Public v. Private: Power Struggle on the Yadkin 2

May 13, 2009

North Carolina officials last week issued a water quality permit that puts Alcoa one step closer to another 50 year license for hydropower operation on the Yadkin River. Governor Bev Perdue and several counties on the Yadkin are contesting Alcoa's application. In the second story of our series "Public v. Private: Power Struggle on the Yadkin," WFAE's Julie Rose takes a closer look at this dispute. 

The Narrows Dam holds back the Yadkin River to create Badin Lake. It is the largest of Alcoa's four hydropower dams on the Yadkin River
Credit Julie Rose / WFAE

  From a one-lane road high above the Yadkin River, you can see the water winding calmly through dense brush. . .and the Narrows Dam is the last thing you'd expect to see coming around the bend. It's huge. "The Narrows Dam makes up just over half of the total power that we generate from the project," says Gene Ellis, head of Alcoa Power Generating. It's the largest of Alcoa's four dams on the Yadkin. It creates Badin Lake and is at the heart of a power struggle.

Alcoa has applied to renew its hydropower license on the river. Governor Bev Perdue, among others, would like the state to take over the project. But federal regulators have never allowed something like that before. Alcoa's Gene Ellis says it's the kind of thing he'd expect of a dictator. "Alcoa's only experience with the socialization or nationalization of a plant was in Venezuela during the leadership of Hugo Chavez," says Ellis.

It may be a rare move, but recapture of a hydropower operation is legal. Congress added it to the Federal Power Act in the 1930's when it declared the nation's rivers belong to the people and cannot be owned by private corporations.

Maybe not owned. But certainly controlled.

Today, the vast majority of the nation's hydropower licenses - including all 22 in North Carolina - are in private hands. And Ellis says Alcoa has a right to continue. "We did purchase the property that makes up the project and we also have owned and maintained the dams since then, too," says Ellis. "So we see it as a fundamental property rights issue."

"Well, they don't - the utility doesn't have a right to a re-license, regardless if it thinks it owns the bed of the reservoir," says Michael Blumm, a hydropower expert from Lewis and Clark Law School in Oregon. "They license the project. They don't own even the project. They have a use right from the federal government for a term."

The term for Alcoa's last 50-year license on the Yadkin is up. Before renewing it, federal regulators are supposed to consider how the project benefits the public. Typically that means maintaining water quality and recreation opportunities.

Alcoa used the dams to power a nearby aluminum smelter, and referenced those jobs to support its last license. But the smelter closed in 2002. Alcoa now has about 30 employees in the area and generates $44 million a year selling the electricity on the wholesale market.

Stanly County Commissioner Lindsey Dunevant says Alcoa no longer offers enough public benefit. "They're asking for a license to continue to use a publicly owned natural resource - one that you own - to continue to benefit themselves and not to benefit the people of the region," says Dunevant. "And it does not create any ripple effect, economic development effect in the state because it creates no jobs."

Stanly is one of seven counties on the Yadkin that have joined Governor Perdue in calling for Alcoa's dams to be turned over to the state. Federal officials say the state may have to condemn the project first. But Alcoa's Gene Ellis wants to know where these critics were during the six years it negotiated with stakeholders and made a number of concessions to water quality, recreation and lake levels. Twenty-three groups signed that settlement, including the Department of Environment and Natural Resources under Governor Easley.

But here's the rub: Federal law gave Alcoa the power in those negotiations. "They controlled the agenda and what was talked about," says Stanly County Manager Andy Lucas. He says concerns about economic benefit and toxic waste at the old smelter didn't get enough attention. Still, federal regulators have the final say, and they do hold public hearings. They have also granted Governor Perdue an emergency hearing to voice her concerns.

"We need to be sure that the water sources that we are allowing to be controlled, if you will, by a private industry, produces something for North Carolina," says Governor Perdue.

Alcoa hoped to receive its renewed license this summer. Now it seems just as likely the issue will end up in court.

Our series "Public v. Private: Power Struggle on the Yadkin" ends tomorrow on Morning Edition with a report on what the controversy could mean for other rivers in the state.