[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

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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involved in various types of communications programs, public information programs. We learned as a—.

[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

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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

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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

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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

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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

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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

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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

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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

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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

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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,

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"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

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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

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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

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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

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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

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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

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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

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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 sense—until you have the crisis. I think that many people would say that it's unfortunate that we didn't do more and do it sooner. But, given the world in

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which we lived in—. You'd have to go back to that period of time and try it figure out what could we have done sooner. I'm sure that things were—. The state after the Brown versus Board of Education decision—. I wasn't involved in this, but my perception is that the state legislature began to try to deal with a way in which you could take down the walls of segregation in public schools and have a transition in an orderly basis. An "orderly basis" means that you do this on a phased basis. Some would say that it took much too long. Others would say that maybe they were satisfied with the pace. You had different levels of integration in the public school system. In the business community—I can't put a date on it, but certainly by the '60s, by the time that I had arrived here—there was an awareness in the business community of the importance of better education and better job skill training for minorities, and a recognition that it was desirable to have a system that enabled them to move up the ladder in business. I think they began to move up the ladder in education and government first. The demonstrations that occurred in North Carolina—the sit-ins in Greensboro, the demonstrations after the Martin Luther King assassination in 1968—were probably similar to those that happened elsewhere. In North Carolina there was, I think, a spirit of progress [and the idea] that things needed to change. Maybe it wasn't going to be a happy or pleasant change for everybody, every place, but things needed to change. If you compare what happened here versus what happened in the deep south—. I don't mean to criticize Mississippi and Alabama. That's where the locations were that were so highly publicized. If you compare the business leadership here and the educational leadership here and the governor's leadership here, you didn't have a governor standing, as Orval Faubus did in Arkansas, in front of the schoolhouse or [as] Wallace[did] in Alabama. You didn't have the head of your law enforcement agencies—.

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I wasn't aware of the business community there, but you didn't have the public resistance—.

[TAPE 2, SIDE A]

JOSEPH MOSNIER:

[This is the second] cassette in the Tuesday, March 23, 1999 interview with Mr. Sherwood H. Smith, Jr. of Carolina Power and Light at their offices in downtown Raleigh North Carolina. This is cassette 3.23.99-SS.2.

SHERWOOD SMITH:

With regard to women in the workforce, and the numbers of women coming in in the workforce, and the opportunities for them in the '60s and '70s and up through today, I think we saw several things happen. Number one, I think we saw—for a variety of reasons—women were more available to work outside the home. I'd like to say that's all because of electricity—because of all the things that electricity could do that had to be done by manual labor—but there are many other things that contributed to that, and so we had women who were available. These women were as intelligent and as skilled as men. Then secondly, I think there was sort of a social awakening that—whether it was the result of the turmoil that we had socially in the '60s or not—there were barriers to entry that had been developed in society. Perhaps they developed for what might be thought of as logical reasons at the time, that simply were unfair. They were restrictive and prevented women from having the opportunities for education. But, I really think that the catalyst there, more than anything else, was the growing exciting, dynamic economy that we had that we needed talented people. Here were talented people. Why not educate them and put them to work and give them opportunities? That's happened.

JOSEPH MOSNIER:

One last question. If you pull out your crystal ball and look down the road here—. Generally [people are] pretty optimistic, pretty bullish on North Carolina's economic prospects. [Do you foresee] any bumps in the road? [Do you have] any

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worries? [Are there] any things that might not make you think on the real upside of [North Carolina's] potential?

SHERWOOD SMITH:

I think North Carolina is very much in the middle of a national and global economy. Obviously, what happens here is going to depend on what happens nationally and internationally to a large extent. But, if you believe, as I do, that the fact that we are no longer in the Cold War—. The demise of USSR and its satellite states has provided, across the world, a lessening of tensions with China and the opportunity for peace and prosperity. I'm very optimistic over the long term. The concerns that I would have in North Carolina would be simply the importance of our keeping our commitment and keeping focused to education, job skill training, to the recruitment of industry, to facilitate the expansion of the existing industry, [and] just keeping our focus. I think the Smart Start program, at the bottom of the education ladder, is tremendously important. I think it ought to be expanded. We ought to follow that with steady improvement in education. In North Carolina, now, there's a lot of activity in trying to improve the product of the public schools. The public schools just mirror society. You generally get out of a public school, what society in that area represents. I think we can't be complacent about that. I think we're going to continue to have to work hard, particularly in the poorer areas, to improve what's being done in our public schools.

JOSEPH MOSNIER:

We've ranged pretty widely, but always I want to make sure that we spend a few minutes at the end of a conversation like this to allow you to lean back and think about things that we haven't touched on—things that you think are important to the story that we've been discussing. Are there matters that we haven't gotten to that you want to be sure to comment about?

SHERWOOD SMITH:

Gee, I'll probably think of several after we conclude the interview. Just thinking quickly over the things we've touched on: we've touched on utilities, their growth, their role, their operation, their regulation, economic growth, the role of the universities in the Research Triangle, political leadership, the business leadership. I think we've certainly covered the high spots of the things that I focus on. As I have more time in the future, which I will have, to work on things that I want to continue to work on—things that we've talked about—I want to continue to work more with young people. This is not a concern about North Carolina. It's just an interest. I think the younger generation that's at-risk are the ones that maybe that come from broken homes, no homes. Boys and Girls Clubs is an organization that I've gotten very much involved in. I serve on their national board. I was on the board of the first club we started here in the 1960s. It is an organization, and there are others, that has a great opportunity to provide a positive pace for kids and I think we need to just focus on this at-risk group. We certainly have got the resources in this country to do it. It's not going to be easy, but if you deal with that effectively, then I think you'll have fewer problems with unwed teenage mothers and guns and drugs. Crime is always something to be concerned about. I think in a society like ours, with the availability of guns and manner of transportation, it's a problem that has to be addressed, locally. I mean, the federal government has to provide the resources, but I think you've got to do a better job at local law enforcement, in a positive and constructive way. I see this more in the big cities than in North Carolina. These are just things that I think about for the future of our country. I think about things like that. If I think about anything else, I may give you a call. I have a bright idea that I want to tell you about. Could I have a copy of these tapes, please?

JOSEPH MOSNIER:

Of course. Of course. Certainly. S: I don't have anything else in mind.

JOSEPH MOSNIER:

Before we turn off here, let me just say on the record, thank you so much for such a generous contribution and for taking all this time. I appreciate it.

SHERWOOD SMITH:

I enjoyed talking with you about it. It brought back a lot of memories.