The Uses of a Water Quality Certification: Alcoa

September 9, 2013.   On August 2, 2013, DENR’s Division of Water Resources denied a Section 401 water quality certification for the relicensing of Alcoa’s four hydroelectric dams on the Yadkin River.   (See an  earlier post  for background on  401 Certifications.) The denial letter did not cite any water quality basis for denying the 401 Certification. Instead, the letter  referred to a lawsuit filed the same day by the N.C. Department of Administration  that: 1.  claimed title to the bed of the Yadkin River under the Alcoa dams as public trust land;  and 2. asked the court to   recognized State ownership of the Alcoa dams  based on public trust ownership of the riverbed under the dams.  The significance of the Alcoa 401 Certification denial is that  many projects requiring 401 Certifications are located  in waters that may be covered by the public trust doctrine. The Alcoa  denial raises  some interesting questions about   issuance of  401 Certifications for  activities in rivers and streams in particular.   First, some history on Alcoa’s dams and  the public trust doctrine.

History.  Alcoa operates four dams on the Yadkin River to generate electricity.  Alcoa bought an  unfinished aluminum smelting plant in the town of Badin from a French company in 1915, completed the plant and began operation in 1917 powered by the newly constructed Narrows Dam on the Yadkin River.  As power demand increased, Alcoa  built three more hydroelectric dams on the Yadkin  —  at the Falls (1919),  High Rock (1927)  and Tuckertown (1962).   After Congress strengthened the federal role in permitting hydroelectric power projects,  Alcoa received  a 50-year federal  license to operate the dams (together  known as the “Yadkin Project”) in 1958.  In 2002, Alcoa  began the process of renewing the federal license.

For two years, a group  of North Carolina local governments, state agencies (including DENR), federal  agencies, lakefront homeowners associations, and environmental organizations met  to develop recommended license conditions for the Yadkin Project.  The   group  reached agreement on measures to protect water quality and habitat; provide public access; maintain lake levels and adequate  downstream flows; and create a drought management system for the area affected by the Yadkin Project.  The group submitted the proposed conditions to the Federal Energy Regulatory Commission (FERC) in 2007.  You can find a description of the 2007  relicensing settlement agreement  here.

Shortly after the settlement agreement had been signed,  Alcoa stopped all production at the Badin aluminum works and eliminated the last 30 jobs at the plant.  At its height, the Badin aluminum works employed about 1,000 people, but production had declined over a ten-year period.  As the demand for power at the Badin works lessened, Alcoa  started selling electricity from the Yadkin Project on the wholesale market.  Complete shutdown of the Badin plant set off a backlash. Stanly County, which  did  not sign the relicensing settlement agreement, demanded that Alcoa compensate the county for jobs lost  in the  shut down of the  Badin works and raised concerns about industrial contamination in the area of Alcoa’s Badin plant.  Stanly County  and others opposed to  renewal of Alcoa’s  FERC license  persuaded Gov. Beverly Perdue to intervene in the FERC relicensing and  request transfer of the  Alcoa  license to the State of North Carolina. FERC’s decision on relicensing of the Yadkin Project has now been on hold for several years waiting for the state to make a decision on issuance of a  401 Certification for operation of the dams.

In 2009, DENR   issued a  401 Certification for the Yadkin Project. The certification required   Alcoa to upgrade the hydroelectric generation facilities and make operational changes to improve downstream water quality and  restore flow to streams affected by operation of the dams.  DWQ revoked that  401 Certification in late 2010 after discovering that  information submitted by  Alcoa during the application review  may have been misleading.  After resolving DWQ’s  concerns, Alcoa reapplied for a 401 Certification last  year.   DWQ was  moving toward issuing a new 401 Certification  for the Alcoa dams — there was  a public hearing on a draft 401 Certification  in  May  — when DENR suddenly reversed direction and denied the 401 Certification on August 2, 2013 citing the McCrory administration lawsuit filed the same day. You can find documents related to Alcoa’s recent 401 application (including the denial letter and the complaint in the McCrory administration lawsuit) here.

Public Trust Doctrine. Under ancient law brought to the American colonies from England,  lands under navigable waters are owned by the sovereign and held in trust for the public.  The “public trust doctrine” protects the right of  the public to use the  waters for navigation, fishing, and recreation.  After independence, the states acquired title to public trust lands previously held by the King. Since the state holds lands under navigable waters in trust for the use of the public,  the state rarely transfers ownership of  those lands  outright.  On the other hand, the state  allows many private activities on  state-owned public trust lands — both commercial and non-commercial. Most of the docks, piers, marinas, and fish houses in  coastal waters have been built on state-owned public trust lands.   You will  find  other commercial activities in  coastal waters, rivers and streams including  aquaculture operations,  mining,  commercial recreation facilities,  and  dams (used for various purposes).

The  McCrory administration lawsuit admits  that  Alcoa had state permission to build hydroelectric dams on the Yadkin River. In the late 18th and early 20th century,  the General Assembly allowed a number of companies to build hydroelectric dams and mill dams on state rivers by  special legislation.  It is not clear that the state claimed ownership of the bed of the Yadkin River at the time.  Some early laws authorizing construction of dams on the Yadkin  refer to construction on “non-navigable” sections of the  Yadkin River  and a number of  state court decisions  recognized private ownership  of the bed of the Yadkin River  at  specific locations.   In Rose v. Franklin, 216 N.C. 289, 4 S.E.2d 876 (N.C., 1939), the N.C. Supreme Court noted that the parties to a title dispute admitted that the Yadkin River was a non-navigable stream as it passed through the town of Elkin and found that the plaintiff owned to the center of the river.

Until the 1990s,  court decisions recognized state ownership of lands under: 1. tidal waters (like the waters of the Atlantic Ocean and the coastal bays and sounds); and 2.   other waters that were navigable by sea-going vessels. The second category covered rivers that were below the fall line and deep enough to  be navigated  by large boats.    The public trust cases  appeared to allow private ownership of  the beds of  other rivers and streams,  but recognized a public trust easement on those that could be navigated by  shallow-draft boats or used to float logs downstream.   Decisions like Rose v. Franklin  fit this understanding of the law.

A  1995 N.C. Supreme Court decision, Gwathmey v. State, 464 S.E.2d 674, 342 N.C. 287,   abandoned the use of tidal influence as a factor and stated a simple rule: the public trust doctrine applies to any water body that, in its natural condition, can be navigated by “useful vessels, including small craft used for pleasure”.   It isn’t clear whether  Gwathmey completely abandons the old distinction between waters navigable by sea-going vessels and those  floatable by canoe for purposes of state ownership of the bed. One  problem with the Gwathmey case is that it  involved tidal  waters and marsh where public trust ownership had historically been recognized. The court just substituted one grounds for public trust ownership (navigability) for another (tidal influence).  The decision never  addressed the  impact of the  new rule  on  inland rivers where state courts had  recognized  private ownership of the river bed.  The McCrory administration lawsuit claiming title to the Alcoa dams may require the court to explain how the Gwathmey decision  applies to  interior rivers and streams.

The 401 Certification Decision.  The letter denying the Alcoa 401 Certification offers only one grounds for the denial — the state’s claim of ownership of the Yadkin River bed and the Alcoa dams built there. Citing a water quality rule, 15A NCAC 02H.0502 (f),  the letter says that “signature on the [401] application ‘certifies that the applicant has title to the property, has been authorized by the owner to apply for certification or is a public entity and has the power of eminent domain’. The required ownership certification ensures that the applicant owns the project’s dams and powerhouses and is fully capable of implementing all protections of water quality that may be imposed as conditions in a 401 Certification.”

The  rule applies to  all 401 applicants, raising the question of what will  now be required of applicants proposing development in public trust waters or in rivers and streams where public trust ownership may be in question.   It  is not a standard that seems to have been applied before to projects  on rivers and streams– even in the very recent past.  Just one month earlier, DENR waived a 401 Certification for the proposed Cleveland County dam without requiring the county to  show ownership of the bed of the First Broad River or obtain state permission to apply for a federal Clean Water Act permit  to build a dam.  Beyond dam construction,   a  401 Certification may be required for other commercial activities like in-stream mining; aquaculture;  construction of recreation facilities;  and  water intake structures for industry or agriculture.  Having invoked the requirement for Alcoa’s hydroelectric dams, DENR will need to  explain how the requirement applies to other applicants and permit holders:

— Does the standard set in the Alcoa denial letter apply to all  projects  in navigable  waters that require a 401 Certification?  This is not a trick question;  the letter indicates that  ownership  or  some form of state permission  will be necessary to satisfy DENR that  the applicant  has  sufficient control over  a project  on public trust lands  to  meet water quality conditions on a 401 Certification.

— What  will an applicant have to do to show  private ownership of land under a river or stream? Deciding whether a river or stream is navigable can require a boat trip — literally.  Answering the question of public trust ownership  will be  further complicated by uncertainty about how  the Gwathmey decision  applies to  rivers (or parts of rivers)  that  had  never been considered navigable by sea-going vessels.  In the past, many of those riverbeds had been recognized as  private property subject to a public trust easement for  navigation.

— Without proof of private ownership of the river or stream bed, what  kind of  state permission will be needed?  In the 19th and early 20th century, the General Assembly  often authorized activities in rivers and streams by special legislation  — as it did for  construction of  hydroelectric dams on the Yadkin River.  The state issues leases and easements in public trust lands for some purposes, but  those   programs developed fairly late in the 20th century and have been used for the most part in coastal waters.  The easement criteria in G.S. 146-12  lend themselves more readily to piers and docks  than to more intensive uses such as mining or dam construction.

In something of a reverse of the Alcoa 401 denial,  the state has   often relied on environmental permits as the vehicle for approving  activities in public trust waters.  Under G.S. 146-12, issuance of a  Coastal Area Management Act (CAMA) permit for development in  coastal waters  also  gives  the applicant a state  easement.  (The State Property Office  has an opportunity to review those CAMA applications.)   Outside the coastal counties, it is hard to find consistent application of the easement requirement.  For projects that don’t require a CAMA permit,  there will likely be more uncertainty about  public trust ownership and a less well-trod  path to state approval if the state does own the submerged lands.

— What standards will be applied in granting or denying state permission for activities on public trust lands?  The McCrory administration lawsuit suggests an intent to tie Alcoa’s operation of the Yadkin dams to generate electricity for sale on the wholesale market to compensation for use of the public trust resources.  Outside of leases to mine on  submerged lands, state law has not generally taxed  revenue from commercial  use of public trust resources.

— What happens when Congress has given a federal agency authority  to permit an  activity in navigable waters?  Under the Federal Power Act, FERC  has the authority to license hydroelectric projects in navigable waters of the United States. The U.S. Army Corps of Engineers has authority to permit other types of structures in navigable waters under the  Rivers and Harbors Act of 1899 and  issues Clean Water Act permits to fill navigable waters.  The Section 401 Certification has generally served as the state approval for  federally permitted projects in navigable waters. I don’t know that  the state has previously required a separate easement or lease. I also don’t know whether the federal  agencies believe any other state approval is needed given  Congressional authority  to permit these activities in navigable waters.

Many questions. The answers will be interesting.

3 thoughts on “The Uses of a Water Quality Certification: Alcoa

  1. Ann Brownlee

    I almost always enjoy and find your blog informative. However, I think some comments are in order on your recent post on Alcoa and the potential ramifications of “riverbed ownership.” You did a lot better than most, but …..

    I am a stakeholder who has been involved in Alcoa’s relicensing process since 2002. I am also a historian who has been studying the Yadkin River since 1994.

    First, let me say the stakeholders met for four and a half years, not two, prior to finalizing the Relicensing Settlement Agreement. Prior to the settlement negotiation phase of the process, we were involved in issue advisory groups, setting study parameters, providing comments on draft study revisions, and other matters. And, we’re still involved. The way FERC does things, Alcoa and the involved stakeholders will prepare a Historic Property Management Plan within a year after the license is issued. So, I’m not through yet.

    I think it should be noted that none of the concerns the state takeover proponents have raised since early 2007, shorty before the RSA was signed, were raised by them during the relicensing process. And they’ve changed considerably since 2007.

    It should be noted that Alcoa had announced the shutdown of the Badin Works plant in 2002, so the layoffs in 2007 were not a surprise. Some other points regarding jobs. First, in the Final Environmental Impact Statement (FEIS) which FERC released in May, 2008, FERC staff found that the jobs lost at the Badin Works plant were not a project-related issue. Nonetheless, Alcoa has spent over $10 million to rehab the old Badin Works site and turn it into the Badin Business Park. Electronic Recyclers, Inc. opened their southeast regional headquarters there, and will provide about 200 jobs when they are fully functional. Alcoa did their darnedrst to bring the Clean Tech company, a $300 million investment, and 450 high-paying jobs to Badin. They were attacked tooth-and-nail by the same people who use Alcoa’s loss of jobs as a rationale for state takeover, and who drove the jobs away. Alcoa is still trying, but it’s doubtful if they’ll be able to attract jobs in the current political climate.

    The 401 Water Quality Certificate which DENR issued in 2009 was the second one. They had also issued one in 2007, but had failed to properly public-notice it.

    I think what is most important is the fact that everyone is glossing over whether the Yadkin River was navigable, in its natural and ordinary condition, at the time of statehood, 1789. Proving that, which is the State’s responsibility, is necessary for the State to claim ownership of the riverbed. I happen to know a bit about that. It wasn’t. No where close. It was a bear. Alcoa’s and Progress Energy’s section was the worst part of the river. (BTW, it’s been widely accepted since at least 1815 that the Pee Dee River – the lower part of the Yadkin – is navigable from the ocean to Cheraw, SC, at the fall line.) The federal government has the final say on the criteria, under the Commerce Clause of the U. S. Constitution. Last year’s unanimous Supreme Court decision in PPL Montana v. Montana is the operable case. I’d be very surprised if any of NC’s inland rivers met the navigability standard for title determination.

    Just to be confusing, there are three definitions of navigability: one for title determination, one for admiralty jurisdiction (which gives federal agencies regulatory rights), and one for an easement for public trust rights for public access for fishing, swimming, and other recreational uses. I think everyone agrees that the public has a right to access the waters of the Yadkin River. I think everyone agrees that federal agencies have regulatory rights on the Yadkin River. The only disagreement is over title to the riverbed. The State has never claimed it before. 224 years of statehood, and it only conveniently comes up when there is a faction who wants the State to take over the project. In addition, in Alcoa’s project area, FERC, not Alcoa, approves all water withdrawal permits over 1 millions gallons per day.

    I’d also say that no one has ever held the Yadkin riverbed “in trust for the public.” The Kings of England granted deeds to the riverbed. Lord Granville, who owned a huge part of the state, issued deeds to the riverbed. Henry McCulloh, who had grants from the King totaling 1.2 million acres, much of it covering what is now Alcoa’s project area, issued deeds to the riverbed. And the State of North Carolina has issued numerous deeds to the riverbed. Not everyone wanted title to the riverbeds, but it appears that the State would sell it to anyone who wanted to buy it. Even where deeds do not specifically include sections of the river, it has always been the practice to assume ownership of the riverbed by adjacent property owners.

    You can find a PowerPoint I presented at a URRC meeting in April on Yadkin River Navigability and Riverbed Ownership here: . I have not heard one challenge to this information.

    I have to say, you really jumped into a deep issue on this one. It took me quite a while and a considerable amount of research to figure it all out.

  2. grant mcbee

    The issue here is not about water, it is about the ownership of the land. If Alcoa is holding a valid deed to the bed of the Yadkin, it is not state property.

    The next question will be: Is the Yadkin a navigable river? The question of navigability is a Federal Question, state laws are largely irrelevant to assessing title based on navigability. The state will need to prove the area under the dam is a navigable waterway, under federal law. Given the size of the Yadkin at the lower dam site, this should be easy for the State.

    NC is a riparian state, therefore neither the water or air are ‘owned’. Like air, while water passes over non-state property it can be only ‘regulated’ for pollution and to insure continuity of flow. Because waters eventually flows into public waters (navigable and tidal), upstream (not navigable) waters can be regulated to prevent damage to downstream (public) waters. Water has nothing to do with property ownership of the Yadkin River bottom
    FERC Grants permits under the commerce clause, therefore their authority extends beyond just ‘navigable waters’. The ACOE also grant 401 permits under the Clean water Act that extends jurisdiction far beyond ‘navigable waters’ . These Federal Permits provide no help is assessing the ownership of the Yadkin’ riverbed.

  3. Ann Brownlee

    Grant and Robin,

    The federal definition of navigability for the purpose of title determination to the riverbed is:
    A river is navigable for the purpose of title determination if it was used or was susceptible to being used in its natural and ordinary condition as a highway of commerce over which trade and travel were or may have been conducted in the customary modes of trade and travel on water at the time of statehood (NC 1789).

    Just because Badin Lake is navigable today by Jon boats, aluminum canoes and fiberglass kayaks does not mean that the kinds of vessels in use in 1789 could have navigated the river in its original condition. Quite the contrary. The U. S. Army Corps of Engineers did a navigability survey of the section of the river from Salisbury to the S. C. line in 1887-1888 and found that entire section of the river to have impediments to navigability (shoals, falls, etc.), a steep descent, a low volume of water, and a rocky bottom. Their finding was that that entire section of the river was not worthy of improvement to make it navigable.

    FERC’s predecessor in 1958 found the lower Yadkin upper Pee Dee River not to be navigable in 1958. So did the Yadkin River Power Company v. the Whitney Company lawsuit in 1909. The deck is really stacked against the state on this one.

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