Washington Post

Tuesday, September 4, 2007

Coal Rush Reverses, Power Firms Follow

Plans for New Plants Stalled by Growing Opposition

By Steven Mufson

http://www.washingtonpost.com/wp-dyn/content/article/2007/09/03/AR2007090301119.html?hpid=sec-business

The mayor of Missoula, Mont., is the latest person to discover just

how unpopular coal plants have become.

In early August, Mayor John Engen (D) won city council support to buy

electricity from a new coal-fired plant scheduled to begin operation

in 2011. He said the city government would save money on its electric

bills.

But three weeks later, Engen pulled out of the deal after receiving

hundreds of e-mails and phone calls from constituents upset that

Missoula would contribute to the creation of a coal plant and

concerned about what the town would do if the plant never got built.

"Coal is a double-edged sword," Engen said. "I sort of felt both edges."

A year after the nation appeared to be in the middle of a coal rush,

widening alarm about greenhouse gas emissions has slowed the efforts

of electric companies to build coal-fired power plants from hills of

eastern Montana to southern Florida.

Recently, proponents of coal-fired power plants acquired a new foe:

Senate Majority Leader Harry M. Reid. In late July, Reid (D-Nev.)

sent a letter to the chief executives of four power companies in

which he vowed to "use every means at my disposal" to stop their

plans to build three coal-fired plants in Nevada. Last month, after a

speech in Reno, Reid said he was opposed to new coal-fired plants

anywhere.

"There's not a coal-fired plant in America that's clean. They're all

dirty," Reid told reporters after speaking at a conference on

renewable energy. He said that the United States should turn to wind,

solar and geothermal power in an effort to slow climate change.

"Unless we do something quickly about global warming, we're in

trouble," he said.

Reid's opposition to coal plants is the latest in a series of new

obstacles for power companies seeking to use the fuel to generate

electricity. A combination of rising construction costs, state

mandates for the use of renewable energy and lawsuits by

environmental organizations have forced many utilities to drop or

postpone coal projects this summer.

In June, all four members of Florida's Public Service Commission --

including two appointed by the new Republican governor -- rejected an

FPL Group proposal for coal plant near Lake Okeechobee. The following

month, another of the state's utilities withdrew its application for

a new coal-fired plant.

Gov. Charlie Crist said approvingly that the Public Service

Commission "sent a very powerful message" and that the state "should

look to solar and wind and nuclear as alternatives to the way we've

generated power in the Sunshine State."

In July, Citigroup coal analysts downgraded the stocks of coal

companies across the board. "Prophesies of a new wave of coal-fired

generation have vaporized, while clean coal technologies . . . remain

a decade away, or more," their report said.

The Citigroup analysts said that by 2008 "election politics are

likely to turn progressively more bestial for coal. Candidates are

already stepping up to 'ban coal.' " The Citigroup report said that

coal producers' earnings would probably be hurt by "new regulatory

mandates applied to a group perceived as landscape-disfiguring global

warming bad guys."

Later in July, environmental groups in Montana filed a lawsuit to

stop the U.S. Agriculture Department's Rural Utilities Service from

providing hundreds of millions of dollars in low-cost federal loans

to a group of rural electric cooperatives seeking to build a

coal-fired plant -- the one that could have supplied power to

Missoula. The city of Great Falls, Mont., is also a partner in the

project.

Abigail Dillen, a lawyer with public-interest law firm EarthJustice,

said that the proposed plant is six times bigger than needed for the

cooperatives, which plan to sell the extra power on the wholesale

market. She added that the Rural Utilities Service had failed to meet

requirements to consider alternatives such as wind power, which would

not emit any greenhouse gases.

The cooperatives said they needed a new coal plant to replace a

soon-to-expire agreement to buy cheap hydropower from the Bonneville

Power Administration in Portland, Ore.

The USDA refused to comment on the lawsuit, but the case could have

far-reaching implications for the coal-power business. While the

United States relies on coal to generate 50 percent of its

electricity, rural electric cooperatives rely on coal for 80 percent

of their power and many are planning new plants with the help of

low-cost government loans. Despite calls for the federal government

to scale back its aid through this Depression-era program, Congress

is planning to sharply increase funding for the Rural Utilities

Service.

Some rural electric cooperatives have shelved coal plant plans

anyway. One of the most ambitious proposals for new coal power plants

a year ago was to construct three units with a total generating

capacity of 2,100 megawatts in western Kansas. The two cooperatives

involved -- Tri-State in Colorado and Sunflower Electric Power in

Kansas -- have scaled down the project to two units. One reason was

that Colorado adopted a law requiring rural electric co-ops to get 10

percent of their power from renewable resources.

According to the Edison Electric Institute, the utility industry

spent more than $22 billion on electricity generation last year and

was expected to spend more this year. That money has, however, been

increasingly given to wind and natural gas projects as utilities fret

over the prospect of legislation that would regulate or tax carbon

dioxide emissions.

Restrictions could come even without legislation. The Sierra Club

wants the Environmental Protection Agency to reconsider permits

granted for new coal plants on the basis of a Supreme Court ruling

this year that said carbon dioxide is a pollutant that must be

regulated under the Clean Air Act. The Sierra Club has sued to block

or alter a $2 billion integrated gasification combined cycle (IGCC)

plant, a type of coal-fired plant that lends itself to separating out

carbon dioxide, that has been proposed for central Illinois. The EPA

must respond this month.

Many companies are pushing ahead with permit applications before

further obstacles arise.

"There is a slug of projects, maybe as many as 40, that are

desperately trying to get their permits, and we are doing everything

we can to make sure those investments don't happen," said Bruce

Nilles, a Sierra Club lawyer. "Once you do an honest assessment of

global warming and the threat it presents . . . these coal plants are

the worst legacy we can leave to the next generation."

Coal companies are pressing ahead.

"In fast-growing areas, there's a need to build coal plants," said

Frank Maisano, a lobbyist with Bracewell & Giuliani, which represents

a variety of coal firms and utilities. He said that while coal

opponents had won "a victory here and there," coal remains "an

important part of the diverse fuel supply that we have. . . . We have

to use coal and use it as cleanly as possible, and environmentalists

are going to have to live with that."

One battle has been raging over Peabody Energy's plan to build a

1,500-megawatt coal-fired power plant called Prairie State in

southwest Illinois. The plant's cost has ballooned to $2.9 billion.

Two of the original partners, Wisconsin Public Power and CMS Energy,

have pulled out of the project. CMS Energy said "at this time, it

does not meet our investment criteria."

Peabody said it has found customers for 80 percent of the plant's

output and vows to begin construction this fall.

In Nevada, the utilities Reid has targeted also vow to forge ahead.

Roberto Denis, senior vice president of energy supply at Sierra

Pacific Resources, said its proposed 1,500-megawatt coal facility

would enable it to close a less efficient 300-megawatt coal plant

built in the 1960s. He said the planned facility, 250 miles north of

Las Vegas, would involve transmission lines to help bring on wind

energy from the mountains there. It is, he said, "a winning

combination." And he said the new plant was needed to meet

electricity demand, which is rising by 4 to 5 percent a year.

But Jon Summers, an aide to Reid, said the plant would import 7

million tons of coal a year from other states, "destroying the air

not only over Nevada but over the entire western region."

Summers said Reid believes he can promote that alternative energy

sources could produce 3,300 jobs and all the power the state needs.

"There's been a lot of talk about the need to reduce our reliance on

fossil fuels but not a lot of action taken," Summers said. "Sen. Reid

saw this as the right time to take a step forward rather than taking

a step backward and increasing our reliance on coal."

--

"Proponents of the loan push notion suggest that the banks have

victimized themselves by their absurd lending decisions .... From

this perspective, bankers as loan pushers become active door to door

salesmen (albeit in pin stripe suits). They persuade borrowers to

agree to credits when the borrowers have no thoughts of borrowing a

loan at all, or at least, not a large one. Moreover, from this

perspective, in euphoric times banks will sell loans to borrowers in

regions they (the banks) customarily leave alone."

The Loan Pushers: The role of commercial banks in the international

debt crisis, by William Darity and Bobbie Horn. 1988. Ballinger

Publishing Company, a subsidiary of Harper & Row.

posted to ClimateConcern