Feds Halt Financing for New Rural Coal Plants

WASHINGTON, DC, March 5, 2008 (ENS) - The federal government is suspending its loan program for new coal plants in rural communities. The Rural Utility Service announced today that due in part to uncertainty over litigation, it will not fund new coal plants in 2008 and 2009.

A branch of the U.S. Department of Agriculture, the Rural Utility Service provides low-cost financing to rural electric cooperatives. It has issued more than $1.3 billion in loans for new plant construction since 2001.

The Rural Utility Service announcement reverses a position the agency took last May when it said it would process a loan application to fund 85 percent of a proposed coal-fire power plant near Great Falls, Montana, at an estimated cost of $600 million.

In July 2007, Earthjustice filed a lawsuit challenging Rural Utility Service financing of the Montana power plant, citing the agency's failure to consider the global warming implications of financing new coal plants.

American coal-fired power plants currently pump two billion tons of greenhouse gases into the atmosphere annually, which exceed the greenhouse gas emissions from any other source.

"This is a big decision. It says new coal plants can't go to the federal government for money at least for the next couple years, and these are make or break times to get these plants built," said Earthjustice attorney Abigail Dillen, based in Montana.

The Rural Utility Service funding suspension will also affect at least five other proposed coal plants in Kentucky, Illinois, Arkansas, Texas, and Missouri.

The Rural Utility Service announcement is the latest piece of bad news for would-be coal plant operators. In January, Wall Street downgraded coal stocks, citing cost increases of burning coal to generate electricity that will be coming when Congress regulates greenhouse gas emissions to curb climate change.

A coal-fired power plant spews greenhouse gases over a Wyoming rural area. (Photo by Greg Goebel)

On February 14, two federal legislators sent a letter to Rural Utility Service Administrator James Andrew questioning the agency's financing of new coal plants.

"We are concerned that financing these huge new sources of greenhouse gas emissions puts taxpayer dollars at risk, as well as undermines the United States government's efforts to address global climate change by reducing greenhouse gas emissions," wrote Congressman Henry Waxman, a California Democrat who chairs the House Government Oversight Committee, and Congressman Jim Cooper, a Tennessee Democrat.

"In addition to these broader issues," Waxman and Cooper expressed particular concerns regarding the role of the Rural Utility Service in the development of the Sunflower Electric Power Corporation's proposed new coal-fired power plant units at Holcomb Station, Kansas.

"The Department of Justice recognizes that Sunflower is a financially troubled borrower, which owes the federal government roughly $200 million in loans for an existing plant at Holcomb Station," wrote Waxman and Cooper.

"Sunflower and its partners are now proposing to take on billions of dollars in additional private sector debt to construct a huge new $3.6 billion coal-fired power plant at Holcomb, comprised of two new units. The expanded plant is projected to release 11 million tons of carbon dioxide annually, which would amount to over 500 million tons of carbon dioxide over its lifetime."

Sunflower cannot take on additional debt without permission from the Rural Utility Service, which granted that permission in July 2007.

But Waxman and Cooper say they are "concerned" that the Rural Utility Service "may not have accounted for the risk of substantial additional costs associated with the new plant's massive greenhouse gas emissions."

If the Rural Utility Service failed to take this into account, "it has put both taxpayer funds and Kansas ratepayers in jeopardy. If this plant is built, Kansas ratepayers may be stuck with billions of dollars in stranded assets and sky-rocketing costs for power," wrote Waxman and Cooper.

In October 2007, Kansas Health and Environment Secretary Rod Bremby denied Sunflower the air quality permit needed to build the two units at Holcomb on the grounds that the greenhouse gas emissions from the facility would be detrimental to the environment of Kansas.

Kansas legislators now are moving a bill through the Statehouse that would overturn Bremby's decision. The bill won approval in the Kansas House today and is now headed for the state Senate. Kansas Governor Kathleen Sebelius is expected to veto the measure.

"We will know that the Rural Utilities Service has agricultural interests at heart when it starts promoting clean renewable energy that directly benefits rural agriculture instead of promoting coal," said Anne Hedges of the Montana Environmental Information Center. "Now it has a chance to help the country and rural communities by funding renewable energy sources that truly benefit local people."

Copyright Environment News Service (ENS) 2008. All rights reserved.