The Bad Neighbor

Alcoa's Dirty Dealing in Central Texas

Esther Cervantes

This article is from the July/August 2004 issue of Dollars and Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org/archives/2004/0704cervantes.html


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This article is from the July/August 2004 issue of Dollars & Sense magazine.

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Earlier this year, the Aluminum Company of America (Alcoa) broke ground on the $83 million Three Oaks lignite mine outside Austin. The mine will provide coal to Alcoa's massive facility near the town of Rockdale: an aluminum smelter plus the three power plants that fire it. In addition to the lignite, Alcoa intends to remove groundwater from the new mine (as well as from its existing mine at Sandow, near Rockdale) and ship it to the city of San Antonio, more than 100 miles away. In a company report celebrating the Rockdale smelter's first 50 years, manager Geoff Cromer thanks the facility's neighbors for "the strong support we have received from the community"—but that's less than half the story. The "several hundred people" who "took time from their jobs" to attend numerous public hearings and "provide comment in support of Alcoa and this project" were far outnumbered by those who struggled against it for four years.

The protesters are an unlikely bunch—mostly cattle ranchers and suburban commuters, a population that has lived in the shadow of the Rockdale facility for decades without complaint. But when the company decided to expand its profit-making repertoire by selling the area's groundwater to a distant city, Alcoa's neighbors rebelled. In their effort to block the new mine and stop the water deal, they also dug up the dirt on Alcoa's 30-plus years of evading the Texas Clean Air Act at Rockdale. In spite of the protests, mining at Three Oaks is slated to begin in September; at the same time, though, Alcoa will have to announce how it will finally comply with clean air regulations.

Coal and Water

Alcoa

East of Austin the austere limestone hills over the Edwards aquifer give way to gently rolling scrubland—a patchwork of both bedroom communities of former ranchers and the oak, cedar, and tall grass-studded ranches of those who have yet to yield to the economic imperative of the commute.

In the 1970s the city of San Antonio bought 10,000 acres of this land, in Lee and Bastrop counties, and later leased mining rights to 4,000 more from Phillips Petroleum. San Antonio's municipally owned energy provider, City Public Service (CPS), hoped to fuel a new power plant with the lignite coal that lay under this domain. Public protest and, eventually, the offer of cheaper, cleaner coal from Wyoming changed the plan. CPS's new lands lay idle for years.

Though CPS never mined its lignite, other central Texas landowners have found use for the area's dirty brown coal. Since 1952, Alcoa has mined the Sandow deposit near Rockdale. Three power plants run day and night on the fuel, producing enough energy each year to light the city—or run an aluminum smelter.

The equipment Alcoa uses to extract the lignite would delight anyone who celebrates humankind's will to dominate the environment—or who has ever liked Tonka toys. Nate Blakeslee of the Texas Observer describes the draglines as two mechanical shovels, each 20 stories high with a 150-ton capacity bucket. Smaller (though still huge) shovels work inside the 100-foot-deep pit. Looking indeed like toys by comparison, dump trucks, bulldozers, and pickups dart around, lifting and hauling coal.

The draglines move enough earth each year to fill the Panama Canal; the resulting landscape dispels any impression that this is a game. Aerial photographs show a stark contrast between the stretches of mine that Alcoa has backfilled and the surrounding land it has never touched. The untouched land is a lush, deep green prairie dotted with stands of mature cedar and oak. The "reclaimed" land, planted almost exclusively with coastal bermuda grass, shows instead a sere khaki.

Alcoa officials like to point out that the company's land reclamation has won awards from the Texas Railroad Commission (TRC) and the U.S. Department of the Interior. But one shudders to imagine the competition for those awards: the TRC cited Sandow for 26 violations of the Surface Mining Control and Reclamation Act between 1992 and 1997. Much of the land mined there before the law's 1977 enactment has only been reclaimed under the auspices of the TRC. Hundreds of acres more, left to Alcoa's goodwill, remain a post-mine moonscape.

Massive earth-moving is not the only environmental disruption Alcoa causes at Sandow. The lignite there sits between two branches of the slow-recharging Carrizo-Wilcox aquifer. The deeper the draglines dig the pit, the harder the groundwater presses against the walls of the strip mine. Since 1988, Alcoa has had to pump seeping groundwater out of Sandow to keep it from flooding. Alcoa uses some of this water for dust control and dumps the rest—some 30,000 acre-feet (more than 9.75 billion gallons) annually—into local creeks.

In Texas, although the rules are slowly changing, groundwater is generally governed by right of capture, or the law of the biggest straw: anyone who can put the water to a legally-defined "beneficial use" may extract as much groundwater as their technology allows, and with the state's blessing.

At Sandow, Alcoa has a very big straw. When it began pumping groundwater, the company agreed with the TRC to compensate nearby groundwater users for any damage, such as wells that dried up because the water table dropped out from under them. Of around 600 official complaints Alcoa has received since 1989, the company has addressed less than half to the satisfaction of the party affected.

Most neighbors were willing to put up with the bother, though, because of the jobs and other benefits that Alcoa brings to the area. The facility is the largest unionized employer in central Texas, employing about 1,200 workers. Alcoa also pays royalties to landowners whose property it mines. Others depend indirectly on the mine and smelter for their livelihoods.

Alcoa had long been seen as a livable neighbor—then it decided to get into the water business.

'Til Your Well Runs Dry

Texas' shift from right-of-capture to more formal groundwater regulation began with a 1991 lawsuit against the U.S. Fish and Wildlife Service for failing to protect the wildlife of the Edwards aquifer (located west of the Carrizo-Wilcox) from the effects of excessive drawdown. According to the Sierra Club and area environmentalists, the vast Edwards aquifer, whose three segments span the more than 230 miles from Austin southwest to Del Rio, supports wide ecological diversity in a semi-arid climate.

More to the point, the Edwards passes below and provides water to two of the state's major cities, San Antonio and Austin. San Antonio is entirely dependent on the aquifer for its drinking water and uses about 175,000 acre-feet per year; the city's water use is expected to reach more than 375,000 acre-feet by 2050. In May 1993 the Texas legislature capped all Edwards withdrawals at 450,000 acre-feet per year, a number to be reduced to 400,000 in 2008.

According to San Antonio Water System (SAWS) spokesperson Susan Butler, "our groundwater supply has been severely reduced by regulation," and the city is preparing for the future. In 1997, SAWS started building infrastructure to expand the city's use of treated wastewater. First used in the 1960s to cool area power plants, treated wastewater now irrigates golf courses and has replaced the fresh groundwater that, until the late 1990s, maintained the flow of the San Antonio River through the River Walk. (The San Antonio no longer flows in dry weather without help.) This style of conservation is not for all tourist attractions, though: the log flume rides at Fiesta Texas, a nearby theme park, are not likely to switch to recycled wastewater.

At the same time San Antonio was casting about for ways to reduce its reliance on Edwards aquifer groundwater, the lignite in Alcoa's Sandow mine was beginning to run out. If San Antonio would let Alcoa mine its long-abandoned lignite, the company offered, Alcoa would incidentally mine groundwater for the thirsty city.

The deal was struck in the last days of 1998. Alcoa acquired San Antonio's 14,000 acres of mining rights and began planning to build the Three Oaks mine there, while agreeing to provide SAWS with 40,000 to 60,000 acre-feet of water per year from the Sandow mine. CPS (the municipal utility) signed over to SAWS the water rights to the same land it's leasing to Alcoa for the new mine, rights good for perhaps another 15,000 acre-feet per year. The high-end total is about 40% of San Antonio's current use, and it comes at no small price. In its contracts for water from Sandow and Three Oaks, SAWS agrees to pay Alcoa: for the water itself; a monthly project management fee for the duration of the contract, whether or not any water is delivered; and all the costs of designing, building, and operating the pipeline and other facilities needed to deliver the water, including, "to the extent allowed by law, all taxes, fees, and other costs … incurred … by Alcoa" due to its ownership of any land or facilities. Upon expiration of the contract (set for 2040, but subject to extension), ownership of all land associated with the pipeline is to be transferred to Alcoa by San Antonio. That's water fees, administrative fees that apply whether or not the water is delivered, reimbursement for all infrastructure, eventual ownership of that infrastructure and the land on which it sits, and tax breaks on that land, all accruing to Alcoa at the expense of the citizens of San Antonio.

But San Antonio need not wait so long to see just how short its end of the stick really is. Once Sandow has closed as a lignite mine, very little of the water Alcoa would supply to San Antonio would be directly tied to lignite mining. The point is crucial. Only water extracted for lignite-mining purposes is covered in Alcoa's agreement with the Texas Railroad Commission to compensate other Carrizo-Wilcox users for harm it may cause them by lowering the water table. The 1998 contracts leave SAWS holding the bag for any additional well damage.

It has the potential to be a mighty big bag. The University of Texas Bureau of Economic Geology's model of the effect of the water-export deal on the Carrizo-Wilcox predicts a drop in the water table of as much as 300 feet by 2050. Such a drop is costly when the affected wells must be repaired or their owners compensated. When Lee County resident L. C. Hobbs wanted to sink a well on his property in 1997, Alcoa's records assured him that he would hit water at 80 feet. The water that Hobbs did eventually find, 467 feet down, was so fouled by mineral deposits that it required filtration. Hobbs asked Alcoa for $8,400 to cover the extra drilling and $7,400 for the filtration system. When the company offered to settle at $5,000, Hobbs sued. The area that would be affected by the predicted drawdown is home to tens of thousands of similar small users of the aquifer today, and the local population is increasing rapidly.

But few knew the details of the water deal before the contracts were signed—three months before feasibility studies ordered by SAWS were finished. Why the rush? After a severe drought in 1996, the Texas legislature finally decided to extend the reform of its groundwater policy to aquifers other than the Edwards. Members of the SAWS citizen advisory panel allege that the rush to slide the agreement in under the door of the proposed new groundwater laws kept them ignorant of the deal until it was nearly done. The complex contracts were released to SAWS' citizen advisors just days before the SAWS board voted to approve them.

San Antonians protested the deal once they knew about it, but the ink was already dry. Bob Martin of the Homeowners-Taxpayers Association claimed that a 31% rate increase announced by SAWS in 1999 brought 40 new members to his group, which opposed the Alcoa deal. At a 2000 public hearing, local minister Leslie Ellison declared the cost of the plan "outrageous." Other speakers criticized the Alcoa deal as a "boondoggle" and called Mike Thuss, then head of SAWS, an "imperial parasite."

The Longest Straw Lives On

In March 1991, when the law of the biggest straw still governed groundwater use across Texas, Ron Pucek opened the Living Waters Artesian Springs catfish farm outside of San Antonio. The farm's raceways were fed by what the owner claimed was the world's largest water well, with a 40,000-gallon per minute capacity. Living Waters' annual water consumption was equal to that of about a quarter of the population of San Antonio at the time. Although Pucek's use of the water was classified as "non-consumptive"—the water still existed when he was done with it—it came out of the raceways with too many impurities, like fish excrement, to be potable. After years of legal wrangling over the wastewater discharge, Pucek packed in Living Waters' fish operations for good.

There was still opportunity in the water business, though, and Pucek took advantage of it. When the Edwards Aquifer Authority asked users to file pumping permit applications in 2000, Pucek was given rights to 17,724 acre-feet annually—far short of his claimed historical maximum usage of 46,483 acre-feet, but still substantial. More legal wrangling followed; in 2001, Pucek gained rights to an additional 4,776 acre-feet per year. In late 2003, the San Antonio Water System, after three years of negotiations, bought the tangible assets of Living Waters Artesian Springs, Ltd., as well as most of its groundwater rights, from Pucek. The deal cost San Antonio $30 million.

San Antonio is supposed to take its first delivery of Alcoa water in 2013, although pipeline construction has yet to begin. SAWS has sought other means and more favorable terms on which to fill its water demands, and it has done well enough that Travis Brown, a founder of the local group Neighbors for Neighbors (NFN), speculates that the Sandow deal will eventually be abandoned. Still, the cost to the city for abandoning the deal grows with each passing month, and representatives from both SAWS and Alcoa maintain that the contracts are "current." And even if no Alcoa water ever makes it into San Antonio taps, the city may decide to resell the water. The most likely customers? Growing Austin suburbs, including the very same communities that are to have the water pumped out from under them. Or, if the contracts completely break down, Alcoa may do the selling. After all, they've already laid claim to the water—and as Texas' new groundwater rules emerge, it's clear that prior claims can easily be parlayed into profit (see sidebar).

Unlikely Activists

Cattle ranchers and suburban commuters seem an even more unlikely source of community activism than Sun Belt urbanites, especially on an environmental issue. But Elgin-based Neighbors for Neighbors has organized just such people, give or take a Buddhist nun and a nudist camp, into a vocal and tenacious resistance against the deal. The issue certainly hits closer to home for those who would be losing the water than for those gaining it. And, says Brown, the contracts "kind of blew up this rural versus urban contest." Organizing was the only way for a scattered population to oppose the power of "all these thirsty cities looking to our area."

John Burke, head of Aqua Water, the area's nonprofit water provider, put it more bluntly to reporter Nate Blakeslee: "If you went down to San Antonio and the Edwards Aquifer and said I'm gonna draw down 100 feet over 1,400 square miles, those people would be coming to your funeral, because someone would hang you."

The announcement of San Antonio's contracts with Alcoa came as a surprise to area residents, according to Brown, and "ignited a firestorm" of protest. Founded in 1999, Neighbors for Neighbors at its peak had 500 dues-paying members and the support of countless other individuals and dozens of community organizations. Brown says, "We would get 200 people to come to [a public hearing] and raise hell."

Neighbors for Neighbors—"one of the most successful grassroots groups" that Brown, in 30 years as an activist, has ever seen—fought the water deal on many fronts, including "raising hell" against Alcoa throughout the complicated process of getting permits for the Three Oaks mine. In 2000, NFN filed an unsuitability petition against the mine before the Texas Railroad Commission. "Most of the area is now a developing suburb of Austin and the area's fortunes are tied to Austin, not Alcoa," says Brown. The mine's proposed location is just 20 miles from the city limits, so "it seemed stupid to ruin this land just to get that dirty lignite out of it." The railroad commission disagreed. Brown counts this as an example of "our state regulatory agencies [being] in the pockets of big corporations."

Brown claims that the "several hundred people" Alcoa says supported the project at public hearings were usually "shipped in by busloads" by Alcoa itself. There were often some "nasty feelings" at such hearings, but, Brown says, "actually we've had some Alcoa employees come to us with good information." Neighbors for Neighbors even has some former Alcoa Rockdale employees among its members. Brown wishes NFN had put more energy into opposing Alcoa's final permits. But NFN's limited resources have been spread thin, protesting the new mine, the water deal—and Alcoa's air pollution.

Burning Dirt

Water is invaluable in Texas' semi-arid climate, but NFN fought its biggest battle with Alcoa over the lignite itself. Lignite is a particularly poor-quality coal; Brown calls it "burning dirt." Sandow lignite produces the more than 104,000 self-reported tons of pollutants that Alcoa's facility dumps into the air over Rockdale each year. Almost all (99.38%) of the pollution enjoys grandfathered exemption from the 1971 Texas Clean Air Act, making Alcoa Rockdale Texas' largest unregulated stationary source of air pollution.

Though NFN's efforts have forced Alcoa to decide how to bring its emissions in line with the Clean Air Act by September, it's already too late for the health of many Rockdale residents. Asks one contractor who occasionally works on refrigeration systems at the plant, "If the air is as safe as they say it is, then why are there so many Alcoa retirees toting around oxygen tanks?" This year, EPA consultant Abt Associates found that every year in Texas, pollution from coal-fired power plants causes 144 deaths from lung cancer, 1,791 nonfatal heart attacks, and almost 34,000 asthma attacks. Most of them could be prevented, according to Abt, if the plants would install available pollution controls.

Alcoa was on the guest list when, in 1997, then-governor George W. Bush invited executives of Texas' largest grandfathered point-source polluters to help him draft a Voluntary Emissions Reduction Permit (VERP) plan. The program's first official review was not scheduled until 2001, a move that ensured VERP a place in Bush's stump speeches in his bid for the presidency. And VERP's corporate co-authors contributed more than their legislation-drafting skills: the same companies donated $250,000 to the Bush campaign. Alcoa itself abstained, but its law firm, Vinson and Elkins, gave $202,850. Bush later tapped Alcoa CEO Paul O'Neill for his cabinet.

Bush would not have gotten nearly as much public relations mileage out of VERP if its first review had come before the 2000 election. In January 2001, the then-Texas Natural Resource Conservation Commission (TNRCC, or "Train Wreck" in local parlance; it later changed its name to the Texas Commission on Environmental Quality) reported that, in its first year and a half, VERP had been responsible for exactly no reductions in grandfathered emissions. None.

To its credit, the Texas Legislature replaced Bush's voluntary reduction plan with a mandatory one in spring 2001. Former state legislators joined citizen organizations in lobbying for the change. Former Representative Sissy Farenthold told the Chronicle that, "Back in 1971, I could have expected that my hair would be white by now, but I certainly did not expect this loophole [of grandfathered emissions] to still be in effect."

The new law was scheduled to take force in September 2001; in another display of impeccable timing, Alcoa finally applied for VERP permits in July, promising to reduce its emissions of smog-forming nitrous oxide by half in one year, and of acid rain-causing sulfur dioxide by 90% by 2006, as long as the reductions proved "economical." Otherwise, Alcoa lamented, pollution reduction would shut the Rockdale smelter down.

Meanwhile, NFN, Public Citizen, and Environmental Defense were gathering dirt on Alcoa's dirt. The groups found evidence that upgrades to the Rockdale facility in the 1980s constituted legally defined "major modifications" that should have nullified its grandfathered status and subjected it to Clean Air Act regulations. Alcoa downplayed the upgrades as "routiwne maintenance." In 1985, however, the Rockdale Reporter quoted Alcoa officials boasting that they had "torn apart as much as [possible] without throwing the whole thing away" and that the facility could "in no way … be called a 30-year-old plant because of the almost constant improvements and construction during the years."

Based on these discoveries, in October 2001 the three groups filed a notice of intent to sue Alcoa in federal court for 15 years of violations of the Texas Clean Air Act. The lawsuit was settled in April 2003. Alcoa would pay $1.5 million in fines and contribute an additional $2.5 million to local land trusts and environmental efforts. By September of this year, Alcoa must decide how to approach long-term reduction of its Rockdale emissions: install pollution control devices in the three existing power plants; shut those plants down and build cleaner ones; or find a cleaner source of energy for the smelter. (Shutting down the power plants would not shut down the mines: Alcoa could still supply lignite to a fourth power plant on site that is owned by another company.)

And there is always the whispered possibility of closing the smelter completely. Since protest against the water deal and the new mine began, Alcoa has complained that the expense of fitting the facilities with pollution controls or switching to a cleaner type of fuel would reduce their profits so much that the smelter would have to be closed.

The Austin American-Statesman has cited the cost of pollution controls at $100 million, resulting in a $40 million drop in profits for the Rockdale facility (no time frame was given for either figure). Alcoa will not reveal numbers for Rockdale alone, but in 1999, the year the Statesman published its figures, the corporation as a whole had $17.46 billion in assets (of which the $100 million would be 0.57%), had profits of $853 million (of which the $40 million would be 4.69%), and employed 92,600 people (of which Rockdale's 1,200 were 1.3%). The lost profits figure in particular makes one wish Alcoa had given the Statesman a time frame. Alcoa could not have meant that improvements at Rockdale would cost it $40 million in a single year; for, if Rockdale accounts for four and a half percent of Alcoa's profits in any given year, then investing one half of one percent of the company's assets in upgrading the site would seem justified. (And what company would give up such workers, who seem to produce three times as much annual profit, on average, as the workforce as a whole?)

It's conceivable that, in September, Alcoa will announce the closure of Rockdale; it already cut capacity by 25% in 2002. If, however, Alcoa continues operating its power plants and smelter, it will spend $4 million in fines and other payments for the Clean Air Act suit, along with the projected $100 million to reduce emissions—where the $100 million by itself was once lamented as too much for the operation to sustain. Perhaps Alcoa hopes that the $104 million cleanup cost (and additional lost profits) at Rockdale will be offset by the cheap coal and the water revenue its new mine nearby is slated to bring.

Alcoa Acts Out Abroad

Alcoa's disregard for the rules is not limited to Texas. In 1997, members of the Border Workers Committee (known by its Spanish initials, CFO) employed in an Alcoa Fujikura plant in Ciudad Acuña, Mexico, presented Alcoa's shareholders meeting with complaints of undisclosed gas releases that had sickened workers three years before. Then-CEO Paul O'Neill at first denied the claim, saying that the plants were so sanitary that you could "eat off the floors." But by the end of the meeting, where CFO was supported by the Interfaith Committee for Corporate Responsibility, Alcoa agreed to investigate the poisonings. The investigators substantiated CFO's claim, and Alcoa Fujikura's president, Robert Barton, was fired.

In 2002, the company resorted to violence and illegal firings to keep its favored representatives in charge of the state union operating in an Alcoa Fujikura plant in Piedras Negras. The CFO is still demanding that all workers who were illegally dismissed be reinstated, that Alcoa Fujikura recognize an independent union, and that two particularly abusive managers be fired.

And in Brazil in 2001, at a time when individual consumers was suffering electricity shortages, Alcoa proposed three major hydroelectric dams in the Amazon—their power to be used exclusively to fire the company's aluminum smelter in São Luis. The Brazilian government welcomed the project and brushed aside the effect it would have on indigenous settlements and the environment.

Similarly, despite years of intense public protest, the Icelandic government in 2003 gave Alcoa the go-ahead (and promises of subsidized energy) to build a smelter on the north side of the island's largest glacier. The project, which was stalled by a citizens' lawsuit in early 2004, would dam a glacial ice-melt river, divert it into a 25-mile long tunnel, and flood 22 square miles of wild tundra. Supporters point out that the smelter and associated works would employ 600 people; opponents counter that the location is prime for ecotourism, a sector that is growing rapidly in Iceland while aluminum performs erratically on the world market. Neighbors for Neighbors' Travis Brown also intimates that not all of the 600 positions promised would go to Icelanders; some Alcoa Rockdale employees have told Brown that they were offered a choice between early retirement or transfer to Iceland.

Everything's Under Control

In 2001, the Austin Chronicle declared NFN "Dragon Slayer of the Year," but the group has been forced to retreat while the dragon still lives. Alcoa, with its massive capital assets, can afford to fight such fights indefinitely. (NFN, in contrast, was delighted to get a $14,000 grant from the Ben and Jerry's Foundation in 2000.) Even Alcoa's defeats, as at the hands of the CFO (see "Alcoa Acts Out Abroad"), are minor, affecting only one part of the corporation and making no change in its usual attitude or behavior.

The mechanical might of the Sandow strip mine can stand as a metaphor for that attitude, which reflects above all a desire to control the environment in which the company operates. The Texas Clean Air Act's requirements inconvenienced Alcoa in Rockdale, so the company blithely ignored the law for more than 30 years. Likewise, the state legislature's proposed groundwater regulations might have impeded Alcoa's ability to trade water for lignite, so Alcoa rushed San Antonio into their 1999 water deal before the legislative session began.

Given the insignificance of the projected cost of alternate fuel for Rockdale relative to the profits and assets of the corporation as a whole, cost may not be the real issue. Perhaps having control over the smelter's energy supply is even more important. Alcoa's bid to build expensive but private energy sources in energy-poor Brazil seems to support the notion, as does its treatment of labor organizers in Mexico.

Alcoa claims that its central Texas deals enjoyed "strong support … from the community," despite the strong, if unsuccessful, resistance they actually encountered. This attempt to revise history may be seen as a reach for control over public perception—keeping up the image of a good corporate neighbor that the company prefers to project. But Alcoa doesn't want to play by the rules set by the communities in which it operates. The company is aided by the complicity of some government officials who make deals that help the company undercut those rules.

"It's the tough stuff, like don't strip mine and don't pollute," that Alcoa can't get straight in Texas, according to former NFN president Billie Woods. When elected officials side with corporations against the public interest, the organized community is perhaps the only effective means for making the public voice heard again. Alcoa, other corporations like it, and the politicians who coddle them cannot claim to be good neighbors, and expect to enjoy the support of the community, until they get the "tough stuff"—including democracy—straight.

Esther Cervantes is a Dollars & Sense collective member and a graduate of the LBJ School of Public Affairs.