‘Green’ aluminum plant in Pacific Northwest struggles to reopen

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FERNDALE, Wash. — Ryan Chapman was on pace to make $148,000 as a roving maintenance worker when he learned two years ago that Alcoa was shutting down the aluminum plant. Soon he was collecting unemployment and pursuing a bachelor’s degree in his late 30s, with two young sons and a stay-at-home wife. It was, he said, “a drastic change in quality of life.”

But unlike so many places gutted by American industrial decline, Chapman and hundreds of other laid-off employees of the Alcoa Intalco Works aluminum smelter are tantalizingly close to recapturing that past.

A plan to revamp this factory as a key piece in the future of renewable energy in the United States has been embraced by seemingly everyone: the machinists union, a private equity firm, the new electric vehicle industry, environmental groups and the state’s political establishment — from Washington’s pro-environment governor, Jay Inslee (D), to pro-jobs local Republicans. And it would make the smelter the only one functioning west of the Mississippi.

But a final obstacle — how to power the factory, and who will pay for that — may yet scuttle the deal.

The dominant Bonneville Power Administration, a federal agency which manages the Pacific Northwest’s huge dams and sprawling transmission lines, is balking, saying it simply doesn’t have enough dependable, low-cost hydropower to promise the Intalco plant, which is set amid forests and pastureland on the shores of the Puget Sound. And its position is backed by local electrical utilities who cherish their dependable power supplies from Bonneville — and their low rates.

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The deadlock over electricity is yet one more indication of how difficult it is to expand the U.S. supply chain and bring American industries back home. From aluminum to lithium to hydrogen, U.S. industry is trying to mine and manufacture materials currently made and imported from places such as China and Canada.

American companies are shunning fossil fuels — coal and natural gas — and are instead aiming to gain a competitive advantage with climate-conscious consumers by using low-carbon materials and low-carbon manufacturing. Yet, only 20 percent of U.S. electricity is generated by renewable sources of energy. And while that number is growing rapidly, so are the demands of American manufacturers, sparking a race for wind, solar and hydropower.

In the Pacific Northwest, for example, while the decline of aluminum manufacturers has reduced industrial demand for electricity, the extra power has been swallowed up by a 15 percent increase in Washington state’s population; computer servers used by big tech firms to store information; and an influx of computers run continuously in a search for digital keys used to unlock cryptocurrencies. Bonneville Power Authority has also sold power to California to help meet urgent needs.

“The grid needs to add more renewable sources to help companies meet their decarbonization targets,” William A. Reinsch and Emily Benson wrote in a February report for the Center for Strategic and International Studies. “However, the location of renewable energy production, such as offshore wind farms or major solar fields, is often distant from production facilities.”

Like similar initiatives, reopening the Alcoa-owned Intalco smelter could help advance President Biden’s domestic manufacturing agenda, reduce U.S. reliance on Russian aluminum, cut worldwide greenhouse gas emissions and create hundreds of well paying jobs.

Yet doing business in the United States means that companies can stumble over everything from permits to politics — even when things seem lined up.

“If we can’t successfully reopen Intalco, it is really bad for our broader efforts to transform and grow the U.S. manufacturing base,” said Jason Walsh, executive director of the BlueGreen Alliance, a collection of unions and environmental groups. “This project embodies everything that President Biden and his cabinet talk about with respect to rebuilding a green energy economy and building a green factory base that reduces greenhouse gases.”

Aluminum is expected to be an increasingly important part of American manufacturing’s transition to a low-carbon future. The metal is used for lightweight auto parts to offset heavy batteries in electric cars; for solar panel frames; for beverage cans and for durable construction materials. Global aluminum demand is expected to grow by up to 40 percent by 2050, according to the International Aluminum Institute. The Energy Information Administration forecasts that the value of shipments of aluminum will grow 45 percent over the same period.

“Our metal has been essential for modern life and will play an even larger role in the low-carbon future,” said Jim Beck, an Alcoa spokesman. “It is lightweight, strong, and — most importantly — infinitely recyclable.”

Automakers are seeking better fuel efficiency by making their vehicles lighter. By using more aluminum, Ford Motor achieved weight reductions of up to 700 pounds in its 2015 model year F-150 trucks. And as the auto industry veers in the direction of creating more electric vehicles, the demand for aluminum will increase.

“These are materials everyone in the world is going to need,” said Sasha Stashwick, director of industry policy, climate and clean energy at the Natural Resources Defense Council. “Countries that can figure out how to use it with low emissions are going to have competitive advantages.”

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Those advantages are what interested Blue Wolf Capital Partners, a private equity firm based in New York, to offer to buy the defunct Intalco smelter, which began production more than half a century ago. The firm, which manages over $1.8 billion largely from big pension funds, describes itself as pro-labor and pro-environment; one of its founders dropped out of college for a while to become a community organizer.

Blue Wolf expects to spend $50 million up front and a total of about $175 million for modernizing the plant, said people familiar with the cost structure currently under negotiation, who spoke on the condition of anonymity to protect business relationships. The plant is expected to produce 240,000 metric tons of aluminum — 10 to 20 percent more than imports from Russia in 2021. The niche market for green aluminum could help make the plant profitable, the company’s representatives have told local officials.

Michael Tanchuk, a veteran of the aluminum industry and leader of Blue Wolf’s effort to restart Intalco, has spent his working life in aluminum plants. “I have been in the metals industry for over 30 years, and I have watched as aluminum production has moved overseas to follow lower price electricity, most often from coal, to the detriment of American workers and our global climate,” he said in an email.

Now, Tanchuk said, Blue Wolf and its allies can restart the plant and move to solar and wind quickly. “With Intalco, the U.S. will again have a reliable supply of a critical material, America will produce green aluminum, and we will bring green jobs to America.”

American companies dominated the aluminum industry for much of the 20th century, and the Pacific Northwest was a hub for its manufacturing. Smelters need vast amounts of energy and the region’s bountiful hydropower provided a steady and affordable supply of electricity. At its peak, the industry employed 11,000 people while consuming enough electricity annually to light three cities the size of present-day Seattle.

But domestic aluminum has been in a long slump, hit by volatile pricing and the rise of foreign competitors. In 1985, there were 31 aluminum smelters in the United States. Today, there are six. Almost all have been dismantled and sold for scrap or to clear the way to erect commercial parks and buildings, with the bulk of production shifting to China.

By April 2020, as the pandemic deepened and aluminum prices plunged to historic lows, Alcoa said it was closing down the Intalco plant.

To the workers, it felt like losing a family business. Several former employees said they worked alongside parents, siblings or in-laws. Chapman was laid off along with his wife’s uncle.

“It has ripped through families,” he said.

The tightknit workforce scattered after the smelter was “curtailed” by Alcoa, now maintained only by a skeleton crew. While many of these skilled employees found other work, labor union representatives say that few have maintained the lifestyle Alcoa afforded them. Addictions flared up and three former employees took their own lives, said Brian Urban, a bricklayer and union official who was laid off.

“We had a major issue with mental health for the guys,” said Urban, who hosts regular dinners and gatherings for former employees. “I can’t tell you how many people I went and picked up and brought them in for health and welfare checks to the hospital because they were feeling like harming themselves.”

The Intalco plant has long played an important role in the Ferndale community, churning out aluminum for cars, airplanes, and beverage cans since it opened in 1966. The plant was one of Whatcom County’s largest employers with more than 700 workers, and each job there produced 1.29 other jobs in the community, according to a 2019 study.

The economic impact of the closure was somewhat obscured because it coincided with the beginning of the coronavirus pandemic, but local officials say it has been a painful blow.

“It was quite devastating,” said Satpal Singh Sidhu, the Whatcom county executive. “Not only for the families, for our economy.”

The smelter has also faced criticism as a big polluter. To make aluminum, the ore is melted down in rows of pots and then fashioned into aluminum rods and ingots. These pots of molten material regularly crust over and each day need to be broken open — a process that releases greenhouse gases into the atmosphere. Before it was closed, the Intalco plant frequented lists of top emitters in the state.

When Sidhu first met with representatives of Blue Wolf last year, this was one of his top concerns.

“’Hey, the first thing is, this is very old technology, what are you going to do about it?’” he recalled asking. “We want 700 jobs in our community and we want somebody to do better on the environmental emissions.”

Alcoa had already started the transition to a newer technology, known as a “point feed” system, that breaks the crust in a way that releases fewer emissions. Blue Wolf plans to complete that process across more than 600 pots. Washington state has pledged $10 million to help pay for this upgrade as well as other pollution-reduction measures that would make the plant one of two in the country capable of producing “green” aluminum.

Blue Wolf estimates it can reduce carbon dioxide emissions by over 800,000 tons a year, or 45 percent. The plant will still emit 1 million tons a year. (A coal-fired smelter, by comparison, emits about 4.5 million tons of CO2 per year.)

“We see restarting the Washington Intalco smelter as a rare opportunity to secure a big win for the climate, and workers and national security,” said Annie Sartor, who leads the aluminum campaign at the Climate Strategies Lab.

Blue Wolf has reached a five-year collective bargaining agreement with the local machinists union, which says more than 90 percent of the plant’s former employees want to come back. Blue Wolf has told local officials that it has also signed a letter of intent with Alcoa to buy the smelter, pending a deal on the power supply.

Jim Beck, an Alcoa spokesman, said the company is still considering its options for the plant, “including a potential sale of the asset.”

“We recognize, however, that securing a competitive power agreement for the smelter will be a critical condition,” he said in a statement.

The entire Washington state congressional delegation — including two Senate Democrats, seven House Democrats and three House Republicans — last week sent a letter to the Bonneville authority urging it to negotiate in good faith with Blue Wolf to reach such an agreement. Inslee has made the same push.

“There’s never been a more critical time to assure our access to green aluminum, to build America’s clean energy future and to support our manufacturing supply chains in the face of global disruption,” Inslee said in a statement. “I urge the Bonneville Power Administration to reach a positive solution that delivers this tremendous set of benefits to the people of the Northwest and the nation.”

But time is running out. Blue Wolf told officials in Whatcom County that their expenses have already exceeded $3 million and they may cut their losses soon if they cannot reach an agreement on electricity.

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“This is a very unusual situation,” said Don Goldberg, director of economic development for the Port of Bellingham. “There are no sides that I’m aware of that are fighting it. There’s no community against it, no local government, no elected officials.”

“It literally is BPA holding the whole thing up,” he said.

The Bonneville Power Administration was created in the 1930s to sell hydroelectric power generated on the Columbia River. The federal agency, part of the Energy Department, now markets power from 31 federal dams in the Pacific Northwest — a major source of clean power in the region — including to 140 consumer-owned utilities in Washington, Oregon, Idaho and parts of other states.

Bonneville for years had provided Alcoa, as well as other industrial customers, with low-cost electricity. But Alcoa ended its contract and Doug Johnson, a senior spokesman for Bonneville, said that the agency simply doesn’t have the 400 megawatts of the lowest-priced, or “firm,” power, that the Intalco smelter had used in the past. He added that Blue Wolf could purchase power from one or more big investor-owned utilities in the Northwest.

“We are not the only potential source of power to serve the plant’s needs,” he said.

Scott Simms, executive director of the Public Power Council, which represents public utilities in the Northwest, said that even if Bonneville had enough low-priced power to supply Intalco, it would be required to offer that supply first to existing utilities. He added that “anything that amounts to a subsidy from these existing Northwest interests to float Blue Wolf’s concept is a non-starter.”

Blue Wolf’s allies say the firm has tried to compromise, offering to pay a higher rate than Alcoa received.

“It’s all coming down to electricity,” said Luke Ackerson, business representative with the International Association of Machinists and Aerospace Workers who was chief shop steward at the Intalco smelter. “I’m worried that it won’t happen.”

Ackerson has been in constant contact with hundreds of former employees, trying to keep momentum alive for a restart at the plant. It’s the same place his father worked after returning from the Vietnam War. So did his sister and her husband.

“Everything that I’ve had came from that place,” he said. “It’s just really, really important to the community.”

Aaron Gregg contributed to this report.