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Intalco Aluminum Smelter Celebrates 50th Year, But Will it Last Another 50? by Dean Kahn Bellingham Herald, August 14, 2016

In this raucous campaign year, politicians from both sides of the aisle were scheduled to gather Saturday, Aug. 13, to celebrate Alcoa Intalco Works' 50 years of smelting aluminum at the plant west of Ferndale, by Cherry Point.

Joining them were corporate executives, plant managers, production workers, and family members, who all came to enjoy a barbecue lunch, listen to speeches, and celebrate the one thing that Intalco has done that nine other Northwest smelters could not do -- survive.

Those same people -- company leaders willing to make needed cuts and changes, workers who put in extra hours as their numbers dwindle, family members who rally public support, and lawmakers who flex their political muscles in a bipartisan way -- have all been needed to keep Intalco's 583 good-paying jobs alive, said Glenn Farmer, business representative for the smelter's local union.

"That continues," he said, "and so do the challenges."

In the early, halcyon days of the region's aluminum industry, smelters enjoyed cheap hydroelectric power from federal dams, wartime demand for their product and post-war growth. But in recent decades, high power costs, weak demand, low prices and foreign competition have shrunk the Northwest industry to one last active smelter.

"Intalco is a survivor," said Farmer, business representative for Local 2379 of the International Association of Machinists and Aerospace Workers. "We're hopeful about the future."

The present is good, too, for now. With a boost from state taxpayers and a revised contract with Bonneville Power Administration, Intalco avoided a planned curtailment in production earlier this year that would have led to the loss of hundreds of jobs. Instead, the smelter is now seeking workers for production and skilled craft openings.

"We are actively rebuilding the Intalco workforce," said spokesman Josh Wilund. "We have a great workforce who work hard every day to help make this plant competitive. Our goal is to work safely and improve our processes to ensure we can continue to provide good jobs and economic value to the region."

"We're excited about continuing our 50-year legacy as a part of Whatcom County."

Looking back

The idea of aluminum smelters wasn't uniformly loved when the federal government began erecting dams on the Columbia River in the 1930s. The reason? Smelters produced relatively few jobs compared to the massive amounts of power they consume.

But BPA's need for revenue, the appeal of good-paying jobs, and Boeing's and other defense contractors' need for aluminum won the day for smelters. In turn, BPA, the federal agency that markets the dams' hydropower, reaped steady money from the smelters, along with operational efficiency for the dams.

Over time, 10 smelters opened for business in the region -- seven in Washington, two in Oregon and one in Montana -- employing about 11,000 workers, combined, at their peak. By the 1950s, the Northwest produced 40 percent of the nation's supply of aluminum ingots.

Intalco joined the mix in 1966 when the smelter began operations as Intalco Aluminum Corp., under the ownership of Alumax, Pechiney and Howmet. In 1998, Alcoa Inc. and Alumax merged, creating Alcoa Intalco Works. A decade ago, Alcoa became the full owner after buying out its remaining partners.

But BPA rates began rising by the late 1970s and early 1980s, and producers starting making aluminum elsewhere around the world where power and labor costs were low.

The West Coast energy crisis of 2000 drove up power prices further, forcing the region's smelters to shut down or reduce production.

Alcoa executives considered building their own power plant to run Intalco. In May 2001, Intalco closed temporarily, kept its workers, and sold its power back to BPA to help in the energy crisis. BPA, in turn, paid for the wages and benefits of most of the workers, and paid nearly $2 million toward Intalco's taxes.

A year later, after being shut down for six months, Intalco reopened two of its three potlines, but shut down one of the potlines in October 2003, cutting 200 jobs.

Tough times continued. Due to oversupply of aluminum, mainly from China, and to reduced prices, Alcoa has closed most of its high-cost smelters in the U.S.

In November, Alcoa announced plans to sharply reduce production at Intalco, potentially laying off 465 workers. The company's older smelter in Wenatchee was idled.

Five months later, however, Alcoa and BPA revised their power contract to keep Intalco running at close to full production. The agreement, which runs through mid-February 2018, lets Alcoa buy more of its energy on the less-expensive spot market. Alcoa also agreed to pay BPA $1.5 million, and to buy some of BPA's surplus power.

Intalco also was bolstered by $3 million from the state for worker training. Alcoa's underlying power contract with BPA lasts until September 2022.

Looking ahead

Farmer, the union representative, acknowledged that "things are tough right now," but remained cautiously optimistic.

He's worried a state proposal to reduce greenhouse gases could hurt Intalco, even though state regulators revised their proposal to give Intalco credit for how much the plant has already done to reduce its carbon emissions, compared to similar operations in the country.

Farmer also is concerned that land-use changes pending for the Cherry Point industrial area could hurt the smelter, although county Councilman Carl Weimer said none of the proposed changes would, or are intended to, affect Intalco's aluminum operations.

In a change at the corporate level, Alcoa plans to split the company into two. One would focus on Alcoa's profitable finished products for the aerospace, automobile and construction industries. The other would house Alcoa's traditional mining, refining and smelting operations, including Intalco. The Wall Street Journal has said the change would buffer company shareholders from what it called "flailing commodity markets."

In the face of such uncertainties, Wilund, the company spokesman, said Intalco's managers and workers remain determined and optimistic.

"We know everything isn't in our control, including global market conditions, so we stay focused on doing what we can to make sure this plant is as competitive as it can be," he said.