[TAPE 1, SIDE A]
[START OF TAPE 1, SIDE A]
JOSEPH MOSNIER:
[I'm here with] Mr. Sherwood H. Smith, Jr. on Tuesday, March 23, 1999
for the Southern Oral History Program's series: North Carolina Business
History. My name is Joe Mosnier. We are meeting in the twelfth floor
conference room of CP&L [Carolina Power and Light]. Mr. Smith is
Chairman of the Board in downtown Raleigh, North Carolina. This is
cassette 3.23.99-SS. Mr. Smith, I thought I might start today just with
a brief biographical sketch. I know you were born down in Florida. [Tell
me about your] family, early education, and how you ended up coming up
to school in North Carolina.
SHERWOOD SMITH:
Yes. I was born in Jacksonville, Florida in 1934 and attended public
schools there, and then went to the University of North Carolina in
1952. I was there through undergraduate school. [I spent] a short time
in the Navy, [went] back to law school, and practiced law in Charlotte,
North Carolina.
JOSEPH MOSNIER:
Let me interrupt a little bit. Let me have you tell a little bit more
about your childhood and family. How you acquired—?
SHERWOOD SMITH:
I don't think you need all that, do you?
JOSEPH MOSNIER:
Okay, [your] public school [exeriences].
SHERWOOD SMITH:
[I went to] public schools in Jacksonville, Florida.
JOSEPH MOSNIER:
Why [did you choose to go to college in] North Carolina?
SHERWOOD SMITH:
I looked at a number of universities, small ones as well as large ones.
I looked at the University of the South at Sewanee, Washington and Lee,
Virginia [UVA] in Virginia, Duke University, the University of North
Carolina at Chapel Hill, and Vanderbilt, and sort of settled in on UNC
after just comparing those for just a variety of reasons.
JOSEPH MOSNIER:
Was that your first move up to North Carolina?
SHERWOOD SMITH:
My first move?
JOSEPH MOSNIER:
Your first real experience [in North Carolina?
SHERWOOD SMITH:
No, I had come up in the summers and camped with my family and had been
up here before. I knew the school just by reputation. As a high school
student, you really don't know much about college other than by
reputation. I knew the reputation, had friends there, liked everything I
knew about it, and thought it turned out to be a good choice for me.
JOSEPH MOSNIER:
What were your years of Navy service?
SHERWOOD SMITH:
'56, '57.
JOSEPH MOSNIER:
And then back to law school?
SHERWOOD SMITH:
Um hmm.
JOSEPH MOSNIER:
Then you started practicing in Charlotte?
SHERWOOD SMITH:
Then I started practicing in Charlotte and practiced there for a couple
of years—mid-'60 to early 1962. Then [I] came to Raleigh to
practice law in February of 1962. In the middle of 1965 I was asked to
go to work with Carolina Power and Light Company as Associate General
Counsel. That was obviously a significant decision for me to make at
that time because the company was expanding a great deal. It is
necessary as you know, I'm sure, for the energy to be
there—particularly for the electric energy, well in advance of
the development. When the development comes, you've got to have the
power to serve it. The company was going into a major expansion program,
building a large number of coal fired and nuclear power plants. [They
had] a great deal of capital to raise. This offered me an opportunity to
have, what a lawyer might say is—You mentioned legal history—a New York City type law practice,
yet live in Raleigh, North Carolina. I felt that the opportunity would
be very interesting for me, and substantial. You never know what the
future holds. At the time I made the change from private practice to
Carolina Power and Light, I didn't anticipate that later I would become
the Chief Executive Officer of the company. I felt that I would enjoy
the legal work that I was doing there, and I could put it on the
foundation of my practice. So, from 1965 until 1971 I worked with the
company's Associate General Counsel. The company—as were the
other electric utilities serving this area—was growing at a
very rapid rate. The economy of the state had been essentially a
combination of agricultural with a few basic
industries—textiles, furniture, and tobacco. But with the
growth that began, I would say, in the '60s, the entire state had
increasing demands for all sources of energy—particularly
electricity. During the six years—I guess it was about six
years, '65 until early '71—I was involved in the number of
things that you do to build power plants. You have to acquire land. You
have to get permits. You go through financings. You have to be able to
adjust your rates to get revenues to pay the cost of the financing. I
was doing all of that. Then in February of 1962, when Reed
Thompson—who was Executive Vice President here—moved
to Washington, DC to become Chief Executive Officer of Potomac Electric,
I then became Senior Vice President and General Counsel and had
responsibility for the legal department and some other departments.
JOSEPH MOSNIER:
That was '72?
SHERWOOD SMITH:
That was February of '71.
JOSEPH MOSNIER:
'71. Okay.
SHERWOOD SMITH:
In the ensuing four or five years, the company continued to expand. I
continued to do more and more in administrative, managerial, business
work, not strictly legal work, and was named president in December of
1976. I guess I was named executive vice president in '74. At that time
the development of nuclear power in the southeast preoccupied the
electric utilities serving the southeast. Every large electric utility
was involved in the nuclear power plant expansion. We'd had an energy
crisis that started with the Arab-Israeli war in the fall of 1973. The
national government had announced a program called Project Independence,
and there was a great push from the national level to reduce the
dependence on fossil fuels, particularly coal and oil and natural gas
and to build nuclear power plants. We built the first nuclear power
plant in the southeastern United States. Our Robinson plant near
Hartsville, South Carolina was completed in 1971. That was one of the
projects that I'd worked on as a lawyer. We'd also built the first two
power nuclear stations to be completed in North Carolina. They were
completed in—. One was completed in 1975 and the other in 1977
at a little town called Southport, south of Wilmington near the mouth of
the Cape Fear River. We had other nuclear units designed and in various
stages of planning. The second OPEC oil crisis began in the late
1980s—about 1988, '89—sort of contemporaneous with
the Iran revolution, the seizing of the Embassy there, and so forth.
JOSEPH MOSNIER:
Late '70s?
SHERWOOD SMITH:
Yeah.
JOSEPH MOSNIER:
You said '80s.
SHERWOOD SMITH:
Thank you. Yeah. Late '70s. I remember when the Federal Reserve raised
the discount rate in October of 1979. We were preparing to sell some
common stock. All of a sudden the markets took a turn
for the worse. The interest rates began to go up sharply. The prices of
all equities began to drop. We went through a period of inflation and
energy shortages again, and much higher prices. At that time, we began
cutting back on our planned expansion because the growth slowed down. We
realized we weren't going to need as many plants as soon as we earlier
anticipated we would based on the earlier, more rapid growth. This was
true for our company, for Duke Power Company, and for Virginia Power
Company, which serves the northeastern part of the state. We focused on
the completion of our fourth nuclear power plant, which is located south
of Raleigh at a site we call our Harris Plant site. The changes in
nuclear regulation at the federal level were enormous in the 1980s. The
federal government moved away from approving a design and letting a
company build it. They constantly were involved in the design as
construction progressed. This was in an effort to better ensure
reliability and safety—particularly safety.
JOSEPH MOSNIER:
The NRC [Nuclear Regulatory Commission]?
SHERWOOD SMITH:
The NRC. At the national level when Mr. Carter became President, his
posture was quite different from that of President Nixon and President
Ford. Times were different. The growth and the demand for energy was
beginning to slow down. We took a posture, nationally, to back away from
the idea that we needed to build more nuclear power plants as quickly as
we could. That was reflected in the NRC actions. The foreign policy
program of the Carter administration was one of non-proliferation. One
of the exciting events that had happened was about the time that Mr.
Carter was elected President. The government of India had detonated a
nuclear device. There was reason to be very concerned about nuclear
proliferation, so the Carter years were focused on two things. One [of the things we were focused on] was trying to slow down
the development of weapons. We were still in the Cold War race with the
Russians. We were trying to isolate Russia and prevent other countries
from developing any sort of nuclear technology that could lead to
weaponry. And in the domestic scene, [we were] not pursuing nuclear
power plants because of, in some cases, concern that the civilian use of
nuclear power in some way might be supportive of more military
development of nuclear power. The Greer reactor was cancelled because it
required uranium to be reprocessed, which would produce plutonium. On
the domestic side, the rise of the environmental movement [also impacted
policy]. The Environmental Policy Act had been adopted in the '70s,
[this included] the Clean Water Act, the Clean Air Act. So, the
environmental movement was directed at slowing down some industrial
expansion—particularly power plants. So, you had those two
factors: the change in the national posture [from a position] which had
supported nuclear power, to one of being neutral, to cool, to negative
on nuclear power, with the environmental movement to slow it down. You
had reduced growth, higher inflation, higher interest rates. The early
1980s were a very difficult time.
JOSEPH MOSNIER:
I can imagine.
SHERWOOD SMITH:
For all the companies that were then engaged in building nuclear power
plants, but as things often do, circumstances changed and during the
middle 1980s the policy of the national government—we had
obviously changed presidents—became more aggressive in
fighting inflation. As inflation subsided, interest rates began to drop,
economic growth began to pick up again, and our company proceeded to
complete our fourth nuclear power plant. Other companies—Duke
Power Company, Virginia—completed those that they had near
completion, under construction. Meanwhile, the economy of the state mirrored the national economy with the growth of
manufacturing of non-traditional goods such as textiles, tobacco, and
furniture. Our labor climate has always been viewed as a very positive
labor climate for economic development. We happen to be a state that has
a right to work law. We are a state where union representation is a very
small percentage of the total workforce. If there is a general business
view on that subject in the state—and you would have it
expressed in many different ways, by many different people—I
think it is that the workforce in North Carolina in manufacturing has
largely come from the farm with a very strong work ethic and also [with
a] sort of a feeling of independence on behalf of the workers and
independence on behalf of the management. If management is responsive
and reasonable to the needs of the employees, then there should not be
the need for a third party—the unions—to be the
intermediary between the employees and the management. Certainly in the
earlier days of the textile strikes and some of the other labor
problems, there's no question in my mind, but that the ability of the
workers to organize certainly was a very important and valuable
function. Perhaps the ability of the workers to organize as a potential
discipline on management encouraged management to be more progressive,
but that's just a general thought. You get more information on that from
the textile people and the furniture people who really were on the front
line with unions. But in any event, there was a reputation of North
Carolina as a state where workers worked hard and were anxious to work.
The state had put in a technical and community college training program
in 1953. Before that we had a few industrial training centers that
started in the late '40s. The Community and Technical College Act of
1953, which provided a foundation for education and training of
non-four-year college attendees throughout the state with particular
emphasis on what we now call workforce training, had
a lot to do with the favorable climate for economic development. The
cost of living here was moderate. Wage rates were moderate. There were a
lot of conditions that made it desirable for industries, as they
expanded nationally, to look at North Carolina. Many of them did. First
the smaller electronic companies and then the larger companies such as
IBM, which came into the Research Triangle Park first in 1965, then
expanded in many other locations throughout the state. All of this was
going on at a time when the electric utility industry was still faced
with growth. The percentage growth was not quite as rapid as it had been
in the 1960s, but there was a need to move forward—but at a
slower pace—to build more nuclear and coal firing power
plants. I had an opportunity, just because I'm here in Raleigh I
suppose, to work closely with the Research Triangle Park development. I
imagine I've been on the board out there for twenty or more years. I
serve as vice chairman of the board and chairman of an organization
called Triangle University Center for Advanced Study. We're the
landlords for a hundred and twenty acres in the middle of the Park. We
have the National Humanities Center, the Biotech Center, and the
Microelectronics Center. I was the first president of the
Microelectronics Center. So more by virtue of the fact that I lived here
and the business that I was in, rather than any skills that I had,
enabled me to be involved as a close observer and many times as a
participant in the recruitment of new industry in North Carolina. It's
been a very remarkable and rewarding phenomena to have happened here. We
lead the state—. In the states, usually we're in the top three
or four every year of new and expanded jobs. Those jobs are, for the
most part, higher paying jobs. The higher paying jobs require higher
levels of skills, which means you have the reason to support stronger
training programs. This filters down to even in your public school system. [One example is] the TechPrep programs that
we have in some places. It [the Park] certainly supports and strengthens
the university system. Now I've given you a long answer to a question
that probably could've been answered in fewer words. But as we sit here
in a conversational way, that's my quick overview, as I see it.
JOSEPH MOSNIER:
Yeah. Yeah. Exactly. Let me take you back and maybe we'll revisit a lot
of these things in a little more detail—sort of replaying some
of that terrain, because that's extremely helpful in beginning to set
our general roadmap. Give me a sense, if you would, of what you recall
thinking—all the way back to early '60s, '65—about
the time you come to CP&L.
[What was] the nature of the relationship between a place like
CP&L and given the heavy regulatory character of the operation
of a utility company, with the folks across the street at the state
capital and the folks up in Washington? How [were] those relationships
managed? What [had] you begun to see, in your early years here, about
how to handle that whole issue of a regulated utility relating to your
governing agencies?
SHERWOOD SMITH:
Yes. It's a tremendously important part of the life of any electric
utility. It was a tremendously important part of Carolina Power and
Light's life, long before I was involved in it, when I was involved in
it, and even today. The electric utility industry is probably the most
highly regulated industry in the country. If you start at the federal
level, you have the Federal Energy Regulatory Commission, formerly the
Federal Power Commission. You have the Nuclear Regulatory Commission for
all companies operating nuclear plants. You have the Environmental
Protection Agency. You have the Securities and Exchange Commission.
Occasionally, you might have the Federal Trade Commission involved.
Occasionally, you might have something that would go before the Justice Department. Occasionally, you might have
ICC [Interstate Commerce Commission], which is now the Federal
Transportation Board. You have all of those regulators, plus the United
States' Congress—which is very interested, as they should be,
in ensuring there's an adequate supply of reasonably priced energy,
particularly electricity, in the country. The state level you have, of
course, a governor and the Department of Commerce [both] very interested
in the economic growth and development. You have a State Utilities
Commission that regulates the rates and services of not only electric
companies, but gas companies, telephone companies. At one time they had
jurisdiction over transportation, but that's either disappeared or moved
to the federal level for the most part. In addition, you have state
environmental agencies. The names of those agencies have evolved over
time. Generally speaking, they're agencies that are responsible for land
use, air quality, and water quality in the state. I haven't mentioned
the state Department of Labor, the Federal Department of Labor, and the
Occupational Safety and Health Act, and those things, because they apply
to all businesses. They also impact utilities because utilities are very
visible. Often we feel the impact or the affect of federal regulation
first, before some other businesses feel that. How does one manage that?
Of course the first thing you have to do—and I'll simplify
this, and then be glad to go into more detail—[is] you have to
make sure that the business that you run, runs very well. Just assume
that you weren't regulated at all. If you had the ability to say,
"This company is going to be run with the highest possible
degree of excellence, just because that's a good thing. That's the way
it should be. It makes the company more profitable, a better
citizen." You have to focus on your operations. Then if you do
a good—. When I say, "you," I'm not talking
about myself or any other individual. If the
company does that well, then your position vis a vis the regulators is,
One: you understand what their legal authority and responsibilities are.
You have written reports and you have formal hearings. But, there's an
interaction that takes place because you're constantly subject to
inspection. Something will happen. Even though it may not be a happening
that requires a formal legal notification—just in the sense of
good communications—the regulators are informed. They know
when something is publicly announced, that it is going to be announced
because they'll be asked questions by the consumer or other people in
government, "What does this mean that X utility is doing such
and such?" You have to have a system so that it's open, it's
communicative, and it's informative. Yet, the regulators aren't the
managers of the company. You have to have an appropriate distance there.
You keep them informed. There may be things that they'd like you to do,
that you don't feel you should do. There may be things that you feel you
must do, that the regulators—some of them, for whatever
reason—feel you shouldn't do. You have to be prepared to stand
your ground based on the facts and the overall best interests of the
company and the consumer you serve. In the electric utility industry,
and not yet fully in telephones or gas [industries], you don't have the
type of competition that you have in many other businesses. The
regulators are deemed to be a surrogate for that type of competition.
That is, they have the responsibility to the public. I'm talking about
the Utilities Commission and the Federal Energy Regulatory Commission,
principally, that regulate the price and regulate the types of service
and the quality of service that you provide. It's their responsibility
to be a substitute for competition. That system was put in place in
order to prevent unnecessary economic waste and
duplication—which apparently, at one time, we had at some
places in this country. You have to respect their authority. You have to be prepared to justify fully whatever action
you have been taking or propose to take whatever steps they may wish you
to do, that you don't feel you should. You have to manage the business,
realizing that they have a very special and unique role and have open
communications. Yet, you have to assume the responsibility for managing
the business as you think best. Many times that leads to disagreements.
The ways for disagreements to be resolved, realizing that the
legislature and the Utilities Commission have the last say
so—. I mean, the regulation of business—particularly
public service—is a legislative function. You have to be
attuned to the fact that your customers expect certain things, and that
they have access to the regulators. The regulators hear from the public.
You want the customers to have every reason, when they do express their
opinions to the regulators, to be able to say, "Yes, I receive
good quality of service." In our business, the quality of
service is the most important thing. It's more important than price,
although price is tremendously important. Someone else once said, in
sort of a national debate on electricity many years ago, "The
most expensive electricity you can have is no electricity."
It's not my phrase, but it says a lot in a few words. How do you manage
that? Well, [you have] good customer service. You operate the business
well. You have employees in various places in your company that have the
responsibilities for interfacing with regulators. They have to be
well-trained and authorized to make sure they perform their jobs, so
that the regulators are kept informed of what you're doing and why
you're doing it. Then, just as it's important to have well qualified
people elected as president of United States, or governor or to the
legislature, it's important that you have well-qualified people elected
to the Public Service Commission or the Federal Energy Regulator
Commission or the Nuclear Regulatory Commission.
The utilities obviously don't have control over who's appointed to those
bodies, but if they let it be known, not which individuals that they
think would be good, but the qualifications that one needs to be a good
regulator—. There are certain qualifications, for example, on
the Utilities Commission that could be very helpful in different
degrees: some background in accounting, finance, even general business
and engineering. With the Nuclear Regulatory Commission, an even more
detailed technical and scientific background can be helpful. Just like
in the Final Four basketball game, you hope you've got good, fair,
reasonable, objective referees. You don't have referees that come into
the game and say, "Hey, I really think it's time for team A to
be watched a little more closely than Team B on technical fouls or
traveling or something."
JOSEPH MOSNIER:
A couple of related questions that broadly gauge, sort of in rough
measure, the span of your service as CEO. About how much of your time
was given over to managing the regulatory climate? Are there any
landmarks on that big issues you mentioned that mattered at the national
level, that are really imposing themselves into the debate about these
issues? Is there a key case that you might want to cite to illustrate
how you—?
SHERWOOD SMITH:
Well, I probably always spent—after becoming Senior Vice
President and General Counsel and I had the rates and regulatory section
reporting to me from 1971 up through 1996, when I stepped aside as Chief
Executive Officer—I always had some level of involvement in
the management of our total regulatory program. When I was General
Counsel, I would be managing our requests for certificates of the public
means and necessity to build power plants or our rate cases. I would say
in the period '71 through until we finished the Harris Nuclear Power
Plant in 1987 and our last general rate case that
was filed about that same year, I probably spent on average fifty
percent of my time involved with the management or some aspect of our
regulatory proceedings with the variety of federal and state agencies
that we were involved in. How was my time spent when I did that? First
of all, [I spent time working on] understanding the issues, making
executive decisions, usually with others, about what course of action
the company would follow and [I was] always thinking about the
regulatory audience and the regulatory dimension of that. I might be
here for several days and not be in contact with any regulators, either
in writing or by telephone or hearing personally or any other way, but
we'd be working on the construction of a power plant. A lot of that time
we were thinking, "Well what are the regulatory requirements?
How are we going to relate to those? How are we going to manage
that?" I'd say I spent fifty percent of my time [on questions
like that]. Highlight cases, you think of those in terms of large
facilities, large dollars. Certainly the management of our nuclear power
construction program included [obtaining] the construction permits and
all the licensing permits. Sometimes we would have hearings on the
financing of it and the setting of rates, from time to time, to cover
the additional costs of those plants and costs of financing those
additional plants. That would have been by far the largest single block
of my time. In some years I would've been involved, on a national level,
working for our industry either through the Edison Electric Institute or
one of the several organizations that the industry participated in in
its development of its nuclear power program. That might have been one
time the American Nuclear Energy Council, Atomic Industrial Forum,
others that have now been combined into one agency. I served as
president or chairman of most of those over that period of time, because
our company happened to be one of the companies in the forefront of
doing that. I think one of the things that our
company has worked on—. Somebody else would have to evaluate
how well we've done it, but one of the things that we were always known
for paying attention to, was our regulators and our regulatory climate.
Others in the industry, they recognized that. They knew we were putting
a lot of time and attention on it. I might ask someone here to lead a
group that was working on something.
JOSEPH MOSNIER:
Let me ask your perspective on this. You mentioned in some of your
opening comments [that] in the course of the '70s and thereafter, you
see the rise of something that people generally label the nascent
American or US environmental movement. Over time that comes to have more
coherence and becomes more articulate and so forth. So in time, part of
the business of running a utility, of course, engages with that nascent
social movement.
SHERWOOD SMITH:
Yes. Yes.
JOSEPH MOSNIER:
I'm wondering about your perspective on what sort of hearing you think
you've gotten over time on environmental issues. Has the regulatory
climate been generally reasonable and fair? Have there been times when
you don't think you've gotten a hearing and, if not, why? In other
words, has the business landscape unfolded in a reasonable fashion, from
your perspective, on environmental issues?
SHERWOOD SMITH:
Yes. That's a very important question. It's a question that involves
some complex issues. It makes it a little bit difficult to say either
"yes" or "no," categorically. The
movement has resulted in fair decisions and the movement has resulted in
unfair decisions. It's been a mixture. I think in a country this big, in
a democracy, that's sort of the way we learn about everything [and
about] how to do things—whether we're talking about civil rights or defense or whether we're talking about
the environmental movement. There are forces there that aren't
susceptible to very simple, easy answers.
JOSEPH MOSNIER:
Fair enough.
SHERWOOD SMITH:
In the business in which an electric utility is in, we have to be
pro-environment. There's no other way to be. I mentioned camping in the
mountains and so forth with my family. I think the individual leaders
that I've known in our industry have been people that valued and
treasured a clean and healthy environment. That's sort of a given. I
think the environmental movement, overall, has lead to a lot of very
important changes that are valuable to our economy and our society.
Whether they all began with Rachel Carlson's book on the sea around us
or—. That was just one of the highlights in the '50s, I guess.
That was published to other concerns. I think the utility industry,
because we build plants that serve other industries, we're viewed as
sort of a choke point, if you would, by people at one end of the
environmental spectrum.
JOSEPH MOSNIER:
[People] who'd prefer to see growth kind of shut off?
SHERWOOD SMITH:
Yeah. It's a different type of society. Yeah. Stop growth and we'll go
back to living in a simplistic, less industrialized, less electrified
way. That's a small group, but they're very vocal. They are there and
they have their influence. The impact of the environmental movement in
our industry has probably been the greatest on our use of fuels. There's
certainly been, I'd say, a national decision that we're not going to
build anymore hydroelectric plants, for example. We're not going to use
water. Water's not a fuel, but we're not going to use water to turn
turbines anymore. In some places where we can actually remove some of
the small dams that we've built, maybe it's a good thing to restore the
quality of the fish life or the community [life] to do that. I would say
that the concerns about the environment have led to
that as a national decision. With regard to the use of fossil fuels,
those fuels emit sulfur, and they emit nitric oxide and other chemicals.
If you take the total amount of sulfur and carbon dioxide that comes
from power plants and compare that with automobiles, the amount produced
by power plants does not seem to be nearly as large as if I just
mentioned a big figure of billions of units of SO2 released. The
environmental movement that resulted in the passage of the Clean Air Act
has resulted in substantial limitations on the ability of electric
utilities to use coal.
JOSEPH MOSNIER:
The types of coal you have to burn?
SHERWOOD SMITH:
Yeah. The types of coal you have to burn. That's had an impact on the
price of coal. It's also had, particularly in the '70s and '80s,
significant impact on the use of oil—low sulfur versus high
sulfur. So, the decisions following from environmental concerns have
lead to limitations on the use of fuel and higher prices for the fuel.
Those higher prices are passed on in the form of rates to the consumers
that use our electricity. The most significant issues that we've
faced—. Let me just pick our nuclear program, because of the
environmental concerns relating to the discharge of heated water from
our Brunswick Plant. Now this is a plant that had two units completed in
'75, '77. The issue as we began to build the plant was, how will the
heated water be treated? It comes from the mouth of the river. Should it
be returned to the river? The decision was made internally in the
company. A lot of advice and a lot of suggestions from regulators
concerning the best way to deal with that heated water is to build a
canal and take the heated water after it comes out of the discharge
facilities of the plant. You take it through a canal that's seven or
eight miles long and build an inverted siphon under the inland waterway.
You could cross the barrier island—Oak Island—and
you pipe it out into the Atlantic Ocean where it
will dissipate very quickly. Until it dissipates, it will also be very
good fishing grounds. Well, when we had completed that—that
canal and that pipe—the issue was raised as to whether or not
we should be required to discontinue the use of that canal and that pipe
and not put any heated water in the ocean, but build a very large and
expensive cooling tower. Well, the cooling tower would have been very
expensive. It would've prevented the heated water from going into the
ocean, but it would've resulted in a warm salt mist being deposited over
a wide area of the coastline. After a lot of discussion back and forth,
the Environmental Protection Agency favored the cooling tower. The
Nuclear Regulatory didn't think it was required. Ultimately, the views
of the Nuclear Regulatory Commission prevailed, but not until we'd been
required to spend several billion dollars building a pad for the cooling
tower. In that case, I think, the ultimate decision—although
we had to spend a lot of money before we got there—was a
reasonable decision. I think anybody now, who looked at the project and
the impact the heated water, would say it's benign. In fact, it's
favorable to the fish in that area. Our Harris Plant, south of Raleigh,
was located at a site where there was no water to begin with. There were
a few streams that were dry in some parts of the summer. It was barren
pine scrubland, not useful for even good farming. When we decided to put
the plant and the lake in there, we were providing a large body of water
that had many attractive features to it, that could not have been there
otherwise. We built it large enough so that, as our engineering
estimates showed, the heated water could have been taken from the plant
and put back into the lake, and it would've dissipated. There, there was
a controversy. The Environmental Protection Agency again took the
position that a cooling tower should be built. The Nuclear Regulatory
Commission said, "No. That's unnecessary." The matter went to the Council on Environmental
Equality and it ruled. I've forgotten the split decision, but it ruled
in favor of EPA. [It ruled] that we had to build the cooling tower. In
my view, the cooling tower was terribly unnecessary. It was very costly.
If we were going to spend that much money for some environmental
purpose, we should've just written a check to some environmental agency
and let them go restore wetlands or save a swamp or do something like
that. That's an illustration of when I think the result was unfavorable
and unwise. There are probably many smaller issues that we would, in our
opinion, say, "That was a reasonable decision."
Others, we would say, "No. It was not only a waste of money,
it's not an environmentally-wise thing to do." I think our
experience would've been similar to every other electric utility that
was involved in the nuclear power program then. One of the concerns that
the electric utilities have now, is whether or not under what's called
the Kyoto Accords—the general agreement that was reached among
the developing countries, including the United States and Kyoto, Japan
several years ago [and] which would require the industrialized countries
to cut back on their industrial production, but would not limit the
lesser industrialized countries like China and India from continuing to
increase their production—whether that's good national policy.
Should we restrain our growth and jobs in order that similar
jobs—maybe even dirtier jobs, if you want to use that
word—in other parts of the world should be created? A part of
the Kyoto Accords would require the substantial reduction of the use of
coal, oil, and natural gas for the generation of electricity and for
some other purposes. It'll be a decision that Congress will have to
resolve. What Congress will do is uncertain, but in Congress there have
been a number of resolutions in the Senate, which would call for the
government not to go forward to try to implement
those, until they fully understand what the impact would be. It's a
matter of concern today, and I think it'll be a concern of the next five
to ten years, probably.
JOSEPH MOSNIER:
One last question on these environmental concerns and then we'll move
onto some broader business issues. [What is] your perspective on the
effort to manage in the direction of conservation? I'm thinking back to
the rhetoric of the Carter administration, certain types of arguments
advanced about the nation's energy future and how it would include a
certain strategy of greater attention to conservation, for example. Many
utilities began very aggressive, well-organized programs to try to
achieve certain conservation gains, to limit the need to build new
plants, and so forth. Can you take the broad view and explain how that
effort has unfolded?
SHERWOOD SMITH:
Yes. I think when the call for conservation first arose, it was
following the OPEC oil embargo in 1973. I think there was a feeling,
generally, that oil was scarce. Oil was going to be more expensive, and
it was very important that we be very wise and efficient and frugal and
conservative in our use of oil. I think that was sort of the keystone to
the energy conservation programs. There were efforts made to expand
[those programs]. Local initiatives and federal initiatives were trying
to expand production of domestic oil and gas and reduce our consumption
of it. The utilities participated. In fact, the utilities, at one time,
were prohibited by federal law from burning natural gas. So, you had an
effort that was part of the reason for the shift to nuclear power. If we
conserved and didn't waste energy, then we'd need fewer plants of any
kind. The development could be: "Let's conserve as much as
possible. That will help us reduce our use of oil and shift to nuclear
power. If we're effective in our conservation, we won't need as many
nuclear plants or coal fired plants." All of the utilities,
ours included, were involved in various types of
communications programs, public information programs. We learned as
a—.
[END OF TAPE 1, SIDE A]
[TAPE 1, SIDE B]
[START OF TAPE 1, SIDE B]
JOSEPH MOSNIER:
This is side B of the first cassette with Mr. Sherwood Smith.
SHERWOOD SMITH:
We learned as a nation that raising prices did result in, of course, a
cutback in usage. We learned in the electric utility industry that if we
artificially raised prices for electric usage in some sectors above the
actual cost, that that was not a very effective or fair way to try to
compel rationing. There was a movement in the country in the 1970s to
adopt what was called incremental pricing for electric utilities. That
is, the more units of electricity you use, the higher price you paid for
each unit regardless of what the cost of the unit was. There was a
national study that our company and other companies were involved in.
The Electric Power Research Institute was involved in it and finally,
perhaps through the passage of time, the idea was tested and rejected in
several states, and that went away. Also, there were theories of
alternative sources of power. Some proved to be feasible. Some did not
prove to be very feasible, largely because we found that there are many
more gas reserves in the world. The OPEC war ended. The prices of oil
and gas began to drop substantially. That removed the economic
underpinnings for drastic, forced draconian kinds of conservation. But,
I think the lessons that we learned are lessons that are still being put
to good use in terms of lighting and building design. Appliances today
are much more energy efficient than they were, just as automobiles have
been much more fuel efficient than they were before the energy crisis.
Although the automobile industry seems to be moving back to the SUVs and
the big gas-guzzlers, which is interesting. What will happen ten years
from now, we don't know. I think our company was probably typical of
what many companies did by encouraging conservation. We helped with the
construction of a demonstration solar house, even though solar power in this part of the world, in this latitude, is not
effective. You have to have a backup source of power. In Key West or
Arizona or New Mexico it is much different. We did a number of things
and I think they could be replicated on a wide scale in North Carolina.
[We did these things] just to illustrate to the public that,
"Hey, these are things that you need to think about. [These
are] things that you could do to conserve." We worked with our
large industrial users to help them achieve the production they needed
by using their energy more wisely. All that goes on today.
JOSEPH MOSNIER:
Let me take you to another sort of range of questions. Think back, if
you would, to what the business landscape in North Carolina looked like
mid-'60s, early '70s. The growth is just about really to take off. It's
already starting. North Carolina's done especially well, if you look in
comparison to the region and to the nation generally. [North Carolina
has] very rapid growth rates. [There are] high rates of industrial
growth and economic development in North Carolina. Why North Carolina?
What has made North Carolina such a successful spot for business
development and economic growth over the last twenty, twenty-five,
thirty years?
SHERWOOD SMITH:
I think there are a number of factors. Obviously, [those include North
Carolina's] moderate to reasonable climate, moderate wage climate, the
cost of doing business here. I think [North Carolina's] progressive
state government [is a factor]. State government was really strong in
building up the community college system, continuing to strengthen our
university system, focus[ing] on public schools. [Being] committed to
finding more jobs and better jobs for the people was very important.
Then, you had a few catalysts. You had certainly, in this area, the
Research Triangle Park. That's, I think, sort of the jewel for the
entire state. Piedmont North Carolina [is] basically located on the transportation corridor between the Washington,
DC area and Atlanta—I-85. That was the area where you had a
lot of textile and furniture workers who, as we moved away from those
products because they could be produced in many cases more cheaply
overseas, you had a workforce there that could be retrained in our
community and technical college system. The right to work
law—sort of a climate that was free of labor
strife—was important. Then, I think you had cooperation
between government and the larger businesses in the state. I'll pick the
banks and the utility companies [as examples]. There are others that
could be put in there. In my experience in working with economic
development, I probably spent more time working together with the banks
and the utility companies than others. There is a good partnership
between education on the one hand and business and government [on the
other] that I haven't seen duplicated, replicated elsewhere. It may
exist in other parts of the country. I know it did exist here. I know it
was tremendously important to the successful development of the state.
JOSEPH MOSNIER:
Anybody you would single out maybe as say secretary, secretaries of
commerce over the years? [Were there] gubernatorial administrations that
have been especially, you think, forward looking in this respect?
SHERWOOD SMITH:
Well, often one talks about Luther Hodges who was lieutenant governor
when William Umstead died, maybe in 1953 or there abouts, and served for
six or seven years and then as governor. [He was] a businessman, a very
talented person, a very good organizer, a leader—someone who
certainly promoted economic development and growth, promoted the
Research Triangle. He was later secretary of commerce, as you mentioned,
and then came back to North Carolina. Following him, Terry Sanford. Then
[there was] Dan Moore, Bob Scott, Jim Holshouser, Jim Hunt, Jim Martin,
Jim Hunt again. I think we've a had a succession of
governors who were quite different individuals, obviously, but who, in
one way or another, all supported this theme of more jobs and better
jobs for North Carolinians with due regard to other
needs—environmental needs. At one time we were in the
forefront, I think, in the south, of transportation. We had a statewide
highway transportation system that got us off to a good start in the
'50s. I think Luther A. Hodges is entitled to a great deal of credit,
but I think we tend to stop there perhaps prematurely and to not
recognize—. He got many things started, and then Terry Sanford
came along. Then, Dan More came a long. Then, Bob Scott came along and
Jim Holshouser, Jim Hunt, Jim Martin, and Hunt again. All of them, in
very different ways, have continued to try to keep the triumvirate of
business and education and government together and focused on a better
economy. Jim Hunt has been governor now for fifteen years. He certainly
had the opportunity, that I think he's used wisely, to promote the
state. Because of his continuity in office, he's made contacts. He's had
relationships. He's built a strong network that enables him to carry
this forward very effectively. I think our congressional delegations
have supported this too. It would be much harder to pick out individuals
in the state legislature. They're not as well known, but certainly going
back to the early '60s, there were individuals such as Tom White in the
Senate, Skipper Bowles in the Senate, Pat Taylor in the House. If I
began to name them, I'd feel sorry later that I should've mentioned so
and so. We've had state legislative leadership that has been responsive
to the governors and that's important in North Carolina because, until
very recently, the governor didn't have the veto power. We've been very
much a state [that is] legislatively governed. You've had to have the
legislature moving in. Kenneth Royal from
Durham for many, many years certainly is in that category.
JOSEPH MOSNIER:
Let me stop for just a second. [Pause]
I'm interested to have you share your perspective. Let me broaden to a
couple general matters of the philosophy of government and its relation
to the business sector. What's your sense of a corporate
entity's—this is conceived in those wide ranging
terms—proper relation to the community at large, the public
good, if you will? What's the corporate range of responsibilities there?
SHERWOOD SMITH:
Well, I think corporate responsibility to the community at large is
derivative. I think the corporation's only reason for existence is to
perform a certain commercial function and to do that well with due
regards to its products and services, its customers, its investors and
to be successful at doing that. Otherwise, there'd be no reason for the
corporation to exist. I think you have to do those things well. I think
if you're ultimately in that scenario, you have to be ultimately
answerable to the people who own the business [and] who provided the
capital, of course. They could take their capital and put it elsewhere
and start another business. Then I think, as you operate in a community,
you don't operate in a vacuum. I think it's tremendously important for a
corporation to realize and act on that. Its [the company is] going to be
more successful in a community that is, first of all, growing in terms
of the quality of life and in many cases in the quantity of life. A
community that has a good educational system, a community that has a
good system of social services—largely provided in our
country, as you know, by the private sector whether that's United Way or
other agencies—. I think that company's going, over the long
term, to be more successful than a company that operates where that
doesn't happen. I think a company should take the long view of things.
There may be things that the company would like to
do or would resist doing because of the need to make more money or to
spend less money in the short term. But maybe in the longer term, if it
did something differently, that would be likely to produce a better
long-term result. Corporations usually, by their legal nature, are of
indefinite perpetual existence. I try to think about the long term. In
our business, you have to think about the long term. It would take five
to six years to build a new coal-fired plant, twelve to fifteen to build
a new nuclear powered plant. You have to think in terms of long term. I
think that corporations today realize that a great deal is expected of
them, in terms of the way in which they conduct their business, the way
in which their employees act. There's a public out there that expresses
its opinion with regard to your activities. To the extent that the
public feels that you do contribute to the over all welfare of society,
in addition to being run effectively and making a profit, I think you're
going to be well received and more successful over time. I think you see
many companies investing more time and money and resources into
community-based improvement activities than you did before. I think
that's good. I think you see many other companies, for a variety of
reasons, that may not chose to do as much as might be the business norm,
but I think that's to be expected in our society. I think you're always
going to have these groups of companies. It may reflect the type of
business that they're in. We're in the public utility business. We're in
a service business. It's natural that the people who work here think in
a service way. We would always lead the United Way in many different
ways in this community. Well, I think that's normal and natural. It's
not something that's forced. Our people generally operate in that way. I
think this whole question of corporate social responsibility is going to
be discussed widely throughout the country. We're in prosperous times now. I think it means that corporations are in a
position to give more to education, to give more to environmental
causes, [and] sometimes to provide more executive talent. Although as we
compete globally and we streamline our management, it's going to be more
and more difficult, I think, to provide the human resources for society
for other non-business purposes than we have before. In North Carolina
you see that many of the North Carolina businesses that were owned here
are now parts of larger companies. If you looked across the state and
said, "Can we get a group of CEOs of North Carolina owned
businesses?," there'd be fewer people on that list than before.
The furniture companies have merged, the banks [have merged].
Fortunately, the three major ones have stayed here. Textiles have
merged. Other companies have merged and agricultural is consolidating.
Personally, I've always felt [that] a way of looking at the world was
that it was important to try to help those that are less fortunate and
do the things that you could to provide more opportunities for other
people. I think that's sort of the way the country has grown and always
will grow.
JOSEPH MOSNIER:
You mentioned the run of North Carolina governors and the relative
record of continuity. Would it be fair to sum up your remarks as being,
in general, supportive of those administrations for [their] business
development here in North Carolina? Have you been happy with over
time—satisfied over time—with the state's fiscal
priorities, more generally?
SHERWOOD SMITH:
More generally, I have been satisfied. I think the state has a policy of
fiscal moderation. I think the current state treasurer, Harlan
Boyles—who has been in office for a long time, and his
predecessor Edwin Gill—as the state had come through the
Depression and through World War Two, has had an ethic of fiscal
responsibility. I hope that that will continue. We
are in prosperous times. It seems to have been easy to do what needs to
be done—because tax revenues have grown—without
raising taxes. [This is] just because of the growth of the economy. I
think the state's fiscal priorities—. If you look, where do we
spend money? Well, we spend money on roads. Secondly, we spend money on
education. I might spend that money a little bit differently from
project to project, but I would say our two top fiscal programs should
be education and schools. A lot of the education is also funded by local
sources. The growth in Medicare and Medicaid expenditures—and
I don't have the figures in mind—has moved at a very
substantial rate as we've met the requirements of the federal government
for funding a wide variety of programs. I think as we look ahead, it's
going to be very important for the state to make some plans now to do
things that will enable it to handle a rapidly growing arena of
obligations in that area—particularly, I guess, in the
Medicaid area, which is what's grown so rapidly.
JOSEPH MOSNIER:
Sketch, if you would, the ways in which—. Obviously, you're
one of North Carolina's key corporate citizens and leaders. You
participate widely in and contribute your skills and expertise to a
whole range of leadership venues: RTP, the Citizens for Business and
Industry, [and] other contexts as well. Can you talk a little bit about
the networks that exist to bring corporate leaders in North Carolina
into contact with one another? [What is] the nature of the exchange that
occurs in those contacts over time?
SHERWOOD SMITH:
Yes. I think this might be true in many industries. In our industry
there are just a few electric and gas and telephone utilities, so
naturally, we would be in contact. We would know each other, and it
would be very easy to have what you might call a "personal
relationship" or a "network" with those
individuals. With the banks—we're fortunate in North Carolina that we have seven or eight very large
regional banks—the network is—. Well, we have the
North Carolina Citizens for Business and Industry, which is the formal
structure. Just engaged in your everyday business activities, you may be
borrowing money from a bank or you may be depositing it there. There's
contact there. So in the state, it's fairly easy for leaders to become
known to one another. I think there's been a history. Some would say
that the University of North Carolina is a great catalyst that's tended
to produce that. I remember reading a study, that had been done in the
WPA [Work Project Administration] years in the late '30s, that said the
University of North Carolina has provided the catalyst where people from
all over the state can come to one location for their education. Many of
those would be your future leaders of tomorrow. I would say that that is
certainly true, although now the university system has grown and
expanded. There would be networks that develop from North Carolina State
and other parts of the university system. But probably going through the
'50s and into the '60s, the University of North Carolina was a great
place for the socialization of people from around the state. That led to
networks later on. In mentioning the University, I think in terms of
economic growth and development as well as education, that it would be
impossible to give too much credit to the leadership that we had there
in terms of Bill Friday. I'm sure you've known Bill Friday or
interviewed him and talked to him. I think the continuity that we've had
there and his skills in presiding over now a wide range of very
different institutions—. He's been involved with many things
that the governors have decided to do. [For example, he was involved in
creating] Research Triangle Park, [and] different things in the Park.
That's been a great benefit for the state, as part of the network. In
networking around the state, in Raleigh—. People come to Raleigh because it's the state capital. The
legislators come to Raleigh and the people that want to see legislators
come to Raleigh and people that have business with the treasurer's
office [come to Raleigh]. By virtue of being in Raleigh, you're sort of
in the hub. Probably more than I realize, my location in Raleigh put me
in contact with a large number of people from around the state. I think
geographic location was one of the things that was helpful. The fact
that I lived in Charlotte for a while, had gone to the University, was
engaged in private practice of law, each of those [things] in some way
enabled me to become acquainted with people who later on I might have
reason to work together on an economic development project or legal
project or utility related project.
JOSEPH MOSNIER:
Earlier on, you used the phrase in describing RTP that, in many ways,
it's a "real jewel" in this state, taking all the
economic growth into consideration. That it really stands out.
SHERWOOD SMITH:
Sometimes you'll go abroad and you'll tell people that you're from North
Carolina and they'll say, "North Carolina. That's in the
Research Triangle Park." They'll put the cart before the horse.
JOSEPH MOSNIER:
Share your summary. What's Sherwood Smith's summary version of how and
why the RTP has flourished as it has? You've seen it over the
years—kind of from the early days.
SHERWOOD SMITH:
Yes. Timing is, I think, a very important part of that. The location of
the three universities and the fact that those three universities for
economic reasons in the '30s had begun some levels of cooperation. The
fact that North Carolina was viewed as a place that was progressive to a
reasonable extent [was also important]. I suppose if you looked at the
southeastern part of the United States and you said for whatever reason,
"We think the southeastern part of the
United States would be a good place to locate," I think the
reputation there of the university had something to do with that. I'm
sure it did. RTP did not happen spontaneously. It was not a matter of
spontaneous combustion. Some of the university leaders were concerned
about it. [They wondered,] "Will the establishment of the Park
in some way distract from resources that otherwise might go to one of
our campuses?" There's sort of a debate there. The way in which
the Park was developed, it was carefully developed in a way so you would
not encourage that. Now the Park itself started in about 1955, I
suppose. That's when the first building was put out there—the
Hanes Building, an office building bringing George Herbert from the
Stanford Research Institute in Palo Alto to North Carolina with a very
small staff to start a non-profit, private research institute there. You
not only had the three universities around the Park, you had a physical
presence in the Park of research that could harness some of the skills
and the universities. Yet, it was a visible demonstration of something
actually happening inside the Park was an important step [as well].
Monsanto—which first came [to RTP]—was looking at
many other places I'm sure. Governor Luther Hodges probably, with
others, persuaded them to come. That's your first start. [That's] always
very important. When Luther Hodges was secretary of commerce, the
legislation established the National Environmental Institute of Health,
National Institute of Environmental Health Services, I guess, is the
correct name. When the federal decision was made that we will have such
[an institute], we had the Research Triangle Park going. We had the
three universities. Luther Hodges was the Secretary of Commerce. We were
in a very good place to compete for that and competed successfully for
[it]. IBM was first contacted probably in '57 or '58 and decided that
they would come. They were here since 1965. They
had a great deal to do with the success of the Park. After they came,
other large industries could see what IBM had done, and they were
encouraged to make similar commitments. The fact that it was put
together at a time when the whole country was expanding, when there was
a great emphasis on research and development and new technology [was
very important]. If it had been started in the '40s, it would've been
too early. If we'd tried to start it in the '60s, it probably would've
been too late. The timing was very fortuitous for us. Then the
leadership and the ability to have a group of leaders—let's
say a dozen to fourteen or fifteen people who came
together—[was also important]. Most of these were businessmen,
but I put Bill Friday in the group, certainly. I put the governors in
the group—[those] who were committed to the project and were
able to advance the project independent of government control. This
wasn't a project that was subject to a legislative oversight committee.
It wasn't a project that was led by a governing body appointed by the
legislature every few years, where you would have changes and you would
have all the ebb and flow of different political interests coming into
and out of it. That was tremendously important. It was a group of people
who came together that were allowed to stay together and were allowed to
bring others in and sort of bring up their successors. That system of
organization worked very well. They were very public spirited,
altruistic, capable individuals [that included] Archie Davis, Akers
Moore, Tom Alexander, Luther Hodges, Watts Hill, Sr. I'll be leaving out
a number of them, as I mentioned those. They all contributed. Then, if
you look at the individuals that came into the Park, the leadership at
IBM that came in, the leadership of Burroughs-Wellcome that came
in—. Fred Coe picked up the company and just moved it from New
York down here. Those all contributed to it.
JOSEPH MOSNIER:
It may be interesting at this point to—.
SHERWOOD SMITH:
The airport was helpful. That was secondary. The airport was going to
come anyway.
JOSEPH MOSNIER:
You've been involved in important ways in the Global Transpark idea.
SHERWOOD SMITH:
Yes.
JOSEPH MOSNIER:
We have the model and the example of the RTP, on the one hand. [Now] we
have this other [idea]. Its function would be different, of course. But
maybe [you could] describe the effort that's been underway to advance
the notion of the Global Transpark and your role there. If you could,
describe how that's unfolded. That would be a very interesting story.
SHERWOOD SMITH:
Yes. As you know, the Global Transpark is, first of all, an area located
in eastern North Carolina north of Kinston. It encompasses about four
hundred acres right there at the jetport, but [it includes] a much
larger area, perhaps 15,000 acres. It's related to an organization of
thirteen counties in the eastern and southeastern part of North
Carolina. They are known collectively as the Global Transpark
Development Commission. The Global Transpark concept is that, at that
location in eastern North Carolina, it's desirable and it's feasible to
establish an intermodal—that is land, surface, [and] water,
because the ports are close by— transportation network that
will enable manufacturing and assembly and, just in time, delivery of
products and goods and services. [This would] be a very feasible and
important economic entity. Now this concept of intermodal transportation
is one that's been developing in this country, I suppose, since World
War Two. A professor at the University of North Carolina, Dr. John
Kasarda—who now heads the Kenan Institute of Private
Enterprise—had studied this concept and
studied the state of North Carolina and probably articulated in 1990 to
Governor Jim Martin the concept of the Global Transpark as concisely
[and] as well as anybody. But, that was done at a time when North
Carolina was still advancing in industrial growth. We were having a lot
of new manufacturing jobs here. At the same time, agriculturally the
eastern part of the state was declining in employment, so you had a
population base there with the work ethic that could be trained. We have
many people that leave the military in eastern North Carolina, that want
to stay. So, you have a labor force there. You had a lot of land that
was virtually undeveloped. Much of it had been used for farmland, that
could be put to this. You didn't have the problem of conflict with a lot
of other land uses nearby. The state first appropriated money in 1991 to
study the planning of the Global Transpark. Then in '92, more money was
appropriated. A master plan was done. It was announced the state has a
Global Transpark Authority, which will own and manage the Park
facilities right there. That's what I was president of for several years
recently. I was not the first president. I came into it several years
after it having been started. I was pleased that I had the opportunity
to work there, and there were a couple of particular activities that I
was very glad to be involved with. [One was] the Development Commission
of the thirteen counties. Then there is a private Global Transpark
Foundation that's chaired by former Governor Jim Martin, and there is
president Felix Harvey, a very successful businessman and
public-spirited citizen in Kinston that's raised about eighteen million
dollars to help support private development there at the Park. The major
differences in what I've described, so far, between the Global Transpark
and the Research Triangle Park are these: The Research Triangle Park was
placed in an area where you already had the three universities. If you
consider the universities, they were indispensable
parts of the infrastructure. That was already in place. The Global
Transpark was more of a freestanding concept in development. The
infrastructure for the Global Transpark is basically an infrastructure
of transportation. The highway network connecting the Global Transpark,
first of all, to the major four lane highways—Highway '70 and
the interstates I-85 and I-40—was not in place and has been
one of the major things that is being worked on. It has to be completed
and put in place. Then, a long runway there which would enable the large
747 planes, fully loaded, to utilize it, had to be constructed. There
was an existing airport there, but the runway had to be lengthened. Now,
when the Global Transpark was announced, it was not then required by the
Federal Aviation Administration to do an environmental impact statement
for the expansion of the airport. It was anticipated by the planners
that an environmental assessment would have to be done and should be
done, but that's a much shorter, more cursory process than a full blown
environmental impact statement. But as time went by—within
about two years—a federal court decision in the Midwest was
handed down that required that environmental impact statements be done
for airport expansions. That literally stopped work, in many senses. It
was necessary to go back to the starting point and begin the process of
getting an environmental impact statement. Neither an environmental
assessment nor an environmental impact statement were required of the
Research Triangle Park. When I've been out in the Research Triangle
Park, I've thought about the comparison of the two projects [and thought
that] if we'd had to do an environmental impact statement for Research
Triangle Park, we never would have had it. We just wouldn't have been
able to complete it and get it through approval. The Global Transpark
was announced by the governor and by the legislative supporters and
others with a great deal of fanfare. I think this
was probably appropriate because it was new. It was novel and [we
needed] to get the attention of the public, so the public could decide
and the legislature could decide whether to support it or not and go
forward with it. Then, secondly, to attract the attention of businesses
that might be tenants of the Transpark, that fanfare was very useful.
But the fanfare also built up expectations in the minds of many that
there would be immediate success. [People thought that] almost
immediately following the announcement—or a short period of
time [thereafter]—you'd see major industries flocking in
there. Of course, things don't happen that way. Even at the Research
Triangle Park, [that did not happen]. I remember it was '57 [or] '58
when IBM was first contacted, and they did not come in with their
facility until 1965. So, it's going to take a lot of persistence and
patience for the Global Transpark just as it did with the Research
Triangle Park. But I think because of the public nature of the Global
Transpark, it's necessary to put more state money into it and to build
the roads and to match the federal money for the airport sooner than it
was at the same stage of the Research Triangle Park. In the minds of
those government leaders in the legislature, it's going to require more
money sooner; therefore, it's going to appear to be a more expensive
project. The state probably has put twenty-five million dollars into the
project today. There's probably been another fifteen to seventeen
million federal dollars put in—large amounts of money. When
you compare that to the North Carolina highway building program, those
dollars are very small. It cost forty-two million dollars to build three
or four miles of connector between Highway 40 and Highway 70 just west
of the airport here. So, I think it's important to view it as a
transportation project. It's a long- term project. It is a project that
if that's not done in Eastern North Carolina—where we have many reasons to think it's feasible to do it,
if we have the patience—then what should we do in that part of
the state? Should we do anything? If so, what? The development of the
medical school at East Carolina has shown that an investment in that
part of the state can not only be successful, but that it can just be
critical for the economic health and social health and viability of that
part of the world.
JOSEPH MOSNIER:
Your remarks you've just made, suggest a further question that I wanted
to ask and [it is a question that] we're asking across this series [of
interviews]. The development model that's been in place in North
Carolina here—. [There has been] a lot of support in the
legislature and governor's office for a certain type of economic growth
and business friendly policies. That model, its success is manifested in
all of the economic development that we've been spending our time
talking about. Is the model encompassing in the way it's reaching out to
all North Carolinians to bring them along? In other words, what's your
perspective on how successful the model has been in distributing its
advances all across North Carolina and to all North Carolinians? Are you
happy with that? You've just been talking about the eastern part of the
state and that's what kind of reminded me.
SHERWOOD SMITH:
Very good question. I think balanced growth across the state is the
desire of the policy makers. It's difficult to achieve because you have
different levels of resources available—educational, labor,
and transportation [resources]—in various parts of the state.
The Research Triangle Park, for example, has been a great catalyst for
development throughout the entire state. When IBM came in 1965, it was
impossible to predict then, exactly what would happen then. But a few
years later, IBM builds a big facility in Charlotte near the University
of North Carolina at Charlotte, which enables their
so-called "University Research Park"— even
though it's not a Research Park, as such—it's manufacturing
center to get started. When Burroughs-Wellcome came in, it was hard to
predict what would happen. But later, in the eastern part of the state,
you had Burroughs-Wellcome build a large manufacturing facility. And, of
course, if you go in concentric circles outside the Park itself for the
radius of fifty or sixty miles, it's just enormous development. So,
there have been some examples of how the development that's been in an
area that's concentrated has helped development elsewhere. The eastern
part of the state has a large population of people who are probably at
the lower end of the economic ladder in North Carolina. Many of them are
agricultural workers. There are many minorities there in certain [parts]
of the [eastern] counties. There are many people that haven't had the
training, haven't had the job opportunities, that you want to provide
them. The state's policy is to try to disperse growth. In order to
disperse growth, you have to have good roads. Certainly, the state has
worked on a road network that would link the different parts of the
state together. I'm not satisfied, in the sense of being content, with
the dispersion of industry across the state. I would like to see it much
more dispersed in terms of the nature of the effort that's been made, or
the policy that's been adopted—the vision. I think the vision
and the policy is there. It's difficult to do in a free market society.
Business goes where the labor is available, the training is available,
the transportation is available, and the markets are available. We've
found that when you try to artificially channel economic
development—unless government was willing to subsidize it over
a long period of time—it just didn't work out. It's hard to
predict what job skills you're going to need ten to fifteen years from
now. You need to have the programs that will train people to learn new
skills as they come along. I think the transportation in the eastern part of the state will help. I think the
community colleges in the eastern part of the state will help. I think
the economic incentive packages that the legislature has adopted are
expensive, but I think [that] in the competitive world that we live in,
we've got to meet the competition. It may be that we desire not to give
those [incentives to] new businesses. A lot question [whether that] that
is fair to existing businesses. Is that the best use of the taxpayers'
money? But, if you're faced with the question: "Do you want
Nucor to go to northeastern North Carolina, or do you want them to go to
some other location?," you measure the value of their jobs and
other things. You have to come down and say, it's probably a good
investment for us.
JOSEPH MOSNIER:
One last general range of questions I think we can do here to finish up.
You must have arrived in Raleigh in '61, '62?
SHERWOOD SMITH:
'62.
JOSEPH MOSNIER:
[That was] about the time when North Carolina, like the rest of the
south, was continuing its pattern of very active civil rights
demonstrations. You might have seen some of them on the streets of
Raleigh in'63, '64?
SHERWOOD SMITH:
Yes. They were here and in Charlotte, Raleigh, [and] Greensboro.
JOSEPH MOSNIER:
Sure. Track, if you would, your perspective of how the state and the
business community, in particular, has encountered and dealt with the
issue of changing race relations and gender relations across thirty plus
years now. How well have we done on those issues?
SHERWOOD SMITH:
As you live through it, you're not aware of the needs or the urgency of
doing it—in a policy making