Two Elk coal-fired power plant granted another delay

After 17 years of promises and delays, the Wyoming Industrial Siting Council on Monday granted Two Elk Power Co. another extension on its construction commencement date.

Two Elk, a subsidiary of Greenwood Village, Colo.-based North American Power Group Ltd. (NAPG), proposes to build a $800 million waste-coal and biofuel-fired power plant in the heart of the Powder River Basin coal mining district in Campbell County.

The six-member council voted 4-2 in favor of the amended construction schedule, but it’s fair to say that none of them believe the company will actually meet the new start time of January 2014.

“I haven’t heard anything here this morning that tells me it’s going to happen,” said council member Richard O’Gara, a Democrat from Cheyenne who voted in favor of Two Elk’s revised schedule.

NAPG vice president Brad Enzi listed several reasons for the unusually long delay in financing, including the collapse of Enron in 2001, a few legal challenges, and the economic recession of 2008. Enzi told the council that Two Elk proposed the new construction start date for January based on the hope that economic conditions and the financial markets “solidify” by then.

“If it didn’t happen between 1999 and 2006, or 2007, I don’t see how it’s going to happen moving forward,” said O’Gara.

Council member John Corra, a Republican from Cheyenne, also expressed doubts about Two Elk meeting the January start date.

“It’s now April. I mean, that’s only nine months away from today,” Corra said.

Industrial projects in Wyoming with capital costs of $191 million or more require approval of the Industrial Siting Council (ISC). The ISC requires owners of the project to coordinate with state agencies and communities affected by the construction activity to help plan for an influx of workers.

A primary function of Wyoming’s Industrial Siting Division is to direct “impact assistance payments” to local communities to help provide police, fire protection, water and other public services stressed by a large construction project. The money comes from sales taxes generated by construction activity. Sales tax that normally would go to the state is immediately redirected to the communities, alleviating a two-year delay in public revenue that has plagued Wyoming communities during energy boom times.

A total of $9.8 million in impact assistance payments were paid to communities party to Two Elk’s ISC permit in 2005 and 2006 — an action of the Industrial Siting Division. Yet construction consists only of a metal storage building and a concrete foundation at the location. Critics of the industrial siting process say these payments serve as an incentive for local communities to continue their support for the project even though the Two Elk power plant may never be built.

Two Elk attorney Mary Throne successfully argued that the question before the council on Monday, and the scope of the council’s authority, was limited to this; does the amended schedule significantly increase the socioeconomic impacts of the project on the neighboring communities that will see an influx of workers due to the construction?

“In Campbell County, there’s decreased energy activity, so we know there is no additional impact,” said Throne. “As I said, the standard is whether there’s a significant increase. This amendment, this schedule change, causes no significant increase in impacts.”

Council member Sandy Shuptrine, an Independent from the Jackson area, took issue with Throne’s argument, noting that it should be the burden of the applicant — Two Elk Power — to provide specific evidence that the continued delays do not negatively impact local communities and businesses. Shuptrine said the ISC process isn’t set up to investigate that question.

“There’s no investigation of potential harm based on the tact we’ve been taking of continually pushing forward the schedule. … Therefore I will be voting against the motion,” said Shuptrine.

The other “no” vote came from James Miller, a Republican from Sundance. “The inaction of this proposal is impacting the future actions of our regulated (utilities) in the area,” he said. “They don’t know what to do. Maybe they’ll come online (with new power), maybe they won’t. … It is an impact on them.”

Miller said the same negative impact applies to local businesses and supply companies. They may choose to prepare for the influx of work in January, and it may never come to fruition.

Council members noted that none of the participating communities in Two Elk’s ISC socioeconomic impact permit expressed opposition to the company’s amended schedule. One representative from the town of Newcastle spoke in favor of approval at Monday’s meeting, as did a representative of Wyoming contractors. Two Elk representatives insist that the revised socioeconomic report should help communities better prepare for construction.

Had the motion to approve the amended schedule failed, it would have gone to a full hearing. The ISC staff and council appeared to be unclear about whether the public should have been invited to comment.

Industrial Siting Council chairman Shawn Warner, a Republican from Powell, voted in favor of the extension, citing no evidence of socioeconomic harm.

“In my mind there’s a lot of ancillary discussion going on, but nobody has told me about increased impacts,” Warner said.

This year, the Sierra Club and Wyoming-based Powder River Basin Resource Council (PRBRC) said they had urged the Industrial Siting Council to reject any extensions of Two Elk’s ISC permit based on other complications with the company’s state and federal permitting to date. The Wyoming Department of Environmental Quality has granted several extensions to Two Elk’s air quality permit — also due to lack of financing. Two Elk maintains its air quality permit (which limits the amount of pollutants it can emit from smokestacks) based on the company’s technical updates in the plant design to meet “best available control technology.” Yet the U.S. Department of Energy has yet to determine whether the power plant qualifies as a “transitional” facility under the EPA’s pending greenhouse gas (GHG) new source performance standard (NSPS) rule for major facilities.

The full brunt of the GHG new source rule — a rule yet to be finalized — would likely prohibit construction of the plant as currently designed and permitted.

“So, the permit modification issue (before the Industrial Siting Council in April) is really a red herring,” PRBRC staff member Shannon Anderson told WyoFile. “The bigger issue is whether they will ever have the financing and wherewithal to construct their plant.”

WyoFile has been following the Two Elk saga for more than five years. In a 2008 story, WyoFile contributor Rone Tempest detailed how North American Power Group benefited from an obscure provision of the Internal Revenue Code to classify its power plant as “solid wasted disposal facility for recycling and reusing waste coal.” Based on this description, since abandoned,  the company received authorization for $445 million in tax exempt bonds from two successive Wyoming governors, Jim Geringer and Dave Freudenthal.

A 2011 story by Tempest reported that an IRS audit revoked the Two Elk’s tax exempt status because of lack of progress on the project. The story detailed how North American president Michael J. Ruffatto and its Wyoming representative, Brad Enzi, son of Wyoming U.S. Sen. Mike Enzi, used federal stimulus funds to pay themselves more than $1 million over a two year period.

— Dustin Bleizeffer is WyoFile editor-in-chief. Contact him at 307-577-6069 or dustin@wyofile.com. Follow Dustin on Twitter @DBleizeffer.

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