Coming to a cornfield near you?
How 'merchant coal' is changing the face of America.
From his rolling green soybean fields above a slow river in eastern Iowa,
Don Shatzer looks out over the farm where he was raised, across land he and
his neighbors have farmed all their lives. Below him are the garden beds where
his wife Linda grows organic vegetables to safeguard the family's health, and
the farm pond and beach he built for the grandkids. A few miles to the west
lies the city of Waterloo, with a population of about 66,000. The sky is clear
and the southwest wind sweet on a humid summer day.
Shatzer's land is some of the most fertile in North America, part of the fecund
breadbasket on which a continent relies. And if New Jersey's LS Power wins the
fight it has started, a 750-megawatt pulverized-coal electrical generation plant
will sit right next door by 2011.
The Shatzers, along with a dedicated coalition of local citizens, have gathered
3,000 signatures on petitions against the proposed plant. They have lawn signs,
car decals, a growing library of informational handouts for public meetings,
and even a blog. The couple's
whole lives are invested in this land. They say they have not yet begun to fight.
And they aren't alone. Across the nation, 153 new coal plants are currently
proposed, enough to power some 93 million homes. Of those 153 proposals, only
24 have expressed an intent to use gasification
technology, which offers a way to handle the large amounts of carbon dioxide
produced by coal combustion. A recent report from the National
Energy Technology Laboratory anticipates the construction of up to 309 new
500 MW coal plants in the US by 2030. If NETL's projections are correct, US
coal-generation capacity will more than triple by 2010, with corresponding
air pollution and greenhouse-gas increases.
Some of the 153 proposed coal plants will add capacity for existing public
utilities. Others, like those by developers LS Power and Peabody, are speculative
"merchant" coal plants, which ultimately intend to sell the power
-- or even the plant itself -- to the highest bidder. Local need for power is
not part of the calculations behind these merchant plants. The concept isn't
new, but the voracious expansion plans are.
Economic projections indicate that demand for electricity will continue to
rise, so developers are gambling that the need for power and the low price of
western coal will make them very rich. Merchant-coal developers are also finding
ways to minimize the risks posed by possible carbon regulation on the horizon.
A recent Business Week analysis approvingly cites Peabody's plan to sell ownership
stakes in its new plants to municipal utilities and electric cooperatives, along
with 30-year Peabody coal-supply contracts. If and when federal carbon regulation
pushes up the cost of coal-fired generation, a smart developer like Peabody
will have insulated itself from that expense. The utilities and cooperatives
will pay ever-higher prices to generate electricity, passing those costs on
to the consumer -- but Peabody's profits will never falter.
The first public statement from LS Power in Iowa in late 2005 indicated that
the power produced at the Waterloo plant would be sold entirely out of state,
probably in Illinois. The Shatzers, neighbor Gail Mueller, local city council
member Kamyar Enshayan, and a growing group of local volunteers printed up and
distributed a few thousand "Why should Iowa kids breathe toxic emissions
to light Chicago?" fliers and fact sheets around Waterloo, along with petitions.
The Waterloo-Cedar Falls Courier began to give coverage to this vocal opposition,
which held its first rally on Earth Day 2006.
LS Power is not saying why it came to Waterloo, but local demographics paint
a poignant picture of a community desperate for any form of economic development
and already paying the price for industrial pollution. Iowa census numbers pinpoint
some of the state's highest poverty rates in Waterloo and Council Bluffs (the
site of another coal plant already under construction). East Waterloo, the neighborhood
nearest the plant, has a large African-American population and high asthma rates.
The county has nearly five times the state average of criteria air-pollutant
facilities per square mile.
The Waterloo economic development agency, which courted LS Power from the
outset, began to push back against local activists by securing union endorsement
for the plant. LS Power, its finger in the wind, stated for the first time at
a public meeting in May that it planned to sell most of the power in Iowa, although
Iowa utilities have publicly stated that they see no immediate need for this
new capacity. No details of power purchase contracts or clean air technologies
have been released regarding the Waterloo plant at this time. Utility executives
unaffiliated with the LS Power proposal speculate that the plan is to develop
the proposal to the point where it can be sold at a hefty profit to an Iowa
utility. Locals are left wondering what their economic development agency has
gotten them into, and why it backs this proposal so fiercely.
Another LS Power proposal, for an 800 MW plant in Riesel, Texas, has also
drawn fire. Although the plant recently received permits from the state, appeals
have been filed and a fight rages on in the media. Seventeen additional coal-fired
power plants have been proposed for Texas over the next five years, many of
them near areas that already exceed safe levels for airborne pollutants. Criticism
of the LS Power project has centered around the developer's status as a merchant-coal
speculator, the fact that it has never operated a coal-fired generation plant,
and the failure to embrace gasification technology. Even the conservative Waco
Tribune-Herald recently printed an editorial urging state regulators to embrace
gasification as the technological standard for new coal plants.
A look behind the scenes of LS Power may be instructive as to the kind of
coal-plant operator the company will be. In the most recent annual report on
file with the Securities and Exchange Commission for LS Power Funding Corporation,
the corporation's listed executive officers were all also executive officers
of North Carolina-based Cogentrix, a longtime player in the coal power game.
Cogentrix has a checkered history in coal-plant management, including failure
to pay taxes in Mississippi, corruption scandals in India, a bankrupt subsidiary,
and selling off plants it has built in a number of locations.
Those who follow the twists and turns of corporate PR might also wonder what
role Goldman Sachs plays in the Cogentrix/LS Power coal-development boom.
According to its own website, in 2003 Goldman Sachs bought 100 percent of Cogentrix.
In 2005, Goldman Sachs became the first global investment bank to adopt a comprehensive
environmental policy. The firm has made a commitment to reduce its indirect
greenhouse-gas emissions by 7 percent from its leased and owned offices by 2012,
and to "report the annual greenhouse-gas emissions from [Cogentrix] plants,
and ... continue to work to reduce direct carbon emissions from them whenever
practical." Critics say Goldman Sachs' public stance regarding climate
change seems inconsistent with the position LS Power has taken in Texas, rejecting
gasification as an unreliable and ruinously expensive technology not ready for
There is also an irony in the new proposals popping up in Texas and Iowa:
the two states were leaders in renewable-energy development long before energy
independence became a national buzzphrase. Texas has one of the most successful
renewable-energy credit trading programs in the country and a booming wind-power
industry. Iowa has the highest per capita amount of installed wind capacity
of any state in the country. Both states have made significant strides toward
integrating biofuels into their fuel markets, far beyond what many states considered
to be more progressive have accomplished.
Their leaders talk the talk on renewable energy and energy independence; the
merchant coal boom will be the test as to whether Iowa and Texas can really
walk the walk of a carbon-neutral, sustainable energy future. Or, like so many
other states, will they be taken in by the promise of quick cash and cheap kilowatts,
to be paid for by generations to come?
Back at the Shatzer farm, there is work to do, as always. LS Power has insisted
on negotiating one-on-one with elderly local landowners for land purchase options.
On some farms, company representatives have allegedly persuaded family members
to talk an elder into signing, or, when an option has nearly expired, threatened
to buy the land and evict the farmers if they don't extend the option. Many
landowners are afraid to express any public sympathy with the project opposition
for fear of losing their land.
These are old-style coal-industry tactics, Waterloo's amateur advocates are
learning. It will be an uphill battle -- but unlike the developers, the Shatzers
and their friends can't just move to the next town if things go wrong here.
Their equity is in land, community, and family, things that don't move easily.
On Wall Street, Goldman Sachs is making self-congratulatory pronouncements about
its climate-change policies, but in Iowa the reality is clear. There is nothing
to do but fight.
Carrie La Seur is a lawyer and law professor in Iowa who
has provided pro bono counsel to the Waterloo citizens' coalition.