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Is Snyder Readying a New Coal Rush?

Dropping defense of ‘need’ rule, he endorses costly new plants

March 17, 2011 | By Jim Dulzo
Great Lakes Bulletin News Service

  Michigan spent close to $1.5 billion in 2008 to import coal, which provided 60 percent of the state’s electricity.

Recent actions by Governor Rick Snyder’s administration regarding Michigan’s energy future are raising concerns that the state could again be facing a rush to build expensive, new, coal-fired power plants.

Since taking office on Jan. 1, the Snyder administration has supported two court rulings favoring coal plant proposals in Holland and Rogers City. The administration also approved a permit for the Holland plant, and two weeks ago the governor, who campaigned as a “green Republican” last fall, told the Michigan Building and Construction Trades Council that he supports building more coal plants.

Mr. Snyder’s tilt toward new coal power is drawing fire from clean energy advocates, who warn that the administration’s moves could backfire legally and economically.

Allowing the two court decisions to stand, they point out, could limit Michigan’s future ability to require utilities to use the cleanest alternatives available—including efficiency, wind, and solar power—to meet future energy demand and boost the state’s emerging clean-energy manufacturing sector.

Evidence also continues to grow that building new coal plants in the state would sharply spike both residential and business electricity rates and ignore less expensive ways to meet the state’s future energy demands.

Coal opponents had cheered the Snyder administration’s first announcement about coal plants, made shortly after it took office: It would appeal a Dec. 15, 2010 Ottawa Circuit Court ruling striking down the state’s denial of the Holland plant’s permit. But when the Missaukee Circuit Court made a similar ruling, on Jan. 28, striking the Rogers City permit denial, the administration backpedaled, saying it would not appeal either decision and, instead, promptly reconsider both permit applications.

Two weeks later, on Feb.11, the Department of Environmental Quality approved the Holland permit, which the agency’s forerunner, the Michigan Department of Natural Resources and Environment, had denied late last summer.

Clean Energy Now, a coalition of national, state, and local citizen groups, blasted the approval of the 78-megawatt plant, saying it would greatly increase ratepayers’ electricity bills.

“Over the next 20 years, ratepayers can expect to pay at least $106 million more than if other [energy] alternatives were to be implemented in Holland,” a coalition statement said. “At a time when people are already struggling with energy costs, this is a slap in the face. Today, the DEQ put Big Coal profits and 19th-century technology ahead of the strong clean-energy future that Holland and Michigan residents deserve.”

CEN members are now deciding whether to appeal the court rulings, DEQ’s Holland permit approval, and its probable approval of the pending Rogers City permit.

What Does ‘Need’ Mean?
As it did during the Holland permit reconsideration, the coalition submitted comments to DEQ about the Rogers City reconsideration. Those comments, sent to the agency last Friday, argue that, despite the court decision, the agency has the power to turn down Rogers City again, largely for the same reason it did last May.

The comments focus on a central question about future environmental regulation of new power plants—whether state regulators can consider “need” in their decision-making.

Both the Holland Board of Public Works and Wolverine Power Supply Cooperative, which wants to build the Rogers City plant, say that the court decisions confirm that using “need” is improper.

Brad Wurfel, Governor Snyder’s new DEQ communications director, indicated his department now agrees with both utilities on that point.

“We were told clearly by the courts that the standards by which permits were denied were illegal,” Mr. Wurfel told the Great Lakes Bulletin News Service. “In terms of going forward, the court was clearly telling us to re-review permits without the ‘need’ standard applied.”

But Natural Resources Defense Council attorney Shannon Fisk, who in December, joined Sierra Club and MDNRE lawyers in unsuccessfully defending that agency’s denial of the Rogers City permit, disagrees.

“Both courts left open the fact that the MDNRE [now DEQ] can deny a permit for a lack of need or the existence of alternatives to coal plants,” Mr. Fisk said, “but the denial letters must specifically tie that denial to concerns about air quality. But the agency never did do that.”

An ‘Alternative’ View
Last year’s decisions by the state to deny air permits for the Holland and Rogers City plants depended heavily on a section of the Clean Air Act, the federal law that controls Michigan’s own clean-air regulations. That section, 165(a)(2), allows “interested persons…to appear [at public hearings] and submit written or oral presentations on the air quality impact of such source, alternatives thereto, control technology requirements, and other appropriate considerations.”

G. Vinson Hellwig, chief of DEQ’s Air Permitting Section, cited that language when he wrote the permit denial letters. But in an interview last month, he told GLBNS that he “knew we were in a weak position” when staff denied the permits, and expected litigation.

Mr. Hellwig also said that he now views 165(a)(2) differently: Based on the court decisions, it was determined to be incorrect to expand the “alternatives” consideration to include “need” for the plant, which he said “had not been [legally] tested [before].”

“Two courts said we can take the comments [about alternatives]” he said, “but not use them as a basis for denial…We don’t have that broad of an authority.

“Our read of the courts in both case,” he added, “is that ‘need’ was applied to whether the company needed the additional generation, and that is inappropriate, in violation of our process of the law.”

But Mr. Fisk rejects that argument.

“Both court decisions made clear that MDEQ must evaluate the public’s concerns that proposed air quality impacts are unnecessary or can be avoided. If the law requires the agency to take comments,” he said, “it would be absolutely meaningless if they can’t deny a permit based on those comments. It sounds to me like the agency is misreading the courts’ opinions in ways that are contrary to what the law requires.”

Mr. Fisk said that both court decisions confirmed that federal law requires states to consider the need for and alternatives to a proposed source of pollution where the public has raised concerns about air quality impacts and ways to avoid such impacts—something that occurred during the three public hearings the state held concerning Wolverine’s permit application.   

“The public has made clear that it does not want Wolverine polluting their air with 9,000 tons of unnecessary air pollution every year and would prefer that Wolverine pursue energy efficiency, renewable energy, and other cleaner alternatives that will create more jobs and save ratepayers money,” he said.

“The DEQ still has clear authority to deny this permit and should do so,” Attorney Fisk said of the Rogers City plant. “Certainly this battle is far from over. There are a number of legal requirements, including needs and alternatives, CO2, [and] compliance with various air quality standards that would have to comply with before any permit could be issued.

“What hasn’t changed is that this plant is simply a bad idea, regardless of whether the law says so,” he continued. “Wolverine is wasting its ratepayers’ money. It’s spent $22 million so far, and it will cost $2 billion more to build it. Not a single coal plant has broken ground in two years, and there is a reason for that. Numerous companies have realized that it is a bad idea economically, and that is why 150 proposed plants [across the country] have been cancelled.”

Meanwhile, Mr. Werful indicated that his department is now working with Wolverine to reprocess the permit application. 

“We have been in touch with Wolverine to figure out what is going to happen next,” he said. “They are interested in getting it done right, not ‘right now.’ They want to make sure any permit will stand up to a court challenge.”

Dollars and Sense
Meanwhile, official findings, recent news reports, and several new studies indicate that building new coal plants no longer makes economic sense.

For example, CEN’s longstanding assertion that the cost of new coal plants would harm electric ratepayers received a big boost last May, when MDNRE rejected the Rogers City permit. Mr. Hedwig’s rejection letter, which drew on work by the state’s utility rates regulators, said that the 600-megawatt plant would hike customers’ rates by about 60 percent. The rate regulators estimated the plant would add $76 a month to the average residential electricity bill.

Wolverine officials, who have not updated their proposal’s original, 2006, $1.3 billion cost, dismissed the projections as wildly inaccurate. But recent news articles from Wisconsin and elsewhere apparently confirm them.

According to the Milwaukee-Wisconsin Journal Sentinel, Wisconsin-based We Energy’s new, 1,200-megawatt Oak Creek coal-fired power plant has triggered big jumps in its customers’ rates.

“A typical bill was almost 40 percent higher last month than it was six years ago, the first year of construction of the power plant project,” the Sentinel reported in its Feb. 26 online edition.

In a Journal Sentinal article published last November, Kyle Christianson, of the non-partisan Taxpayers Alliance, said the costs of building power plants and rising prices for natural gas and particularly for coal, whose price has doubled since 2000, are the main causes of Wisconsin’s soaring electricity rates.

Meanwhile, clean energy advocates’ predictions that Michigan’s mandated renewables would cost less than utilities claimed they would are proving to be correct. According to a recent news report, the prices these utilities are paying for recently installed utility-scale wind power are cheaper than the contracted price of power from new coal plants.

The article said that Consumers Energy spent only $23 million of the $78 million it collected from customers to finance its mandated clean-energy investments. The investor-owned utility is now asking the state for permission to return the surplus money to its ratepayers—a move clean energy advocates promise to contest, given that the money could be invested in other, cleaner, less-expensive energy options.

Also, last month, the Union of Concerned Scientists weighed in on the cost of coal power. UCS’ new report, A Risky Proposition: The Financial Hazards of New Investments in Coal Plants, warns that the rising cost of coal, new coal plants, new coal regulations, and coal-burning’s health effects make investments in either new plants or cutting emission from old ones a bad business strategy.

Another study, released a few weeks earlier by the Harvard Medical School, examined coal’s “externalities”—a term economists use for the costs of a product or service not reflected on company balance sheets or products’ prices.

The study, “Full accounting of the life cycle of coal,” published by Annals of the New York Academy of Sciences, added up the costs the health effects, waste streams, and hazards of mining, transporting, processing, and burning coal. The authors said they used conservative assumptions in calculating coal’s externalities and ignored factors that were too difficult to price.

“We estimate that the lifecycle effects of coal and the waste stream generated arecosting the U.S. public a third to over one-half of a trillion dollars annually,” the Harvard researchers said. “Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of non-fossil fuel power generation, along with investmentsin efficiency and electricity conservation methods, economically competitive.”

The Clean Energy Now Coalition includes Sierra Club, Michigan Environmental Council, the Natural Resources Defense Council, Clean Water Action, Ecology Center, Environmental Law and Policy Center, Great Lakes Environmental Law Center, MidlandCARES, Michigan Energy Alternatives Project, Citizens for Environmental Inquiry, Progress Michigan, and Michigan Land Use Institute. Jim Dulzo is MLUI’s managing editor. Reach him at jimdulzo@mlui.org.

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