THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, November 20, 1995 TAG: 9511200069
SECTION: LOCAL PAGE: B1 EDITION: NORTH CAROLINA
SOURCE: BY KAREN WEINTRAUB, STAFF WRITER
LENGTH: Long : 156 lines
Later this month, Virginia Beach will commit huge sums of money to the completion of the Lake Gaston pipeline.
City officials are elated that they've finally reached what they see as the beginning of the end in their struggle to make the project a reality.
But pipeline opponents say Virginia Beach's celebration is premature. North Carolina and leaders in southwestern Virginia say they will keep fighting the proposed pipeline for as long as it takes.
If they win, Virginia Beach stands to lose as much as $200 million in taxpayers' money and a source of water that would meet the needs of more than half a million people.
``This is a huge risk,'' said Alan S. Hirsch, special deputy attorney general in North Carolina. ``Would anybody invest this kind of cash knowing the entire investment might be lost?''
``There is a risk,'' Virginia Beach City Manager James K. Spore agreed. ``We think it's a very small risk.''
Virginia Beach officials are convinced that their latest victories - before the Federal Energy Regulatory Commission and the U.S. District Court - pave the way for a swift end to the 12 1/2-year pipeline saga.
By Nov. 30, Virginia Beach will have signed seven construction contracts totaling $100 million to build the 76-mile pipeline and complete a water pumping system.
Once those contracts are signed, the builders will start ordering parts and spending money. Even if the contracts are later canceled - as similar ones were in 1990 when North Carolina won a court injunction blocking construction - Virginia Beach could owe a significant amount of money.
Beach officials are confident that the pipeline will be completed eventually, but several said last week that they think the contract-signings will encourage project opponents to step up their attacks.
Hirsch, a lawyer, would not reveal his state's strategy. But he outlined three pitfalls he says the pipeline faces:
An appeals court that will consider the case next spring could side with North Carolina.
Pending federal legislation -which would force Virginia to agree to an earlier settlement if the pipeline is to be built - could win congressional approval.
North Carolina could challenge the pipeline again when Virginia Power, which operates a hydroelectric plant at Lake Gaston, must receive a new 50-year license in 2001.
Patrick M. McSweeney, who represents the Roanoke Basin Association, a group of pipeline opponents along the Roanoke River, said Virginia Beach also risks the possibility that its credit rating, and therefore its cost of doing business, will be damaged by the fight for the project.
Beach officials dismissed those obstacles late last week, saying that opponents are overconfident and that Beach residents are at greater risk if their leaders don't proceed with construction now.
``I think everybody's committed to moving ahead,'' said council member John A. Baum, a member of the city's Water Task Force. ``If you're an absolute perfectionist, you might say something else might come up, but then you never do the project.
``I really think the risk is bigger to do nothing,'' Baum said. ``That definitely won't get you water.''
Without an additional water source, Virginia Beach residents could face severe shortages in a drought. Chesapeake, Franklin and Isle of Wight County would also draw from the pipeline.
Spore said he thinks North Carolina will have a much harder time stopping construction now than it did in 1990.
The Federal Energy Regulatory Commission, heeding North Carolina's objections to the project, completed a yearlong environmental review in July and endorsed the pipeline. Spore said he thinks the courts will see North Carolina's cry for more study as a waste of time.
``I can't believe there's a court anywhere in the country that would give any credence to their arguments at this point,'' Spore said.
But Virginia Beach's optimism overlooks one basic truth about the case, Hirsch said: No city or state can win over the strong objections of another state.
``The city misunderstands the fundamental structure of federalism in America,'' Hirsch said. ``So long as a sovereign state believes it is being treated unfairly, there are no limits to its ability to fight.
``Virginia Beach thinks that simply because it wants something, it can go and take it,'' he continued. ``Sovereign states cannot be defeated that way.''
Hirsch said he thinks North Carolina has a good chance of getting the federal Court of Appeals to overturn the Federal Energy Regulatory Commission's decision to issue the pipeline a permit.
The commission chose not to follow a federal law that Hirsch said requires states to approve projects like the pipeline.
Section 401 of the Clean Water Act says that when a federally licensed project creates a ``discharge'' in a state, that state must sign off on the project. Virginia Beach officials have said Section 401 does not apply to the pipeline because it will discharge water only on the Virginia side of the border.
But Hirsch, citing a 1994 Supreme Court decision, said the court found that lowering the water level, as the Gaston pipeline would do, also required the state's permission.
On Wednesday, North Carolina fired another offensive against the pipeline.
Sens. Jesse Helms and D.M. ``Lauch'' Faircloth submitted a bill that, if approved, would allow North Carolina's governor to block the pipeline. Several North Carolina and Virginia congressmen submitted a similar bill in the House on Thursday.
Virginia Sens. Charles S. Robb and John W. Warner and Rep. Owen Pickett said the measure isn't likely to be approved over their opposition.
And even if it passes, the bill would allow the pipeline to be built if both states agree to the compromise settlement hashed out this summer. The pact dissolved in July, when the Virginia General Assembly and Gov. George Allen could not agree on procedural details.
Hirsch said North Carolina also can threaten the pipeline when Virginia Power applies for a new license at the turn of the century.
Virginia Power's license to operate the hydroelectric dam and plant that created Lake Gaston will expire in 2001. North Carolina basically could use the relicensing process to force Virginia Beach to start the five- to 10-year permitting process from scratch, he said.
If Virginia Beach begins construction early next year as planned, the pipeline will be completed in mid-1998 at the earliest. ``In the best of all worlds, they have two years before everything starts over again,'' Hirsch said.
Virginia Beach officials said Hirsch is dreaming if he thinks the federal government will make them turn off the spigot on a two-year-old, $150 million project.
Pipeline project manager Thomas M. Leahy III said last week's congressional legislation shows that North Carolina doesn't actually believe it has the power to shut down the pipeline through either the Section 401 regulation or relicensing.
``If they really believed that, they wouldn't need their senators and congressman to change the law to give them a power they claim they already have,'' Leahy said.
The longer pipeline opponents manage to delay the project, McSweeney said, the more money Beach taxpayers will have to fork over for the pipeline and everything else their city builds.
McSweeney, the lawyer for the Roanoke Basin Association, said that if the city takes out loans to build the pipeline, and opponents significantly stall or kill the project, Virginia Beach will have an extremely difficult time repaying the loan.
If bond rating agencies think the Beach can't or won't repay the loan because the pipeline is turned off, they will downgrade the city's bond rating, McSweeney said. A lower bond rating would make borrowing - for everything from the pipeline to new schools - more expensive.
``There's a very real prospect that they will invest $100 million bucks - plus what they will commit to pay Norfolk (to process the water), which is another $100 million - and lose,'' McSweeney said. ``They won't be able to operate it.''
Virginia Beach Finance Director Patricia A. Phillips said McSweeney's analysis misses one key point: The city has enough money to build the pipeline without borrowing.
She said her office is studying whether to issue some debt for the project or pay for it in cash with reserves from the water and sewer fund. The city raised water rates years ago to help pay for the pipeline; because of repeated delays, the fund is flush enough to pay for the project outright.
And even if it took out loans, bond rating agencies aren't likely to lower the city's rating just because opponents manage to slow the pipeline's progress, Phillips said.
KEYWORDS: LAKE GASTON PIPELINE by CNB