres to various jurisdictions if the
application is approved.
The fact that 23 public and civic organizations signed on as supporters,
Ellis says, "shows that the public interest is being served."
Ellis concedes that the smelting plant, like
most industrial plants of its vintage, polluted for most of its history. "Before
modern- day environmental regulations, everybody used the 'Back 40' to get rid
of their waste byproducts," he says, and, like the rest, Alcoa dumped. Waste
oils, PCBs and PAHs (polycyclic aromatic hydrocarbons): They all were poured on
the ground, into a lagoon next to the plant or into the town dump, he
admits.
Ellis shows a visitor around the plant site, pointing out the many places
where Alcoa removed soil, sealed its pollution with clay, and drilled test wells
that demonstrate, he says, that no contaminants are leaching into the aquifer or
the lake.
Stanly County contested that position when the company applied to the state
for a 401 water quality certificate for the Yadkin Project. The application
(and, ordinarily, its approval) is a required step in the FERC licensing
process.
The county commissioned a study of pollutants in Badin Lake by Dr. John
Rogers, a Clemson University professor and ecotoxicologist who co-directs
Clemson's environmental institute. Rogers found evidence of a "relationship"
between the kinds of PCBs he found in the lake's sediments and material used in
the smelterundefinednear the plant itself, he reported, the relevant concentrations were
10 to 100 times greater than in other places.
Alcoa disputed Rogers' findings, saying the PCBs in the lake were commonplace
in industry and could've originated elsewhere. In any event, the state Division
of Water Quality, part of the Department of Environment and Natural Resources,
limited its 401 review to impacts from Alcoa's generating facilities, steering
clear of the smelter's problems.
Ellis says that was the correct call because the certificate is for the power
plants, not the smelter. Moreover, if pollution is traced to the smelter, Alcoa
will be required to clean it up, regardless of what happens to the power
license.
After that, however, the situation got murky. DWQ approved the 401 permit,
but with a requirement that before it was issued, Alcoa must post a $240 million
bond to ensure that it will make necessary improvements to the turbines in the
power plants. The old ones are reducing dissolved oxygen levels in the river,
impairing water quality for the fish. Alcoa didn't dispute the need, but neither
did it post the bond. Instead, it appealed the requirement as exceeding the
division's authority. Stanly County and Naujoks, the riverkeeper, also appealed,
and, in September, an administrative law judge sided with them and blocked DWQ
from issuing Alcoa the permit pending a hearing, probably in February.
Interestingly, the governor's office sided with the county and Naujoks
against its own state agency.
Meanwhile, the state Division of Public Health, a unit of the Department of
Health and Human Services, posted a fish consumption advisory for Badin Lake
because of the elevated levels of PCBs and mercury. Most people should limit
themselves to one meal per week of largemouth bass and catfish caught there, it
said. Pregnant women and children under 15 shouldn't eat any.
Alcoa tried unsuccessfully to block the posting.
Click for larger image • Alcoa fought against the
posting of Fish Consumption Advisory signs along the shores of Badin Lake, where
elevated levels of PCBs have been found and are believed to be related to the
aluminum smelting plant Alcoa operated for 90 years.
Photo by D.L. Anderson |
Naujoks argues that for all of Alcoa's test wells and capping, it hasn't
opened the plant site to an independent assessment of the contamination. He's
challenged Alcoa to do so "and shut us up." Ellis says it's not necessary. The
Division of Water Quality has certified that Badin Lake is safe for swimming, he
noted. And the Division of Waste Management, another unit in DENR, found that
wherever the PCBs came from, they pose no threat to human health.
Whether any of this will matter to FERC isn't clear. Ellis says it won't,
because there's no link between the power plants and the pollution in Badin
Lake. The state, however, cites the 401 dispute and the fish advisory in a
section of its filing to FERC titled "Environmental Degradation of Yadkin Water
Quality Remains a Public Concern."
"Regrettably," Secretary Crisco says, "the more recent history of this
licensee fails to demonstrate that the State can rely on the licensee's concern
for the State's well-being."
Click for larger image • Jimmy Dick, a retired
University of South Carolina professor, is back in his native Stanly County,
fighting Alcoa's bid to remain on the Yadkin.
Photo by D.L. Anderson |
Roger Dick, Jimmy's brother, is an unusual sort of
banker, the kind who talks passionately about economics on a human scale; about
ethical, socially responsible businesses; about how Ronald Reagan led us astray
with his thoughtless support of free trade; and about how cool it is that
Pittsboro has a currency based on barter. A liberal Democrat? No. Roger Dick,
like his brother and most of Stanly County's leading citizens, is a
free-enterprise Republicanundefinedone with a strong distaste for monopolies.
Dick is president of Uwharrie Capital Corporation, a holding company for a
trio of community banks in Stanly, Anson and Cabarrus counties whose mission, he
says, is to "restart the local economy" after a long period of stagnation. Its
annual report comes with a "Shop Local" refrigerator magnet. The home office is
a converted department store in downtown Albemarle, the Stanly County seat.
The Uwharrie stretch of the Yadkin, Dick says, was always remote and poor, a
place with rocky soils and a river whose banks were too steep to locate a
textile mill. But the Yadkin holds a tremendous amount of water and power, both
of which can mean jobs for the regionundefinedbut not if Alcoa's in charge.
Alcoa started to shut down the smelter in 2002, the same year it began its
relicensing process under the Federal Power Act. Dick says he sat down at the
table with Alcoa, expecting it would cut a deal to retain its license in return
for sharing its power revenues with the community, both for economic development
and pollution cleanup. But Alcoa offered only cheap timberland, he says, some of
it already clear-cut. That's when he started to read up on the law and its
history.
Originally called the Federal Water Power Act, the 1920 statute capped a
long, bitter fight in Congress over who should be in charge of the nation's
waterways, the people (government) or private companies.
Breakthroughs in dam building and in long-distance electricity transmission
(via alternating current) had made hydropower hugely profitable. Businesses like
Alcoa naturally wanted to control itundefinedwithout government interference, if
possible.
But the conservation movement was also gaining steam, and Presidents Theodore
Roosevelt and Woodrow Wilson fought to keep the nation's rivers as public trusts
and out of the hands of private monopolies. "Keep an eye on the Aluminum Company
that is trying to get control of your water powers," Roosevelt warned in 1915,
when he was out of office. "Don't let go of them."
Five years later, Wilson signed a compromise that gave the federal government
jurisdiction over the rivers (taking it away from the states), but allowed
leases to public or private enterprises for limited periodsundefinedwith "recapture"
permitted when the license expired.
All this is covered in a 1959 book, The Conservation Fight, written by
Judson King, a turn-of-the-century progressive who worked with Roosevelt and
Gifford Pinchot, the famed forester, among others.
Wilson, according to King, worried that the recapture clause in the law was
so diluted and complicated that it would prove unworkable.
Indeed, Roger Dick says, recapture has never been used, but that's somewhat
misleading. The fact is, a number of states where the rivers had big hydropower
potentialundefinedNew York and Washington among themundefinedcreated their own public power
authorities after 1920 and applied to Washington for the licenses, which they
still hold. They then subcontracted with private firms like Alcoa, but under
terms favorable to the states.
Before his election as president, New York Gov. Franklin D. Roosevelt created
the New York State Power Authority in 1931. It still controls the power plant at
Niagara Falls. And in South Carolina, Strom Thurmond learned from FDR and
created the Santee Cooper Authority, still a low-cost hydropower generator for
that state.
But in North Carolina, Alcoa was already operating on the Yadkin by 1920, and
the state never protected itself. It supported Alcoa's initial bid for licensing
and, when the first license expired in 1958, backed Alcoa's application for a
50-year license based on its promised expansion of the Badin smelter.
Now is the time for North Carolina to rectify its mistake, Dick argues. The
reason recapture is in the law, according to his reading of history, is for
cases such as this, in which the licensee's interests and the public interest
are diametrically opposed.
If the state misses this chance, it won't get another one for 50 years.
Meanwhile, Alcoa will have perfected a perfidious kind of globalism: It still
generates power from the Yadkin, and the power is still linked to industrial
jobsundefinedonly the jobs are in Iceland.
That's the kind of free trade we don't need, Roger Dick says. He thinks the
conditions are rightundefinedweak dollar, available laborundefinedfor local manufacturing to
make a comeback in this country. His banks would love to get behind it. The
Yadkin region would have an advantage, he thinks, if a state or regional
authority could help make cheap electricity available to such start-ups. But it
can't happen as long as Alcoa holds its monopoly.
"If you don't control monopolies," Dick says, "you've just put some poo in
the cogs of a free-market system. Free markets cannot function with monopolies
hanging around."
And when the monopolies are multinational, he says, local enterprises don't
stand a chance against them.
Roger Dick doesn't swear at Alcoa like Jimmy does. He prefers historical
hyperbole. Letting Alcoa control the Yadkin, Roger Dick says, is similar to what
the American colonists rebelled against with the British trading monopolies.
"It's no different than if they hit our beaches toting rifles and with knapsacks
on their backs," he declares. "They're taking our dignity. They're taking our
ability to restart an economy."
But Roger Dick is as irate as his brother when he hears Alcoa's argument that
recapturing the license would be a "taking" of its private property and
therefore unconstitutional.
"Alcoa will say they're not contractually obligated to provide jobs, but it
was certainly morally implied," Roger Dick says. Now, the Perdue administration
is ready to pay them exactly what their licenseundefinedtheir contractundefinedpromised when
they signed it, but that's not good enough for them?
"I'm a free-market capitalist," Roger Dick went on, "I believe good
capitalism is virtuous. I believe when you put people back to work, that's how
you build community. We've got to get back in our society to making things, not
just being the raw material for global capital. Our economy should be serving
our society. But we've got a society serving our economy."