By Phoebe Sweet

Tue, May 6, 2008 (2 a.m.)

A canceled contract for water could signal trouble for a coal-fired power plant planned for the Mesquite area.

Sithe Global Power has to have water for its 750-megawatt Toquop plant but has let the contract with its water supplier lapse. Opponents of the plant are hoping that’s the first sign the developer’s commitment to the plant is waning.

The company has another five projects in advanced development and one under construction, according to its Web site. Sithe’s proposal for Nevada, in contrast, “is probably looking less and less likely to go forward,” said Tim Hay, a former state consumer advocate and Public Utilities Commission member.

The canceled water contract “is probably an indication that they, for internal reasons, have decided to abandon the project ... or at least put it on life support for the time being,” said Hay, an opponent of coal power.

But Frank Maisano, a spokesman for Sithe, insisted this week the project will go forward despite the company’s decision to “back out” of its water contracts because of delays on the project.

Maisano said Sithe made an initial payment to Poquot Water and Power Co., which purchased the water rights from Vidler Water Co. in 2005. But Sithe did not make a second payment to Poquot.

“We would have had to make a big payment,” Maisano said. “We’re not in a position to do that” because state and federal agencies haven’t finalized the plant’s environmental permits.

Maisano would not reveal the amount of either payment or the date of Sithe’s decision to forgo the water contract. He did say Sithe is still under negotiations with Poquot as well as other parties, but he wouldn’t elaborate.

In an area where nearly every acre-foot is accounted for, however, the company may have trouble finding an alternative water source at any price.

The plant would be just over the Clark County line in Lincoln County, a dozen miles from Mesquite, a city projected to grow by 100 percent over the next five years. According to Mayor Susan Holecheck, who opposes the plant, there are likely to be plenty of suitors for any available water rights.

Sithe had planned to use about 2,100 acre-feet of Tule Desert water for cooling and cleaning emissions at the plant. (One acre-foot equals the volume of water necessary to cover an acre with 1 foot of water.)

Hay said merchant power developers such as Sithe are vulnerable to delays in the federal and state permitting processes because they must pour millions of dollars into development before signing power purchase agreements with customers. And without customers, they can’t secure hundreds of millions in financing for the project.

The developers of Toquop have twice gone through the lengthy and expensive environmental review process since 2001, when the plant was originally proposed as an 1,100-megawatt natural gas-fired plant.

Environmentalists say this latest change in plans could mean a third go-round.

The Bureau of Land Management is the steward of the land on which the Toquop plant would sit and has already taken public comment on its initial environmental review of the plant. The bureau has been expected to issue its final review this summer.

But plant opponents argue that if Sithe is getting its water from a source different from the one named in the preliminary review, the bureau should analyze the environmental effects of the new water source and allow for additional public comment before ruling on whether the plant can go ahead.

Western Resource Advocates and 23 other environmental groups sent a letter to the BLM and the state’s Environmental Protection Division late last month asking for additional review of Sithe’s permit applications should its water source change.

Maisano said he doesn’t believe any additional environmental review will be necessary because the change was made before the BLM issued its final ruling on the project.

“I don’t know how this is going to play out ... The reality is, things change,” he said, adding that Sithe would not oppose additional time for “reasonable” public comment if it reaches a new water agreement.

Charles Benjamin, director of the Nevada office of Western Resource Advocates, said environmental groups would have grounds for a lawsuit if the agencies do not take the new water source into account. Environmental groups have promised to sue the state and federal governments over Toquop and two coal plants proposed for Northern Nevada.

Those power stations — a 1,500-megawatt plant proposed by the state’s major utility owner, Sierra Pacific Resources, and a 1,590-megawatt plant proposed by another merchant developer, LS Power Group — would be outside Ely in White Pine County.

The water source for the Sierra Pacific Resources plant has also been changed in the past year. Originally the company was to buy surface water from mining company Kennecott, but now plans to lease the rights to 15,000 acre-feet from White Pine County. LS Power will also lease the rights to 15,000 acre-feet from the county.

Because Sierra Pacific’s initial environmental review hasn’t yet been issued and because the utility has always indicated it might use White Pine County’s water at its plant, it appears to be immune from the additional reviews environmentalists are insisting on in Sithe’s case.