Coal plant offers promising future, but clouds remain

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RIESEL — A single smokestack 30 stories high looms on the horizon of this town 15 miles east of Waco.

Some 275 people are working there to build the Sandy Creek coal-fired power plant. Up to a thousand more could join them before the plant opens in 2012.

To some in Riesel, the tower is a symbol of an economic bonanza, a boost to a community with few businesses or job opportunities.

School officials are anticipating the property tax benefits of the billion-dollar project.

Already, the construction traffic has helped quadruple Riesel’s sales tax receipts in 2008. Stores and cafes are doing a “land-office business,” said Walter Kuehl, Riesel vice president for Texas First State Bank, and he thinks the plant will be a foundation of long-term prosperity.

“We’ve got a bright future,” he said. “We just have to take advantage of it.”

But a coalition of environmental groups who see the smokestack as a pollution menace are trying to stop the project dead in its tracks. And with the prospect of carbon regulation clouding the future of the coal industry, they say the political winds may be blowing their way.
Concern for coal industry
Early in 2008, Dynegy, the lead investor in the 900-megawatt Sandy Creek plant, sold off part of its interest in the plant. Earlier in December, its chief executive, said the company was “re-evaluating” its role in new coal plants, including Sandy Creek.

Dynegy cited “tightening credit markets” and other “rising barriers to entry” as the reason for its re-evaluation. But environmental groups interpreted the news as a reaction to the growing likelihood of carbon-emissions regulations, which could make coal power much more expensive. Just this past summer, PNM Resources abandoned plans for a 305-megawatt power plant expansion in nearby Roberston County, citing concerns about carbon regulation.

Tom “Smitty” Smith, Texas director of Public Citizen, one of the groups suing to stop the Sandy Creek plant, said he expects a carbon tax or a “cap-and-trade” system under the new Obama administration, eliminating the economic advantage of burning coal compared to cleaner energy sources.

“The future is not good for coal at this point,” Smith said. “Why continue to prop up a plant that is quickly going to become the SUV of the power industry? It’s going to be too expensive to operate, and you can’t sell it for the amount you paid for it. … It is my hope that in an Obama administration it will be impossible to build a coal plant anywhere in the country.”
Legal action pending
Dynegy spokesman David Byford said construction on the Sandy Creek plant is still full speed ahead.

“Our focus is on continuing to construct the facility,” he said.

Byford said it’s too early to discuss how carbon regulation will affect the coal industry.

“We’re anticipating some form of regulation on carbon, but we would rather hold off on commenting on the impact of regulation until it’s out there and being debated,” he said.

The Sandy Creek plant is being built by a joint venture between Dynegy and the privately held LS Power Group. The joint venture sold off interests in the plant to Brazos Electric Cooperative in 2007 and Lower Colorado River Authority this past summer and now owns just 64 percent of the plant.

Recently, the Sierra Club, Public Citizen and other environmental groups wrote a joint letter to LCRA and Brazos warning them of the uncertainties in the future of coal and urging them not to invest further in the Sandy Creek plant.

“The handwriting is really on the wall as far as coal plants are concerned,” said Ken Kramer, the Sierra Club’s Texas director. “I think we’ll have a new carbon regime within a year. I think investors are seeing uncertainties in the coal market, and this is a business where people want stability.”

Sierra Club, Public Citizen and a local group, Texans Protecting Our Water Environment and Resources, or TPOWER, have lawsuits pending against the plant, saying its permit violates state and federal environmental rules.

“We said we’d hold them off as long as we could, and that’s what we intend to do,” said Ricky Bates, a member of TPOWER.

The legal action hasn’t stopped construction. Officials at San Antonio-based Zachry Construction say they are moving ahead as quickly as they can.

“We’re slowly ratcheting up,” said Kathy Green, vice president of Zachry Construction, which is building the plant. “We should probably peak around fall 2010 when we’ll be employing about 1,200 people.”

Zachry will be bringing in many of its own workers from outside the area, and already a large RV park is under construction near Riesel for those workers.

But Zachry is also hiring locally through an employment office it set up in the middle of Riesel, and local hires for jobs such as welders, pipefitters and electrical workers will increase as the project progresses, Green said.

“To get to 1,200 is a pretty critical mass,” she said. “A good part of the hiring is going to be from that area.”
Promises
Once constructed, the plant would employ about 100.

Kuehl, the Riesel banker, said the short-term and long-term employment will be a blessing to Riesel. Some residents who used to be employed at nearby TXU gas-fired power plants have had to seek work elsewhere in recent years as those plants have been effectively mothballed.

He said the Sandy Creek group has been generous with local charities. It has also promised to help Riesel with a new well that should relieve water shortages that have “stifled” the community’s growth.

“It’s difficult to get a water meter right now in Riesel,” he said. “Once we get the water issue resolved, I think we’ll see some more development. … I think it’s going to bust wide open.”