Power Offer Could Salvage CFACby Richard Hanners
Hungry Horse News, August 3, 2011
A Bonneville Power Administration proposal to sell 140 megawatts of power to Columbia Falls Aluminum Co. is a key component to getting the smelter plant up and running again. The announcement was made during an open house at Discovery Square on Monday, Aug. 1.
BPA's offer is for enough power to run two potlines at the aging plant for four years and six months. According to BPA account specialist Mark Symmonds, the starting price would be about $36 per megawatt-hour for at least 24 months, at which point the price could be contested.
CFAC lost BPA power following a 2008 court case and shut down completely in October 2009 after running on spot-market power and using any raw materials that could be scrounged up around the plant for about 10 months.
Two types of analyses must be completed by BPA before the proposed power contract can be signed off. One is an environmental document under the National Environmental Policy Act. This would be a supplement to a full-blown environmental analysis of power sales to the 10 Pacific Northwest aluminum smelters conducted in 1986, BPA environmental specialist Sandra Ackley said.
Secondly, BPA must complete an "equivalent benefits test" that was developed in response to the 2008 Ninth Circuit Court of Appeals ruling that forced the CFAC to close its doors two years ago. The analysis must conclude that the benefits to BPA of serving CFAC would equal or exceed BPA's cost of providing the power. That analysis has been completed and led to the latest power proposal.
The current two-year economic recession has significantly impacted the changing regional power market. BPA's low-cost power has displaced some fossil-fuel powered generating plants, while seven of the Pacific Northwest's 10 aluminum smelters cease to exist and 3,000 megawatts of new wind power is on the market.
BPA has power available to sell, but the "take or pay" contract really favors the federal power agency, former CFAC spokesman Haley Beaudry noted. Under the proposal, BPA can sell any of the contracted power not used by CFAC on the open market. If it's sold at a below-market price, CFAC must make up the difference. If it's sold at an above-market price, BPA gets to keep the difference.
It might make more sense in terms of economies of scale to run three potlines, not two, Glencore representative Matthew Lucke said. That would mean purchasing another 70 megawatts on the open market and employing up to 300 employees instead of 230, he said.
Three potlines would mean 100,000 tons of metal per year, he said, which he expects Glencore can sell on the international aluminum market for a profit.
But a power contract is just one piece of the CFAC start-up puzzle. The plant's outmoded equipment has sat idle for so long it's not just a question of whether the plant can be competitive but whether the plant will start right up. Finding skilled workers with the specialized knowledge needed about the plant will also be difficult.
On top of that, transportation issues exist over raw materials. CFAC no longer owns the storage and shipping facility in Everett, Wash., where ships off-loaded alumina to rail cars bound for Columbia Falls. Glencore also has used its Vanalco smelter facility on the Columbia River for off-loading ships, but that equipment has been dismantled. Lucke said Glencore is currently in talks about transportation facilities.
The proposed power deal is slated to start April 1, 2012, if it receives final approval. That might give Glencore enough time to line up raw materials and transportation as well as enough skilled workers to get the plant up and running.
BPA will accept comments on the proposed sale through Aug. 31 online at www.bpa.gov/comment. For more information, cll 800-622-4519 or visit online at www.bpa.gov
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