The History of Water Rights Part III:
The Yadkin Project Relicensing
As we mentioned in our previous blogs The History of Water Rights I & The History of Water Rights II, the federal licensing process for a nonfederal hydropower plant includes standards that must be met before the administering body, the Federal Energy Regulatory Commission (FERC), issues a license either to construct a brand new project (initial license) or renews a license to a company for an existing, licensed plant (strangely enough, this is called a “new” license and the process is called relicensing). We on the North Carolina Water Rights Coalition believe there are several standards Alcoa has failed to achieve. To help you better understand them, a little history about the Yadkin Project is in order.
The Yadkin Project consists of hydroelectric stations, dams and reservoirs along a 38-mile stretch of the Yadkin River in central North Carolina. Stanly, Montgomery, Davidson and Rowan counties have shorelines along the four water reservoirs that include: High Rock, Tuckertown, Narrows and Falls. The Yadkin-Pee Dee Watershed includes 21 counties and contains 93 state municipalities.
The project’s roots extend to 1896, when Egbert Hambley, a gold mining engineer from Salisbury, was the first entrepreneur to obtain a license to produce hydroelectric power from the flow of the Yadkin. To obtain capital to develop the power, Hambley partnered with investment bankers in Pittsburgh and New York. According to the report published in the New York Times, February 6, 1899, the transaction was the largest business transaction in the history of the State. After a couple of changes in ownership, Alcoa bought the rights to the property in 1915. Two years later, the Badin Works smelter began production in Stanly County.
Aluminum is rated by MIT as one of the top ten toxic manufacturing processes on the planet. In the unregulated environmental decades that followed, Alcoa disposed of spent pot linings – a hazardous waste containing cyanide complexes – and other refuse from the operations. The smelter produced an average of 4,800 tons per year of spent pot linings, as well as 70 plus years of unregulated smokestack emissions. This activity contaminated nearby land and water that remain under study by Alcoa for the effects of such practices, even though the industrial operations have ceased. There is no guaranty that Alcoa will fully clean up the contaminated sites. The presence of such contamination may pose a significant hazard to the community and adversely affect the water supply of the whole Yadkin-Pee Dee Basin, as well as inhibit new and desirable development.
Also, the County and State know that certain Alcoa-owned lands were used in the past as disposal sites for post-processing industrial waste and sludge from its smelter. The County and State do not know the extent and location of all of these sites.
Nevertheless, the federal government officially licensed Alcoa as the sole entity to use the Yadkin as a source of hydroelectric power in 1958 for 50 more years. Alcoa would enjoy the use of the waters on the Yadkin from 1915 to the year 2008; a total of 90 years. When granted the license, Alcoa knew and understood that this was akin to a lease of the water rights and that at the end of the lease the public had the right to recapture the water resources that belong to them. The Federal Water Power Act that passed in 1920 established the principle that the flowing waters of America’s great rivers are natural resources that belong to the people. Further, that water on its way to the ocean, hitting paddle wheels or turbines, created the potential for producing lots of low cost energy that also belonged to the public. This was the primary purpose of the 1920 Federal Water Power Act: to assure that when it came to the utilization of natural resources, like our water, that the public welfare would have priority over private gain. The water and the abundant cheap electrical energy that it created, on its way to the ocean, should be preserved for the prosperity and economic well-being of all citizens.
Private operators of hydro electric facilities on America’s great rivers are not engaged in “free enterprise,” although they insist they are. The laws of competition and the risk of loss of capital are not at play today in the production of hydro electric energy at existing hydro sites; instead, it is often a guaranteed income stream that will create prosperity for its owner until the end of time. Whenever private gain is paramount, and the laws of competition and free markets are not at play, the usual conditions for creating a monopoly are present, especially where scarce, natural resources are concerned. To fully protect the public, consideration should be given as to whether that business should come under public ownership to avoid a hidden cost to ordinary people.
Today our laws in North Carolina permit Alcoa, through deregulation of the power industry and arguably competitive conditions, to effectively use the water of the Yadkin to produce hydro electric power worth billions of dollars over the next fifty years, and effectively use those dollars anywhere they choose in their global operations. It simply makes better financial sense for Alcoa to go elsewhere for its core aluminum business, where labor is cheaper and governmental environmental regulations are more favorable. The laws of the states of New York and Washington, for example, permit their states and public bodies to invest in the construction of hydro plants, allowing them to retain the power generated for the benefit of their states’ wealth and the well-being of their own citizens. If the states of Washington and New York had the same legal limitations as North Carolina law, the Alcoa smelting operations and manufacturing jobs that currently exist in those States for Americans would be gone, as well.
We in North Carolina are not benefiting the way other Americans benefit with jobs and wealth from their water resources; Alcoa can do less for ordinary citizens in North Carolina simply because our state law allows them to do so. Alcoa is simply doing what a private corporation is supposed to do, and that is pursue within the law the highest and best benefit for their investors’ capital. It is the responsibility of good government to keep corporate interest in check and promote the public interest and that is the objective of the 1920 Federal Water Power Act.
The questions about the environmental hazards originating with Alcoa’s aluminum operations (which were directly tied to its ability to use the Yadkin waters for cheap electricity) as well as the change in emphasis from the 1958 licensing, when Alcoa claimed it would be best to handle rights to the river because it promised to provide nearly a thousand jobs thanks to its smelting operations, are key issues the FERC must consider when deciding the future of the Yadkin Project. In the opinion of the North Carolina Water Rights Coalition, the relicensing application as proposed by Alcoa is not the best adapted use for the Yadkin River because it does not address these local items.
Water is a natural resource, and public welfare should take priority over private, where there is a conflict. The highest and best use in the future for the waters of the Yadkin may very well be for drinking water….that is to sustain life. With the expected growth of our state’s population and changing climatic conditions, adequate water to drink may be more important than water for hydroelectric production. The current Alcoa proposal would seek a license to control virtually the entire flow of the Yadkin for hydroelectric production to maximize gains for a private corporation. Additional uses of the same waters would require payment to Alcoa in an amount equivalent in value to what the flow would have produced in hydroelectric power had it not been diverted for drinking or other public uses and had flowed through the turbine. This puts us in the situation where we would literally be paying to drink water from our own basin. We on the NC Water Rights Coalition believe that the present agreement is not wise, and potentially could make us “beggars at our own table”, when it comes to the future use and needs of the use of our water resources.
In conclusion, the N.C. Water Rights Coalition believes North Carolina’s citizens should not give away control of economic benefits of our second largest watershed, the Yadkin. We want our state to be at the table talking with the Federal Government about the future management of the Yadkin River, not a private corporation. Alcoa should be talking with the leadership of the State of North Carolina about the use of these resources, the same way it is done in New York state and Washington state. In both New York and Washington State, Alcoa and the representatives of the people of the state came to agreements that allowed Alcoa to use the cheap hydro, but only in exchange for jobs and investment in the state. If Alcoa failed to produce the promised jobs or investment, Alcoa agreed that it would relinquish use of the cheap hydroelectric and the public bodies, which own the hydro resources, could put the flowing waters to other uses.
The federal law provides an opportunity for the citizens to achieve the same equitable agreements here in North Carolina, at relicensing. Simply put, because it is now relicensing for the Yadkin Project, North Carolina has the rare opportunity to put itself in the position where it can seek to manage the waters of the Yadkin for the prosperity and benefit of its citizens…..we deserve no less than the citizens of New York and Washington, where those states have recognized the importance of keeping control of their major water sources and taken action, available under the Federal Laws, that protect their citizens’ rights to their water resources and help keep American manufacturing jobs at home.
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