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Tondu Pushes ‘Clean Coal,’ Sues City That Demanded It

Some experts say efficiency is cheaper than building more power plants

August 15, 2004 |
Great Lakes Bulletin News Service

MLUI/Gary Howe

At a public hearing, Joe Tondu promised residents of Manistee, Mich., that he would build the country’s cleanest coal-fired power plant. City officials rejected the proposal because, among other reasons, they discovered that it did not use the most non-polluting technology available.

MANISTEE — Joe Tondu, who was raised just up the coast in Arcadia, but who settled in Texas and formed his own energy development company there, is fond of saying, “Michigan is my home.” It is often Mr. Tondu’s way of explaining why he is so unrelenting in his campaign to build a coal-fired power plant along this stretch of Lake Michigan shoreline.

But while Mr. Tondu’s aggressive personal style helped him build his Houston-based Tondu Corporation into a player in that city’s bare-knuckles energy industry, it has proved far less successful in this town of 6,600. His proposal to build a $700 million, 425-megawatt, coal-fired power plant within the city’s limits stirred an uproar when he made it last fall. The city spent more than $100,000 investigating the proposal’s environmental, health, and fiscal consequences, and conducted months of public hearings. Hundreds of people attended; most spoke out sharply against the plant. In April, the Manistee Planning Commission unanimously denied Tondu a special-use permit to build what would have been a 25-story-tall facility.

Now the Texas businessman is the talk of the town again. In twin moves that strike some in Manistee as either revenge or manipulation, he is both shopping a proposal for a new, cleaner plant design to a number of communities and suing Manistee for $100 million for rejecting his original, dirtier design. Many townspeople worry that the suit could cost them dearly; while some legal observers say that it could also undermine the zoning power of local governments in Michigan. And still others argue that such a big new plant is unnecessary in this state.

But Mr. Tondu claims his quest to bring more coal power to Michigan, or perhaps to Indiana or Ohio, simply reflects big energy market opportunities throughout the region, which he insists will soon be short on electricity. Buttressing his determination is the Bush administration’s steady promotion of coal as a source of fuel for generating electricity. The White House has weakened clean air regulations, provided industry subsidies, and opened new tracts of federal land in the west for coal mining. 

One more factor working in Mr. Tondu's favor is Michigan’s near-complete lack of fiscal or policy incentives for energy efficiency. Without those state incentives, most experts agree, the demand for more coal-fired plants in Michigan will indeed grow, not fade.

It’s Cleaner, but Is It Necessary?
Mr. Tondu’s latest idea for using coal to generate electricity in Michigan involves a more environmentally friendly technology than what he proposed for Manistee. It is called “integrated gasification combined cycle” (IGCC) and uses a chemical process to aid combustion. The technology is being tested in government-subsidized, privately owned plants in Florida and Indiana. Mr. Tondu now wants similar support from the federal Department of Energy in order to reduce what he says are the economic risks of using a commercially unproven technology.

David Gard, an energy policy specialist at the Michigan Environmental Council in Lansing, agrees that IGCC technology significantly lowers emissions and its “potential environmental impact is far less when you compare it to conventional coal plants.” For example, compared to traditional coal-fired plants, the 250-megawatt IGCC plant built by the Tampa Electric Company with federal support cuts particulate matter and sulfur oxides by at least 95 percent and mercury by 50 percent.

But Mr. Gard said that it still makes better financial sense to employ energy efficiency technology rather than new coal-burning technology to meet the state’s electrical needs. He said that is because a capital investment in better insulation and more efficient appliances, heating systems, and industrial technologies “generates” more electricity by saving it than does an equal capital investment in a new power plant making “new” watts.

Tom Stanton, who staffs the Michigan Public Service Commission’s competitive energy division, agrees: “For any individual coal plant that you look at, there is absolutely no doubt in my mind that we can conserve away the need for it.”

Another energy expert, Dr. Martin Kushler, points to studies conducted while he worked for the MPSC. He says those studied priced energy efficiency measures at between 1.5 and 2.5 cents per kilowatt-hour saved, but priced new, coal-fired power at 6 cents per kilowatt-hour. Dr. Kushler, who now directs the utilities program at the American Council for an Energy Efficient Economy, used those studies in the mid-1990s to initiate a statewide energy efficiency program that used incentives and penalties to encourage utilities to participate. The program died in 1995, however, during the administration of former conservative Michigan Governor John Engler, due to both utility company opposition to the program and little support from Engler-appointed MPSC commissioners.

Dr. Kushler said that is why Michigan has such a weak energy efficiency program today while approximately 20 other states, including neighboring Wisconsin, Minnesota, and Ohio have highly effective ones. He asserts that if Michigan invested in energy efficiency at the median level of those states, about $100 million annually, it would eliminate the need for a large power plant every few years. Currently, he says, Michigan spends less than $2 million per year on efficiency.

Attacking the “Environmental Taliban”
Mr. Tondu’s take on energy efficiency is strikingly different. He insists that the demand for power is growing so rapidly in Michigan that conservation measures simply cannot keep up. And, he adds, the decision to create more energy by either conserving it or directly generating more of it at new power plants should follow free markets, not academic studies.

“Do you believe in freedom?” Mr. Tondu asked. “In a free market, the market decides which one goes.”

He has no patience for government efficiency mandates because, he says, they end up costing Americans some of their freedom. “The government wants to mandate that you have a low-flow toilet so you have to flush twice,” he said. “Now there’s a real simple way to have conservation. The question is, ‘Is your right to have access to electricity something you believe should be controlled by the environmental Taliban?’”

Mr. Tondu, who declined to talk about the court case he is pressing against Manistee, added that because he believes the jury is still out on whether IGCC technology will work economically, it may be four or five years before building a “clean coal” facility is feasible. But he still hopes to have a complete proposal ready by next year.

A Costly Case 
Mr. Tondu's record of aggressive litigation in Manistee, though, could make officials in other communities wary. A $100 million court decision against Mainstee would bankrupt the city, which has an annual budget of just $5 million, according to City Manager Mitch Deisch. The suit is the second legal attack on a Manistee County local government by Tondu; earlier this year the company lost a ten-year, tax-related, $8 million lawsuit against Filer Township, which is adjacent to the city. One Filer Township official said that if Tondu had won that case it would have bankrupted the township and harmed the area’s public schools and library.

But others say that, beyond harming a small town’s finances and possibly impairing Mr. Tondu’s ability to do business in the region, the new case threatens to set a dangerous legal precedent. The company claims in its suit that the City of Manistee violated its constitutionally guaranteed property and civil rights, based on rights enumerated in the 14th Amendment to the U.S. Constitution, an amendment passed shortly after the Civil War to protect minorities, particularly recently freed slaves.

Tondu’s lawyers are using the amendment in their case because they believe it will help them expand the case from a normal court hearing over a zoning dispute into a full-blown jury trial. The suit claims 14th Amendment protection because, it says, the city’s decision to reject the coal-fired power plant was based on “discriminatory, unreasonable, arbitrary, and capricious enforcement of its zoning ordinance.”

This approach bothers some legal experts, including Chris Bzdok, an environmental lawyer in Traverse City. He points out that allowing a jury trial for a zoning decision effectively transfers decision-making power on such decisions to a group of people — a jury — who are not on a planning commission. And that, he added, would strike a huge blow against local zoning power, even if the city wins the suit.

“[Tondu] wants a jury trial,” said Mr. Bzdok, “because the idea of having a jury trial on zoning issues fundamentally realigns the entire relationship constitutionally between the courts, local governments, and developers. And that’s a slippery slope.”

Stephanie Rudolph, a junior at Haverford College in Pennsylvania, reported for the Institute’s news desk this summer. She can be reached at stephanie@mlui.org.

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