Purchase photos

CEO gives update

7/13/2012

By SHAJIA AHMAD

Special to The Hays Daily News

GARDEN CITY -- Officials from Sunflower Electric Power Corp. are awaiting a Kansas Supreme Court decision about the status of their Holcomb expansion project's air quality permit.

But even a positive judgment from the state's highest court wouldn't necessarily clear the way for Hays-based Sunflower's plans to construct an 895-megawatt, coal-fired generating unit at its existing Holcomb plant.

That message came from the wholesale power supplier's CEO, Stuart Lowry, who met with a group of civic club members and some local elected officials Tuesday.

Lowry, who said the state Supreme Court is scheduled to hear arguments on the air quality permit in late August, said there are further hurdles to jump over before a new plant can be built.

"Not only will the plant be subject to the permit issued by the state, it will also be subject to all the other (Environmental Protection Agency) regulations that have been issued," Lowry told the group gathered for lunch at Wheat Lands Convention Center in Garden City. "One of the specific challenges we have right now is that under the proposed greenhouse gas rule, the Holcomb expansion project and 11 others in the country are given one year to begin substantial construction -- they avoid the effect of the greenhouse gas rule if they do that. But the other EPA regulation -- the (Mercury and Air Toxics Standards) rule -- is effective immediately. And we're being told that's not achievable. So we're sort of being twisted into knots. We could build under the greenhouse gas rule and not have any negative effect. But if we can't meet the (MATS) standard, we can't operate."

The Kansas Department of Health and Environment granted an air quality permit to Sunflower in December 2010 for the estimated $2.2 billion project.

As part of the permit's approval, Sunflower was mandated to begin construction within 18 months, but legal challenges by outside groups have stalled construction.

Proponents continue to say the project will bring much-needed economic growth and jobs to the region.

Opponents believe strongly greenhouse gas-causing pollutants generated by the plant are harmful to the environment.

Lowry, who took the head post just less than a year ago, told those gathered Tuesday that Sunflower was fortunate to receive a stay on the permit's 18-month timeline in mid-2011, essentially stopping the clock until a decision is made by the Kansas Supreme Court, likely at the end of this year or early next year.

But the regional power supplier also is being presented with a "very challenging environment" as it attempts to determine the design and cost for the multi-billion dollar expansion project.

The Sunflower CEO said much of the regulatory environment set by the EPA has been changing drastically and significantly in recent years as it updates and makes changes to the Clean Air Act. Some of those rules already are in place, some have been proposed, and some are being appealed in the courts.

"Where we are in the process right now really is somewhere between the regulations and the permit and the design," he said. "What we really want to be able to have is a stable regulatory environment, so we know what the requirements are (and) can take those requirements to an electrical engineering firm and have them design a plant."

Lowry also said the power supply company has not been sitting idle while it waits for legal decisions.

As EPA regulations on air quality standards are proposed, take effect or are challenged, the CEO said Sunflower has taken those regulations and their terms to construction and design vendors; however, Lowry also said some of those regulations have been "moving targets" or simply cannot be met with "commercial guarantees" from the vendors.

The "prevailing wisdom," according to the CEO, is that some regulations "simply cannot be achieved." Lowry said, in his mind, regulations had to balance multiple policy objectives, including the undeniable demand from the public for a constant supply of energy.

"I would also be remiss if I didn't say the Clean Air Act, which has been in place in this country for a long, long time has worked incredibly well. I personally believe, as the CEO of a company that operates a power plant, that we need to control emissions. The way we've done that in this country successfully for decades is (that) we've looked at not only what emissions limitations can be achieved but what will the cost of those limitations be and how will we implement them?" he said. "But in the regulatory environment today, we're stretching beyond what we've ever stretched before in terms of emissions limitations for power plants. ... Really, for any company, who wants to build a $2 billion project without commercial guarantee you'll be able to operate?"

Lowry, a former lawyer for the Kansas Electric Cooperatives Inc. before arriving at Sunflower, said the power generation and transmission company continues to consider the Holcomb project for the future baseload energy needs, especially in the interests of the regional community.

"We know after June 14's (two-hour-long power outage in Garden City) that you want a reliable power supply. I sat at a table with economic developers, and I know they want businesses to move to Garden City. Low electric rates are a driver of business relocation, so I want to make sure, as your partner, that I'm doing everything I can to bring low electric rates," the CEO said.

According to Sunflower, the multibillion-dollar coal plant project could take approximately five years to build and generate an estimated 5,900 job years -- one job for one year -- throughout the state, paying $250 million in labor income and generating $400 million in total income.

During each year of operation, the expansion unit also is expected to generate more than 260 jobs statewide, paying $17 million in labor income and almost $200 million in total income, Sunflower officials have said.