Port staff: Company in negotiations for Alcoa smelter, $10 million proposed in state funding to reopen facility

A New York City-based private-equity firm is considering buying Alcoa’s idled Ferndale smelter but will need contracts with Alcoa and Bonneville Power Administration (BPA) first, according to Port of Bellingham staff. This comes as $10 million is being funneled through the state Legislature that could help reopen the smelter while reducing its greenhouse gas emissions.

Don Goldberg, the Port of Bellingham’s director of economic development, told port commissioners January 18 that he urged in testimony to the House Capital Budget Committee and Senate Ways and Means Committee for money to reopen the Alcoa Intalco Works smelter.

A $7.6 million line item contained in governor Jay Inslee’s budget would help the smelter meet stricter recent environmental regulations and rehire the 700 workers that were laid off after the smelter curtailed operations in April 2020, Goldberg said. An additional $2.4 million is already secured in the state budget to reopen the smelter.

If approved, the money would transform the smelter into one of two “green” aluminum plants in the U.S., Goldberg said. The greener smelter would remove 65 percent of previous carbon-dioxide emissions, or at least 750,000 metric tons per year, Goldberg said. Fluoride and particulate matter emissions would also be reduced.

The $7.6 million request is one of two major clean energy projects in the governor’s Clean Energy Fund, aimed to decarbonize the industry sector, according to the governor’s policy brief on his 2022 legislative session climate proposals.

“We’re bringing back these important, high-paying jobs and making it more environmentally friendly,” Goldberg said in a phone interview.

According to the funding requests in Senate Bill 5651 and House Bill 1781, the $2.4 million reappropriation must be used by June 2025, or the state Department of Commerce may use the money for other clean-energy investments. Both appropriations would be used for the first phase of restarting the aluminum smelter.

Regardless of the proposed legislative funding, Goldberg said the smelter’s prospective buyer, Blue Wolf Capital Partners LLC, seems committed to purchasing the property.

Blue Wolf is a New York City-based private-equity firm controlling over $1.8 billion in capital and invests in middle-market companies in industrial, manufacturing, building and healthcare industries, according to its website. A Blue Wolf spokesperson declined to comment.

Blue Wolf is waiting on contract negotiations with Alcoa and working on an energy contract with BPA, Goldberg said. Alcoa’s contract with BPA, which allowed the smelter to purchase large quantities of discounted power, previously expired. Blue Wolf will need to enter a similar agreement to make the smelter profitable, Goldberg said.

“It’s a big ask,” he said. “It’s very difficult to get BPA to do that but the Blue Wolf people are in discussions with BPA from what I understand.”

Blue Wolf seems to be trying to close the deal as quickly as possible, Goldberg said.

The firm plans to bring back all 700 jobs lost in April 2020, most of which are expected to be union positions. About 350 former employees are expected to be rehired, while the Bellingham Technical College and an upcoming Lummi Nation technology training center would likely train the rest, he said.

A steel company that showed interest in acquiring the Ferndale smelter last fall is not as far along as Blue Wolf in making a deal, Goldberg said, but added the company still has strong interest in Cherry Point. Goldberg told port commissioners during their October 14 meeting that the steel company wanted to create the most environmentally friendly steel mill in the world by using scrap in the U.S. and using a modern electric furnace and green hydrogen power. The company had discussed opening the steel mill in three phases that would eventually create 1,000 jobs.

Ferndale mayor Greg Hansen said reopening the Ferndale smelter would reaffirm the city’s identity as being a hard-working industrial town.

So far, Ferndale hasn’t seen much specific economic impact from the plant’s shutdown, Hansen said, because it occurred as businesses slowed down during the pandemic. Fairly strong revenue streams and a booming housing market softened the blow from something that may have been much worse a decade ago, he said.

But the potential buyer could run into problems if it needs to hire 350 new employees during a time when housing in Ferndale – and greater Whatcom County – is limited and manufacturing employers are already competing for workers, Hansen said.

The momentum behind reopening the Ferndale smelter comes just as Alcoa’s Wenatchee Works smelter officially closed in December after sitting idle since 2015. The Ferndale smelter was the only operating aluminum smelter left west of the Mississippi River when it was curtailed in 2020.

Jed Holmes, spokesperson for the Whatcom County Executive’s Office, said county executive Satpal Sidhu plans to testify as the funding progresses in Olympia. The state funding would align with the Whatcom County Climate Action Plan that calls for emission reductions, he said.

“I think there’s a recognition we need to move in the direction of clean energy and clean industry production,” Holmes said. “If we can have aluminum and have it be clean, that would certainly be a benefit. We would like Whatcom County to be at the forefront of clean energy and clean industrial production.”