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N.C. rivers belong to public

By Curt Whittaker and Scott Brown
Special to the Observer

On April 30, New Energy Capital of Hanover, New Hampshire, a fund manager for renewable energy facilities, filed a petition with the Federal Energy Regulatory Commission in Washington, D.C., addressing Alcoa’s Yadkin River hydroelectric facilities. We filed for one reason – we don’t think the federal government can, under law, take several hundred million dollars worth of North Carolina’s public assets and give them to Alcoa, or anyone, for virtually nothing.

On Thursday, FERC declined to address our substantive arguments. We will seek a rehearing at FERC and appeal as needed – but in the meantime, we would like to explain to the public what we are trying to do.

Let’s start with the fact that there are two sets of Yadkin assets, and they belong to different entities. The first set consists of privately owned dams, powerhouses and transmission lines. These were built by Alcoa and its predecessors, and Alcoa owns them.

The second set of assets is owned by North Carolina – the energy inherent in moving water and the other characteristics of the Yadkin River watershed. Those assets have always been owned or held in trust by the State of North Carolina. Yes, Alcoa owns a lot of land bordering the Yadkin – but that land ownership does not come with any automatic right to impound water, flood upstream property, change watershed courses, or change the makeup of the river water.

The ‘deal’ under federal law

So in order to build and operate hydro assets like the Yadkin facilities, one must use public watershed assets. To do that, one must obtain permission – a government-issued license to do so. Alcoa had such a license for about 50 years, and it expired. Alcoa has applied for a new one, for another 50 years.

Oddly, the federal government, rather than the states, decides whether to license state watershed assets to private developers on large rivers. There is a story there, dating back to 1920, when the federal government passed an act to consolidate federal reviews of private hydropower development. Decades later the U.S. Supreme Court held that this federal licensing scheme “preempted” – or overrode – state permits on most large hydropower developments.

That legal history allows the federal government to walk into any state, package up a state watershed asset and hand it over to a private developer for up to 50 years, in return for private power investment. But there is a catch: After 50 years, the public can get back not only its public watershed asset, but the private dams and powerhouses as well at their depreciated book value. That is “the deal” enshrined in federal law.

Once the initial 50-year license expires, most hydropower installations can readily obtain a new one because they continue to provide some kind of larger public benefit. Most private hydropower capacity is owned by regulated utilities, and is used to provide local utility customers with low-cost electricity. Others installations directly supply local manufacturing/commercial enterprises with low cost power that in turn powers local economic development. In each case, there is a broader “public” benefit to the private licensee’s continued use of the public watershed assets – the “deal” is maintained.

No public benefit anymore

The Yadkin assets are different. Alcoa used its initial 50-year license to generate power for its local manufacturing facilities – creating significant local economic development. But those operations are over now. So how would North Carolina benefit from the federal government providing Alcoa with another 50-year license to use public assets? How would “the deal” be maintained?

Neither Alcoa, nor FERC, has provided an answer – and that is why we petitioned FERC. Simply put, FERC has not done its job in implementing “the deal” at Yadkin.

Alcoa should not get millions

What should not happen at Yadkin is this: Alcoa gets a new 50-year license of North Carolina assets for no payment, then sells that license off to the highest bidder for hundreds of millions of dollars. Alcoa did exactly that in 2012, when it obtained a new federal license to use Tennessee’s watershed assets at Alcoa’s Tapoco hydropower dams, then quickly sold that license in the open market.

The Tapoco outcome was wrong, as it left Tennessee with next to no value for its assets – it broke “the deal.” We are asking FERC not to repeat that mistake in North Carolina. We are pleading with FERC to give us an opportunity to pay North Carolina hundreds of millions of dollars, rather than Alcoa stockholders, for the right to use North Carolina assets. We will pay Alcoa tens of millions for its dams, but the lion’s share of the Yadkin asset values are public, and should go to North Carolina.

The Yadkin is your watershed; you should be paid fairly for its use, and you should retain long-term control over its competing uses in the future. FERC needs to make sure of that.

Curt Whittaker and Scott Brown are managers at New Energy Capital.
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