Alcoa appeals state bid to thwart FERC relicensing of 210-MW Yadkin hydro project

Alcoa Power Generating Inc. has filed a state administrative appeal of North Carolina’s denial of water quality certification intended to prevent Federal Energy Regulatory Commission relicensing of Alcoa’s 210-MW Yadkin hydroelectric project.

North Carolina filed suit in August against Alcoa Power Generating, challenging the company’s ownership of riverbeds beneath the Yadkin project. Then, because of that lawsuit, the state denied water quality certification required for the project to obtain FERC relicensing.

As part of Yadkin’s relicensing process, Alcoa has been embroiled in a years-long attempt by the state of North Carolina to take over the project (No. 2197) on North Carolina’s Yadkin River. The state argued that Alcoa closed its Badin, N.C., aluminum smelter that had been powered by Yadkin, moved the jobs overseas, and retained the four-plant hydro project to sell its electricity.

The state has repeatedly balked at granting the project Clean Water Act Section 401 water quality certification, which is necessary before FERC can relicense the project. Previous Gov. Beverly Perdue also unsuccessfully urged FERC to reject Alcoa Power Generating’s relicense to allow the state to take ownership of the project.

Latest state takeover bid began with lawsuit over riverbeds

In its most recent attack, the North Carolina Department of Administration first filed a lawsuit Aug. 2 in Wake County Superior Court seeking a declaratory judgment that the navigable portions of the Yadkin River bed under the project are the property of the state. The state asked the court to find that the Yadkin River bed under the dams is the sole and exclusive property of North Carolina, and therefore, the state owns an interest in the dams.

Only hours later, the North Carolina Division of Water Resources denied 401 water quality certification to the project saying the lawsuit filed by the state asserts that North Carolina owns the riverbed and portions of the dams standing on the riverbed. DWR said it could not consider the application valid until ownership of the riverbed is decided.

Alcoa Power Generating notified FERC Oct. 25 that it had filed a petition for a contested hearing of the 401 denial before the North Carolina Office of Administrative Hearings.

“…Regardless of the state’s unproven assertions in the lawsuit, those assertions do not constitute a determination of ownership — they are merely claims,” Alcoa’s Sept. 25 petition said. “… The state simply decided that, in order to continue with its efforts to interfere with the FERC process, it had to prevent the imminent issuance of the 401 certification, and the state chose to do so by causing DWR to single out APGI’s application and to treat it differently from all other 401 certification applications.”

401 denial reversed hearing officer’s recommendation

Alcoa pointed out that, days before the lawsuit was filed, a hearing officer of the state Department of Environment and Natural Resources recommended the state issue the Clean Water Act water quality certification to the Yadkin project. Hearing officer Jim Gregson recommended that the state certify that water quality standards would not be violated if Alcoa continued to operate the dams. Gregson went so far as to say in his recommendation that ownership of submerged lands is not relevant or required in order to issue the 401 certification.

Alcoa noted the state’s lawsuit also admitted that the FERC relicense likely would be granted unless there is a declaration that the state owns the riverbed.

“This abrupt reversal of position (on 401 certification) was simply dictated by the state’s desire to prevent the issuance of a 401 certification, a prerequisite to the issuance of a FERC license, and, thereby, to continue in the efforts of its political arms (e.g., the governor’s office) to interfere in the FERC licensing process,” Alcoa’s petition said. “As such, the denial violates the APA (state Administrative Procedure Act), and should be overturned…”

In its petition, Alcoa alleged DWR’s denial of 401 certification: deprived Alcoa of property, substantially prejudiced its rights, exceeded DWR authority or jurisdiction, was erroneous, failed to use proper procedure, was arbitrary or capricious, and was a failure to act as required by law or rule.

“A 401 certification decision may not be used as a vehicle to interfere with and frustrate the applicant’s FERC relicensing, and by doing so the state and DWR have exceeded their authority and jurisdiction, in violation of the APA,” Alcoa concluded.

In 2012, the U.S. Supreme Court unanimously overturned a Montana state Supreme Court decision that would have required hydropower licensee PPL Montana to pay $41 million in back rent for the use of riverbeds under portions of three Montana rivers. The high court declared that states can own navigable portions of rivers as a public trust, but navigability is determined segment-by-segment within a river. It said any portion of the river that could not have supported navigation at statehood, such as a series of waterfalls, is not subject to public trust ownership by the state.

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