News: CJ Exclusives

Three Bills Target Alcoa Operation in Stanly County

Legislation seeks to raise the company’s taxes and deny it a water quality permit

Officials from Alcoa Power Generating Inc. say it will be tough for the company to stay in business in North Carolina if three bills sponsored by Republican Sens. Fletcher Hartsell and Stan Bingham become law.

One would put the cleanup of Alcoa’s closed aluminum plant in Stanly County under stricter scrutiny. Another would impose a new franchise or privilege tax on wholesalers of electricity. A third would make it more difficult to obtain a state water quality permit, a prerequisite to the federal license Alcoa needs to operate its four hydroelectric dams.

Only one of the three bills has Alcoa’s name on it, but the other two may as well, as they appear to be targeted at the company, said Alcoa spokesman Mike Belwood.

“We believe these bills are part of the broader effort by the state to seize our property,” Belwood said.

Cleanup

Senate Bill 626 calls for a study on the progress of Alcoa’s cleanup of its recently closed aluminum smelter in the Town of Badin, near the company’s still-operating hydroelectric dams on the Yadkin River.

The study would evaluate whether the Department of Environment and Natural Resources is doing an adequate job of overseeing the cleanup. Findings would be submitted to the Joint Committee on Program Evaluation Oversight, which Hartsell, of Cabarrus County, co-chairs.

Water quality permit

Senate Bill 628 would deny a water quality permit to an applicant that “intentionally withholds or omits information that is material” to the permitting process.

Alcoa is asking the Federal Energy Regulatory Commission to renew a permit issued in 1958 allowing the company to use and resell energy from its dams on the Yadkin River. The renewal depends on Alcoa getting a water quality permit from the state.

Two years ago, DENR issued a permit based in part on Alcoa’s ability to maintain a certain level of oxygen in the water controlled by the dams. Stanly County did not sign off on the permit and sued the state. Alcoa initially sided with DENR.

In December, DENR revoked the permit after finding emails between Alcoa engineers expressing doubts about the effectiveness of the technology the company was using to pump oxygen into the water.

Alcoa asked FERC to bypass the state approval process, and sued when FERC refused. Alcoa argued the emails were written years ago, when the technology was being refined. Since then the technology has been enhanced so that Alcoa is meeting or exceeding the EPA standard for dissolved oxygen 99 percent of the time, said Alcoa lawyer and lobbyist Chuck Neely. Alcoa has spent $13 million so far and plans to spend millions more in order to meet the standard 100 percent of the time, he said.

The state action now sits in the state’s Office of Administrative Hearings. Since Alcoa was meeting the standard at the time the permit was issued, DENR would have a tough time prevailing under current law. If Hartsell’s bill passes, DENR would have a stronger case.

The judge must decide whether Alcoa’s internal emails were “material” to the permitting process. “Material” is a heavily litigated term that often is hard to define, said Jeanette Doran, senior staff attorney for the North Carolina Institute for Constitutional Law.

The judge would have to consider not only the content of the emails but also when they were written and whether the facts have changed since that time, Doran said.

“The older the email, the less likely it is material,” she said.

The word “intentional” would be another tough one to prove in court, Doran said.

‘Unfair’ tax

Senate Bill 629 would impose a franchise tax of 6 percent of gross receipts on “unregulated utilities.”

The bill encompasses all wholesale electricity producers and water companies with a gross annual income exceeding $6 million. It would apply to Alcoa and a handful of other companies in the state.

The tax is nearly twice the amount of the franchise tax imposed on utilities regulated by the North Carolina Utilities Commission and is several times greater than the franchise tax imposed on other business corporations in the state.

Alcoa argues that the only way regulated utility companies like Progress Energy and Duke Energy survive with their 3.22-percent franchise tax is that they are guaranteed a certain rate of return. In exchange for monopoly provider status, the Utilities Commission allows the retailers to charge higher rates to make up for their higher-than-normal franchise tax.

Wholesalers of energy, whose prices are not set by the Utilities Commission, must sell at market prices and “live or die by their ability to compete,” Neely said.

The bill “is anti-business, anti-consumer, and appears devised to punish a
company that has been a taxpayer in North Carolina for nearly 100 years,” Belwood said.

All three bills appear to be part of the continuing effort to take Alcoa’s dams and 38,000 acres of adjacent property turn them over to the state, Belwood added.

“As we look around the world, our experience has been that governments 
that seize business assets ultimately stifle
 investment and do permanent damage to their economies,” Belwood said.

In all of its business dealings around the world, officials said, Alcoa has faced only one other government takeover of its property — when Venezuelan President Hugo Chavez forcibly seized once of its plants.

Both Hartsell and Bingham failed to respond to repeated phone calls and emails asking for comment.

Sara Burrows is an associate editor of Carolina Journal.