Wednesday, April 29, 2020
ALCOA UNMADE: A story 20 years in the unmaking, a slim picture book at city hall tells of the creation of Alcoa Intalco, the international aluminum company smelter at Cherry Point. It is the remarkable narrative of a coalition of civic leaders, business leaders and port officials—tenacious mandarins all—who decided the region needed a heavy industry and through sheer force of will went out and brought one to these shores.
It was a project Republicans and Democrats alike could work together on in the 1960s—the former, because it represented private industry and heavy manufacturing capacity; the latter, focused on the working class, because it offered hundreds of union-scale jobs.
At its height of operations, Intalco employed 1,350 people and produced more than a quarter of a million metric tons of aluminum capacity each year. The industry had enormous knock-on effects in the local economy, employing scores of family-wage jobs including longshoremen at the Whatcom International Shipping Terminal.
The secret ingredient that made it work was taxpayer-subsidized public power—hydroelectricity wheeled into the region from Roosevelt-era Bonneville Power projects, with a great deal of that capacity managed through contracts with the state’s public utility districts.
It worked for four decades.
The secret ingredient ceased working early in this new century when then-Vice President and former Halliburton CEO Dick Cheney formed the National Energy Policy Development Group, a clandestine cabal including interests like Enron intent on profiting from a spot energy market—where power could be sold as a commodity much like stocks. In the retooling, Bonneville Power capacity was oversold and the administration was bordering on default of its contracts. Indeed, the looming insolvency of Bonneville fit the Republican energy policy like a glove fits a hand—the obliteration of public power would open the way for a new private, for-profit energy market.
Approaching insolvency, Bonneville Power Administration clawed back its sweetheart power contracts with Pacific Northwest heavy industries. Georgia-Pacific in Bellingham, which at its peak employed more than 1,200 people, folded quickly, shuttering operations in 2007. Intalco hung on in a diminished capacity, one of its potlines inoperative throughout much of the aughts.
The picture brightened for Intalco in 2009 as BPA was able to offer a series of power contract extensions that kept the lights on and the potlines running. Still, the company has struggled.
The economics of aluminum production are pretty simple—when the energy cost to melt the metal exceeds the market and labor costs of the product, the plant must close. Since the beginning of the year, aluminum prices have fallen more than 20 percent, down 45 percent from highs in 2018. In the first quarter of 2020, the Intalco smelter lost $24 million.
The hardship and lasting economic effects of that closure are much more complicated, and devastating:
More than 700 family-wage jobs lost, and a substantial portion of property tax and other revenues ripped away from schools and the local community.
Where Ferndale once had no fear for the quality of its school district, the loss of Intalco and the failure of a school bond at the polls earlier this year are crippling blows.
Aluminum is a strategic metal, used extensively in aerospace and high-tech applications; and it is astonishing in a nation that spends untold trillions of dollars on national defense that the United States would allow its strategic metals capacity to slip away offshore. Where the United States has only seven operating smelters, China has 140.
The aluminum manufacturers association commented on the dire situation as recently as March, describing the metal as “vital to national security, especially in an unexpected or extended conflict or national emergency” such as the COVID-19 crisis. The industry produces a number of products that are essential during a public health crisis including medical supplies, building materials, transportation equipment, and food and beverage packaging.
“From building material for emergency facilities and critical infrastructure to antimicrobial medical equipment to packaging for food, beverage, hygiene and other products, aluminum is a key part of any disaster response effort,” the association noted. As a consequence, the aluminum industry should be designated as essential by state, local and federal governments.
Our elected representatives have done journeyman’s work over the past 20 years trying to help stabilize and renegotiate energy contracts that might keep Intalco and other Northwest industries solvent—and to his credit, this has been one area where Doug Ericksen, as a representative and later as a senator, has excelled as an ally of Intalco.
But the entire weight of his Republican Party—and even Ericksen’s own endless glib anti-government, anti-tax rhetoric—has lodged crosswise in his efforts and those of other elected officials to save a vital industry.
Government can play a role, taxes can play a role, in keeping 700 jobs local to Whatcom County.
Bonneville Power Administration was undone by a searing contempt of the public sector and of large-scale public works projects in preference for a fixation on private projects, private equity and stock market volatility. Union-scale employment has been undercut by enormous hostility to organized labor and federal policies that shovel these jobs offshore.
By force of will Intalco was created; by perverse will it was lost.