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Senate panel endorses state takeover of Alcoa’s Yadkin operation as lake association supports Alcoa

By Mark Wineka
mwineka@salisburypost.com
Senate Bill 967, which would establish a state trust to own and manage the Yadkin Hydroelectric Project, won the unanimous support Tuesday of the N.C. Senate’s Judiciary II Committee.
The bill now moves to the Senate Finance Committee.
If enacted, the legislation would take the ownership and operation of the hydroelectric project from Alcoa Power Generating Inc.
Both Alcoa representatives and members of the Stanly County Board of Commissioners attended the committee meeting Tuesday when members voted 16-0 in favor of the bill.
The Stanly commissioners endorse the trust concept.
Alcoa representatives testified that efforts to take its hydroelectric business are unnecessary to retain state control of the water.
Alcoa also said it would be expensive for N.C. taxpayers and would damage the state’s business friendly reputation.
Stanly officials released a statement later Tuesday, thanking the committee members for their vote and noting that those favoring the legislation represented both Democrats and Republicans.
They especially thanked Sen. Fletcher L. Hartsell Jr., R-Cabarrus, who handled the bill in committee “and articulated our goal of returning the waters of the Yadkin to the people of North Carolina.”
“This widespread, overwhelming support indicates legislators’ faith that the trust best addresses water control, job creation and environmental cleanup for the Yadkin Hydroelectric Project,” the commissioners said.
The hydroelectric project covers a 38-mile stretch of the Yadkin River and includes powerhouses and dams at the High Rock, Tuckertown, Narrows and Falls reservoirs in Stanly, Davidson, Rowan and Montgomery counties.
Meanwhile, the High Rock Lake Association’s board of directors supports Alcoa’s position.
The board took formal action last week and unanimously opposed a takeover as outlined by Senate Bill 967.
Larry Jones, president of High Rock Lake Association, said in a press release that several areas of the Senate bill demand explanations from legislators.
He said the proposed legislation causes further delays in the license renewal process and has no legal precedent. Jones added it would lead to loss of county tax revenues, add to the burden of state taxpayers, destroy the business friendly reputation of North Carolina and adversely affect pollution abatement now in progress.
The High Rock Lake Association board also voted to oppose Gov. Bev Perdue’s motion to the Federal Energy Regulatory Commission to intervene in the relicensing process.
The association said it “conscientiously and publicly” negotiated for more than six years with Alcoa Power Generating Inc., FERC and many other stakeholders in the Yadkin River Basin to arrive at the pending Relicensing Settlement Agreement under FERC’s relicensing procedures.
“It is extremely disappointing to HRLA and its 1,500-plus members to suddenly hear the state call for an ’emergency hearing’ ” to allow for an intervention at this time, the association said.
“The governor’s actions, in the opinion of the HRLA, do not reflect the will of the people,” the association said.
Alcoa has been stalled in its efforts to renew the FERC license for the project, which once provided the power for its aluminum smelter in Badin.
The Badin aluminum plant is no longer in operation, but Alcoa wants to continue selling power from its hydroelectric operation.
“HRLA believes that these lakes are one of the crown jewels of North Carolina, providing environmental, recreational, economic and aesthetic benefits,” the association said. “We encourage everyone to study SB 967 and consider the questions it raises.”
Last week, state Rep. Lorene Coates, D-Rowan, served as one of four primary sponsors for House Bill 1455, which is similar to the Senate bill in calling for a state trust to own and manage the Yadkin Project.
The N.C. Water Rights Committee, which first proposed the idea of a state trust to take over the Yadkin Project, said the House legislation would ensure sufficient water levels at Badin Lake, direct the trust to give preference to Alcoa employees currently working at the hydroelectric dams and steer profits to water resources and infrastructure needs in the state.
A N.C. Water Rights Committee statement charges that Alcoa has “grotesquely mischaracterized the proposed Yadkin River Trust’s cost.”
“In fact,” the committee said, “it will cost the state nothing because the trust is designed with the ability to issue revenue bonds for the purchase and improvements.
“Even if APGI’s conservative estimate of an annual profit of $8 million is accurate, the Yadkin River Trust will easily be able to finance the project without costing N.C. taxpayers a single penny.”
N.C. Rep. Fred Steen, R-Rowan, is one of 22 co-sponsors of the recently introduced House bill.
In its testimony Tuesday, Alcoa made some of the following points.
– “Despite Stanly County’s 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, Alcoa says there was no requirement for jobs in the 1958 license.
– “Proponents of this bill claim they can acquire the project through ‘recapture’ at a cost of $25 million to the state. The state cannot recapture the project, period, because the deadline has passed.”
Under federal law, Alcoa says, the time for “recapture” passed nearly three years ago.
– After a comprehensive and lengthy environmental review process, a Final Environmental Impact Statement for the Yadkin Project was issued in April 2008 by FERC.
FERC staff concluded in the EIS that a federal takeover of the Yadkin Project was not a reasonable alternative and said it would not be considered further, Alcoa says.
– No project regulated by FERC has been taken over by FERC in the 89-year history of the Federal Power Act.
– Even if recapture were still an option, it would cost 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 the state would need to invest $200 million to upgrade and modernize the dams in addition to any costs paid, as well as the costs of takeover,” the Alcoa statement said.
– Given the capital cost expenditures required to make the required upgrades and modernization for the project, the state would operate at a negative cash flow for many years into the future, meaning the state would have to borrow additional funds to pay operating and maintenance expenses during those years.
“We believe the only way for the state to acquire the project today is through condemnation ó a taking,” Alcoa said.
“That would require the state to pay fair market value for the project which APGI estimates at more than $500 million. And it sets a precedent that North Carolina should never consider ó that if the state sees a benefit in your business, it will take it for its own use.”
– Should the state take over APGI’s hydroelectric generation process, Alcoa said, “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.”

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