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


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