North Carolina again tries to thwart FERC relicensing of 210-MW Yadkin hydro project

The state of North Carolina has filed suit against Alcoa Power Generating Inc., challenging the company’s ownership of riverbeds beneath its 210-MW Yadkin hydroelectric project. Then, because of that lawsuit, the state denied water quality certification required for the project to obtain relicensing by the Federal Energy Regulatory Commission.

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.

Lawsuit contends North Carolina owns riverbed, parts of dams

In its most recent two-pronged gambit, 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.

“We filed suit today on behalf of the people of North Carolina who aren’t receiving a fair deal,” Administration Secretary Bill Daughtridge said. “The people never gave away their ownership interest in the Yadkin River. It’s their river and it should be used for their benefit.”

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.

“The Yadkin River is a North Carolina river,” Gov. Pat McCrory said. “We should be able to use it for North Carolina water needs and to create North Carolina jobs. The benefits of the Yadkin River belong to North Carolina’s people.”

401 certification denied due to ownership challenge

In a second blow to Alcoa, 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 and holds in trust for the people the riverbed and portions of the dams standing on the riverbed.

“The division cannot consider the application to be a valid application until the issues of ownership of the submerged bed of the Yadkin River and the project’s dams are resolved by the parties or by a final order of the court in the pending lawsuit,” Water Resources Division Director Tom Reeder said in a letter to Alcoa.

The division said if the court resolves the riverbed ownership issues, “the owner or owners” may submit a new application.

Report: 401 was on track for approval until lawsuit filed

The Associated Press reported Aug. 5 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.

The AP said DENR released a report dated a week before the lawsuit in which hearing officer Jim Gregson recommended that the state certify that water quality standards would not be violated if Alcoa continued to operate the dams.

Environmentalist group: ‘Wow! Wow! Wow!’

The anti-hydro environmentalist group Yadkin Riverkeeper hailed the state’s attack on the project noting on its Facebook page: “Alcoa will have to legally challenge their own 401 (needed to get their 50-year license) and fight this river bed legal challenge at the same time! Media is exploding right now! This both a media and legal nightmare for Alcoa right now! What a great day. Wow! Wow! Wow! More to come!”

On its Yadkin Project Relicensing blog, Alcoa Power Generating called the state’s lawsuit “flat-out wrong.”

“Ownership of submerged lands is a question of federal law and we will immediately begin the legal process to move it to federal court,” Alcoa said. “This ownership has already been decided by the U.S. Supreme Court in a 9-0 decision in 2012 (Montana PPL v. Montana). APGI is confident in its ownership position and that it will be firmly established in court.”

Case could affect other FERC-licensed projects

The riverbed ownership issue has been governed by past decisions of federal courts and is expected to be monitored by other hydroelectric project licensees for ramifications in their states. The Montana decision cited by Alcoa limits, but does not eliminate, state ownership of riverbeds as a “public trust”

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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