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BPA Proposal Looks Like it Will Keep Ferndale-area Intalco Smelter Going by John Stark Bellingham Herald, July 17, 2009

The path to continued operation of Alcoa Intalco Works and its 500 jobs appeared almost clear Friday, July 17, after the Bonneville Power Administration announced the framework for a long-awaited power supply deal with the big aluminum smelter. "We believe this framework gives us the opportunity to survive," said plant manager Mike Rousseau.

While many complex details of the power contract remain to be worked out, the power supply proposal contains three key features Alcoa had asked for:

• A power supply that would be all but guaranteed for at least seven years.

• An industrial power price set at the same level as that paid by other Northwest industries that get their power from public utility districts or municipal power systems.

• Enough power to operate the plant at or near two-thirds of full capacity.

The terms of the proposed power deal are intricate, and things could still come unraveled. All the terms must be approved by Sept. 30, when Intalco's current power contract is set to expire.

Another potential crisis could come at the end of March 2010. At that point, BPA proposes to take a look at power price and supply in the region to determine if it will be financially feasible to provide power over the final five years of the seven-year agreement.

Rousseau said Alcoa is willing to keep the plant operating with that degree of power supply uncertainty, because the company's own assessment is that the economics of power will be favorable enough next spring to get the final five years of power supply into place.

As aluminum prices plummeted due to a global economic slump, Alcoa reported huge losses on its global operations and closed or curtailed aluminum production in many places, cutting production by 20 percent.

Earlier this year, Rousseau and other company officials had said it would be difficult to continue to operate the Intalco smelter at a loss without a guarantee that BPA power would still be available when the economy improves.

Rousseau said the proposed deal framework appears likely to provide the guarantee the company needs.

"We want to run this facility," he said.

BPA is the federal agency that markets the low-cost power produced by federal dams on the Columbia River system. Decades ago, when that cheap power was plentiful, aluminum smelters sprang up across the region, because they need vast amounts of power to produce the lightweight metal.

Today, BPA no longer has enough cheap power available to meet regional demand. As a result, most of the region's aluminum smelters shut down years ago.

In recent years, officials from public power systems around the Northwest have argued that Alcoa Intalco Works should be pushed off the BPA power system too, to make more cheap power available for their customers, and they have tried to get federal courts to order BPA to do just that. But their legal efforts have not been successful so far, and BPA officials have not accepted their arguments either.

An aluminum smelter's appetite for power is enormous. At two-thirds capacity, Intalco uses 320 megawatts of power. That's enough power to light up 320 million 100-watt bulbs, and is roughly equivalent to about one-fourth of the power consumption of the city of Seattle.

Few other industries use anything near that much. The now-departed Georgia-Pacific Corp. pulp and paper mill on Bellingham Bay used about 40 megawatts.

Alcoa is the world's biggest aluminum producer. According to information on the company Web site, Alcoa owns all or part of 10 U.S. smelters. Five of those have been shut down "temporarily," while three more, including Intalco, are operating at reduced capacity.

Alcoa has 15 smelters outside the U.S., including in Australia, Brazil, Canada, Iceland, Italy, Norway and Spain.