On Oct. 2, 2013, a trio of state inspectors traveled to the site of the proposed Two Elk Power Plant near Wright to see how construction of the long-planned facility was progressing.
The group, from the Department of Environmental Quality, was met by Brad Enzi, son of U.S. Sen. Mike Enzi and vice president of North American Power Group, the company behind Two Elk.
The roughly 1,300-megawatt power plant was first proposed as a coal-burning facility in 1996. But on this day, 17 years later, little work had been done. The inspectors reported the road to the plant had been damaged by a recent rainstorm and was overgrown with weeds.
Enzi showed the group where some rock had been removed. He reported a set of power lines crossing the property needed to be relocated to make way for construction activities. The inspectors asked if three water wells, which were supposed to be drilled in 2011, had been completed. Enzi told them no.
“No construction activities could be confirmed to have taken place in the last twenty-four months,” Tanner Shatto, a DEQ engineer, wrote in a memorandum to his superiors a week later.
The lack of construction appeared to be a violation of Two Elk’s state air quality permit. The permit is considered invalid if no work is done within two years.
Two Elk had already experienced problems with its permit. In 2005 and 2007, DEQ briefly revoked the permit after it appeared no work had been done within the required two-year time period. On both occasions it was reinstated.
But after Shatto’s visit in 2013, nothing happened. DEQ maintains Two Elk holds a valid air quality permit to this day. A cement pad poured in 2005 for the plant’s exhaust stack remains the only construction ever done.
Department officials say the proposed power plant meets the terms of its permit because Two Elk representatives regularly send quarterly updates detailing their planning efforts.
“I think they’ve planned. I don’t think they’ve actually done,” said Steve Dietrich, who oversees DEQ’s air quality division.
Delays and promises
A Star-Tribune review of Two Elk’s quarterly reports dating back to the beginning of 2013 shows a pattern of delays and unfulfilled promises.
Power lines promised to be moved by the end of 2013 remain in the same place. Work has yet to begin on pipelines projected to be installed by the fall of 2014.
Oftentimes, large portions of the reports appear to be copied and pasted from previous submissions.
The last four reports are illustrative of the trend. Each contains a section about Two Elk’s efforts to acquire a gas turbine. Each says the technical information for the turbine has been acquired, the mechanical requirements for its installation determined and the budgets for the work established. And each time they promise to examine the turbine’s electrical requirements in the coming quarters.
The section always ends like this: “It is anticipated that the schedule for the installation of the turbine will be the topic of upcoming meeting(s) on the project and could occur in the next construction season.”
DEQ does not appear to independently verify these assertions.
“We read the reports that come in and, periodically, when we do inspections out in the field, we kind of see if any other activity has changed since the last time we there,” Dietrich said, when asked if the department follows up on any of Two Elk’s claims. “That’s all we can do at this point.”
The on-site inspection in 2013 was the department’s last.
Two Elk maintains it remains as committed to the power plant as ever. And company representatives can point to some signs of progress. Two Elk reinstated an interconnection agreement with PacifiCorp, a six-state utility, in May. The power plant had suspended the agreement in 2012.
There is still a need for Two Elk’s electricity, said Charlie Russell, a North American Power Group spokesman.
“At the end of the day, American industry has always been driven by low-cost, reliable power,” Russell said.
Paul Murphy, a PacifiCorp spokesman, confirmed Two Elk is an interconnection customer. However, to the utility’s knowledge, the power plant still does not have a customer for its power, Murphy said. Two Elk has until Aug. 15 to provide financial assurance it intends to proceed with the plant. If it does, PacifiCorp will build a power line and a substation to connect the facility. But if it fails to provide a guarantee, Two Elk will have to reapply for a large generator interconnection agreement, Murphy said.
The agreement projects Two Elk’s in-service date as 2018.
‘Veneer of plausibility’
Two Elk has long faced questions over its viability, but it has never faced more scrutiny than it is encountering today.
The U.S. Department of Justice is seeking the return of $5.7 million in federal stimulus funding. Documents obtained by the website Wyofile show the government claims money was spent on unapproved costs.
A Campbell County judge issued a default notice last month against Two Elk for failing to pay $207,000 in property taxes. Two Elk officials have said the payment is coming. It had not been made as of this week.
Dietrich said he was unaware of those developments. Those concerns, he said, are outside his division’s jurisdiction.
“Air quality is not going to ask those questions,” Dietrich said. “Air quality division doesn’t get involved in that kind of discussion.”
But Two Elk has consistently involved its DEQ permits in funding discussions, using Wyoming’s approvals to give the project a veneer of plausibility. A separate permit, for industrial siting, has been extended eight times.
In a 2009 application to the U.S. Department of Energy seeking $576 million in federal stimulus funding, Two Elk officials noted Unit 1 was “fully permitted.” It ultimately received around $10 million in public financing.
The next year Two Elk applied for pre-certification under California’s renewable portfolio standard, which requires a third of all the state’s power to come from renewable sources by 2020. The certification would make Two Elk’s power more attractive to utilities trying to meet that threshold.
Company officials told the California Energy Commission that the plant would burn biomass, qualifying it as renewable power. But California regulators were concerned. In emails to the company, they cited news accounts that described Two Elk as a coal plant.
Michael Ruffato, North American Power Group president, wrote a letter to the commission in October of that year, seeking to address what he called “Internet information” that “may not provide an accurate view of the project.”
The plant would burn biomass, he said, though he conceded that “as originally conceived and permitted” it would burn coal.
Ruffato did not specifically mention that DEQ had temporarily invalidated Two Elk’s permit in 2007. Instead, he wrote, “Subsequently, on Dec. 3, 2007, the WY-EQC issued its decision and order that the Project had not discontinued construction for a period of twenty-four months or more. Construction is on-going.”
The Environmental Quality Council, or EQC, is a civilian board that oversees DEQ.
California regulators ultimately pre-certified Two Elk units 2, 3 and 4. Unit 1, which has an air quality permit to burn waste coal and natural gas, was disapproved. It is the only unit Two Elk is pursuing today.
“Anyone who is pursuing money from the bank or the government are going to want to show as much project viability as they can. That’s permits, land leases, investors or whatever it is,” said former Wyoming Gov. Dave Freudenthal.
Freudenthal, a Democrat, approved $445 million in state industrial development revenue bonds for Two Elk during his time in office. (Two Elk says it has yet to issue the bonds.)
The state did not grant the bonds because of the permits, Freudenthal said. However, he noted the bonds would not have been approved had the permits been revoked.
“The problem is air quality extensions are too easy to get,” Freudenthal said, noting that something as simple as an equipment purchase could qualify as construction. “It was intended to work with people who were operating in good faith, and frankly, I’m not sure Two Elk always was.”
Hindered by uncertainty
Two Elk maintains its plans have been hindered by “regulatory uncertainty” created by President Barack Obama’s proposals to limit carbon dioxide emissions from coal-fired power plants.
The proposal was unveiled last year, 18 years into Two Elk’s planning. But it underscores the changes in the power sector since the plant was first proposed.
Demand for electricity was growing at a rapid rate in the late 1990s, said Rob Godby, a professor at the University of Wyoming who tracks the power sector. Today, electricity growth is stagnant and construction of new coal plants almost unheard of.
“The world of the 1990s was a completely different one from the one we have today,” Godby said. “Even if they did get it off the ground, most of the companies around here had their needs filled.”
Plans to install a boiler stoked by waste coal are now on hold, company officials say. A downturn in the coal market has created “market uncertainty,” Enzi wrote in a letter to DEQ this month seeking a ninth extension of Two Elk’s industrial siting permit.
The company is focused on acquiring and installing a natural gas turbine at present. He said construction is now expected to begin next April.
News accounts have frequently estimated Two Elk’s price tag around $1 billion. Russell, the NAPG spokesman, said it is premature to say what the plant might cost to build now.
Asked what kind of plant Two Elk is today, Russell responded, “It’s a multifaceted generation facility that runs on waste coal, natural gas and biomass.”
As part of its settlement with DEQ in 2007, Two Elk submitted a modification to its air quality permit that would allow it to burn biomass.
Eight years later, Two Elk has not sent the information to the state needed to complete the modification. A DEQ spokesman said the department will be in touch with company officials about the modification.
“We’re working to get more information,” said Keith Guille, the spokesman. “It has been a while here, and this modification obviously needs to move forward.”
Leave a Reply