Coal loophole may block SEC revenue

Kansas Coal Mandate Loophole allows Holcomb's 895-MW coal plant by Sunflower Electric and Tri-State to bypass in-state coal, citing air permits, KDHE rules, and Powder River Basin sourcing to meet emissions and contractual requirements.

A new coal-fired electricity generation plant planned for western Kansas had the potential to bring revenue to southeast Kansas.

But, a loophole in state law, and the fact that a new governor reversed course on coal policy, may shut the region out of some, if not all, of that potential.

Recently, Kansas Gov. Mark Parkinson announced an agreement described as a coal plant compromise with Sunflower Electric Power Corporation of Hays to build a new, 895-megawatt coal-fired power plant at Holcomb in western Kansas.

And, a bill signed into law in 2009 included a provision that mandated any new coal-fired plant shall purchase 5 percent of its coal from Kansas. The provision was authored by State Rep. Bob Grant, a Cherokee Democrat.

“My purpose in authoring it with the intent of offering jobs in southeast Kansas,” Grant said.

However, the loophole in the bill states that and provision shall not apply if the use or purchase of Kansas coal would violate any air permit or other contractual obligations for the owner or operator, in this case Sunflower Electric.

Scott Allegrucci, of the watchdog agency Great Plains Alliance for Clean Energy GPACE, as power plant resistance grows across Kansas, said that Sunflower and Tri-State Generation and Transmission of Westminster, Colo. — another stakeholder in the Holcomb plant — has applied for a permit to use coal mined from the Powder River Basin in Wyoming, not Kansas coal.

“There hasn’t been any of the legwork done to show why they wouldn’t use Kansas coal,” Allegrucci said. “It is just going to sit there.”

In a response filed by the Kansas Department of Health and Environment, if the provisions of the loophole are met, Sunflower is not bound to use Kansas coal. The response also stated that economic benefits “are not relevant to the issuance of the permit or the establishment of applicable emissions limitations.”

That is problematic for Grant, who said he knows that coal in southeast Kansas is high in sulphur content but should still be considered for use at the new power generation facility.

“It does concern me, because that is part of the agreement and it’s why I voted for the bill,” Grant said. “This provided jobs down here and I looked at the potential for those jobs.”

One reason why southeast Kansas coal may not be used can be traced back to the U.S. Department of Labor’s Mine Safety and Health Administration. Western Fuels Association has been the primary controller of the mine since April 1, 1989. A subsidiary of Western Fuels, Western Fuels-Wyoming, Inc., actually operates the mine. According to its website, Sunflower Electric is a member of the Western Fuels Association.

According to Carol Bilbrough of the Wyoming Land Quality Division — the arm that permits mines in the state — Tri-State is the guarantor of a $12.5 million bond for the Dry Fork Mine and Fort Union Mine, both in the Powder River Basin.

“If Western Fuels forfeits as a company, the bond is used to reclaim the mine,” Bilbrough said. “We would claim the bond and hire contractors to reclaim the mines so that there won’t be a giant hole there.”

No officials have denied the economic impact created by the building of the new plant in western Kansas, which is nearing its next step in permitting.

“There’s no question that there will be some economic impact, and the heat is on for coal plants, but the question is: Is this the best way?” Allegrucci said.

Grant said that using southeast Kansas-based coal is not out of the question for the new plant.

“The thing about it is that, as coal generation facts indicate, you don’t have to burn as much southeast Kansas coal and it creates more BTUs than the coal from the Powder River Basin,” Grant said.

He said that the active coal mine in Bourbon County currently has coal blended with coal from the Powder River Basin and is used at various plants in Missouri and Kansas, where the state line factor often shapes proposals.

But, the prospect of not using coal mined in southeast Kansas does leave a bitter taste in Grant’s mouth.

“Here we go again, we’re getting treated like the red-headed stepchild,” Grant said. “It sure sounds like it, doesn’t it?”

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