Three new small hydro plants are now operating at existing dams on the White River in Arkansas. The story of their development illustrates the challenges and rewards of building new hydro in the United States.
By Rita J. Potts
Development of 12 megawatts of new hydropower capacity in Arkansas involved a utility, a college, a city, a county, the U.S. Congress, 27 years, a myriad of engineers and lawyers, and lots of tenacity and perseverance by a dedicated group of individuals.
On July 20, 2007, county, state, and federal government officials dedicated three new hydroelectric plants at existing dams on a 20-mile stretch of the White River in Arkansas:
–4.3-MW White River Lock and Dam No. 1 plant at Lock and Dam No. 1;
–3.9-MW White River Lock and Dam No. 2 plant at Lock and Dam No. 2; and
–4.3-MW Shelby M. Knight Hydro Plant at Lock and Dam No. 3.
The $32 million, three-powerhouse project is a developmental enterprise of Independence County, Ark., in association with the city of Batesville, Ark., and Lyon College of Batesville. Independence County holds the Federal Energy Regulatory Commission (FERC) licenses for two plants: White River Lock and Dam No. 2 and Shelby M. Knight (Lock and Dam No. 3). The city of Batesville is the licensee for the White River Lock and Dam No. 1 plant.
The county – responsible for the financing, design, construction, and operation of all three powerhouses – will share net revenue from the sale of electricity with both the city of Batesville and Lyon College, a four-year liberal arts college in Batesville. The city, college, and utility Arkansas Power and Light (now Entergy Arkansas, a subsidiary of Middle South Utilities) contributed money and property toward the costs of project permitting and licensing.
History of the project
Between 1900 and 1907, the U.S. Army Corps of Engineers built three timber-crib and concrete dams and locks, White River Lock and Dam Nos. 1, 2, and 3. The locks were used for navigation, moving boats containing shipments of timber, cotton, and mining products such as limestone and silica. However, by the mid-1950s, trains had replaced boats as the primary method for transporting these products. Consequently, the Corps decommissioned the locks and sold the properties. At that time, the city of Batesville purchased Lock and Dam No. 1 for $1. The locks were decommissioned and have not operated since. Lock and Dam Nos. 2 and 3 were sold to private interests, which also did not operate the locks. No maintenance occurred from the 1950s to 1997 when the county, through the hydro project, did extensive remedial work on Lock and Dam No. 1 in Batesville.
Near the end of the energy crisis during the Carter Administration, a nationwide focus on developing alternative, renewable energy resources to decrease the U.S.’s reliance on foreign oil fostered interest in renewable energy sources, including adding hydro powerhouses at existing low-head dams like the three dams on the White River in Arkansas.
Lock and Dam Nos. 3 and 2
As part of this interest in developing domestic, renewable resources, Arkansas College (now known as Lyon College) bought Lock and Dam No. 3 in 1978 and subsequently began investigating the potential for hydro development at the site. Eventually, the college teamed with Independence County to apply for a FERC preliminary permit and to share costs of hiring a consulting firm to conduct a feasibility study.
In the fall of 1981, FERC issued preliminary permits to Independence County for hydro development feasibility studies at Lock and Dam Nos. 2 and 3. Following extensive dialogue with county officials, Arkansas Power and Light, which owned Lock and Dam No. 2, agreed to contribute 25 percent of the cost of the feasibility studies for Lock and Dam Nos. 2 and 3. Halliwell Associates Inc. of Rhode Island in joint venture with Garver & Garver Inc. of Little Rock, Ark., was hired to conduct the studies. Arkansas College also joined the county to split responsibilities, costs, and benefits at Lock and Dam No. 3, with the county’s share at 51 percent and the college’s at 49 percent. (In subsequent negotiations around 1989, the college’s share was reduced to 15 percent.)
The final report from the feasibility studies, completed in October 1982, concluded that development of hydropower at both Lock and Dam Nos. 2 and 3 was economically, technically, and environmentally feasible. In 1983, the Quorum Court of Independence County voted to develop hydro plants at Lock and Dam Nos. 2 and 3.
Lock and Dam No. 1
In about the same time frame (late 1970s/early 1980s), the board of directors of the White River Heritage Center in Batesville was considering building a heritage cultural center and river museum at the city park near the river using the old lock keeper’s house as a part of the structure. The center would include a 900-seat banquet hall, kitchen facilities, space for traveling exhibits, classrooms for educational programs, and a permanent home and stage for the Batesville Community Theater. The board’s plan was to finance and endow the center by selling electricity from a new hydro plant to be built at the city-owned Lock and Dam No. 1. The hydro plant itself would become an exhibit, constructed so visitors could view the operation. The board asked the city to apply for a preliminary permit from FERC to investigate the possibilities.
In 1981, FERC issued a preliminary permit to the city of Batesville to study hydro development at Lock and Dam No. 1. The cultural center board hired consultants Brown and Root Inc. to conduct the study. Brown and Root concluded hydro development was feasible.
In 1983, the cultural center board asked the city council to participate in developing a hydro plant at Lock and Dam No. 1. The city leased the dam and surrounding land to the board for 99 years, with a provision that neither the plant nor the cultural center would cost the city anything.
Forming a consortium
Later in 1983, the city of Batesville and the Independence County Quorum Court formed a consortium and hired the Halliwell/Garver Group to prepare applications for FERC licenses for all three projects. By forming the consortium, the entities were able to share costs, deal with just one consulting company, and improve their negotiating position for a power purchase agreement.
A FERC license, designated Project No. 4204, at Lock and Dam No.1 was issued to the city of Batesville in February 1986. A FERC license, Project No. 4660 at Lock and Dam No. 2, was issued to the county in November 1985, and a FERC license, designated Project No. 4659 at Lock and Dam No. 3, was issued to the county in February 1986.
Financing the project
In October 1985, Independence County officials authorized a $112.5 million bond issue to finance initial design of Lock and Dam Nos. 2 and 3 and shortly thereafter, included the Lock and Dam No. 1 project in the package, to cover the cost of power purchase contract negotiations. The 2.5-year bonds were used to buy U.S. Treasury securities, which paid a higher interest rate than the county would pay on the bonds. Revenue from electricity sales would, in turn, be used to repay the bonds, as well as provide a profit. The plan was to convert the bonds to a long-term issue if all three plants were found feasible. If the projects weren’t feasible or if a power purchase contract could not be negotiated, the county would pay off the bonds from the Treasury securities.
When the first 2.5-year term ended, the county had realized a profit of $1.3 million in interest and paid off $26.8 million of the debt.
Acquiring a power purchase agreement
Project financing depended on a signed power purchase agreement. Officials knew early on that a contract would be hard to come by, but they didn’t realize how difficult it would turn out to be. Negotiators spent more than 18 years keeping licenses in effect while actively seeking a buyer for the projects’ electricity.
At first, everyone expected to sell the electricity to Arkansas Power and Light. However, in December 1987, a utility representative told county officials the per-kilowatt-hour (kWh) cost of electricity from the White River project couldn’t compete with power from other sources. That year, Arkansas Power and Light was buying electricity from a supplier in Missouri for 3 to 4.85 cents per kWh, while estimates of White River’s cost to produce electricity was 6.3 cents. However, the representative said the utility would be interested in the White River power in about ten years and recommended postponing construction to 1995.
Postponing construction was not simple. First, financing had to be restructured. In November 1988, the county remarketed the remaining bonds worth $85.7 million. Three years later, the county retired the bonds. However, net interest earnings through May 1991 of approximately $4 million from the reinvestment of the bonds enabled the project to continue with preliminary design, equipment, and construction contract procurement, and marketing efforts.
Second, the plants’ FERC licenses required commencement of construction by 1987 with completion by 1991. FERC could grant a two-year extension to this requirement. Further extensions would require Congressional authorization. Eventually, Senator Dale Bumpers, D-AR, and Representative William “Bill” Alexander, Jr., D-AR, introduced bills in the U.S. Senate and House of Representatives granting FERC the authority to provide the projects three additional extensions of two years each. The legislation passed both houses as a “non-controversial” matter and was signed into law in 1989. In 1996, Congress passed a second bill sponsored by Senator Bumpers and Representative Blanche Lambert-Lincoln, providing for an additional six years to start construction.
During this period, the county hired Morrison-Knudsen Engineers as project engineer. Morrison-Knudsen re-configured the project and conducted preliminary design and bidding. The FERC licenses were amended to incorporate the elements of the reconfiguration, including unit size, number, and type as well as relocation of the powerhouse at Lock & Dam No. 3.
Finally, in 2003, Independence County secured a power sale and purchase agreement with Clarksville Light & Water. The Arkansas municipal utility agreed to purchase all theelectricity generated by the three plants for a 30-year average annual cost of just under $70 per megawatt-hour.
In order to secure the agreement, the county downsized the project capacity to 12 MW from the 20 MW originally designed. Along with downsizing the capacity, the key to securing an agreement was finding a municipality with long-range plans and a desire for hydropower. The agreement benefits the city of Clarksville by providing electricity with a relatively fixed cost that won’t exceed market rates over the long term.And, in turn, the agreement benefits Independence County, the city of Batesville, and Lyon College with net revenues shared three ways: 15 percent each to the city and college and 70 percent to the county.
Construction financing used $44.5 million of new 30-year, tax-exempt hydroelectric revenue bonds. Bond sales began in 2003. In addition to design, equipment, and construction costs, the financing included costs for capitalized interest during construction, bond insurance, debt service reserve, closing costs, and some reimbursement to the county for pre-financing costs.
Design and construction
In the development’s early stages, county officials considered several proposed designs for the three plants with a total capacity exceeding 20 MW. For Lock and Dam No. 1, consultants Brown & Root suggested one turbine-generator unit with a 1.5-foot-high rubberized dam on top of the existing dam to increase head. However, Halliwell/Garver consultants expressed doubts that the inflatable flashboard arrangement would be a dependable method to increase hydraulic head and noted that the inflatable dam could be subject to vandalism. Subsequent studies by both Halliwell/Garver and Morrison-Knudsen eliminated the concept of raising the head at Lock and Dam No. 1 but proposed the use of steel sheeting to raise the head at Lock and Dam No. 3.
For Lock and Dam Nos. 2 and 3, Halliwell proposed three small units for each plant. Halliwell engineers considered three types of turbines: tube, bulb, and pit Kaplan. A tube turbine was smallest and least expensive and would prevent costly underwater excavation. However, with this type of turbine, each plant would need three units. A bulb turbine was the largest suitable for the sites, the consultants said. Installation of a bulb turbine would require extensive excavation, but each site would only need one unit. Morrison-Knudsen’s design used a pit Kaplan turbine, which was described as a “compromise” between the other two types. Each site would need one unit.
The final equipment design by North American Hydro Contracting/Hatch Acres for each plant featured one regulated horizontal pit-type Kaplan turbine.
Powerhouse design was driven by the features of each site. The powerhouses at Lock and Dam Nos. 1 and 2 are constructed of reinforced concrete and use the existing lock structures for powerhouse walls. The main difference in these sites is location: Lock and Dam No. 1 lies within the Batesville city limits in the city park. Lock and Dam No. 2 lies on the opposite side of the river in a remote location. Otherwise, they are almost identical.
Construction at Lock and Dam No. 1 included walking trails and a visitors’ center, which were part of the original plans of the White River Heritage Center Board. The board disbanded in the mid-1980s, but several former members have expressed joy that at least part of their dream has been realized.
The reinforced concrete powerhouse for the Shelby M. Knight plant at Lock and Dam No. 3 is designed independent of the lock structure, built on 6.4 acres beside the river. The county acquired a portion of the land (1.4 acres) for the powerhouse site from the Shelby M. Knight family through a 99-year lease. In return, the county named the powerhouse in the family’s honor.
The Shelby M. Knight Lock and Dam No. 3 hydro plant began operating August 2006; Lock and Dam No. 2 started March 2007; and Lock and Dam No. 1 began operating June 2007. Average monthly revenue is about $150,000.
Individual plans for use of net revenues will be developed by each of the development partners. However, all revenues will accrue for local government and education purposes, possibly in the form of economic development, infrastructure improvement, scholarships, or parks and recreation. At this point, revenues are used only for debt service. Projections indicate that, due to the delays encountered, net revenue will not be available until around 2011.
Independence County and the city of Batesville are fortunate that they owned existing dams for development of the three small hydro plants. Otherwise, these facilities may never have been built. When the dams were constructed at the turn of the 20th century, environmental issues were practically non-existent. Today, however, there are regulatory, environmental, and cultural re- sources requirements. It is important that good rapport is established early on with FERC and the various agencies and groups, as well as the public, so that as many concerns and issues as possible can be addressed as early as possible.
The new 4.3-MW Shelby M. Knight hydro plant, built at the site of the existing White River Lock and Dam No. 3, is one of three new hydro plants on the White River in Arkansas.
The White River projects faced a number of challenges and delays. Had the county not issued bonds in the mid-1980s and not been good stewards of the earnings afforded from that bond issue, it is unlikely that it could have endured its 27-year pursuit to develop these projects.
Now that water flows through the plants, however, officials are pleased that the dream of hydro development at the three sites has been realized. “We are very pleased that the project has come to fruition,” says Walter B. Roettger, Lyon College president. “We know that a number of individuals have worked very hard over an extended period of time to make this dream come true.”
Stewart W. Noland, vice president of Crist Engineers who has been involved with the project over the long term as the county’s engineer and representative, agrees. “I am pleased that these renewable energy projects are on line and being utilized by an Arkansas entity,” he says.
Ms. Potts may be contacted at White River Hydroelectric Project, 192 East Main Street, Batesville, AR 72501-5510; (1) 870-793-8856; E-mail: rjpotts@ swbell.net.
Rita Potts is coordinator of the three-powerhouse White River hydroelectric project. She has served for 27 years as executive secretary, administrative assistant, and hydro project coordinator for the Independence County Judge, who is the elected chief administrator of the county and has executive responsibility for development of the three White River hydro plants. Three county judges have served since commencement of the project in 1981.