News: CJ Exclusives

Mystery Group Behind Dam Takeover Bid

Panel Pushing for State Ownership of Yadkin Project

A driving force behind the state’s effort to take over a central North Carolina hydroelectric project owned by Alcoa Power Generating Inc. is a mysterious group called the North Carolina Water Rights Committee.

The panel is headed by Raleigh City Council member Nancy McFarlane. She has refused several Carolina Journal requests to be interviewed about her organization.

Exactly when the committee was formed, who formed it, who its members are, and how the body is governed are not clear. While donations are solicited, no donors are named. No phone number or physical address is listed.

Gov. Beverly Perdue and the N.C. state Senate want the state to take over the project, claiming it would be in a better position to control the water generated by the project’s several dams, and sell power, and deal with environmental issues associated with the project.

Since Alcoa is not interested in selling the project to North Carolina, the state will likely have to use its power of condemnation or some other legal strategy if it wants to pursue the matter.

In early May by a 44-4 vote, the N. C. Senate passed a bill to establish a new public agency that would control the dams if the state were able to acquire the project from Alcoa. The state House has not taken up the bill yet, and Minority Leader Paul Stam, R-Wake, told Carolina Journal he didn’t know how the bill would fare in the House, but said he strongly opposes the takeover.

“It would be unprecedented for the state of North Carolina to take over a private business, and it would be extremely expensive,” he said.

Known as the Yadkin Project, the hydroelectric plant is comprised of four hydroelectric dams and reservoirs located along a 38-mile section of the Yadkin River in Davidson, Davie, Montgomery, Rowan, and Stanly counties.

The reservoirs, named High Rock, Tuckertown, Badin, and Falls, lie within 38,000 acres of real estate owned by Alcoa Power Generating Inc., a subsidiary of Pittsburgh-based Alcoa.

Alcoa bought the land and constructed the hydroelectric dams to supply power to its aluminum smelting plant in Badin, a small Stanly County town east of Albemarle. Aluminum production started in 1917 and continued until 2002, when the company shut down most of the operation. All production stopped in 2007.

The hydro facilities continue to generate up to 210 megawatts of electricity that Alcoa wholesales to other power companies.

Alcoa operates the project under a license from the federal government.The previous 50-year license was issued in 1958 and Alcoa started the relicensing process in 2002. The Federal Energy Regulatory Commission (FERC) would likely have issued a new license to Alcoa if Gov. Mike Easley had not intervened in April 2008.

Citing concerns of some local governments in the region, Easley asked the FERC to delay issuing a new license until those concerns were addressed. Easley left office in January, but Perdue, his successor, has also asked the FERC to delay a new license. A legal brief recently filed by an attorney representing Perdue stated the she “intends to vigorously oppose” a new license for Alcoa.

Easley’s action came after Bill Ross, his Secretary of Environment and Natural Resources, had already signed off on the relicensing agreement.

Secret committee

On May 15, 2008, the North Carolina Water Rights Committee announced the launch of its new Web site,

According to information on the site, the “Committee is a coalition of North Carolina businesses and concerned citizens who aim to inform citizens of the critical issues concerning water rights that affect all North Carolinians.” From information on the Web site, it appears its only mission is to support the state takeover of Alcoa’s Yadkin Project.

News reports listed the organization’s first president as Asheboro businessman Keith Crisco. He stepped down as president in January after Perdue appointed him as secretary of the N.C. Department of Commerce. McFarlane, who represents a North Raleigh council district, then took over as president of the organization. McFarlane is president of MedPro Rx, a provider of specialty pharmacy services.

McFarlane did not respond to numerous phone messages requesting an interview about her committee. CJ confirmed through the committee’s public relations firm that McFarlane received the messages.

Raleigh-based MMI Associates sends out press releases and handles other public relations for the water rights committee. MMI also does public relations for McFarlane’s pharmacy services business.

Steve Levitas, former deputy secretary of the N.C. Department of Environment, Health and Natural Resources, registered as a lobbyist for the organization in April 2009.

Lobbyist registration records list McFarlane’s North Raleigh business as the address the committee.
In January 2009, the committee released a document outlining a “State Trust Concept” for government takeover of the Alcoa’s Yadkin Project. The concept then became the basis for the Senate bill establishing a new agency, named the Yadkin River Trust.

The agency would be governed by a seven-member board appointed by the governor, with members subject to approval by the General Assembly. It would produce and distribute power, control the water flow, expand recreational facilities, and deal with environmental issues.

It would first have to compensate Alcoa for the project. The level of compensation is highly disputed. Advocates for a takeover say federal law stipulates compensation to Alcoa requires a payment only equal to Alcoa’s net investment of approximately $25 million.

Alcoa’s position

Alcoa does not want to surrender the project to the state, but even if forced to, the company says the state would have to pay the fair-market value of more than $500 million.

Alcoa’s local manager Gene Ellis has worked for the company for 30 years. He officially retired June 1, but will continue as a consultant to the company.

“We began the relicensing process in 2002. When we did that we cast a very broad net to try to bring in as many people with an interest in how the project was operating as we possibly could,” he told CJ during an interview at his office in Badin.

Wanting to resolve all issues associated with a new license, Ellis said Alcoa chose voluntarily to pursue a relicensing settlement agreement that addressed local interests. A formal agreement supported by 23 major stakeholder groups was submitted to the FERC in May 2007.

Ellis said just before that process began, changing global economic conditions caused the Badin operation to lose money and the company decided to curtail the smelter operation, costing almost 400 jobs. Thirty employees now remain to operate the hydroelectric facilities.

Realizing that those jobs would probably not come back, Stanly County officials eventually decided not to support the relicensing effort.

Ellis said the first significant concern raised by the county officials was the loss of property tax revenue from Alcoa’s plan to donate about 1,100 acres to the state as part of the settlement agreement. He said he calculated the annual loss at less than $20,000, but said the county kept coming up with more reasons to oppose Alcoa.

“It went from the land donation, to environmental issues, to water quality issues, to contamination from the smelter, to water quantity issues, including how we operate during a drought, and generally followed a pattern of trying to discredit Alcoa and its operation as much as they could in order to get attention to what they felt was the right thing to do, and that is for there to be a federal takeover of the project,” he said.

Stanly County wants a federal takeover followed by a transfer to the state of North Carolina. Citing the relicensing guidelines, Ellis said the state’s opportunity to influence a federal takeover passed three years ago.

Ellis said a final hurdle was reached in May when the state issued Alcoa a water quality certificate. He said he hopes the state’s OK will lead FERC to go ahead and issue the company a new license.

He said taxpayers have nothing to gain by a state takeover of the project. “Something that is now free will have to be paid for by the taxpayers,” he said.

Ellis said Alcoa officials have made several efforts to meet with Perdue in person but she would not agree to meet.
Progress Energy also operates two hydro plants farther downriver. Progress is also going through the relicensing process but the state has made no efforts to take over that company’s facilities.

Commissioner rebukes Alcoa

Stanly County Commission Chairman Tony Dennis is a prominent player in the effort for the state takeover of the Yadkin Project. “The flow of that river belongs to the people. They [Alcoa] put the power on the grid and they are sales-tax exempt, so the state of North Carolina is getting nothing for it. The plant is shut and we don’t have any jobs. My opinion is they lost the license 1,000 jobs ago,” he told CJ during a recent interview.

He said there is a lot of pollution in the county caused by Alcoa that the company has not dealt with. He also said that both the state’s Department of Health and Natural Resources and the FERC have failed citizens in allowing the relicensing process to proceed.

“It is the biggest issue that we need to take control of for the helping of our grandchildren and our great- grandchildren,” he said.

Dennis said Alcoa’s objective is to maximize power generation from the dams, while the state would run the project to protect the safety and supply of the water. “The drought was a godsend to us. That made everyone get to thinking about it,” he said.

Don Carrington is executive editor of Carolina Journal.