Environmental Law

Government Authorizing Coal Projects -- Illegally -- Environmental Group Says

By Dennis Pfaff and Kevin Livingston, Editors

Despite acting earlier this year to withdraw direct support for coal-fired power plants, an influential government agency is continuing to indirectly authorize billions of dollars of new investments in such projects, and doing so illegally, an environmental group has charged.

In a recent letter to the Rural Utilities Service, or RUS, a lawyer for the Sierra Club accused officials there of allowing electric cooperatives to pursue funding for investment in or power purchases from coal plants in violation of the National Environmental Policy Act, which would require an analysis of the projects' environmental impacts. The letter identified 10 plants the federal service that rely on recent or pending approval by the agency, an arm of the U.S. Department of Agriculture, to proceed. Each plant could cost $1.5 billion, the letter said. 

Continued the letter:

"It is unconscionable for USDA to ignore the environmental effects of its actions ... Coal-fired power plants rank among the largest individual sources of greenhouse gas emissions in the United States. If built, the ten coal plants listed above would emit almost [45] million tons of carbon dioxide into the air each year, thwarting other governmental attempts to reduce carbon dioxide emissions."

In a statement, the organization warned that the additional debt posed "enormous financial risk to taxpayers" and could push rates higher for energy customers.

Unlike its more direct financing of power plant projects, put on hold earlier this year, the agency still must approve rural cooperatives' requests for private financing, said Virginia Cramer, a Sierra Club spokeswoman. In an e-mail to Climate Law Update, she elaborated:

"Basically, since these co-ops already owe RUS a lot of money, they have to get approval from RUS before they can take on additional debt -- the logic there being that taking on additional debt will affect their ability to repay the original loans. So what we are saying in a nutshell is that RUS should not be rubber stamping these approvals because taking on this additional debt presents a significant risk to ratepayers."

By issuing such approvals, the agency has taken a "major federal action" which triggers the requirement for environmental reviews, the Sierra Club letter said. It asked the agency to "cease and withdraw" its approvals so that greenhouse gas emissions and other environmental impacts could be evaluated.

Although the letter did not specifically threaten a lawsuit, Cramer told Climate Law Update that one "could be" filed. The letter asked for a response by Sept. 26.

Cramer said Wednesday the agency had not responded to the letter. Officials also did not return calls from Climate Law Update seeking comment. However, the issues raised in the letter are similar to those presented in a lawsuit filed by the environmental group last year challenging the utility service's approval of a number of business agreements needed by a Kansas cooperative to proceed with a major expansion of the Holcomb Station coal-fired plant. That project has separately been embroiled in controversy at the state government level.

But government attorneys, who moved to dismiss the lawsuit, noted that none of the money used for the expansion project would come from the utility service. In that case, the environmental review could be triggered only if the agency had "control and responsibility" over the project, which it did not, the attorneys argued. The agency "does not have discretion to impose environmental controls or to undertake a meaningful analysis of alternatives to the non-federally financed project," they wrote.

Sierra Club attorneys countered that NEPA "makes environmental protection a part of the mandate of every federal agency and department." It cited the fact that the utility building the project still owed the utility service more than $200 million from past loans, giving the service "substantial control" over its business. 

In July, U.S. District Judge Emmet G. Sullivan of the U.S. District Court for the District of Columbia rejected the motion, keeping the lawsuit alive, according to court records.

Formed in the 1990s as a successor to an agency founded by President Franklin D. Roosevelt, the Rural Electrification Administration, the utilities service has become a major player in utility financing, according to the letter. It cited figures prepared for Congress showing that the agriculture department agency has about $36 billion in loans and some $400 million in loan guarantees outstanding for the electricity sector. A "substantial portion" of that money has been used to finance coal-fired power plants, the letter said.

Federal officials, in what environmental groups hailed as a victory, said they would halt direct financing of "base load generation plants," citing rising costs and the uncertainty of litigation. One immediate effect of the move was to cast a cloud over the financing for a Montana coal plant, although the Great Falls Tribune recently reported that the project is still moving forward.   

--Dennis Pfaff of Thelen   

Full post as published by Climate Law Update on September 03, 2008 (boomark / email).