For Peat's Sake

When African workers dug the Collins Canal in the 1780s, the impact of their labors on the surrounding swamp seemed enormous. But it took decades — at a rate of one acre per worker per month — to clear the 65,000 acres that made up Somerset Place Plantation. Now huge tractors do in hours what slaves once did in weeks, and the area around Lake Phelps faces environmental shifts that far surpass those of 200 years ago. While Josiah Collins tapped just enough water to drive a mill wheel, the latest generation of canal builders plan to pump more than two million gallons of water a day.

The Josiah Collins of our generation is Malcolm P. McLean, a millionaire who made his fortune in trucking and containerized shipping before turning to resort development and superfarming. When heavy machinery and cheap fertilizer again made eastern land clearing a tempting North Carolina investment, he set up First Colony Farms on 372,000 acres in 1973. As the Collinses sold grain in Japan before the Civil War, McLean now markets corn and soybeans on the international market. But on much of his land, the rich mineral subsoil suited for agriculture is still covered by a six-to-10-foot layer of peat.

Peat is the waterlogged mat of partially decomposed vegetation that has gathered for millenia in the delicate, still-mysterious freshwater bogs known as pocosins. These beautiful and vast sponges — there were 2.3 million acres of pocosins in North Carolina in 1953 — serve as vital protective filters for the upper estuaries that are the primary nursery area for North Carolina's valuable fish population. In recent decades more than two-thirds of the state's pocosins have undergone large-scale clearing, and less than five percent of the existing pocosins are in publicly owned protected status.

While this rapid shift has been profitable for agribusiness, it has been costly for the region. Huge fields have made dust storms a hazard; wind-blown sediment has settled more than a foot thick in parts of shallow Lake Phelps, suffocating fish eggs and killing aquatic life. Destroying the dense pocosins has endangered the black bear, and carving drainage canals has affected the water table. Experts worry that surface salt water intruding inland could damage agricultural land, and surges of fresh water pouring into saline estuaries during the spring could disrupt the spawning of shellfish.

In 1981, when an underground peat fire burned through more than 12,000 acres south of Lake Phelps, First Colony Farm employees joined state foresters in digging three canals to the lake and pumping 27 million gallons of water per day into a network of ditches. While officials claim this did not affect the lake, its level has dropped considerably as the area's preoccupation with peat has grown. Now the region around the lake is bracing for an escapade in peat mining that could change the lowcountry and the fisheries of adjoining Albemarle and Pamlico sounds forever.

As peasants have known for centuries, dried peat is a clean-burning fuel with an efficiency comparable to coal. Four-fifths of U.S. reserves are in Alaska and the northern Great Lakes states, where the climate is too cold to dry the peat efficiently and the distances are too great to move the bulky substance at low cost.

Warmer North Carolina possesses nearly 900 million tons of fuel-grade peat, equivalent to more than one billion barrels of oil, deposited across 1,000 square miles near the coast. First Colony Farms on the "Palimarle" peninsula owns more than 200 million tons of peat covering 120,000 acres (equivalent to 676 million barrels of fuel oil), and First Colony has already obtained a permit to strip mine peat on 15,200 acres south of Lake Phelps.

A big question is where McLean's superfarm will sell its peat. Recently Ireland, Finland and the Soviet Union have been burning peat to generate electricity, and First Colony executives have talked with local utility officials about building a 150-megawatt peat-fueled power plant. When nearby Virginia Electric and Power Company experimented with peat in 1981, Vepco officials decided the substance was not feasible for commercial operations. Nevertheless, Carolina Power & Light Company is budgeting more than $100,000 to experiment with peat in several of its coal-fired boilers, and First Colony Farms and two other peat-mining firms are donating the fuel for the well-publicized test.

Meanwhile, in December, 1982, ground was broken near the center of First Colony's holdings for the world's first commercial facility to convert peat to methanol. A consortium called Peat Methanol Associates (PMA) expects to invest over $200 million in a plant to convert 676,500 tons of peat per year into 67,500,000 gallons of methanol. The plant, being constructed without any environmental impact statement, will employ 200 people and be capable of expansion. The cast of characters involves the world's largest bank, a covey of Republican powerbrokers (including the director of the CIA) and the government's Synthetic Fuels Corporation. SFC was created by the Energy Security Act of 1980 to assist private investors in developing a commercial synthetic fuels industry. Its actions are exempt from compliance with the National Environmental Policy Act, the federal Coastal Zone Management Act and even the Freedom of Information Act.

Early in 1980, as Ronald Reagan began his bid for the presidency, Malcolm McLean's advisor on energy matters — former oil executive and independent investor Jack B. Sutherland — introduced the founder of First Colony Farms to Robert Fri, a veteran of the Nixon and Ford administrations who had served in the Environmental Protection Agency and the Energy Research and Development Agency. Fri had recently created the Energy Transition Corporation (ETCO), a Santa Fe-based firm specializing — according to its brochure — in obtaining financing; anticipating "the course of future government policy;" securing "necessary cooperation and approvals;" and encouraging government "to create the climate in which the private sector can operate successfully."*

Soon ETCO had become the managing partner in the PMA consortium, convincing Koppers Company Incorporated of Pittsburgh to pick up the lion's share of the stock through its subsidiary, the North Carolina Synfuels Corporation. Koppers would redesign its coal gasification process to handle peat, while ETCO worked from its Washington office to obtain loan guarantees and methanol price supports from the new Synthetic Fuels Corporation.

The scheme finally began to bear fruit on December 2, 1982, when the U.S. Synfuels Corporation agreed to grant PMA up to $465 million in loans and price guarantees. Though peat-to-methanol hardly involves a "major" new energy source as described in the charter of the $17 billion Synfuels Corporation, PMA's project is the largest to obtain the board's blessing so far.

With these massive public subsidies in place, the Bank of America should be willing to deliver a $175 million loan for the project — no great sum for an institution with assets worth $87 billion. If all goes well, Malcolm McLean will have a steady purchaser for his peat at government-backed prices right in the middle of his own superfarm. McLean's farm will receive $12 million from PMA for peat rights, according to the Environmental Policy Institute in Washington.

And when the peat has been removed to expose the valuable mineral subsoil, First Colony will be left with a broader base for agribusiness. "It's certainly an attractive business proposition for McLean," EPI researcher Rich Young told a reporter recently. "How else can you get paid millions of dollars to clear land [that will then be] worth millions of dollars."

But just as hidden politicking and upbeat publicity seem about to pay off, Carolina's Great Peat Rush may yet bog down. When Democratic governor Jim Hunt goes after the U.S. Senate seat now occupied by Jesse Helms, he "might could" stop running interference for East Carolina business interests that are firmly in Helms's conservative camp. Moreover, environmentalists have begun to push for stricter regulation of peat strip mining as they did for coal strip mining in the 1970s. Florida recently denied a Georgia-Pacific peat-mining application because state water standards could not be met, and Minnesota, after four years of study, has imposed a moratorium on any peat-mining operations of more than 2,000 acres.

The real battle may come over release of heavy metals into the ecosystem. Minnesota's Department of Natural Resources found that peat lands acted "as accumulators of atmospherically introduced heavy metals, particularly mercury," thus "removing heavy metals from potential concentration within food webs." Experts suspect that drying peat releases mercury into the atmosphere and into the ditches and canals used to drain the bogs. Canals now draining the Lake Phelps peat field at the mining site show mercury levels 26 times higher than state standard, and an assessment prepared for PMA concedes that the source of mercury and iron exceeding state standards "may be seepage from the surrounding peats."

PMA and their supporters seem ready to claim that peat mining should not be blamed for "unexplained" high background levels of mercury in the area. But mercury in high concentrations is toxic to aquatic life and bioaccumulates through the food chain. Since the economy of eastern North Carolina is tied increasingly to fishing and recreation, state citizens will be taking a hard look.

The heavy metals question is "a red flag issue," says Derb Carter, a Raleigh lawyer who directs the Carolinas Wetlands Project of the National Wildlife Federation. Carter points out that even if fully exploited, the Phelps peat field could only furnish two-and-one-half days of energy at current U.S. demands, and yet the state is running serious long-term risks. "The real driving force behind peat mining in North Carolina," he charges, "is not the development of an energy resource but the necessity of removing the organic soils so the mineral soils below can be farmed. The beneficiaries of SFC funding for the PMA project will be several out-of-state investors and one agribusiness group in particular."

It took a Civil War to challenge the labor practices that built the Collins canal and its tributaries. But for decades herring swam up the channel and were readily harvested by slaves for food and sale. Few fish will spawn in the canals being dug by First Colony Farms. As a new age of agribusiness bursts upon Lake Phelps, North Carolinians are now getting their first glimpse of who will profit and who will pay the price.

Derb Carter speaks for a growing constituency when he concludes: "The ultimate losers may be the American taxpayers and coastal citizens."

* Four other ETCO founders from recent Republican administrations included Charles Robinson, a deputy secretary of state under Henry Kissinger; Frank Zarb, formerly with the Federal Energy Administration; and William Turner, past U.S. ambassador to the Organization for Economic Cooperation. William Casey (the current CIA director) served President Nixon as chairman of the Securities and Exchange Commission and as undersecretary of state, and managed Reagan's campaign in 1980.