Capital Goods - May 2009

Water on the brain
By Scott Mooneyham

A few decades ago, more than 1,000 workers toiled at Alcoa Inc.’s smelting plant at the south end of Badin Lake. The Pittsburgh-based aluminum maker was the largest taxpayer and largest employer in two counties. In ways small and big, Alcoa shaped the tiny town of Badin and the rolling hills for miles around.

But global competition proved tough. By 2003, Badin Works had closed, its jobs gone. Alcoa, though, didn’t disappear from the Yadkin River Valley. It still owned four dams on the river, dams built decades ago to generate electricity to power its smelters, dams that created the reservoirs that formed Badin, High Rock and Tuckertown lakes. Alcoa in North Carolina morphed from aluminum manufacturer to electricity wholesaler.

These days, many residents of Stanly, Montgomery and Davidson counties question how a private company that employs fewer than three dozen people locally has the right to control the flow of one of the largest rivers in the state. They’ve raised their questions as Alcoa seeks to renew a federal license to operate the dams for another 50 years.

The fight over relicensing gets more interesting by the day. Not long ago, Gov. Beverly Perdue told The Charlotte Observer, “It’s hard for me to understand how a company could own water rights to an entire river basin.” She, like predecessor Mike Easley, urged the Federal Energy Regulatory Commission to delay the licensing and, in early April, filed a motion to intervene. The state also has withheld a water-quality permit. State legislators, led by two Republicans, have filed bills aimed squarely at the company. One would force Alcoa to pay a local tax on its power generation. The other would create a trust that could buy the dams or vie with Alcoa for their future control.

The company doesn’t want to sell. It says the legislation could lead to a “government taking” of its property. Chuck Neely, a Raleigh lawyer and lobbyist who represents Alcoa, says the bills set the stage for any legislator with an ax to grind to attack any company. “Singling out a particular industry or a single business is a terrible precedent,” Neely says. The issues being raised are bigger than one company or a few dams on a single river. The fight is part of a larger, fundamental question that legislators have been struggling with lately, as droughts and population growth have caused increasing conflict over water: Just whose water is it?

If I buy a piece of land, dig a well and hoist a bucket of water, it’s mine, right? Well, what if I dig a well and pump so much water from the aquifer that my neighbor has none? Is it still mine? Actually, even that bucket of water might not belong to me. Water use in North Carolina and other Eastern states is generally guided by something called riparian rights. The common-law principle entitles you to the reasonable use of water under, on or adjacent to your land. But what’s reasonable use? Generally, it has been interpreted to mean anything that doesn’t significantly diminish or affect the quality of the water for other landowners who happen to be upstream, downstream or otherwise have rights to it.

Like most common law, riparian rights have evolved with court decisions and regulation. In North Carolina, they may soon become a lot more regulated and a lot more limited. Lawmakers are considering a bill that would require large commercial users to obtain permits that could, in times of drought, limit withdrawals. The bill also makes plain that the bucket of water I thought was mine doesn’t really belong to me. The bill begins: “The waters of the State are a natural resource owned by the State in trust for the public and subject to the sovereign power of the State to plan, regulate, and control … .”

That statement might not sit too well with Alcoa. State Sen. Fletcher Hartsell, a Catawba County Republican, doesn’t care. He’s the sponsor of the legislation to create a publicly held trust to take control of the dams. He notes that Alcoa, as a part of federal relicensing of the dams in 1958, had to state why it was in the public interest. One of the major reasons cited: jobs. “Clearly, circumstances have changed in the last 50 years,” Hartsell says. “They’ll change in the next 50 years.”

In fact, they’re changing under our feet. Whether it’s a struggle against a company’s control of a river or a battle over shifting water from one basin to another, water has become an emotional issue in North Carolina. What makes this issue so emotionally charged is that the flow of people into the state keeps increasing. But not its water.

Scott Mooneyham is the editor of The Insider,