NEWS RELEASE

CONTACT:

Michael Grimaldi or John Martellaro

Trozzolo Communications Group

816-842-8111 or mgrimaldi@trozzolo.com or jmartellaro@trozzolo.com

GPACE Lauds Added Coal Plant Comment Period

KDHE does right thing to accommodate utility’s need to fix data

TOPEKA, Kan. – Scott Allegrucci, executive director of the Great Plains Alliance for Clean Energy (www.gpace.org), issued the following statement today in response to the decision of the Kansas Department of Health and Environment to schedule a second comment period on Sunflower Electric Power Corp.’s draft air quality permit to construct a new 895-megawatt coal-burning power plant in Holcomb, Kan.:

“While it would have been preferable that Sunflower Electric Power Corp. had submitted accurately adjusted air dispersion data at the outset and thus necessitated only one comment period, the KDHE’s decision to allow additional public comment is good news for Kansas and all Kansans.

“Correctly adjusted air dispersion data is critical to a complete technical review of the project’s impact. We are grateful that KDHE will allow comments on the entire draft permit after Sunflower Electric submits revised data, since changes to one part of this complex information will impact many other aspects of air quality.

“GPACE recognizes the critical and essential role of electricity generation as a significant component of economic development and job creation in the state. What’s right for Kansas is that any major utility investment should support the state’s economy, use natural resources wisely and protect the health of citizens.

“We’re grateful that regulatory processes are in place to ensure that these objectives are met. GPACE pledges to support the work of elected officials, industry and regulators so that public policy decisions are made in the best interest of all citizens, our state and our nation.”

# # #

Note to editors:

For an informative timeline illustrating the history of the proposed Holcomb Station expansion project, visit http://rethinkrepowerks.com/

To see the KDHE’s news release about the additional comment period, visit http://www.kdheks.gov/news/web_archives/2010/07302010a.htm

More Input: Hearings can help clear up the issue

Garden City Telegram Editorial Board

More public hearings on the planned expansion of the Sunflower Electric Power Corp. plant at Holcomb are on the horizon.

Just as in 2006, when the Kansas Department of Health and Environment organized public meetings to gather input on Sunflower’s request for an air-quality permit needed to add three 700-megawatt units (later changed to two), the KDHE will again ask Kansans to provide input on a plant expansion.

In 2006, public hearings took place in Garden City, Topeka and Lawrence. A year later the KDHE denied the air-quality permit request.

Now, with a deal brokered by Gov. Mark Parkinson last year that gives Sunflower another shot, the KDHE will seek public input on a revised application to add a single, 895-megawatt coal-fired power plant to the Holcomb facility.

That’s led a Lawrence-based environmental group that opposes the expansion — The Great Plains Alliance for Clean Energy — to call for five public hearings on the plan.

But a decision on the number of hearings certainly isn’t up to an environmental group, just as it’s not Sunflower’s call. It’s up to the KDHE.

That said, geography is an equally if not more important consideration than the number of meetings.

Western and central Kansas, areas served by Sunflower, need to be meeting sites. Beyond that, the KDHE should schedule additional public hearings convenient to Kansans in all regions.

Citizens also have the option of providing input in writing. But putting thoughts on paper isn’t the same as engaging in public discussions that address pros and cons, and help people better understand issues and form their own opinions.

Much of the input no doubt will echo what was said last time, when opponents decried carbon dioxide and other emissions from a bigger plant, and supporters touted a plan that would incorporate cutting-edge carbon mitigation technologies while meeting growing electricity demand and delivering the positive economic impact of a multibillion-dollar construction project.

It’s a heated debate. If the two sides agree on anything moving forward, it should be in making sure as many Kansans as possible engage one way or another in the public discussion.

Solar and wind options ignored

By Brian Smith at unearthed.earthjustice.org

Proponents of an 895-megawatt coal-fired power plant expansion project in Holcomb, Kansas have resubmitted an application for an air permit. The first application was rejected by the state environmental agency in 2007 due to concerns over air and global warming pollution. This was the first coal plant air permit rejected on those grounds in the United States.

With the new filing, Sunflower Electric Power Corporation will try again, with the backing of climate change denialists in the state legislature.

But the project still faces a number of obstacles.

Among them:

Sunflower still owes hundreds of millions of dollars to the U.S. taxpayer for its previous coal plant funded by the Rural Utilities Service. This debt led to a legal challenge by Earthjustice because the federal government cannot lawfully allow Sunflower to expand without examining its environmental impacts.

Sunflower has also not proven the need for this electricity in Kansas. Activists are concerned that the power would largely be exported to suburban development interests in Colorado. Kansas gets the pollution, Colorado gets the power.

Finally, Sunflower still has to obtain a new air permit from the state before it can start building, and the state agency is legally required to take and respond to comments from the public and the U.S. EPA on the harm the plant’s pollution will cause before making a final decision on the permit.

Our clients are near exasperation fighting this zombie polluter when clean energy options are so obvious. “Our state is perfectly positioned to develop its abundant clean energy resources that can help solve global warming and create thousands of new family-supporting jobs,” said Stephanie Cole of Sierra Club, Kansas.

New Questions as State Mulls Wolverine Coal Permit

Co-op sees big demand drop, ignores a cheaper, cleaner power plant

By Glenn Puit , Great Lakes Bulletin News Service

As a rural electric co-op awaits a state decision on its push to build a controversial new coal-fired power plant in Rogers City, evidence continues to accumulate that the firm does not need the plant and, instead, could buy cheaper electricity from a significantly cleaner-burning facility in southwestern Michigan.

According to documents reviewed by the Great Lakes Bulletin News Service, Wolverine Power Supply Cooperative Inc.’s peak power demand has dropped dramatically over the past two years. In 2008, the firm’s peak demand dropped a remarkable 12.6 percent, and internal documents show evidence of a significant demand drop in 2009, as well.

Meanwhile, another document reviewed by the news service shows that while the Cadillac-based cooperative is pushing its proposed coal plant, which could sharply increase its customers’ electricity rates, it is ignoring an opportunity to meet its long-term power demand and save its customers money. That opportunity is a less-costly, less-polluting, combined cycle, natural gas-fired “base load” power plant near South Haven.

Both facts—and the recently revealed purchase of another natural gas plant by Wolverine that is not capable of supplying continuous, base load power—could weigh heavily on the state’s pending decision about the Wolverine proposal. State and federal laws require that, before a new coal plant can be built, a company must demonstrate that it needs the new electricity and that burning coal is the most “prudent and feasible” way to provide it.

Wolverine’s demand drop, according to both the company’s 2009 annual report and an internal document obtained by GLBNS, is dramatic. The company’s report says that its peak demand numbers fell 12.6 percent from 2007 levels during 2008. And the internal document—minutes of a recent company board of directors meeting that the news service reported on last month—indicate that the fall may have accelerated in 2009. The minutes show peak demand 14.6 percent lower in September 2009 than September 2008.

Two weeks ago, after the double-digit drops came to light, the news service received a copy of a letter to state regulators written by an attorney for the New Covert Generating Company L.L.C. The letter says that Wolverine could have signed long-term power supply contracts with New Covert, which operates a six-year-old gas-fired power plant in Covert Township,near South Haven, or perhaps purchased the facility outright. The attorney said it is the cleanest-burning and most energy-efficient base-load power plant in the state.

According to the attorney, Rodger Kershner, of Howard & Howard Barristers and Solicitors, in Royal Oak, new coal plants are now old hat—and financially risky.

“At one time, a decision by an electric utility to build a coal-fired power plant rather than a natural gas-fired plant must have seemed like a natural and obvious choice,” Mr. Kershner wrote to Michigan’s Public Service Commission and Department of Environmental Quality.

Wolverine, which has refused to speak with Great Lakes Bulletin News Service since July of 2007, started planning to build the coal plant as early as 2000. But, Mr. Kershner wrote, in recent years coal prices and financing costs have soared while natural gas prices have fallen, making new coal plants a bad financial bet.

“Wolverine’s plans have apparently remained unchanged while the world changed around them,” he observed.

Clean energy advocates add that the coop could lower or significantly slow the rise of its customers energy costs, better protect the environment, and bring more jobs to Michigan by investing more heavily in customers’ energy efficiency, windpower and other renewable sourcess, and signing agreements like the one Mr. Kershner is touting.

A strong turn by Wolverine toward efficiency and renewables, they say, would assist Michigan’s push to become a global center in the rapidly spreading, worldwide revolution in clean-energy production. That is a key part of Michigan Governor Jennifer Granholm’s drive to revive the state’s collapsed manufacturing base.

As part of that drive, Governor Granholm invoked state and federal laws to require companies proposing new coal plants to perform a “needs” and “alternatives” study. The Michigan Department of Natural Resources and Environment, the newly established successors to MDEQ, says its decision on the Wolverine permit is imminent.

Meanwhile, statewide and national declines in electricity demand continue. For example, DTE Energy has told MPSC that it expects its electricity sales to decline by slightly more than 1 percent a year between now and 2014. And the Wall Street Journal reported on Jan 14that national electric sales declined by 3.7 percent in 2009, the steepest drop in 71 years. The drop followed a 1 percent fall in 2008.

Covert’s Operation
Attorney Kershner presented his client’s views to MPSC and MDEQ as part of the state permitting process for new coal plants.

Mr. Kershner wrote that, because Covert burns natural gas, it emits far fewer pollutants than coal, including roughly half as many climate-changing CO2 emissions. He asked why Wolverine, a power distribution co-op owned by four northern Michigan retail co-ops, is pursuing new coal when Covert is able to sign long-term power-purchase agreements. Wolverine has long argued that because its current power purchase agreements with other companies are expiring soon, it needs to build its own coal plant.

The co-op current gets virtually all of its power from downstate sources and redistributes it to its reatail co-ops; it also draws some power from Michigan’s first wind farm, located in The Thumb.

At 1,100 MW, the New Covert plant has almost twice the power capacity of Wolverine’s proposed 600 MW coal plant. Yet, according to a U.S. EPA Clean Air Market data base quoted on page 28 of another comment filed with Michigan regulators about Wolverine’s plant application, Covert operated at only 8 percent of its annual generating potential in 2008. Although Covert’s power prices are difficult to ascertain, Mr. Kershner’s letter indicates that they are significantly lower than the wholesale price that Wolverine would have to charge for power from its new plant—almost 11 cents per kWh. That is about twice the current average wholesale rate for coal power in Michigan.

According to one rough rule of thumb, the current, historically low price of natural gas means that many gas-fired plants’ rates are around 6 cents per kWh.

Attorney Kershner also pointed out that, since the Covert facility was already built, Wolverine could eliminate the multi-billion-dollar financial risk of building a coal plant—something that over the past several years has helped convince companies to drop plans for more than 100 other, similar facilities. Wolverine estimated in May 2006 that its new plant would cost $1.3 billion, and has not publicly updated that estimate since then.

Meanwhile, costs for building new coal plants have skyrocketed. For example, estimates for the 930 MW coal plant Consumers Energy wants to build near Bay City range from $2.3 billion to $ 3.58 billion.

Tax records for the New Covert plant indicate that its cash value is $433 million; Mr. Kershner’s comment letter hinted that his client’s plant could be purchased outright at a favorable price, given the sharp fall in power demand both in Michigan and nationally.

Dollars and Environmental Sense
Joseph Romm, a senior fellow at the Center for American Progress, a non-profit progressive think tank, pointed out that moving to natural gas instead of coal also makes environmental sense. Mr. Romm told the news service that natural gas has half the carbon emissions of coal, making it especially attractive as America seeks to take steps to address climate change.

“For a very small extra cost, perhaps half a cent to a penny per kilowatt-hour,” Mr. Romm said, comparing the price of gas power to existing coal power, “you could dramatically reduce U.S greenhouse gas emissions. That is one key role for natural gas in the next 10 to 15 years in replacing coal.”

Mr. Romm sees natural gas as a very important “bridge fuel” to get off coal. Increasingly, other utility executives are agreeing with that assessment.

InvestorPlace.com, a financial advice Web site, notes that there is currently a lot of discussion on the national level about replacing coal-fired electricity with natural gas.

According to the online publication, the natural gas industry now argues that an innovative extraction technology called “fracking”—injecting water and chemicals deep underground to free up gas that previously was out of reach—is lowering the price of that fuel. Prices had soared in previous decades as more natural gas power plants came on line, pushed up demand, and shrank supplies.

Gas industry officials also point out that because gas plants can start up so much more quickly than coal plants, they are ideal for providing power in league with renewable energy sources like wind and solar power, which are not continuously available.

“A gas-fired plant could be sited near a wind or solar farm to generate electricity when the wind is calm and the sky is dark,” according toInvestorPlace.

Efficiency First?
While many clean-energy advocates and coal plant opponents agree that a deal between Wolverine and New Covert makes a great deal of economic and environmental sense, some caution that the price of natural gas could remain quite volatile and that the fuel is best seen as a lower-CO2 “bridge” to a fossil fuel-free energy future.

They point out that, dollar for dollar, Wolverine could free up many more megawatts of “base load” or continuous electricity supply by investing in its customers’ efficiency, rather than in coal plants or agreements with companies like New Covert.

They argue that the co-op would help its members save both electricity and heating costs by doing so, and quickly put a large number of construction and other trade workers to work in Wolverines northern Lower Michign service area to work retrofitting Michigan’s many highly inefficient houses, office buildings, stores, and factories.

Currently, the Granhom administration is using funds from last year’s federal American Recovery and Reinvestment Act to “weatherize” more than 30,000 heat-leaking homes around the state.

Meanwhile, MPSC is working on a “pay as you save” program that would encourage electric utilities to help their customers finance cuts to their overall energy use through weatherization, extensive building efficiency retrofits, and purchases of much more efficient Energy Star appliances, air conditioners, and furnaces.

MPSC is also planning to allow utilities to “decouple” their profits from the amount of electricity they sell and, instead, make money by helping their customers reduce their demand for electricity. That innovative business model, some point out, would actually help the bottom lines of utilities when their sales decline due to the economy, the weather, or enhanced customer efficiency.

And a group of non-profit organizations, faith-based groups, and Lansing lawmakers pushing the ReEnergize Michigan campaign are currently working on proposals that would require utilities to accelerate the installation of energy efficiency measures and renewable energy sources. The coalition is also pushing for feed-in tariffs, which require utilities to pay profitable rates to customers who install wind turbines or solar panels and feed their clean, renewable energy into the grid.

Glenn Puit is a policy specialist for the Michigan Land Use Institute. Reach him at glenn@mlui.org.

Topeka — A controversial power plant proposal is under consideration again.

Hays-based Sunflower Electric Power Corp. has filed a revised permit application for an 895-megawatt coal-burning unit near Holcomb in southwest Kansas.

The application was submitted to the Kansas Department of Health and Environment whose staff will conduct a review that will take from three months to six months, the agency reported Wednesday.

Following the review, public hearings will be held to receive comment on the proposal.

“After the public comment period, KDHE will address any concerns and make revisions as necessary to prepare the permit for final issuance,” the KDHE news release said.

Sunflower Electric previously wanted to build two 700-megawatt units. But in October 2007, KDHE Secretary Roderick Bremby denied the permits, citing the effects of the plants’ potential carbon dioxide emissions on health and environment.

Bremby’s decision was hailed by environmentalists across the nation, but produced a bitter political fight in Kansas as Republican legislators blocked “green” energy legislation in an attempt to override the permit denial.

When former Gov. Kathleen Sebelius, who stood by Bremby’s decision, left office last year to lead the federal health and human services department, Gov. Mark Parkinson brokered a deal in May to allow Sunflower to build one coal-fired plant in return for legislative approval of the so-called renewable energy legislation.

We would like to draw your attention to a conference being held by the KU Energy Council on November 18th, at the Dole Institute of Politics in Lawrence, Kansas. The event is free and open to the public, but requires registration.  The goals of the council are to highlight connections between energy research at KU and state/national policy priorities.  We applaud these goals and the opportunity to hear from credible public and private sector experts.

We need you to help hold them accountable!  Please register and attend the KU Energy Council event on November 18th at the Dole Institute of Politics – especially the afternoon panel session.  The event is free and open to the public. Details and registration information can be found here.

Aside from the environmental and health consequences of coal, some noteworthy developments have occurred in the last few weeks that make coal an even bigger loser than we have previously considered. Dynegy, a Houston, TX-based energy company having the infamous distinction as the “King of Coal,” has since 2006, been planning the construction of seven new coal-fired energy plants—more new coal plant construction plans than any other company in the United States. Several setbacks to the 2006 plans followed, most notably a 2008 agreement with New York Attorney General Andrew Cuomo whereby Dynegy would be required to report to the U.S. Securities and Exchange Commission the “material financial risks faced by coal-fired power plants associated with global warming.”

Dynegy announced early this week that it was calling off its 2006 plans to build another of the original seven planned new coal-fired plants. This announcement came in addition to the January 2009 announcement that five new plants that were planned had been scrapped. Kudos to the Sierra Club for organizing the largest environmental grassroots campaign in the organization’s history in order to fight the new developments. The reasoning from Dynegy regarding the dissolution of development plans was clear: coal is a dirty, expensive business that isn’t a money-making proposition. This is clear for Kansas’s Sunflower Energy, even.

Last week, a petition was filed by Earthjustice on behalf of the Sierra Club against the Rural Utility Service (RUS) of the United States Department of Agriculture asking the DC federal district court to enforce the environmental review provisions of the National Environmental Policy Act (NEPA). The petition revealed Sunflower’s precarious financial situation, and, more importantly, the amount that U.S. taxpayers are on the hook for Sunflower’s first failed coal development in the 1980s.

“In the early 1980s, RUS committed $543 million in loans and guarantees so Sunflower could build its existing 360-MW coal-fired power plant, Holcomb 1. Soon after the construction of Holcomb 1, Sunflower experienced financial difficulties and defaulted on its debt service payments. Sunflower’s financial difficulties have been attributed to its construction of excess capacity.”As a result, RUS and Sunflower in 1987 entered into an agreement to restructure Sunflower’s debts. Under the Debt Restructuring Agreement (“DRA”), Sunflower was indebted to RUS via three notes with different terms: the ‘A Note’ ($383 million) payments were fixed and serviced from current cash flow, the ‘B Note’ ($173 million) was paid from incremental increase in Sunflower’s available cash flow, and the ‘C Note’ ($106 million) was to be paid after the B Note was fully repaid.

“Even after the restructuring, Sunflower was unable to generate sufficient cash flow to satisfy its obligations to RUS on these notes. Unpaid interest on the B Note was capitalized and, by 2002, the B Note debt had ballooned from $173 million to $518 million (total Sunflower debt in 2002 was over $914 million). [Citations omitted.]

More ominous for Sunflower and Sunflower’s ratepayers, the petition alleges that RUS has concluded the B Note payments are unlikely to make any appreciable returns and, if left without an additional restructuring, will further balloon to $2.7 billion in 2021. Of course, the petition has been redacted due to an order by the DC district court, so the full details of the amounts fully written-off and absorbed by RUS—a taxpayer-funded loan agency—remains unknown.

That’s right, Kansans! You’ve paid thrice for the failed corporate planning of Sunflower Energy—once with your pocketbook, once with your environment and once with your health. And, here we go again. I’m afraid the “If at first you don’t succeed…” axiom is inappropriate in the context of taxpayer-funded failures, especially where the health and environment of taxpayers is substantially eroded. While the air may not be clear if Sunflower ultimately gets it way, it is clear Sunflower intends on burning more than just coal — it plans on burning another hole in the pocket of U.S. taxpayers.

By Carolyn Szczepanski in The Pitch

In the marathon controversy over the expansion of the coal-fired power complex in Western Kansas, environmentalists have argued the new facility would be a giant, climate-change-accelerator, coughing up ungodly amounts of the carbon dioxide gas that leads to global warming.

But the latest legal filing from Earthjustice and the Sierra Club lays out another reason the monster power plant in Holcomb could be a disaster. Sunflower Electric Power Corporation, the company that wants to build the plant, has a disturbing history of racking up massive amounts of debt — and leaving taxpayers holding the bag.

Last week, two environmental groups filed a motion in federal court against Sunflower Electric and the Rural Utilities Service. They’re asking a federal judge to stop any progress on the Holcomb plant — given a free pass by Kansas Governor Mark Parkinson — because the RUS violated the National Environmental Policy Act.

What’s the RUS, an arm of the U.S. Department of Agriculture, have to do with Kansas’ coal controversy, you might ask? Here’s the deal.

Basically, in order to construct the first coal-fired power plant in Holcomb, Sunflower needed some help from taxpayers. That’s where the RUS stepped in. According to the legal filing, Sunflower got a cool $543 million loan from the federal government in the early 1980s. But the company was in bad financial shape and couldn’t make good on the payments.

By 2002 its debt had ballooned to $914 million and the RUS estimated that, “If not paid, the balance on the [B note] in 2021 will be over $2.7 billion.” Knowing that money would never be paid back, the RUS essentially bailed them out. The agency forgave a portion of the staggering debt, but required Sunflower get prior approval from the RUS for any major business decision.

When the Kansas cooperative started talking about expansion in Holcomb, the RUS started seeing dollar signs. Between October 2006 and March 2007, Sunflower tried to buy its way out of RUS control, but the negotiation tanked. According to the legal filing, now that RUS has secured a $91 million stake in the expansion, it has given Sunflower the green light to move forward with the new plant.

But the Sierra Club wants the agency to be a little more thoughtful since it has effectively backed the plan with hundreds of millions of taxpayers’ dollars, and forgiven the interest and most of the principal debt. The group argues that RUS should have conducted an environmental impact statement for the new plant before giving the go-ahead.

“The plan to add another dirty coal plant is essentially a project sponsored by the Rural Utilities Service,” Stephanie Cole, an activist with the Kansas Sierra Club, said in a statement. “We believe the RUS has a duty to review all environmental impacts of the proposed new, polluting coal project. Why should taxpayers take both the financial and environmental risks while Sunflower rolls the dice again on a high-risk project?”

Cindy Hertel, a Sunflower spokeswoman, says the filing is just another attempt to throw a wrench in the gears. “This is not new, we’re not surprised by these filings,” she says. “However, it’s our belief that an environmental impact statement is not necessary by RUS, because the rules don’t require it.” She didn’t want to talk about how and why Sunflower dug itself into such staggering debt. Jay Fletcher, a spokesman for the USDA, said the RUS wouldn’t comment on pending litigation.

The Sierra Club isn’t the only group that thinks taxpayers should be concerned. Check out the Great Plains Alliance for Clean Energy blog or read the full legal filing for all the gory financial details.

On the heels of the proposed coal plant deal between the Governor and Sunflower Electric, a troubling history between USDA and the utility has been unearthed as part of a federal lawsuit.

In the 1980’s, Sunflower got cheap loans from the federal government, courtesy of American taxpayers, in order to build a coal plant bigger than its ratepayers needed or could afford. As a result, the company has been unable to make the payments. USDA has three times bailed the company out by restructuring and forgiving hundreds of millions of dollars of loans and interest. In exchange Sunflower signed over some control of its business decisions to USDA.

Sunflower had USDA’s permission to build another coal plant it couldn’t afford, and without conducting requisite environmental analysis. But even then, USDA complained about the “extensive and time-consuming” assistance Sunflower’s business practices required.

Now, with the nation reeling from bad loans and dubious bailouts, with major banks refusing to finance risky coal plants, with Kansas’ vast wind resources remaining largely untapped, and with the costs of carbon emissions about to be accounted for, our governor and legislature have passed a law demanding that air quality permits be granted to build another coal plant larger than needed, and that customers cannot pay for.

Sunflower traded federal oversight for taxpayer dollars to bail it out of a previous misguided investment in coal-fired power. The company has defaulted on those loans multiple times. Now it is turning to out-of-state utilities to build and own another oversized coal-fired plant, sucking electricity and water out of Kansas, leaving us pollution, health costs, and huge financial risks.

The challenge: A critical utility provider for Western Kansans has some serious management and fiscal problems and has been stung by questionable business decisions in the past. Its service area contains significant reserves of two of the state’s most abundant and cleanest energy resources, wind and natural gas – both of which form the foundation of the Pickens Plan.

The solution proposed by Kansas politicians: Encourage this utility to make the very same mistake that got it into this mess by investing in another over-build of coal-fired capacity, sending millions of Kansas ratepayer dollars out of state every year for utility-grade coal we can’t produce.

Two critical legislative sessions were wasted pursuing this plan. Countless millions of dollars were spent on lobbyists and media supporting the coal plants, while the utility that wants them can’t even pay back existing loans from taxpayers. Meanwhile, Kansas, with the third best wind resource in the nation, ranks ninth in installed wind capacity.

It is unfortunate that, by trying anything to dig its way out of this mess, Sunflower may actually be digging a deeper hole for its ratepayers. It is inexplicable that our top elected officials have responded by throwing the company a shovel. The real question is: In this race to the bottom, who pays to dig the “winner” out of the hole?

From a press release by Amanda Goodin, Earthjustice and Stephanie Cole, Sierra Club KS

Washington, DC – As Sunflower Electric aggressively pushes for expansion of a coal-fired power plant at Holcomb, Kansas, the Sierra Club, represented by Earthjustice, filed court papers last Friday seeking to stop any additional action in support of the expansion project. The court challenge is to the federal Rural Utilities Service (RUS), which has effective oversight over Sunflower’s business decisions, including the expansion. Groups say federal financing and approval of new power plants should investigate cleaner, smarter options.

Sunflower’s Repeated Financial Blunders and RUS Bailouts made RUS a Stakeholder

An extensive review of financial documents reveals a long and troubled financial relationship between Sunflower and RUS. The result is that Sunflower has essentially been forced to accept strict oversight and control by the owner of its loans; the federal government.

In the early 1980s, RUS, a little known arm of the Department of Agriculture, committed $543 million in loans and guarantees so Sunflower could build its existing 360-MW coal-fired power plant. Soon after the construction of Holcomb 1, Sunflower experienced severe financial difficulties and defaulted on its debt service payments, due largely to having built a bigger plant than there was a market for. In 1987 RUS and Sunflower entered into an agreement to restructure Sunflower’s debts. Even with the restructuring, Sunflower could not meet its debt service obligations and Sunflower’s balance of debt ballooned. RUS and Sunflower entered into another debt restructuring agreement in 2002. RUS conditioned the refinancing on Sunflower handing over significant authority and control of its business operations to RUS. Under the governing loan documents, Sunflower had to obtain RUS approval for any significant project or decision, which led to considerable friction.

“The plan to add another dirty coal plant is essentially a project sponsored by the Rural Utilities Service. We believe the RUS has a duty to review all environmental impacts of the proposed new, polluting coal project. Why should taxpayers take both the financial and environmental risks while Sunflower rolls the dice again on a high-risk project?” said Stephanie Cole, Sierra Club KS.

“Federal agencies with significant interest in projects are by law required to evaluate the environmental impacts of such projects. Sunflower has been financially propped up by the US taxpayer for decades and those taxpayers deserve to know if the project is sound, or a boondoggle that hurts the environment and the health of Kansans,” said Jan Hasselman of Earthjustice who is representing the Sierra Club in the legal action taken on Friday, July 31.

The lawsuit argues that RUS must conduct an environmental impact statement (EIS) evaluating the impacts of—and alternatives to—Sunflower’s expansion before authorizing the project to proceed and before signing off on Sunflower taking on any more debt. Because the expansion would generate vast amounts of global-warming gasses and other harmful pollutants, the project must be fully examined by RUS before moving forward and an environmental impact statement must be written. There is no dispute that RUS failed to do an EIS before authorizing Sunflower to take on even more debt in order to repeat a mistake a of the past; building too much generating capacity.

The project’s air permit was rejected by the Kansas Department of Health and Environment in October 2007. Former Governor Kathleen Sebelius repeatedly vetoed legislation seeking to force this project on the citizens of Kansas, but the new Governor recently inked a deal that seeks to allow the project to go forward.

Read the motion here [redacted to protect business information]

http://www.earthjustice.org/library/legal_docs/rus-sunflower-motion-redacted.pdf