A private equity firm — backed by labor unions, electric-car makers and much of the Washington state political establishment — said it has failed to seal a deal with a federal electricity agency that would have restarted an aluminum smelter that has been idle for 2½ years, and some are questioning why the White House hasn’t intervened.
“The administration has done a lot of work to restart manufacturing,” said Joe Quinn, vice president of strategic industrial materials at Securing America’s Future Energy, a group of business and military officials. “It’s not clear to me why aluminum is not high up on their agenda.”
Blue Wolf Capital and the Bonneville Power Administration have been negotiating all year to revive the plant, which would have become the only aluminum plant west of the Mississippi River. The reopening would also have put about 700 highly paid union employees back to work and supplied the sturdy lightweight alloys that automakers and other manufacturers require.
The sticking point has been the cost of electricity, which aluminum production requires in abundance. Electricity accounts for 40 percent of manufacturing costs in aluminum smelters, according to the Congressional Research Service.
Bonneville Power, which markets electricity from the Pacific Northwest’s huge dams and sprawling transmission lines, says it simply doesn’t have enough dependable, low-cost carbon-free hydropower for the Intalco plant, which is set amid forests and pastureland on the shores of the Puget Sound. And BPA’s position is backed by local electrical utilities who cherish their dependable power supplies — and low rates — from the federal agency, which is overseen by the U.S. Energy Department.
But Bonneville Power said it could offer only a portion of the 400 megawatts of electricity that Blue Wolf said it needed to ensure its roughly $150 million investment would cover the cost of overhauling and then running the plant. Moreover, Bonneville Power spokesman Douglas Johnson said that the agency would supply that electricity only at market prices — rates significantly higher than those paid by the agency’s existing customers.
Union officials hope another investor will step in to revive the plant, “but the outlook isn’t very good,” Luke Anderson, business representative of the local branch of the International Association of Machinists and Aerospace Workers, said on a Facebook group. While he said a new funding source was “just a few days away,” Anderson said that “no amount of money will make BPA budge.”
Senior labor union officials urged Energy Secretary Jennifer Granholm to step in because Bonneville Power is a self-funding agency within the Energy Department. But such a move would be highly unusual, and it is unclear whether Granholm tried to intervene. Department spokesmen did not return requests for comment.
In Washington, IAM International President Robert Martinez Jr. said the “inability to find a competitively priced source of power is beyond disappointing.” He said “it remains vitally important to our economic and national security to increase strategic domestic manufacturing and bolster our supply chains.”
Earlier this year, Washington Gov. Jay Inslee had urged Bonneville Power to reach an agreement with Blue Wolf Capital, saying in an email that an agreement would “demonstrate our national commitment to enhancing America’s competitiveness and investing in clean manufacturing technology.” The state also offered to provide $10 million to upgrade the plant.
On Thursday, Inslee issued a statement saying he “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.”
In the Pacific Northwest, the decline of the aluminum manufacturers has reduced electricity usage, but that has been offset by greater industrial demands; 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 Administration has also sold power to California to help that state shore up its grid and avoid more power blackouts.
BPA also said that when Alcoa, the plant’s previous owner and operator, closed the facility, it severed the power agreement and lost its contractual right to buy power as a direct industrial customer at special low rates. Blue Wolf Capital disputes that contractual interpretation.
Once Russia invaded Ukraine and disrupted world markets, the price of electric power rose broadly, nearly doubling in the Pacific Northwest. Many aluminum makers around the world have curtailed their operating hours because of it. Before the war in Ukraine, Russia had been a modest exporter of aluminum to the United States.
“The U.S. aluminum industry has been in steady decline for several decades,” said Jason Walsh, executive director of the BlueGreen Alliance. The industry has been “shipping jobs overseas and importing pollution as we purchase foreign goods and primary aluminum made with lower environmental and labor standards, often from countries who are not our allies.”
Overall, however, global demand for aluminum could increase by as much as 80 percent by 2050, according to the International Aluminum Institute. Individual products will be lighter, though; Ford achieved weight reductions of up to 700 pounds in its 2015 model year F-150 trucks by using more aluminum. Given the energy intensity of both aluminum and steel, the company said in November that it would “purchase at least 10 percent near-zero carbon steel and aluminum by 2030.”
The Inflation Reduction Act, which President Biden signed in August, provided some hope for Blue Wolf negotiators. It was targeted largely at climate change issues. It included a tax credit for domestic manufacturers of aluminum (as one of the bill’s “critical” minerals) and a production tax credit, plus a variety of other grants and loans.
But Blue Wolf Capital was dealt a setback on Dec. 9 when the World Trade Organization announced its opposition to steel and aluminum tariffs that had been put in place by President Donald Trump and maintained there by Biden.
Until 2000, the United States ranked as the world’s largest producer of primary aluminum, the Congressional Research Service said. But by 2021, the United States accounted for less than 2 percent of worldwide primary aluminum production; its rank tumbled to ninth among primary aluminum producers.
In 2000, 12 companies operated 23 primary smelting facilities in the United States; by the close of 2021, six primary smelters were operated by three firms, CRS said. One more smelter closed this year.
“Adding new capacity would have been terrific,” said Quinn, the vice president at Securing America’s Future Energy. He noted that the United States “on its best day” would import two-fifths of its 5 million metric tons a year of aluminum.
“In the recent Inflation Reduction Act, Congress supported the development of electric vehicles, solar, and wind power using domestic U.S. supplies,” said Joshua Gotbaum, an adviser to Blue Wolf who has served in five administrations. “All of those require aluminum, and virtually none of it will be U.S.-made without a U.S. aluminum industry.”
Gotbaum said in an email that “unless Congress and the Biden Administration do what virtually every other nation does — provide affordable electricity with government help — the U.S. aluminum industry will vanish and America’s energy transition will be forced to rely on the goodwill of other nations.”
Josh Partlow contributed to this report.
