An effort to reopen Washington’s last standing aluminum plant with a lower carbon footprint faltered last week after the company backing the deal failed to secure a guarantee of low-cost power from the Bonneville Power Administration.

For more than two years, a New York City private equity firm, a labor union, the state government and BPA worked to revive the plant near Ferndale, Wash., and hire back the 700 employees laid off when Alcoa shuttered the smelter in 2020. Gov. Jay Inslee wanted the state to contribute $10 million to the revival; shrinking the resurrected plant’s carbon emissions figured into his push to combat climate change.

The big hurdle was that BPA and the private equity firm that wanted to buy the former Alcoa Intalco Works, Blue Wolf Capital of New York City, could not agree on terms for BPA to provide electricity for the power-hungry plant.

On Thursday, Blue Wolf broke off talks, BPA spokesman Doug Johnson told RTO Insider. The federal power agency is willing to resume discussions if Blue Wolf returns to the table, he said.

Talks broke down over the huge electricity demands of aluminum smelting. When Alcoa owned the plant, it received power at a special industrial rate provided under the 1980 Northwest Power Act. Blue Wolf and a new operating company, Intalco, wanted to buy the facility from Alcoa with the site’s industrial power purchase rate intact, but the 1980 law said the rate could not be transferred.

Consequently, the Blue Wolf-BPA talks focused on market rates, which are subject to fluctuation and could move above or below the industrial rate, Johnson said. Blue Wolf wanted a rate similar to the industrial rate, but a fluctuating market could result in other BPA customers paying more to subsidize Intalco’s power purchases, he said. The bulk of the BPA’s power comes from hydroelectric dams.

Scott Simms, executive director of the Portland, Oregon-based Public Power Council, a coalition of consumer-owned utilities in seven states, including Washington, said Blue Wolf misread BPA’s legal obligations to provide power.

“By Congressional statute, BPA must first and foremost serve the needs of Northwest non-profit public utilities at cost. To the degree BPA has surpluses, it can make excess supplies available to others in the wholesale marketplace,” Simms said in an email. “As our Western power grid becomes tighter on available supplies given heightened demands and new climate mandates, BPA must be certain it can supply public power first, as Congress intended. 

“I believe Blue Wolf either misunderstood or failed to realize this long-standing BPA statutory obligation to public power. It legally wasn’t ever possible for Blue Wolf to step in front of public power’s legitimate and rightful obligation to BPA power for a sweetheart deal,” Simms said. 

Blue Wolf did not reply to a request for comment.

‘Huge Employer’

Supporters had hoped to get the Ferndale plant fully running by mid-2024.

The governor’s office remains optimistic that the project can be salvaged with new equipment that would trim carbon emissions — mainly sulfur dioxide — below previous levels when Alcoa closed the plant in 2020 due to dropping aluminum prices, a scenario that has played out for smelter across the U.S. The high costs of smelting aluminum, especially due to the volume of electricity required, resulted in the number of the nation’s smelters shrinking from 30 in 1985 to six today.

The anti-carbon measures proposed for the Ferndale plant include better scrubbing and filtering of the fumes going up smokestacks. They also include switching from electricity generated by fossil fuels to that provided by wind, solar and hydropower.

The Ferndale plant would need roughly $250 million in improvements and overhauls to get back online and 400 MW of electricity to operate. 

In a statement Friday, Inslee’s office said “the governor remains committed to the vision of upgrading and reopening the plant as a secure, domestic source of the green aluminum that is critical for our clean energy transition. He stands ready to work with labor and community partners as they continue to seek a solution.” 

“We are disappointed that negotiations to restart the Intalco aluminum smelter in Washington State, which would provide 700 local high-paying jobs and help secure a domestic supply of low carbon aluminum appear to have failed,” Annie Sartor, aluminum campaign director for Industrious Labs, said in an email. Industrious Labs is a Cincinnati-based think tank focusing on helping industries grow while coping with climate change issues. 

Sartor wanted the Biden administration and Congress to invest in reviving aluminum manufacturing with renewable energy. Aluminum is a key component in building electric vehicles, solar panels and transmission lines.

Meanwhile, the likelihood of 700 resurrected jobs in Ferndale has taken a huge hit.

Luke Ackerson, business manager of the International Association of Machinists Local No. 160, remembers when the plant shut down during the pandemic in 2020. “Some worked there for 30, 40, 50 years, and you would see on their faces ‘What am I gonna do next?’” Ackerson said last month. “Ferndale is a small town, and this is a huge employer.” Ackerson could not be reached for additional comment.

Brian Urban, who worked as a bricklayer at the plant, said of the plant’s closing: “It came as a complete surprise. Some people got angry. Some people got completely depressed. There were some suicides. Some marriages suffered.” Urban and his wife coped, and he continued as a bricklayer for Local 160.

The union had negotiated a contract with Intalco that would have kept the Alcoa-level wages and would give the workers partial ownership of the plant.

Meanwhile, Intalco expected to negotiate a “bridge contract” of a few years to obtain electricity from traditional sources before switching entirely to alternative power sources such as solar and wind, Intalco CEO Mike Tanchuk said in an interview last month. He could not be reached for comment after the BPA talks ended Thursday.  

U.S. industry has an annual aluminum demand of 5 million metric tons (MMT). American smelters produce 1 MMT a year, while another 2 MMT come from Canada. The remainder comes from overseas, including 300,000 metric tons a year from Russia. The Ferndale plant could produce 235,000 metric tons annually, which would make up most of the aluminum imported from Russia, said Joe Quinn, director of the Center for Strategic Industrial Materials, a D.C.-based think tank.

China produces more than 60% of the world’s aluminum, primarily through coal-fired electricity. The world’s leading producer of aluminum using carbon-free, hydro-powered energy is Russia, Quinn said.