NC rejects water quality claim, sues over Alcoa's riverbed property rights for 4 Yadkin dams

RALEIGH, N.C. — North Carolina officials filed a lawsuit Friday in a long-running fight with Alcoa Inc. over who will control the water and electric power that comes from the state's second-largest river system for the next 50 years.

State officials said in the lawsuit that Alcoa Inc. has no ownership rights to the bed of the Yadkin River over which four dams were built beginning a century ago. The lawsuit asks a state court judge in Wake County to rule that the state retains ownership rights to the submerged land, so North Carolina now has rights to a stake in the hydropower dams.

A state environment agency then rejected a water quality certification Alcoa needs for a new federal operating license, citing the new dispute over riverbed property rights.

The river runs for about 200 miles to the east of Charlotte and becomes the Pee Dee River before entering South Carolina on its route to the Atlantic Ocean. The dams powered an aluminum smelter that closed in 2007 and the company has since sold the electricity to commercial customers.

"The Yadkin River is a North Carolina River," Gov. Pat McCrory said in a prepared statement. "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."

Former Gov. Beverly Perdue took a similar position in fighting Alcoa's effort to secure a new federal license that would allow the company to continue operating the dams for up to 50 years, or sell the dams to another buyer.

Pittsburgh-based Alcoa and its operating subsidiary Alcoa Power Generating Inc. said it will ask that the case be moved to federal court for a judge there to weigh the case's merits.

"We believe this filing is 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 relicensing manager E. Ray Barham said in a statement. "APGI is confident in its ownership position and that it will be firmly established in court."

In a second move Friday, the state Division of Water Resources denied Alcoa's bid for state certification that it is meeting water quality standards. That certification is needed before the Federal Energy Regulatory Commission will issue a new multi-year license.

Alcoa is prepared to spend about $80 million to improve water quality, but that's on hold because the state refused on Friday to certify that the project was already meeting water quality standards, Barham said. While the company fights the property ownership case in court Alcoa will continue to pursue a new federal license, he said.

The company noted that the U.S. Supreme Court last year issued a ruling on riverbed property rights.

Ownership of riverbeds beneath commercially navigable waterways has historically gone to state governments upon statehood. Non-navigable riverbed ownership stays with the federal government.

The Supreme Court sided in 2012 with a power company in a dispute with Montana over who owns the riverbeds beneath 10 dams sitting on three Montana rivers. Montana sought to collect more than $50 million in back rent and interest after that state's highest court determined the state owns the submerged land beneath the dams.

The U.S. Supreme Court ruled that entire rivers can't be declared navigable and thus state property, and courts instead should instead analyze whether the spots where dams were built were navigable before deciding state ownership.

A separate court filing by state lawyers said a decision will hinge on whether the 38-mile segment of the Yadkin River at issue could be navigated when North Carolina became one of the 13 original states, and whether the state ever transferred its property interest to the riverbed or still owns it in trust for the state's people.

In January, the state General Assembly's internal watchdog division reported that North Carolina has historically failed to keep track of who owns riverbeds where the state is entitled to ownership.

The General Assembly's Program Evaluation Division said current state law prohibits the state from giving or selling anyone else title to submerged lands without the Legislature's explicit approval. But the state may have conveyed riverbeds in the past and lost track, the report said.

North Carolina resolved and mapped all private claims to submerged lands in 25 coastal counties over nearly two decades ending in 2004, but the state hasn't tried to do the same for the other 75 counties, the report said.

Ten of the 12 other original, post-Revolution states also fail to track ownership of their submerged lands, the report said.

The lawsuit contends North Carolina officials allowed the dams to be built and to operate in return for the well-paying jobs in the smelter that once employed nearly 1,000. But the state never transferred ownership of the riverbed and the stakes changed when Alcoa laid off the workers and shuttered the plant, the lawsuit said. Left behind is "a massive footprint of toxic industrial pollution" including cyanide, arsenic, PCBs, and other contaminants in the soil and water, "all of which threaten the health, safety and welfare of area and downstream residents."