N.C. judge rejects state bid to thwart FERC relicensing of 210-MW Yadkin hydro project

Yadkin Hydropower Project Map

A North Carolina administrative law judge has overturned North Carolina's denial of water quality certification intended to prevent Federal Energy Regulatory Commission relicensing of Alcoa Power Generating Inc.'s 210-MW Yadkin hydroelectric project.

With Alcoa close to receiving Clean Water Act Section 401 water quality certification from a state agency, North Carolina filed suit in 2013 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.

In its most recent attack, the North Carolina Department of Administration first filed a lawsuit Aug. 2, 2013, 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 filed a state administrative appeal of the 401 denial.

Judge orders agency to act on 401 application

Administrative Law Judge Selina Brooks granted Alcoa's motion May 29 and ordered the state to review Alcoa's 401 application as soon as possible and to issue a decision in 30 days. The judge said ownership of the river bed has nothing to do with water quality and criticized the state for improperly injecting the state's attempt to take over the project into the 401 proceedings at the last minute.

"Petitioner (Alcoa) has met its burden of showing that respondent (North Carolina Division of Water Resources) acted in an arbitrary and capricious manner in issuing the denial because it was not the result of a careful consideration of petitioner's application or of an impartial decision-making process and because it resulted in manifest unfairness to petitioner," the judge said. "Respondent provided insufficient substantial evidence in the record to support the denial in the face of uncontradicted evidence provided by both parties that demonstrated deficiencies in the manner and bases underlying the denial. Respondent exceeded its authority, acted erroneously, and failed to act as required by law or rule, because the denial was based upon a factor that respondent is not authorized by statute and its rules to consider. Respondent failed to use proper procedure by acting on the basis of ownership issues without requesting information from petitioner about those issues or otherwise providing petitioner with an opportunity to address them before issuing the denial."

The judge also noted the denial of 401 certification delayed the implementation of water quality protections and improvements that would come from issuance of a new FERC license.

The administrative law judge's decision may be obtained from Alcoa's Internet site at www.alcoa.com/yadkin/en/pdf/2015_05_401_Final_Decision.pdf.

"This was never an issue about water quality," Ray Barham, Alcoa's relicensing manager, said. "We have a proven plan in place to improve water quality and ensure compliance with the state's water quality standards. We are prepared to invest up to $80 million in the Yadkin project to continue enhancing water quality in the Yadkin River."

Alcoa and North Carolina continue to battle over the state's lawsuit contending the navigable portions of the Yadkin River bed under the project are the property of the state. The case was moved from state court to federal court, which ruled in May that the relevant section of the Yadkin was not navigable, which prevents the state from asserting special ownership rights to the river bed.

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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