Coal plant plan: Alone but unfazed

By Alexandra Berzon (contact)

Tuesday, March 10, 2009 | 2 a.m.

Chris Morris

Sithe Global, the last of three companies to seek to build a new coal plant in Nevada, now has the last coal plant proposal standing in the state — for now.

LS Power announced last week that it was postponing a 1,600-megawatt plant planned near Ely to focus on a power transmission line for renewable energy. The announcement echoed a decision last month by NV Energy to halt development of a 1,500-megawatt plant planned nearby.

The two announcements in quick succession were part of a quick reversal from what was, not too long ago, a mad dash to build coal plants in the state and nationwide.

Sithe Global executives say their project in Lincoln County, near Mesquite, will be the exception to the postponements and project cancellations.

But some are doubtful. National opponents of coal plants say the continuation of projects is becoming increasingly unlikely amid a regulatory and economic climate that has become unfavorable to new plants.

“We’re finally getting an honest accounting of the cost of building coal plants that we haven’t had in the past,” said Bruce Nilles, director of Sierra Club’s National Coal Campaign. “The more sophisticated utilities and developers have looked at the tea leaves and run the numbers and determined that the cost of coal is greater than the alternatives.”

Congress is expected to debate climate change legislation that will likely create costs for carbon emissions from coal plants. The Environmental Protection Agency also recently said it is considering regulating carbon emissions of new coal plants under the Clean Air Act, a move that could have far-reaching effects.

The economic uncertainty caused by the possibility of these changes to government regulation prompted NV Energy to shelve its Ely Energy Center, Chief Executive Michael Yackira recently said.

Nationwide, the Sierra Club estimates that of the plant proposals it has tracked since 2002, 94 have been halted, while 59 are still active. Just 22 have progressed.

Local activists found LS Power’s reversal stunning because the White Pine Energy Station was further along in the process than the other Nevada projects, having received environmental approvals from the Bureau of Land Management.

LS pulled out days before what was expected to be a heated hearing before the Public Utility Commission.

Brian Schweitzer, the pro-coal governor of Montana, recently told the Associated Press that coal projects still in development are “one press release away” from aborting.

But Sithe Global insists it does not intend to issue that press release for its 750-megawatt Toquop plant.

“We plan to start construction early next year,” said Thomas Johns, a project manager for Sithe Global. Johns expects the final environmental statement for Toquop from the Bureau of Land Management to be published in the Federal Register in the next few weeks.

Johns says Toquop has some advantages that its counterparts planned for Ely did not: It’s closer to Las Vegas, requiring less investment in transmission to transport electricity to a customer base, and it is half the size of the other planned projects.

“I don’t think anybody in the industry believed all three projects were ever going to be built,” Johns said. “We believe the most cost-effective will go forward.”

Johns said he is working with the theory that carbon regulations won’t “make coal uneconomic” and be “too punitive on coal.”

Those assumptions will first be tested in front of the Nevada Environmental Protection Division.

The division had plans for a hearing in two weeks to allow public comment on the agency’s decision not to regulate carbon dioxide emissions under the Clean Air Act. (Because LS put its application on hold, a hearing won’t be held until the agency completes its review of the Toquop application.)

“To try to deal with climate change in the Clean Air Act is going to have a great deal of unintended consequences,” said Environmental Protection Division administrator Leo Drozdoff. “A better solution is to deal with climate change on its own.”

But those who oppose the project say several factors could make it increasingly difficult for the Toquop plant to get financing. They say the project is on shaky ground because it lost its water rights.

But Johns says the company has reacquired options for water rights.

The project does have other challenges, such as finding a customer base, a problem LS Power also faced.

One potential customer was eliminated two years ago when California banned utilities from purchasing new coal power from out of state.

Johns said he intends to sell to Las Vegas and small utilities outside the city.

“We have faith that the utilities in Southern Nevada will be the most likely candidate,” Johns said.

NV Energy controls more than 90 percent of the state’s electricity market. Yackira recently said he thought it was unlikely either LS Power or Toquop would be off the ground anytime soon — a statement some interpreted to mean NV Energy is unlikely to become a customer of either plant.

NV Energy spokesman Mark Severts disagreed with that interpretation.

“If the power purchase price were right, we’d pursue it,” Severts said. “If it’s too expensive then we wouldn’t.”

Unlike the Ely projects, Toquop faces large-scale opposition from its closest population center, Mesquite, where residents and leaders fear it will hurt air quality in the area. For these Toquop opponents, LS Power’s announcement was reason for hope.

“My first thought was that this is the trend, this is the step that says the big utility producers are using caution in how they proceed with these big projects,” said Michele Burkett, a local activist. “I was ecstatic personally.”