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 U.S. by 2030. If NETL’s projections are correct, U.S. 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.*
There is much 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. The reality is clear: There is nothing to do but fight.
*[Correction, 07 Sept 2006: Originally, this article suggested a relationship between global investment bank Goldman Sachs and LS Power. In fact, there is no such relationship. Rather, a subsidiary of Goldman Sachs owns LS Power Funding Corporation, which is wholly separate from LS Power.]
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