A last minute amendment to the Kansas budget bill seeks to bar the Environmental Protection Agency (EPA) from regulating carbon dioxide linked to global warming in that state. If adopted, the effort — led by Republican State Sen. Tim Huelskamp — could quickly turn into a lesson in unintended consequences.

Observers say the poorly written measure could end up giving the EPA unprecedented oversight over coal permitting and other regulation of utilities in Kansas, at a time when fossil fuels are under political attack in Washington.

The issue has sparked outrage on both sides of the aisle. But perhaps the most worried are backers of Sunflower Electric Corp.’s proposed coal-burning facility. The plant is two years from breaking ground in the town of Holcomb, and the EPA still must approve its revised permit application.

Supporters had hoped for a 2010 greenlight from EPA. But in a May 18 letter to Kansas Gov. Parkinson, Sunflower CEO L. Earl Watkins, Jr. warned that the new budget amendment could delay the permit until after the 2011 deadline for the EPA to issue its “tailoring rule.” The rule is expected to outline what sources of carbon emitters will be regulated, and it could put the plant in jeopardy.

“Under the budget bill, if KDHE [Kansas Department of Health and Environment] staff is prohibited from addressing GHG [greenhouse gas] regulations, they could be forced to delay issuing permits on large projects until FY 2011 is expired,” the letter said. “Otherwise, EPA would step in and implement the GHG piece of the CAA [Clean Air Act], or simply refuse to allow KDHE to issue permits for which GHG regulations would apply.”

Measure Revives Long-Running Battle over Holcomb Plant

The controversy marks the latest chapter in a three-year struggle between lawmakers, environmental advocates and utilities over new coal-fired construction in Kansas.

In 2007, the proposed 2,100-megawatt Sunflower coal facility in Holcomb, some 60 miles from the Colorado border, became the first in the nation to be denied an air permit by a state agency based on potential dangers that greenhouse gas emissions pose to human health and the environment.

After four follow-up attempts by the Kansas legislature to push through plans for the two large coal plants — and four vetoes by then Gov. Kathleen Sebelius — the Sunflower saga finally seemed to be drawing to a close last May, when a backroom deal was brokered between the utility and the current governor, Mark Parkinson.

The agreement gave Sunflower the greenlight to build a smaller 895-megawatt plant at the site.

But now the state legislature appears to be back at it. And this latest attempt to intervene in the coal plant’s fate may have fractured a key relationship between Sunflower and one of its chief advocates, State Sen. Huelskamp (picture).

Huelskamp, a Republican who is also running for Congress in the Kansas 1st District, added a late amendment to the budget bill that would prevent any state agency from spending money “to plan, draft, propose, promulgate, finalize or implement any rules and regulations pursuant to the Clean Air Act [CAA] involving the greenhouse gases identified” in the EPA’s endangerment finding.

In stripping the Kansas Department of Health and Environment (KDHE) of its right to control global-warming pollution, observers say, EPA would get that authority instead.

The move would have negative consequences for all utilities in Kansas, including Sunflower. The odd twist to the story is that Huelskamp has long been a vocal supporter of Sunflower and has received campaign contributions from the utility.

Opponents of the amendment, which now include Sunflower and Westar Energy, another Kansas utility, agree it paves the way for the EPA to take over the permitting process for new coal plants in Kansas. Fearing “regulation overkill” from the feds, they have asked Governor Parkinson to use his line item veto power to kill the amendment.

The budget hit Parkinson’s desk last Tuesday. He now has until Friday to use his authority to remove the controversial measure. At this late stage, its fate remains uncertain.

According to Stephanie Cole, a spokesperson for the environmental group Sierra Club, many in Kansas believe Parkinson will veto the amendment, but there is no guarantee.

“Parkinson has been unpredictable in terms of his energy and environmental policy,” said Cole. “He’s somewhat of a wild card.”

The Clean Air Act Enters the Mid-Term Elections

For the Sierra Club and other environmental groups largely on the sidelines of the dispute, the purpose of the amendment is hazy. According to Cole, what is clear is that it’s a “risky” political tactic on the part of Huelskamp.

“There is speculation that this could simply be a political move to boost [Huelskamp's] campaign,” Cole said.

“However it’s a very risky move if the goal is to please those who want the coal plant built. While he is describing the EPA as radical, this very amendment could lead to more EPA oversight. It’s a very risky strategy that could backfire.”

Scott Allegrucci, executive director of the Great Plains Alliance for Clean Energy (GPACE), a Topeka-based nonprofit group, agrees that the amendment may have been politically motivated.

“You have to consider that there is an egregious amount of pandering to the far right,” Allegrucci said. “In Kansas we have three parties — Democrats, moderate Republicans and conservative Republicans. The most vitriol is between conservative and moderate Republicans.”

One of Huelskamp’s opponents in the Congressional primary, Rob Wasinger, another Republican, is already making the potential EPA takeover of the state permitting process a talking point in his campaign. He has been accusing Huelskamp and Jim Barnett, who is also running in the primary and has not come out for or against the amendment, of political grandstanding.

Paving the Way for an EPA Takeover in Kansas: Why Utilities are Opposed

Amanda Goodin, an attorney at Earthjustice, a California-based law firm, says the amendment is consistent with legislation coming out of Kansas that aims to circumvent the EPA. But it goes much further by revoking all Kansas authority to administer the CAA under its state implementation plan.

Instead, it would leave the EPA as the direct enforcer and issuer of air permits. This is a situation, Allegrucci says, that both state rights advocates and emitters don’t want to see happen.

“There are all sorts of regulatory and litigation implications,” he says.

According to Cole, federal standards will be enforced in Kansas one way or another, if the past provides any indication. When state agencies previously have been denied this authority, she said, the EPA has stepped in.

“The last time the legislature passed legislation that restricted Secretary [Roderick] Bremby [of KDHE] with a provision that restricted KDHE from enforcing regulations stronger than any federal guidelines, the EPA stepped in,” Cole said.

“It would seem that we are taking a gamble again. Once again the state is risking the EPA stepping in and taking over the state’s control for regulating air quality.”

Clare Gustin, vice president of member services and external affairs for Sunflower, says that the company did not know about the amendment in advance.

“We believe there are some unintended consequences and that there may be some confusion about the status of greenhouse gas regulations and how that impacts all sources of greenhouse gases,” Gustin said.

Watkins, Sunflower’s CEO, likewise recognized the bill’s unintended consequences in his May letter to the governor.

“We appreciate the effort of the Kansas legislators to protect Kansas companies from additional regulation. But additional regulation through the Clean Air Act should not be ignored,” he wrote.

The Intent Behind the Amendment

Allegrucci doesn’t believe that Sunflower was unaware of the amendment in advance. He believes that they simply miscalculated.

“Sunflower’s fingerprints have been on every single piece of legislation that has to do wtih air quality,” Allegrucci said. “I find it difficult to believe that given the amount of money and staffing that Sunflower and their allies have applied to this fight that they didn’t know anything about this amendment.”

Huelskamp’s office did not return SolveClimate’s request for comment, but the Kansas Liberty newspaper quotes Huelskamp as saying that he was determined to “oppose the EPA implementation of their cap-and-trade regulatory scheme at every possible opportunity,” although the EPA does not currently implement any carbon trading mechanism.

Huelskamp also referred to the EPA as “radical” in a Lawrence Journal World article.

Sources say that upon adding the amendment in a late-night budget session, Huelskamp mentioned Sunflower and its regulatory struggles several times during his remarks. Sunflower has been saddled with massive debt to Kansas taxpayers. At one point the figure was upwards of $1 billion. The utility still owes $200 million to the Rural Utilities Service (RUS) for its previous coal plant.

Current permitting costs, as well as the pricey legal and legislative battles to get approval for the new Holcomb-based coal plant, have been bankrolled by Colorado utility Tri-State, which will own 80 percent of the plant and its energy output, says Allegrucci.

“The coal plant is Tri-State’s, not Kansas’…Presumably, they don’t want to face the regulatory hurdles and citizen opposition in Colorado,” said Allegrucci, adding that Tri-State is “funneling tens of millions from out of state to fight that battle.”

While Sunflower is now fighting the amendment, Allegrucci said the intention of the measure may have been to help the company more easily build new coal plants, in the wake of its third RUS restructuring in 2002.

“Under current restructuring, Sunflower is incentivized to build three massive coal plants in Holcomb,” he explained.

“In some ways, the worst possible outcome for Sunflower could be one 900 MW plant which is 80 percent owned by a Colorado utility. It’s always been about a three-plant expansion. They are so in debt that they can’t stop [at the 900-megawatt plant]…We have to consider that the intent may have been to clear the way for future power plants from Sunflower.”

Cole agrees with that assessment.

“In the settlement agreement it states that Sunflower is not allowed to submit an application for any additional coal plants until April 30, 2011,” she said. “However, at one point they were proposing 2,100 megawatts. That’s greatly more than what they need. Clearly, Sunflower has a desire for hosting coal capacity for out-of-state utilities as it’s becoming more difficult to build coal in other states.”

The settlement agreement made between Gov. Parkinson and Sunflower, which approved the smaller plant has been questioned on grounds that the governor may not have had the authority to broker the deal and issue the necessary air permit.

In fact, the EPA stepped in last July and mandated that Sunflower resubmit its request for a permit. The agency also said that Kansans should be given an opportunity to participate in public hearings. KDHE is in the midst of that process, and despite Sunflower’s confidence about the permit, it still must be approved by the EPA.

Allegrucci says that the irony is that if Sunflower and the legislature had not tried to circumvent KDHE through the legislative process in the first place, they might already be through the prescribed regulatory and judicial process for reevaluating a permit denial.

“As a citizen of the state, what’s sad is that this is the third year in a row that Sunflower’s political allies have done whatever they want to do with the legislative process in Kansas in an attempt to host an unnecessary, polluting coal plant that benefits Colorado,” he said.