State takeover of Yadkin hydro explored
This entry was partially inspired by a rather lengthy discussion I had with my eldest son the other day, whose main mission in life (apparently) is to poke holes in my logic. When I held him as a baby and said, "You're going to be smart!", this wasn't what I had in mind, but...such is life.
He made a valiant effort in this recent set-to, but I emerged from this patricidal exercise still conflicted about the subject at hand. So I decided to bring more logic pokers into the fray by airing some of my opinions here. Feel free to poke away.
First, let me explain my position on renewable energy. As I mentioned in this radio interview, in order to achieve the level of growth we need in renewable energy generation, private sector engagement is critical. That's what our (and other states') REPS is designed to do: create a market-based demand for renewable energy, to entice private investors into producing this valued item. Along with this "driver", tax credits, loan guarantees and other incentives are directed toward private entities, as well.
President Obama uses the word "catalyze" to describe the government's efforts to spur private-sector investment into renewables, and it's an apt description. And it's working. Wind power alone has increased to over 35,000 megawatts in the U.S., and that wouldn't have happened without those private dollars.
I believe (and here is a poke point for you) the state's efforts to capture Alcoa's license could have a chilling effect on private-sector investment in energy generation projects as a whole, and especially on the continued maintenance of (current) hydroelectric operations. Why spend the money to maintain them if they could be taken away? Don't forget, hydro is still the biggest producer of renewable energy in the U.S. (and the world, for that matter).
Another issue I have with this proposed takeover is the costs associated with. Just to get an idea of the dollars involved, you may want to peruse this fiscal note. As another reference point, consider the Electricities debacle (my son declared this irrelevant, by the way): the municipalities assumed the horrific debt burden for real property (including a nuke plant), and they compounded that debt by issuing bonds for maintenance and upgrades (and God knows what else).
While it has yet to be settled how much the state will have to pay Alcoa to acquire the dams and land in question, the tab for taxpayers is going to be substantial. And (like with Electricities) additional bonds will likely be issued, some of them for much-needed cleanup and water quality projects (which I agree with). But other projects may be funded as well, that have more to do with (local) economics than environmental stewardship.
See, this is not just about the state being able to sell renewable energy, it's also about:
(2) To ensure the equitable distribution of water for public purposes.
(3) To maintain recreational facilities associated with the Yadkin River.
Think about that. The single source of revenue to recoup the taxpayer's investment in this venture is the sale of electricity from the dams. Both of these major "goals" will result in less energy generated, because the hydro plants will need to be shut down more often to meet these (other) water demands. Less energy generated=less energy sold=less money to cover the costs.
And then there's these other (maybe worthy) projects this reduced revenue must support:
(4) Apportion up to twenty‑five percent (25%) of the net proceeds from the Yadkin Project's electrical output for use by a regional "Power for Jobs" fund to be established by the Department of Commerce. The Power for Jobs fund may make grants to businesses and not‑for‑profit corporations to create or retain jobs in the Yadkin River Basin.
(5) After performance of subdivisions (1) through (4) of this subsection, compliance with subsection (b) of this section, and retention of any necessary operating reserves, the Trust shall utilize up to twenty‑five percent (25%) of the remaining annual net revenues from the Yadkin Project to make grants to the Community Colleges System Office for allocation by the State Board of Community Colleges for instructional equipment at the community colleges as determined by the State Board.
I like #5, but I have a hunch #4 is going to be the squeaky wheel on this wagon. And you better believe I'm going to be watching who gets the grease.
Let the poking begin...
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Just an added bonus
I find it very ironic that those eminent-domain-hating Republicans actually outnumber the Dems (4-3) as sponsors of this bill. And when time comes to discard market value and pay Alcoa the least amount possible, there should be some really choice quotes available from Hartsell, (Phil) Berger, Bingham and Tillman. If the local media chooses to ask, that is...
This is the kind of situation where innovation is needed
The take over or not take over positions feel like the two ends of a continuum, with an infinite number of other options that could be explored in between them. Maybe we need to engage a deal-making genius ... some rock star in finance and partnering ... to come up with Plan C, D, E, F and G.
I agree
I don't think the pie is as big as all the people sitting around the table think it is. And I'm not sure they can afford it, either.
I really like the idea of giving the Yadkin Riverkeeper (Dean Naujoks) the authority and resources to do the things that need to be done, but that's only part of this, and I'm afraid it will end up being a small part.
On that part especially, I would love to be proved wrong.
What are the things that need to be done?
If we could start with those things at the top of the list it need not be a small part. Isn't that the lovely thing about being back in the bargaining seat again after all those years?
Progressives are the true conservatives.
There are at least six
contaminated sites around the old plant that need to be dealt with properly, which (I'm assuming) calls for the removal and replacement of hundreds of cubic feet of contaminated soil. Why that hasn't already been addressed by the EPA and/or DENR is a question that begs an answer.
Aside from that, stormwater runoff is a big issue for the Yadkin, and the General Assembly could help out a great deal by cooperating on the implementation of NPDES rules. Some of that "power money" should be dedicated to assisting municipalities in covering the costs of abatement. That would help the River a lot.
Need to read the contract
It is not clear to me that the state would have to pay Alcoa anything. Many contracts of this type and period stipulated that ownership of all related assets revert to the Public Entity (NC), granting the free use of the resource for the stipulated period. In other words ownership transfer of the physical assets at the end of the term was in lieu of rent or fee. However, this would not give Alcoa any relief on remediation of environmental hazards as contract probably also stipulates physical assets to be turned over in good and working condition. Wonder just how the contract treats this "ground rent" issue.
The state will have to pay
Alcoa's contract (agreement, whatever) has a clause about this, but it will probably have to be settled in court on how much.
Yadkin River
Somehow this debate is being improperly framed. The license is NOT Alcoa's. Originally, Alcoa received a 50 year license from the federal government with support from the state, as an economic incentive for creating a couple of thousand jobs. Those jobs are long gone and the 50 year license has expired. The core question is whether Alcoa can get a new 50 year license so it can make money generating electricity. The water rights and hydro electrical ability on the river belong to the public. That's why Alcoa has to seek a new license. Certainly Alcoa has invested large amounts of money over the years in building the hydro electric capacity. However, that was done by Alcoa so as to benefit its corporate bottom line and it has. Now they want another 50 years, essentially because it's a cash cow that they somehow think they are entitled to get automatically. The answer as to whether they should get the license or whether the state should intervene isn't as simple as Alcoa would have you believe.
Here's the real truth
This is the best explanation I've come across - copied from the high rock lake association website.
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The North Carolina Legislature has again rejected the idea of a State Take-Over of the Yadkin Hydroelectric Project.
July 10, 2010
Efforts by a few special interests to create The Yadkin Trust, a State agency proposed and designed to acquire the Yadkin Project, were soundly defeated by the 2009-2010 General Assembly.
Activities at the Legislature this week were cause to believe something sinister was going on! Last August Senator Hartsell had attached an amendment to HB1099 which would set up a State Agency to be known as the Yadkin River Trust to acquire ALCOA’s the Yadkin hydroelectric dams. However, when it became evident that that bill would probably not be considered in this session, he took another approach.
On July 1, a different amendment was attached to the economic incentive bill, HB 1973, again, to set up at the State’s expense a Yadkin Trust with a three man Board and the independent power of a Government for the counties of Stanly, Rowan, Montgomery and Davidson. They could construct their own by-laws and from our view do as they wish - all without the approval of the County governments. A horrible bill – a scam.
When the bill came before the Senate on July 6, Rep Hartsell withdrew the above amendment, apparently having decided the Yadkin River Trust was an issue the House of Representatives wanted nothing to do with. After all, the House had decisively killed a similar bill last August. Instead, Hartsell attached a new part to HB 1973 setting up a Uwharrie Commission to promote and monitor the development, water distribution and the environment in Stanly, Rowan, Montgomery, Davidson, Davie and Randolph counties. The Commission would have a ten man Board and would have administrative duties handled by the NC Secretary of Commence, Hartsell’s cousin. Administrative expenses would be paid by the State.
HB1973, as amended, passed the Senate unanimously. We wonder if any of the Senators read this amendment before they voted. The bill was forwarded to the House for concurrence. The House rejected the amendment.
After the Senate adjourned at 6 PM on July 6, Hartsell presented the UNV – TV abstract on ALCOA to his committee and the public. Like the actual show, it was very biased. The main interviewee was a lawyer from Salisbury who makes a living filing personal injury law suits. Great advertisement for business. There were lots of insinuations but few facts. There were few comparisons of the practices of most industries of the time; after all, it has only been in the last years that society understood the contamination effects. The reporter did not report any comments from NC DENR, who has tested the waters and said that most all of the pollution comes from upstream and that the waters of Baden Lake were safe for swimming and boating. There were many incorrect statements made by the narrator of this show. It is no wonder that the management of UNC-TV posted a disclaimer before the showing this footage on air.
On Thursday, July 8, Senator Hartsell made another of his signature moves. He introduced a Senate Committee Substitute for HB972. HB972 was sponsored last year by Representative Tarleton of Watauga County, to allow the Town of Boone to construct a needed water intake on the South Fork of the New River. The Senate trashed Rep. Tarleton’s bill, and substituted language called Uwharrie Regional Resources Commission. This bill was passed and sent to the House.
HB 1099 was totally changed by a joint committee, and all traces of the Yadkin River Trust proposal were removed, and the Bill became a short one page bill with no reference whatsoever to the Yadkin Project.
The House initially rejected HB972 Friday afternoon, but later in the night a joint House-Senate committee comprised of Bingham, Hartsell, Atwater, Burr, Wainright, and Tarleton agreed to take out language that would have allowed the Commission to monitor federal activities, and deleted provisions related to enforcement of environmental laws or contribution to environmental cleanup costs. HB972, as amended, passed late Friday night, July 9, 2010.
To read the entire Bill, CLICK HERE
The Bill that creates the Uwharrie Regional Resources Commission purports it is the purpose of this Bill to encourage quality growth and development while preserving the natural resources of the Uwharrie region of North Carolina. Uwharrie region of North Carolina. – The area encompassed by the counties of Davidson, Davie, Montgomery, Rowan, Randolph, and Stanly.
The Uwharrie Regional Resources Commission shall have all of the following powers and duties:
To develop rules and procedures for the conduct of its business or as may be necessary to perform its duties and carry out its objectives, including, but not limited to, calling meetings and establishing voting procedures. Rules and procedures developed pursuant to this subsection shall be effective upon an affirmative vote by a majority of the Commission members.
To pursue efforts directed at the equitable distribution of water for public purposes.
To establish standing and ad hoc committees. The Commission shall determine the purpose of each standing or ad hoc committee.
To seek, apply for, accept, and expend gifts, grants, donations, services, and other aid from public or private sources. The Commission may accept or expend funds only after an affirmative vote by a majority of the members of the Commission.
To exercise the powers of a body corporate, including the power to sue and be sued, own or lease property, and adopt and use a common seal and alter the same.
To enter into contracts and execute all instruments necessary or appropriate to achieve the purposes of the Commission.
To designate a fiscal agent.
To perform any lawful acts necessary or appropriate to achieve the purposes of the Commission.
So, it appears we will have another State body with oversight responsibilities in the region which includes the Yadkin Project. It is far too early to forecast the impact this will have on High Rock Lake directly, or on the process of the Federal Relicensing of The Yadkin Project. It is important to be aware the idea for this Commission came from the promoters of a State take-over of the Yadkin Project, so it is reasonable to assume they expect to use the Commission in their efforts of opposing a new license being issued to Alcoa.
It is important to note the NC Legislature has twice voted down legislation which would have created The Yadkin River Trust, first last August, and again this week. The Legislature clearly did not have the appetite for acquiring the Yadkin Project. We believe the majority of our Representatives understood the proposal for the State of North Carolina to acquire the Yadkin Hydroelectric Project made no sense whatsoever for North Carolina citizens.
We will have to remain vigilant at any continuing efforts to deny the Relicensing Settlement Agreement. Continued delays in issuance of a new Federal License with provisions of the Relicensing Settlement Agreement are hurting all HRLA members. Please use any opportunity you have to express your support for the Relicensing Settlement Agreement.
This is about water quality
Incidentally, creating jobs had NOTHING to do with the first license that was granted to Alcoa by FERC and still has nothing to do with it. As soon as Alcoa is successful in fighting appeals to the water quality certificate ALREADY issued to them by the NC DENR, FERC will grant the license. According to the agencies that regulate these things (DENR) the water quality is FINE.
Delaying this renewal is hurting Davidson county by delaying the jobs that WILL be created as Alcoa begins the millions of dollars of improvements and new rec areas that were agreed-upon as part of the license agreement. it is also hurting the real estate market for 2nd homes and the property tax revenue that would be realized.
Please let Beverly Perdue know she is damaging her own state for the special interests of a FEW!!
Would you care to explain
why the people of North Carolina having the rights to our own natural resources is Gov. Perdue...
Progressives are the true conservatives.
More facts
Fact: No one owns the water in the Yadkin River. Under NC law, property owners along a river have the legal right to make reasonable use of the water running through their property. By virtue of the 38,000 acres it owns along the Yadkin River and the dams and generating equipment it built with private capital, Alcoa Power Generating Inc. (APGI) makes a reasonable use of the water which crosses its property.
Fact: APGI does not consume any water. Water simply passes through the turbines to generate clean, renewable energy.
Fact: APGI does not decide who can and cannot withdraw water from the Yadkin River. That is the federal government’s responsibility. All water withdrawals in excess of one million gallons per day require FERC approval, regardless of who owns or operates the Yadkin Project. So even if the State of North Carolina took the Project, it would be subject to the FERC’s rules and regulations just like it is now.
Fact: The relicensing of the Yadkin Project will not limit the State of North Carolina’s ability in any way to withdraw water from the Yadkin River. State law gives North Carolina the authority to regulate water use within the Yadkin River, including the right to issue new water withdrawal permits. The State has already given an interbasin transfer permit to Concord-Kannapolis for 10 million gallons per day. And the State can go straight to FERC for any request to withdraw water – it does not need APGI’s consent to do so. This ensures that North Carolina will always have access to water from the Yadkin River regardless of who owns and operates the project.
Fact: Ownership of the project has no bearing on the State’s control over the waters of the Yadkin. “Any” owner is subject to the laws of North Carolina and the United States.
Fact: 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, there was no requirement for jobs in the 1958 license.
Fact: The State cannot recapture the Project, period, because the deadline has passed. Under federal law, the time for “recapture” passed nearly three years ago.
Fact: 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.
Fact: No project regulated by FERC has been taken over by FERC in the 89-year history of the Federal Power Act.
Fact: The only way for the State to acquire the Project today is through condemnation – a taking. 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 – that if the State sees a benefit in your business, it will take it for its own use.
Fact: Should the State take over APGI’s hydroelectric generation process, 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.
Fact: Twenty-three stakeholders, including environmental groups such as American Rivers, The Nature Conservancy and the Land Trust of Central North Carolina support the relicensing of the Project to APGI.
Fact: Alcoa has been working alongside state and federal officials since the 1980s to identify, investigate and remediate waste sites associated with its Badin Works plant. This work is being done under the close supervision of the N.C. Department of Environmental and Natural Resources, Division of Waste Management. Studies show — and the State of North Carolina has agreed — that there is no threat to human health or the environment and that no further action is necessary for these sites at this time.
Fact: Stanly County has speculated that additional waste sites may exist. Alcoa has investigated every suspected waste site provided by Stanly County in conjunction with State or County officials. In each instance, the sites had already been identified and were being managed; no evidence of waste was found; or issues associated with the site were resolved. Data on all waste sites has been provided to the N.C. Department of Environment & Natural Resources.
Fact: Those who oppose Alcoa’s licence renewal are asking the state to set a standard for Alcoa that is higher than what the State asks of every other company in NC managing waste sites. It asks that these sites be “remediated to levels over and above the level that would be required under current law.” If the state wants to see remediation levels changed, it should change its laws for the entire state – not single out one company.
Before I would send any letters to the governor,....
there are probably a whole bunch of unanswered questions I would need explained. The biggest is why the state would want that particular site, compared to setting up some place maybe to the north? As you said, the water is to turn the turbines for electricity, not dam the river. This whole issue should see more light of day, considering that many of us would like to see this type of energy production, rather than oil and coal expansion.