Property rights advocates are on alert over efforts by lawmakers to pass legislation that would give the state control over Alcoa’s Yadkin river dams and hydroelectric facilities. The effort failed in the General Assembly this summer, but the state’s push to gain control will continue, according to the governor’s office. Rick Henderson, managing editor of Carolina Journal, discussed the controversy with Donna Martinez for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Martinez: Set the scene for us, if you would. Where are these dams and plants that we’re talking about?
Henderson: They are in a section of south-central North Carolina. Stanly County is the main area — Albemarle and that general area. There are four hydroelectric dams that have been owned by Alcoa since 1917 and used to provide power for a smelting plant, an aluminum-producing plant that Alcoa owned there and operated until the early part of the century.
Martinez: So Alcoa, a private company, owns them now. Do they want to give them up?
Henderson: No, no, not at all. In fact, Alcoa is quite adamant about keeping the dams. They claim that the value of the dams — the property around them, 38,000 acres of private property — the dams and the energy-generating capacity is worth about $500 million. And the state places a much lower valuation on that, but Alcoa says this is basically the amount of money that we would want to have, to sell the dams to anybody, if we wanted to sell. But they don’t even want to sell.
Martinez: It seems a little bit curious. A private company owns these dams, these facilities, and suddenly the state of North Carolina says, “Hey, we would like to have them.” Why would the state say that?
Henderson: Well, that’s a real good question. There are two stated reasons, and then a lot of reasons that are really uncertain about that. To set the stage a little bit, Alcoa’s aluminum smelting plant closed, as I say, around 2000, 2002, because they were losing money. They couldn’t make money there. And the dams continue to operate; they continue to sell electricity from the dams to outside parties. But when the smelting plant closed, Alcoa also sent away about 900 jobs — and pretty high-paying jobs — which is a big deal in that part of the state, for a manufacturing facility in particular.
And so, in part, this is a fit of pique by local officials who are mad at Alcoa for letting jobs go away, because a significant amount of tax dollars went away to local governments and to the state, to some extent, although Alcoa still is the largest taxpayer in Stanly County because it does pay property taxes on the land it owns there. But there’s still just a lot of anger about that. And in fact, when I attended some legislative hearings about the bills we’re going to talk about, this summer, there was no secret. The sponsor of the bill, Sen. Fletcher Hartsell, who’s from Cabarrus County, essentially said, these jobs went away and Alcoa essentially allowed these jobs to go. We want them back.
Martinez: Well, it sounds like, then, local government officials and the state are essentially ganging up on a private company.
Henderson: Well, there’s a lot of that there. Now, there are some local officials who are very happy with Alcoa, especially municipal officials in the towns affected, because Alcoa does provide some tax revenue for them and still supports the local community in lots of ways. Perhaps not as much as it did when it employed so many people, but still, it has its fans there. And there are also, of course, local property owners who are really concerned — what if the state were to take over this land? How would this affect their property values, for instance, if this land were no longer in private hands?
Martinez: Now, the effort in the General Assembly has failed so far, but it appears that there’s some politics at play, that this is not going to go away, and that there is a licensing situation that Alcoa is involved in. Do we have, perhaps, some officials who are trying to delay that licensing?
Henderson: Well — that’s correct. In 1958, the Federal Energy Regulatory Commission (FERC) issued a 50-year license for Alcoa to operate the dam. The waters are technically the waters of the United States, and so they’re regulated by FERC. FERC issued a 50-year operating license, and right around the time the smelting plant closed, Alcoa began the process of getting a renewal of that license. And these things are technically, for the most part, routine, unless there’s some serious problem with operation or environmental issues — almost always these things get renewed. And, in fact, Alcoa started the effort around 2002, was going along smoothly until in 2008 the Easley administration stepped in.
We’re not really sure exactly why. They claim there are water quality concerns, but the state actually had issued a water quality permit to get the license renewed again earlier this year, and so the concern is, why is the state even intervening. And they’re claiming it’s a water quality issue, but that doesn’t really seem to be it. Could be just penalizing Alcoa; the local officials are mad. There could be other things going on here, which we’re not really sure about. I mean, for instance, if the state were to take over these dams, and turn them over to, let’s say, Progress [Energy] or Duke [Energy] — some private utility — and then sell the property, would there be some property value there? It’s very, very confusing as to why it’s happening, but what is clear, though, is that there were big efforts at the last minute to try to get something done, so that there was no time to stop it. Because Gov. Perdue has actually said this is a big priority of hers, to make this run forward.
Martinez: If it is, indeed, her priority then, let’s fast-forward a bit. Let’s say that the state’s effort is successful; they end up taking over the Alcoa dams and facilities. Will Alcoa be compensated for that?
Henderson: Well, yes, it will be. I mean, it will immediately go to court. If I can give a quick summary of where we stand right now, there’s legislation that passed each house of the General Assembly — different legislation — in this session. When the legislature adjourned, the legislation technically could be revived again, until it adjourns after the short session next year. So it still could happen. And if this happens, there will be a process in place for the state to take over these dams, and then there will be a question of arguing over what the compensation is going to be. Alcoa will go to court immediately, because there probably is some amount of money that it would use to surrender the dams, but it’s a lot less than the state’s going to offer. The state valuation was anywhere from $24 million to about $170 million. Alcoa says, no, $500 million is a minimum, and we don’t even want that. We want more than that to surrender these facilities. So there will be a court fight. It’ll take a while. This could all be obviated if the feds reissue the license between now and the time the legislature convenes next year. That could happen.
Martinez: And that’s what state officials do not want to see happen.
Henderson: Exactly. They’re trying — they’re using some procedural delays right now to tie this up until the legislature comes back into session again. But as of right now, it could happen. Now, if this does, then you’re talking about what I believe would be a massive taking of private property. And the question is, what compensation is going to be enough?
Martinez: Even if this occurred, and even if Alcoa were compensated, even at a level that they were satisfied with, the issue is property rights. What does this say to you about property rights in the state of North Carolina, if the state can just say, I would like your property, even though you don’t want to sell it to us?
Henderson: Well, there was a great statement that was made by Bill Owens — who is a legislator who is head, I believe, of the House Rules Committee — at one of the hearings, in which he essentially said, Alcoa sort of owes us these jobs, and because these jobs went away, then we need to take this property. I mean, that was sort of the attitude of what he said — that if companies aren’t going to create the jobs we want, then we have the right to go in and take their stuff away from them. And it’s very, very concerning. If I had a private hydroelectric facility on my land, I’d be really worried the state’s going to come after it. And there are all sorts of other implications for private companies who aren’t dealing in energy issues — that if you don’t satisfy the political leaders, your business could be in trouble.
Martinez: Property rights is a priority for coverage in Carolina Journal. Are there some other stories you’re working — in other parts of the state perhaps — that are seeing similar types of actions against private property owners?
Henderson: Well, we have the whole issue of annexation reform, which was a big one in this session of the General Assembly. You still have hostile annexation taking place in lots of communities, where people can have their land annexed and not even be allowed any sort of voice in the process, not only a vote, but you can have any sorts of issues where you have people having their land taken away from them. And there’s no recourse whatsoever, and that’s something we’re going to keep a focus on.