Energy and Environment Monitor

“Yes, You Can Own a River”

October 26, 2015

By: Blair M. Gardner

The U.S. District Court for the Eastern District of North Carolina has affirmed a very traditional issue of property rights in a very unusual setting. The district court affirmed that one may acquire ownership of a river by means of adverse possession. Equally significant is that adverse possession may be successfully asserted against the state.

The facts are highly unusual. Aluminum giant ALCOA built four dams at the beginning of the last century on the Yadkin River to generate electricity and support the smelting of alumina at a major facility in Badin, North Carolina.  When it began the project in 1916, it did so with the cooperation of the state, and systematically acquired land on the Yadkin. With the land acquired it constructed the four dams between 1916 and 1962, flooded the riverbed and adjacent valley, controlled access to the land, paid taxes, managed the shoreline with the approval of the state, and posted its lands as privately owned. ALCOA applied for two licenses to operate its hydroelectric facilities with the former Federal Power Commission, now the Federal Electric Regulatory Commission (FERC), in 1937 and again 1956. In those applications it stated in extraordinary detail the steps it had taken over the decades to acquire the bed and banks and lands adjoining the relevant stretch of the river it utilized. In its hydroelectric power applications it identified that it did not own approximately 1% of the river it was using for electricity production.

ALCOA’s problem began when is sought to renew its power license with FERC in 2006. ALCOA sought what should have been a routine Clean Water Act §401 water quality certification from North Carolina. The certification was a necessary predicate to FERC issuing the license. Four years later ALCOA announced that it would close its Badin facility in 2010, but still sought the renewed license so it could operate the hydroelectric facilities and sell power to wholesale markets. North Carolina brought suit in 2013 asserting that ALCOA did not own the 99% of the riparian lands it had purchased or the 1% which it acknowledged it had not been able to acquire.

To prove its case, ALCOA went to trial – twice. In the first case in April 2015 it demonstrated that the Yadkin River was not navigable upon statehood, and thus the state’s claim to ownership of the river rested on North Carolina statutory law. ALCOA prevailed on that claim in the second trial, but only as to the 99% of the river it had acquired. Because it admitted that it never acquired the remaining 1%, ALCOA resorted to a claim of adverse possession. The district court entered judgment on that claim as well.

Traditionally, in order to prevail on a claim of ownership by adverse possession, the claimant must show actual, open, hostile, exclusive, and continuous possession of the land over visible boundaries. These elements are repeated like a mantra in most cases. The meaning of each of the five elements was amply illustrated by the court in reference to ALCOA’s history of ownership and use of the river over the course of a century. The ample historical documentation collected by ALCOA during its 1956 and 2006 hydroelectric power applications easily documented its use.

One other claim made by the state is also noteworthy. North Carolina asserted that adverse possession could not be established because of its “public trust” doctrine. The court made short shrift of the argument, finding it a correct statement only if title to real property is actually held by the state. “The prohibition cannot apply where, as here, the State has not demonstrated that it has title to the real property at issue.” Even if “the land is imbued with public trust rights, the State does not automatically obtain title to all land subject to public trust rights. It is clear under North Carolina law that riverbeds that are subject to public trust rights can be privately owned.” (Op. at 8.)

This final observation is important. Virtually all environmental plaintiffs and many governmental units assert a public trust over rivers and streams when a private entity’s use of the stream is in question. The public trust doctrine is a traditional expression of the state’s police power over a river or stream. It does not defeat a riparian owner’s property rights in a stream, including the right to use the water as a resource, to withdraw the water, or to restrict access to the stream from the riparian owners’ property.

An assertion by government or environmentalists of the public trust over a stream is normally made for two reasons. First, it blurs the limited rights that a government has over a water course which are regulatory, but rise to ownership only infrequently. Second, an assertion of a public trust over a stream diminishes the riparian owners’ real property rights in the stream. The district court’s decision is a useful reminder that the public trust doctrine does not act to create or vest title to property in the government. Instead, the government must affirmatively demonstrate and prove its title like any other property owner.  

The case is State of North Carolina v. ALCOA Power Generating, Inc. (EDNC, No. 5:13-CV-633-BO, Sept. 28. 2015).

The author of this article is Blair M. Gardner, a member of Jackson Kelly, PLLC.