Will federal climate legislation help reopen aluminum plant in Whatcom County?

The federal health care and climate legislation signed Tuesday by President Joe Biden includes tax credits and grant money that would help subsidize the cost of low-carbon aluminum produced in the United States.

But the reopening of the Intalco Works aluminum smelter in Whatcom County – sought by a coalition of unions, environmentalists and Washington politicians pitching design changes to reduce carbon emissions – remains uncertain.

Aluminum, used in solar panels, electric cars and many other staples in the transition away from fossil fuels, is an energy-intensive industry. And so far, backers have yet to secure a contract from the Bonneville Power Administration, or BPA, which markets electricity from the regional network of federal hydroelectric dams.

The Inflation Reduction Act law signed by Biden “can give us resources to restart Intalco, but we still need affordable power,” said Mike Tanchuk, a former Alcoa executive who is a leader in the restart effort.

Alcoa shut down the Ferndale smelter in 2020 after more than a half-century of operation. Its closure marked the end of an era for Pacific Northwest aluminum production. The industry, located in the region to take advantage of abundant hydropower supplies, by the 1960s employed some 11,000 people at 10 plants, according to the Northwest Power and Conservation Council.

The difficulties in bringing back the smelter are an example of the broader challenges of rebuilding the U.S. supply chain, even as Congress, through passage of the Inflation Reduction Act and other legislation, tries to make that happen.

A coalition of environmentalists and labor unions proposed a plan earlier this year to try to restart the Intalco facility. They gained the backing of Blue Wolf Capital Partners, which would purchase the plant from Alcoa if the restart moves forward.

The renovated facility is expected to create 700 jobs on-site, many more support jobs and provide regionally sourced aluminum for Pacific Northwest and other U.S. clean energy industries. Backers say the plant’s greenhouse gas emissions, which were 1.2 million metric tons a year, could be cut to about 500,000 metric tons annually.

On May 26, 12 members of Washington’s congressional delegation wrote a letter to BPA administrator John Hairston urging the agency work “in good faith” with Blue Wolf Capital labor groups to reach “a competitive power agreement” to support reopening the smelter.

The BPA, a federal agency, sells power at cost to Northwest consumer-owned utilities. It also sells surplus power at market prices, which has become more lucrative during the past year, as it has become more expensive during peak demand times. Through the years, those market sales have helped defray expenses and limit the size of BPA rate increases to consumer utilities.

BPA also provided power contracts to aluminum smelters, but that era ended when Alcoa terminated the Intalco agreement in 2019 before closing the facility.

The Public Power Council, which represents Northwest consumer-owned utilities, has attacked efforts to gain a new BPA contract for the Intalco smelter at below-market rates.

“(The Public Power Council) would strongly oppose any effort that relies on subsidies from public power consumers, many of whom are already struggling,” Scott Simms, the council’s executive director, said in a Tuesday statement.

The BPA, in a written statement, said the agency continues to have discussions with Blue Wolf about the potential sale of surplus power to supply some of Intalco’s power requirements. The price would be at a rate that reflects the costs of power in the market.

The plant’s backers also are exploring another option to secure power at below-market rates.

Under the Defense Production Act, they say, the Energy Department can buy power, then sell it at a discount. This would be a federal subsidy to the aluminum plant similar to those provided in other countries. The Inflation Reduction Act, backers say, includes money that could be used to make this happen.

“We think it’s appropriate because we compete against countries that do that. We’re like one hand tied behind our backs,” said Larry Brown, president of the Washington State Labor Council.

Brown said federal subsidies could be phased out as more clean power comes online and market prices go down. But the project needs to come together soon, otherwise Alcoa might opt to dismantle the plant in late 2023, according to Brown.

Simms, of the Public Power Council, said that it would be up to the Energy Department to determine a prudent use of taxpayer dollars. But if any of the power supply involved the BPA, he said it would need to be “carefully assessed” to ensure no ratepayer subsidies.