In the battle for control of the Yadkin River, Alcoa sustained a major setback in early December when the state Division of Water Quality revoked a critical permit it had issued in 2009, saying Alcoa had withheld important information about its operations on the Yadkin. (For background, see our cover story, "Give back the Yadkin, dammit," Nov. 18, 2009.)
"[Alcoa's] application and its supporting information were incorrect through intentional withholding of information material to" whether the dams could ever meet the permit standards, DWQ Director Colleen Sullins said in a revocation letter sent to Alcoa Power Generating Inc., a subsidiary of the giant worldwide corporation.
The permit, known as a 401 water quality certification, was based on Alcoa's assurances of improved performance at its four very profitable hydroelectric dams, built long ago to supply power to a giant smelting plant in Stanly County that shut down in 2007.
Without the state permit, Alcoa cannot be relicensed by the federal government to continue operating the dams.
Alcoa has operated three of the dams for the last 90 years under a license originally issued when the Federal Water Power Act was enacted in 1920. With no objection from the state, the Federal Energy Regulatory Commission (FERC) renewed the license for 50 years—and a fourth dam—in 1958.
With the federal license now expired, however, and the Alcoa smelter closed, a coalition of state and local officials and the nonprofit Yadkin Riverkeeper have called on FERC to deny Alcoa's application for yet another 50-year renewal. They argue that Alcoa's right to control and profit from the river was predicated on its continuing to employ hundreds of people at the plant.
No jobs, no license, they say.
Alcoa, on the other hand, insists that it has a vested right to the dams because it built them—and FERC has never failed to renew a licensee.
Under the proposed state legislation backed by Gov. Bev Perdue and Stanly County, though, the General Assembly would create a Yadkin River Trust Authority to assume the license and take over the dams if the FERC ruling goes their way. Under the never-exercised recapture section of the federal statute, Aloca would be entitled to compensation for its net investment in the dams only, not their much greater fair-market value.
The fair-market value of the dams, according to Alcoa, is in the hundreds of millions of dollars, based on the profits produced from the sale of generated electricity. By contrast, the net investment value—essentially the depreciated value of Alcoa's equipment—was estimated by the company's subsidiary at about $25 million a few years ago. Since then, Alcoa's additional investments in new turbines, designed to meet the 401 water quality standards, have pushed that figure into the $100 million range, according to both the company and Stanly County Manager Andy Lucas.
Were FERC to strip Alcoa's license under the terms of the proposed state legislation, Lucas says, the newly created Yadkin trust authority would be empowered to issue revenue bonds sufficient to pay off Alcoa. The profits to the authority from electricity sales would far exceed the amount needed to back the bonds.
DWQ's revocation abruptly ended the case before a state administrative law judge over whether the 401 permit was properly issued in the first place. The judge had stayed the permit while he took testimony from Alcoa officials and anti-Alcoa witnesses called by Stanly County and the Yadkin Riverkeeper. In the course of the testimony, internal e-mails from Alcoa surfaced indicating that what company officials were telling DWQ wasn't necessarily so.
The issue was whether the new, aerated turbines Alcoa was installing would definitely solve the problem of low dissolved oxygen levels in the water being released (the "tailwaters") from two of its dams. A string of Alcoa e-mails indicated they might not. One, written by company official Gene Ellis, nonetheless counseled against telling DWQ. "If we even begin to suggest to DWQ that [the new equipment] may not allow those tailwaters to meet state standards, Ellis advised, "DWQ can't issue us a 401." His advice: Get the permit, and if the turbines don't work, negotiate with DWQ about "next steps."
Alcoa has 60 days to challenge the revocation, or it can start the 401 application process again. Rick Bowen, the Alcoa official in charge of its hydropower operations, said the company will challenge the ruling, calling it neither justified nor appropriate. "No material information was withheld," Bowen said in a statement.
The same equipment is widely used in other locations, Bowen said, and in fact dissolved-oxygen levels have been improving since last year when it was installed on the Yadkin.