Clock ticking on Plant Washington construction deadline

hduncan@macon.comApril 3, 2013 

A previous version of this story misstated pre-construction financing arrangements.

Developers of Plant Washington, a planned 850-megawatt, coal-fired power plant outside Sandersville, say they are in a “dead sprint” to meet an imminent deadline to begin construction.

If the plant is not “under construction” by April 13, it won’t be exempt from the first-ever carbon pollution limits for U.S. power plants.

Proposed by the Environmental Protection Agency a year ago, the limits would not apply to existing plants. They are intended to reduce greenhouse gas pollution from new plants. In the U.S., power plants are the largest individual source of the greenhouse gases that contribute to global climate change, according to the EPA.

As proposed, the rule -- which is expected to make new coal-fired power plants much more expensive -- basically exempts new plants that had already received an air pollution permit and that start construction before April 13, when the rule is due to be finalized.

But the EPA has often delayed finalizing its rules, sometimes for years. None of the requirements is enforceable until then, said Jac Capp, chief of the air branch of Georgia’s Environmental Protection Division.

It’s even possible the proposal will never be finalized. The Washington Post reported in March that the EPA -- which received 2 million comments on the proposal -- might rewrite the rule.

That could help power companies by delaying new requirements, and such a delay would further increase the likelihood that Plant Washington would be unaffected.

But a delay could also add to regulatory uncertainty that has already caused some power companies to back away from new coal projects, such as the Longleaf coal plant project proposed for west Georgia but abandoned in 2011.

EPA’s delay in finalizing other air pollution rules has already created problems for Plant Washington: Developers couldn’t complete its boiler design until a new mercury and air toxics standard was finalized just last week. Without those designs, developers couldn’t line up financing and sign engineering, procurement and construction contracts.

Dean Alford, whose company, Allied Energy Services, is developing the $2.1 billion Plant Washington project, said he is “very pleased” with the final mercury rule. He said vendors say they can meet its requirements.

“That was a real big question, so now that we finally have that rule we can finalize our contracts,” Alford said. “There were a lot of issues waiting on that dime to fall. EPA waited to the very last minute.”

Stephanie Stuckey Benfield, executive director of Atlanta environmental law firm Greenlaw, said she thinks the project won’t qualify as “under construction” without a completed boiler design and construction financing.

But Alford said the company had prepared a mock-up of the boiler design based on expected changes to the final mercury rule.

“Hopefully we’ll now enter into final negotiations with contractors,” Alford said. “The real question we’re all working on is can we get it all done between now and the 12th?”

Alford said he feels confident the contracts will be in place and many other aspects of the project will be moving forward, but he said it’s unlikely that the plant will break ground in less than two weeks.

“If you were building a house and you signed a contract today, you really don’t think somebody would be out there with a shovel tomorrow, do you?” he said. But he said he wanted site preparation to begin “almost instantaneously,” and he thinks the project will have met the legal definition for being “under construction.”

He predicted it will be “a matter of months” before workers are hired to build the plant.

It remains to be seen whether the EPA will consider the plant to be exempt from the carbon requirements. Capp said in an e-mail that “to commence construction” means that the source has both “begun a continuous program of actual on-site construction” and “entered into binding agreements or contractual obligations which cannot be canceled without a substantial loss.”

But Alford said he believes the project will be far enough along to be exempt from the greenhouse gas requirements.

“It’s a massive amount of effort going into this right now,” Alford said. “We’re not getting much sleep right now, literally.”

Among those interested in financing the construction are utilities, private investors, pension funds and independent power producers, he said.

“If I add up everybody I’m talking to, I’ve got way over the amount of money I need for this project,” Alford said.

When the project began five years ago, it was funded through POWER4Georgians, a consortium of 10 Georgia electric cooperatives. Over time all but four pulled out, although their initial investment is supposed to pay off later in the form of preferential power purchase agreements.

The remaining cooperatives stopped providing pre-construction financing last year, when Colorado-based private investment group Taylor Energy Fund LL stepped in.

A House bill was introduced during the final days of Georgia’s legislative session to require that the Georgia Public Service Commission approve electric cooperatives’ power purchase agreements. The bill’s sponsors said it was intended to deter cooperatives deciding to fund projects like Plant Washington without public discussion. Cooperative member-customers were often frustrated by lack of information about their own investment in the project. The Cobb Energy CEO who spearheaded the project was charged with theft and racketeering.

“I think that if Plant Washington had been regulated by the PSC, it would have been scrutinized more closely,” said sponsor Karla Drenner, D-Avondale Estates. “Perhaps it would not have languished as long as it did and cost taxpayers so much money.”

Alford said even if the bill passed next year, which its sponsors admit is unlikely, Plant Washington should have its power purchase agreements lined up long before then.

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