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National Energy Market, Political Trends Foster Manistee Coal Plant

White House move to spur mining, ease air regulation big factors

March 14, 2004 | By Keith Schneider
Great Lakes Bulletin News Service

US Bureau of Land Management
  White House proposals to weaken air quality laws and aid the mining industry are making coal-fired power plants more attractive to build and operate.

MANISTEE – As word spreads along the northern Lake Michigan coast about a Houston company’s plan to build a 425-megawatt coal-fired power plant here, skeptics and proponents are asking the same questions.

Why is the plant, the largest new coal-powered electric utility proposed for Michigan in two decades, coming to this coastal city of 6,600? And why, in the face of an abundance of electric power that has driven wholesale prices to the lowest level in more than a decade, is such a large plant even being considered now?

Joe Tondu, the plant’s principal developer, who was raised in nearby Arcadia and attended Frankfort’s public schools, casts his answers in almost altruistic terms involving local job, economic, and energy needs. He claims that the $700 million facility, called Northern Lights, will be the cleanest coal-powered electric plant in Michigan and will provide more than 100 temporary construction jobs and 60 permanent full-time positions in an industrial city struggling to find a new economic base.

Mr. Tondu also has a track record in the region; in 1990, his Texas-based Tondu Corporation opened a 60-megawatt plant in Filer Township, next door to Manistee.

Tondu Proposal One of 94 Across the Country
Research by the Great Lakes Bulletin News Service, however, reveals that much more underlies Northern Lights than Mr. Tondu’s local ties. Government officials, energy industry executives, and environmental authorities say the plant reflects a convergence of powerful national energy market developments and, to some degree, political and environmental regulatory trends that are prompting a nationwide surge in proposals for new coal-fired power stations that is most concentrated in the Great Lakes region.

An analysis published on February 24 by the National Energy Technology Laboratory, a unit of the federal Department of Energy, identified 94 coal-fired plants in various stages of planning, by far the most such proposals in years. Although the report said that plans to build major new power plants are “often speculative and typically operate on boom and bust cycles,” experts at the Energy Department predict that up to half of the coal-fired utilities will eventually be built. Illinois leads all states with 10 proposals; Wisconsin has five. Utilities in the Great Lakes states plan 23 new coal-fired plants. Northern Lights is the only such proposal identified in Michigan.

“Five years ago, if you had prepared the same list, it would have been dominated by natural gas plants,” said Tom Sarkus, the director of advanced energy systems at the National Energy Technology Laboratory, speaking from his office in Pittsburgh. “Natural gas prices were comparatively low. Natural gas prices have gone up.”

Price of Natural Gas Spurs Fuel Switch
Indeed, a chief factor prompting new interest in burning coal to make electricity is that natural gas prices have more than doubled since the 1990s. Utilities embraced cleaner-burning gas principally for generating electricity during peak summer demand. Michigan utilities operate 44 gas-fired plants, which produce about 10 percent of the state’s electric power, according to the Energy Information Administration.

Although construction costs for a gas-fired power plant are typically about a third less than for a coal-powered plant, the current high cost of natural gas defeats that initial advantage. Today, capital costs aside, it costs four times more to generate a unit of energy using gas than it does using coal. Energy experts, including Mr. Sarkus, say that while gas prices will retreat, they will still remain relatively expensive.

The price difference elates the mining industry, which predicts coal consumption this year will reach 1.16 billion tons, 3.5 percent more than last year; most of it will be burned to generate electricity.

White House Promotes Coal And Dirtier Air
But the national surge in coal plant proposals is also supported by the Bush administration and Congressional Republicans, who back new federal research spending for cleaner coal-burning technology, tax credits to expand investments in mining, opening  new stretches of the public domain in the West to new coal leasing, and loosened clean air standards that save money on pollution controls. Sixteen of the 25 states where the $21 billion-a-year American coal industry operates are solidly Republican. Wyoming, among the most Republican states in the country, supplies more than a third of the nation’s total coal production.

Critics point out that while the president’s 2005 budget includes more than $400 million meant to help perfect cleaner coal-burning, by far the dirtiest process for generating electricity, Mr. Bush allowed an important tax credit that was spurring the development of wind power — a very environmentally benign energy source — to expire in December.

The White House is also pressing for changes in the 1970 federal Clean Air Act that would allow older coal-fired power plants in Michigan and other states to modernize their plants to increase power production — and the amount of coal they burn — but avoid improving air pollution controls. More than a dozen states and national environmental organizations are mounting a legal attack on the proposed changes, which a federal appellate court blocked on December 24, pending a full hearing on the matter. Experts agree that the nitrogen, sulfur, carbon dioxide, particulate, and mercury emissions from coal plants contribute to smog, acid rain, global warming, asthma, and toxic contamination in fish, wildlife, and people.

Eastern state officials and environmentalists also say that the White House is attempting to help the coal and utility industries by trying to significantly weaken a Clinton-era plan that proposed the use of emerging technologies to reduce total national mercury emissions from coal-burning plants from its current 48 tons a year to five tons a year by 2008, approximately a 90 percent reduction. The White House and EPA, however, have proposed reducing mercury emissions 70 percent by 2018, and critics worry that, given the lack of any specific rules attached to the proposal, the reduction could be delayed until 2030 or later.

“The Bush administration’s proposal is designed to do almost nothing for at least the next 20 years,” said David Hawkins, director of the climate center at the Natural Resources Defense Council, a national environmental organization.

But Mike Leavitt, the EPA administrator, insists that the administration’s 70 percent plan is sound. “The EPA is charged with writing a regulation that works for an entire industry,” Mr. Leavitt wrote in an article for the Detroit Free Press last month. He added that the administration’s proposed mercury reductions are not larger because the “technology is simply not there.”

Mercury has emerged in recent months as a major health issue fraught with great economic significance for the utility industry and political consequences for both major parties. Trace amounts of mercury can cause extensive nervous system damage in people and animals; a teaspoon of it can contaminate a lake. Michigan has posted mercury-related health warnings about fish consumption on all of its inland lakes; 42 other states have also posted similar warnings. But the coal and utility industries have fought for decades to avoid being required to eliminate mercury emissions, fearing it would significantly drive up generating costs.

The G.O.P and Coal
The administration’s less rigorous clean air standards, environmentalists add, also have political implications. By improving the economic attractiveness of coal-fired power, say environmental leaders, the Bush administration and Republican lawmakers are helping select industries in the traditionally Republican areas of the country, and along with it, the party’s electoral prospects.

“If you look at the electoral map, and consider the Bush administration’s political base, these environmental and energy policies are geared to promoting that base in the West and South,” said John Thompson, advocacy coordinator for the Clean Air Task Force, a national environmental group. “They’ve gone out of their way to promote the interests of their core constituencies, western coal interests and southern utilities.”

During the Bush administration, southern utilities have pushed hard for increasing the use of fossil fuels, particularly coal, while also lobbying for changes in the Clean Air Act that would allow them to avoid adding more pollution controls. For instance, the Atlanta-based Southern Company, the nation’s second-largest utility, heavily influenced Vice President Dick Cheney’s fossil fuel-promoting energy task force in 2001. The White House responded with a controversial proposal that would allow utilities to modernize their plants without adding new control equipment to reduce polluting emissions.

Many of the participants in this high-level effort to ease regulation of utility companies have deep roots in the national Republican Party. Internal documents from the energy task force, which has been the focus of congressional and judicial investigations, show that among the Southern Company’s lobbyists were Haley Barbour, the former Republican Party chairman and now the governor of Mississippi, and Marc Racicot, the president’s 2004 campaign chairman.

Tondu Discounts Political Influences
Jim Ford, an engineer and the Tondu Corporation’s managing partner, acknowledged in an interview that the long-term outlook for high natural gas prices and low coal prices prompted the company’s decision to build a coal-fired station in Manistee. Industrial companies and Michigan utilities burn roughly 33.6 million tons of coal annually at 24 utility plants and eight more operated by industrial companies, according to the Department of Energy. Mr. Ford discounted the Bush administration’s resistance to new environmental safeguards as a factor in choosing which fuel to use in the Manistee plant.

“I don’t see it as a driving factor for the use of coal,” said Mr. Ford, who’s been with Tondu since 1990. “Our plant will meet whatever regulations are applicable. We’ll be one of the cleanest plants in the country.”

Mr. Ford said Tondu proposes to build its new plant, which would burn roughly 1.6 million to 2 million tons of coal a year, for a consortium of 19 Michigan municipalities, most of them small cities along Lake Michigan’s fast-growing coast that face rising power costs because existing plants are aging and natural gas prices are soaring. Northern Lights, he said, would provide steady power at very competitive prices, starting at around four cents per kilowatt- hour.

Utility experts, though, said the municipalities could very well gain the same or lower prices by negotiating long-term contracts for electricity from other companies now, while wholesale electricity prices are at their lowest level in more than a decade, about three cents per kilowatt-hour.

“There’s an oversupply in the Midwest power market,” said Howard Learner, executive director of the Environmental Law and Policy Center, a regional research and legal advocacy organization based in Chicago. “We’re swimming in power and there will be excess capacity in the Midwest for at least five to six years.”

But Mr. Ford said that it is not at all clear if the surplus will exist in six to 10 years, when Northern Lights would begin producing power. Mr. Ford said building a new plant takes time: “It takes two years in the permitting stage, three to four years in construction. By 2010 most regions will need more power, including the Midwest.”



Coal Plant Proposal Denied
Manistee, April 15, 2004 --   The city planning commission here received a standing ovation when it voted 8 - 0 to strike down plans for a coal-burning power plant. The decision follows months of heated public debate and kills the Manistee Saltworks/Tondu Corp. proposal to build Northern Lights, a 425-megawatt facility on the shores of Manistee Lake, the Traverse City Record-Eagle reported.
      "With the facts presented before us, it was the only decision we could make," commission chairman Roger Yoder said.
      Planners voted earlier this month to draft a resolution to deny the special-use permit for the plant after finding many "unacceptable" issues surrounding the plan, including mercury emissions and the economic impact the plant could have on the Lake Michigan community.
      A version of the resolution adopted Thursday night also cited the plan's incompatibility with adjacent land uses, its impact on public services, and substantial public comment and opposition.
      "The use is not reasonable, nor designed to protect the health, safety and welfare of the community," Erin Kilpatrick, a planning commission consultant, read from the resolution.
      Tondu president Joe Tondu said he did not know if he would push forward with the plan, either by altering it or filing suit against the city.
      "It's discouraging right now," he said. "It's really premature to think about litigation. I'm not a big fan." See complete article here:

Tondu Payment in Lieu of Taxes Rejected
MANISTEE, March 18, 2004 -- In a lopsided vote that offered the first official measure of its members' views of the Tondu Corporation's proposed coal-fired power plant, the Manistee City Council voted 6 to 1 on March 16 to reject an offer by the company to pay an annual municipal service fee of $2 million. The payments would have been in lieu of property taxes on the proposed facility; the project as currently configured would be tax-exempt because it would be owned by two Michigan municipal power consortiums.

Estimates of the plant's annual property tax bill, if it were privately held, range from $11 million to $16 million. Several council members said that, given the project's environmental risks, strain on city services, and possible negative impact on other property values throughout the city and the city's burgeoning tourist industry, the proposed $2 million fee was too low.

The city council vote came on the heels of the first working session held by the Manistee Planning Commission in regard to the company's application for a special use permit for the plant.

Most members of the commission had previously listened to almost nine hours of public testimony about the plant, during which almost 100 citizens spoke passionately about the controversial proposal. Those speaking against the plant, who outnumbered those speaking for it by roughly a 4 to 1 margin, had indicated that they came from a wide range of backgrounds and careers; they included farmers, doctors, housewives, students, biologists, small-business owners, hunting and fishing enthusiasts, emergency workers, and retirees. All but a few of those who spoke in favor of the proposal, however, indicated they worked in professions that would enjoy either a temporary or long-term boost in local employment from the project--particularly the construction trades.

At Tuesday night's working session commission members began considering the huge amount of information that had been submitted to them about the project. They discussed questions revolving around the appropriateness of the proposed facility's use to the zoning of its site and whether its presence and operation would interfere with or put undue stress on the city's roads, public safety services, bridges, water treatment plant, and other infrastructure. It was apparent that the commissioners believe that the proposed facility's use would be appropriate to current zoning. But the group was split on how well the city would be able to handle the additional strain on its infrastructure.

The planning commission continues its deliberations this evening at 7 p.m. at the Manistee Middle School, located at Sixth Street and Maple. Tonight the commission will consider questions that some of its members indicated they believe are far more difficult: The appropriateness of the project to adjacent property use--which is heavily residential--and the effect of the project on the city's overall health, safety, and welfare.

The planning commission intends to hold one more open working session on March 23 and will formally vote on the special use application at its April 1 meeting.

Flurry of Charges Leads EPA to Revisit Mercury Regs
WASHINGTON -- Amid a swirl of angry charges from states, environmental groups, and its own employees, the U.S. EPA is promising to revisit controversial proposed regulations on mercury emissions from power plants, according to a March 16, 2004 report in the Los Angeles Times. Several EPA staffers -- who remain anonymous to avoid retaliation -- revealed what environmental groups have long suspected: The process whereby the regulations were developed was driven almost entirely by political appointees doing the bidding of industry lobbying groups and a sympathetic White House. According to the staffers, an expert advisory board's 21 months of work was ignored and staffers were instructed not to conduct the analysis the board requested. Language for the regulations was taken directly from industry lobby proposals. The EPA claimed its regulations would reduce mercury emissions from power plants by 70 percent by 2018, but its own database reveals this to be utterly implausible. EPA Administrator Mike Leavitt is now backing away from the claim and promising to conduct the very analysis staffers were forbidden to undertake previously. Mr. Leavitt called post-regulatory analysis the agency's "normal process."

Keith Schneider, a journalist and editor, is deputy director of the Michigan Land Use Institute. Reach him at keith@mlui.org. Keith Breuker, an Institute member and volunteer, provided research assistance for this article. Jim Dulzo, the Institute's managing editor, provided the update on city council and planning commission meetings. He can be reached at jimdulzo@mlui.org.

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