Construction of the Niagara Power Project a half-century ago wasn't kind to the environment or the pocketbooks of numerous local governments and school boards.

The new license granted in March to the New York Power Authority to continue operating the plant makes gestures toward addressing economic and environmental issues -- but in a pennies-on-the-dollar kind of way, The Buffalo News has determined.

Unlike the privately owned Schoellkopf plant it replaced some 50 years ago, the New York Power Authority's facility is exempt from paying property taxes. That cost Niagara Falls alone some $239 million in city and school taxes from 1982 to 2003.Estimates have pegged the lost tax revenues to schools and local governments to anywhere from $35 million to $58 million a year countywide.

"In exchange for relinquishing a large part of their property tax base, the host communities were promised more jobs, higher incomes, prosperity and even higher property tax revenues," said a report by FMY Associates, a consulting group that was commissioned about five years ago by the Niagara Power Coalition.

But the report contended the promise of prosperity didn't follow.

"It is easy to see that rather than helping the host communities, the project has had a substantial negative effect," the report continued. "The host communities were effectively forced to subsidize other communities through the provision of low-cost power."

As part of its settlement with the Niagara Power Coalition, the authority agreed to compensate seven local governments and school districts -- Niagara County, Niagara Falls, the towns of Lewiston and Niagara and the Niagara Falls, Niagara-Wheatfield and Lewiston-Porter school districts.

They'll divide $5 million annually for 50 years. That's worth $89 million when future inflation is taken into account. The coalition can also purchase 25 megawatts of low-cost power from the authority to power its facilities or use to promote economic development.

The out-of-pocket cost to the authority is $1.8 million a year -- a fraction of what it would pay in property taxes.

Although the New York authority has long opposed making payments to local governments to make up for lost tax revenue, privately owned plants pay taxes, including one in the Niagara County Town of Somerset, which pays $18 million a year in county, town and school taxes.

There are also examples of payments from other nonprofit entities.

The hydropower plant that sits directly across from the Lewiston facility in Niagara Falls, Ont., makes such payments to its host community. The provincial corporation that operates the plant paid the Canadian city $2.6 million last year.

The Tennessee Valley Authority, which produces electricity for portions of seven states, returns 5 percent of its revenues to the states and counties where its generating plants are located. Last year, that amounted to $376 million.

The operator of nuclear power plants in Lacey Township. N.J., pays about $1.5 million annually in property taxes and $11.9 million in other taxes pegged to plant revenue. Together, these taxes provide the town more than half its operating revenue.

New York State government makes payments in lieu of property taxes to Albany for its considerable land holdings in the capital. The payment last year totaled $10.7 million.

The authority's new federal license also commits the authority to spend $61 million in inflation-adjusted dollars over 50 years to mitigate the impact of the plant's operation on the Niagara River. The focus of the planned work is restoration of wetlands and bird, fish and wildlife habitats and improved public access to the river.

The work does not address what in some cases is irreversible environmental damage caused by the plant's construction, which occurred before environmental laws were on the books. The federal relicensing process considers the impact of plant operations, but not prior construction.

The plant's construction couldn't help but have an impact.

The work included the blasting of 13 million cubic yards of rock and the transport of 34 million cubic yards of stone and earth. Intakes were built and tunnels dug to carry the water diverted from the river some 4.5 miles to the generation plant. The Robert Moses Parkway was also built, running along the Niagara River and Niagara Gorge.

Blasted rock was dumped in the Niagara Escarpment, destroying a portion of it. Construction of the parkway wiped out wetlands and other environmentally sensitive areas along the Niagara River, damaged the top of the Niagara Gorge and disrupted its ecosystem.

Several feeder creeks were wiped out, and underground water tables were altered.

Variations of up to 12 feet a day in water levels -- up to three-quarters of the water that would otherwise go over the falls is diverted for generation -- erode shorelines and disrupt fish and plant life.

"You can't do a project of that scale and scope without having an impact. It's going to alter the environment substantially," said Barry Boyer, a board member of Buffalo-Niagara Riverkeeper who was involved in relicensing negotiations.

Couple the impact of the plant with pollution from nearby industries and you have damaged goods -- "half a river," in the words of one government environmental official.

"What's been most devasting," Boyer said, "is the chemical industry there. The pollution that comes from it, the alteration of the shoreline. Hydropower development has been part and parcel of that."