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GREENSBORO — A lawsuit between seven hydroelectric plants and the Piedmont Triad Regional Water Authority could help clarify North Carolina law for generations to come.

Experts say North Carolina is open to such conflicts because its water laws are relatively unrefined, with gaps between rules governing private use of streams for profit and those controlling public reservoirs, known as impoundments in legal jargon.

“Compared to a lot of states, we haven’t had that much conflict between competing water uses over the years,” said Bill Holman, former secretary of the N.C. Department of Environment and Natural Resources. “I don’t think our impoundment law has been challenged before.”

“This case could either settle it or raise other significant issues about the rights to store water (in a reservoir) and the rights of downstream users of that water,” said Holman, now the director of state policy at Duke University’s Nicholas Institute for Environmental Policy Solutions.

The small “hydro” plants on the Deep River claim the authority’s Randleman Regional Reservoir diverts water they otherwise could use to produce and sell electricity.

The water authority’s most recent audit warned that the case could trigger losses of $1.5 million to $5 million, a cost many area residents would bear in taxes or water rates.

The case had been scheduled for review in Guilford Superior Court last week, but was postponed.

The outcome of the Deep River lawsuit and a few similar water wars elsewhere in the state could determine how difficult and costly it is for growing urban areas to build new reservoirs, Holman said.

Dated laws

North Carolina water law is rooted, critics say, in a bygone era when industry harnessed streams as small as the Deep to power riverside textile mills.

Tar Heel courts stress the rights of private landowners at water’s edge. Some other states, particularly in the eastern half of the nation, put more emphasis on water as a public resource, critics say.

“We’re still stuck in the 18th century,” said Catawba Riverkeeper David Merryman, whose watchdog group monitors that river system. “If you have access to (a river), you have the right to stick a straw in and start sucking.”

The Deep River lawsuit shares some features with a more widely publicized controversy — industrial giant Alcoa’s ownership of a 38-mile stretch of the Yadkin River for hydropower production, said Yadkin Riverkeeper Dean Naujoks.

State government wants to take control of four hydroelectric dams from Alcoa, arguing to the Federal Energy Regulatory Commission that the river is a public resource that should no longer be in private hands.

“People often forget these are public-trust waters that belong to the people of North Carolina,” said Naujoks, whose nonprofit group polices the Yadkin-Pee Dee Basin.

Alcoa takes a different view, accusing the state of attacking the most basic property rights. It likens North Carolina’s actions to moves against its holdings in Venezuela by that nation’s socialist leader Hugo Chavez.

Conflict of interest?

The next step in the Deep River case apparently will be a hearing on the authority’s effort to overturn an October ruling by Superior Court Judge Calvin E. Murphy of Charlotte.

The authority argues Murphy’s ruling is tainted by the appearance that he had a conflict of interest in the case.

Shortly before the ruling, he was one of three people U.S. Sen. Kay Hagan recommended for a lifetime appointment to a single vacancy on the U.S. District Court for the western part of the state. President Obama has final say and likely would have picked one of them.

Hagan’s husband, Greensboro lawyer Charles T. “Chip” Hagan III, is part owner of one of the hydro plants suing the authority, along with two of his brothers. Sen. Hagan said she did not know of Murphy’s role in the case when she chose him, later withdrawing his name to avoid “any appearance of favoritism.”

Meanwhile, the water authority also believes Murphy’s ruling errs in its strong focus on the plant owners’ riverfront property rights at the expense of the public’s legitimate water needs.

Murphy ruled that a jury should decide exactly how much the authority owes the plant owners, but he limited damages to 12 million gallons of water it will take from the reservoir each day initially.

Murphy also limited reimbursement to five Deep River plants now working. He left the door open for the other two — located in Worthville and Ramseur — to claim damages if they resume operation. And he said plants could seek more damages as the authority increases the amount of water it uses.

Reborn by the oil crisis

The plants are small operations dotting the riverfront from Randleman more than 60 miles downstream.

In their heyday, most powered local mills. They were phased out as major utilities found more efficient technology, usually involving fossil fuel. Most plants on the Deep were revived in the 1980s by small-business people after the federal government reacted to oil shortages by making utilities buy power from such renewable sources.

Murphy’s ruling that the revived plants are due “damages” correctly interprets North Carolina water law as it is now, said Scott Hale, a lawyer with Chip Hagan’s firm that represents all the plants. Government can’t take private property without just compensation, a right protected by the constitution, say Hale and other authority critics.

“Applying existing North Carolina law ... this case involves nothing more than a straightforward damages calculation,” Hale said in a recent e-mail. “As you know, North Carolina’s courts interpret existing law and do not make policy decisions.”

David Moreau, water expert and veteran member of the state Environmental Management Commission, agrees the case seems to be a simple matter of paying plants for lost capacity: “Just see how much power the plants were able to make before, without the reservoir, and then compare it to their present situation.”

But if the authority gets its wish, the Deep River case will turn on the state’s impoundment law that gives communities the right to withdraw water from a reservoir if the lake has been created lawfully.

Randleman Regional Reservoir emerged from decades of legal review, first as a federal project, then a regional effort by the authority to provide drinking water to Greensboro, High Point, Jamestown, Archdale, Randleman and Randolph County.

Too late to complain?

John Kime, the authority’s executive director, questions the value of the permit the Randleman project eventually received from the Environmental Management Commission if the reservoir remains so vulnerable to lawsuits.

“At the end of the day, that permit is supposed to mean something,” Kime said. “If it doesn’t, we’re in trouble in this state.”

Part of the authority’s defense centers on the plant owners’ failure in the 1990s to assist the review that led to that permit.

They never responded to a request for information so their needs could be factored into the reservoir’s planning and design, said John Morris, former director of the state Division of Water Resources.

“We basically did not get the help we needed from them,” Morris said.

It’s unfair for plant owners to boycott the planning process, then make claims against the finished project years later, the authority contends.

The case eventually could be settled on such a peripheral issue, but some hope for an ending with a clearer message about who has what right to North Carolina’s waters.

Over the years, North Carolina water disputes keep getting resolved “on procedural grounds and we just don’t get any clarity,” said Richard Whisnant, former general counsel for the state Department of Environment and Natural Resources and now a professor in UNC-Chapel Hill’s school of government.

“For me and for a lot of other people interested in this case,” Whisnant said, “it would be helpful for a court to bring some resolution to the question of who actually has the right to the water.”

Contact Taft Wireback at 373-7100 or taft.wireback@news-record.com