Manage Delivery
A six-year fight to block the construction of a coal-fired power plant heats up in the Kansas Supreme Court on Friday amid growing speculation that economic trends suggest it might never be built.
Friday’s legal argument centers on a permit the state issued to Sunflower Electric Power Corp. in 2010 to build an 895-megawatt coal plant that the Sierra Club says would violate the federal Clean Air Act and pose a threat to human health.
The Holcomb plant in western Kansas has been one of the most intensely debated coal-burning projects in the country, and its permit is among the most controversial ever issued by the state.
Industry experts said this week they doubt the plant will ever be built. They said radical changes in the industry – particularly a move away from coal in favor of natural gas and its lower prices – and strict regulations on coal plant pollution likely will doom the Sunflower project.
Utilities this year have announced plans to close nine or 10 plants, bringing the number of plant closures to 120 since 2010, according to the Sierra Club. Since 2008, no utility has broken ground to build a new coal plant.
“The world has changed,” said Andy Weissman, an attorney who represents the industry, and a power and gas analyst. “There are very few changes this significant. It is understandable that (Sunflower) would not be quick to understand this. But this should not be a difficult decision.”
In fact, a recent national survey of industry leaders, executives who had been reluctant to abandon coal as their most economical option, showed their support for coal plummeting. And the U.S. Energy Information Administration reports that while coal was a leader in energy production for 60 years, its “annual share of (power) generation declined from 49 percent in 2007 to 42 percent in 2011 as some power producers switched to lower-priced natural gas.”
Still, Sunflower officials and their partner in the plant, Tri-State Generation and Transmission in Colorado, said that they stood by plans to build the coal generator in western Kansas.
“Yes, we are certainly hopeful that it will come to fruition,” said Cindy Hertel, Sunflower spokeswoman. She acknowledged hurdles ahead, but said they were not insurmountable.
Jim Van Sommeren, a spokesman for Tri-State, which plans to buy a majority of the electricity from Holcomb, was more circumspect.
“Regulations are making it harder and harder and less and less likely to construct a coal plant and less likely that is going to happen,” said Van Sommeren, whose co-op recently purchased a coal mine. “But we certainly support (Sunflower) in those efforts.”
Bruce Nilles, who heads the Sierra Club’s Beyond Coal program, said ignoring the changes could be fatal for utilities.
“We are going through a profound transformation in the electric sector,” Nilles said. “Sunflower is one of the very, very last coal plant projects in the country. It is really one of the last dinosaurs being proposed.”
Shifting economics
The conflict brought national attention in 2008 when the state health department’s secretary became the first to reject a coal plant permit based on health concerns because of emissions. The decision was supported by then-Gov. Kathleen Sebelius. But when Mark Parkinson succeeded her, his administration reached an agreement with Sunflower to allow the plant to be built.
This week, state Department of Health and Environment officials said they had no comment about the plant and whether the legal battle should continue. They also would not provide an estimate of the legal cost to taxpayers.
Attorney general spokesman Jeff Wagaman said the Sunflower permit was lawful. He would not say how much time the state had spent preparing the case except, “We spent the time necessary.”
When Sunflower proposed the plant about eight years ago, said industry analyst Weissman, it made sense. Natural gas prices were considered extremely volatile and wider use of renewable energy was in its infancy. Weissman said he even advised the industry then to stay with coal because of those prices.
Today, key factors in choosing fuel to produce electricity have changed. Among the differences:
• Economics. About the time the Sunflower plant was proposed, technology was refined to extract natural gas trapped in shale formations. The United States then quickly emerged as a leader in natural gas production. Shale gas formations have been discovered in Kansas.
As an energy source, natural gas is cleaner to burn. And natural gas prices have plummeted relative to the cost of coal.
Consequently, natural gas plants are being built across the country.
Sunflower’s sister company announced this week that it plans to build a 110-megawatt natural gas plant about 45 miles from the planned Holcomb generator.
• Regulations and lawsuits. The Environmental Protection Agency this year issued the Mercury and Air Toxic Rules that require all new power plants to limit emissions so they meet or exceed the cleanest plants in the nation.
If a plant is not in construction by April 2013, federal regulations require technology that captures and stores carbon emissions. Only one plant is using that technology and it’s still experimental, said Christine Tezak, managing director of Clear View Energy Partners LLC, a research and consulting firm for industry and its money managers.
Sunflower and a handful of other utilities have sued the federal government over those rules. A decision is expected early next year.
But even if Sunflower wins both its state and federal cases, it still must find financing. The cost of complying with mercury and carbon regulations could add significantly to the cost. In 2009 the estimated cost to build the Sunflower plant was $2.2 billion to $3 billion.
Weissman said regulatory costs to reduce coal plant emissions would add dramatically to the cost of the Sunflower project.
“(Sunflower) doesn’t really seem to have tried to think through what might happen in the future that might affect the wisdom of building a coal-fired power plant,” he said. “It just doesn’t make sense.”
