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RUS Denies Funding
Federal Agency Says No to Funding for Highwood—and Other Coal Plants
In a huge victory for the environment, the federal government has decided not to fund the construction of eight new coal-fired power plants across the country, including the Highwood Generating Station proposed for east of Great Falls.
The Rural Utility Service (a part of the U.S. Department of Agriculture) is a Depression-era agency whose mission is to electrify rural America. RUS was considering loaning billions of dollars at a low-interest rate to finance the construction of coal-fired power plants. At least that used to be true.
However, in February 2008 RUS officially informed Southern Montana Electric (SME) that it would not provide funding for the Highwood Generating Station. In addition, RUS said it would not fund any new coal-fired power plants either this year or next. The risks, it said, were too great.
Last Summer, MEIC, Citizens for Clean Energy, and the Sierra Club filed a lawsuit against RUS, arguing that it had to consider how its funding of coal-fired power plants would affect global warming. Cumulatively, the plants it was considering would have put tens of millions of tons of global warming pollution into the atmosphere each year. RUS initially insisted that the funding of any one plant would have a negligible effect on worldwide global warming emissions. It refused to consider the cumulative effects of the emissions of all of the plants. And it completely ignored what the inevitable regulation of global warming pollutants might do to the borrowers’ ability to repay the loans.
In its letter withdrawing funding for Highwood, RUS referred to the “uncertainty of litigation now filed,” “the feasibility of the project,” and the increasing financial costs and risks of loaning money for this type of project. These are the same arguments that MEIC has made for years. The five co-ops that originally proposed the 250-megawatt Highwood plant only needed 58 megawatts of electricity on average, or 130 megawatts during peak usage. Now that the largest co-op, the Yellowstone Valley Electric Co-op, has pulled out, the need for the plant has decreased even further.
While RUS made a prudent decision, it does not necessarily spell the end for Highwood. SME is still desperately searching for money. However, more than 50 coal-fired plants have been cancelled, postponed, or denied permits in the last year. This is largely due to the increasing costs of construction, escalating coal prices, and the growing certainty of carbon regulation. Carbon regulation will mean that coal will become more expensive compared to other, cleaner energy resources such as wind, solar, and even natural gas.
It is the fear of carbon regulation that caused leading lending institutions including Bank of America, JP Morgan Chase, Morgan Stanley, and Citibank to adopt “Carbon Principles” in February 2008. These principles are intended to help them evaluate the potential carbon-related risks associated with investments in coal. It may be that both Wall Street and the federal government now see the writing on the wall when it comes to coal. It would be nice if the co-ops involved in the Highwood plant would read that message as well.
IN THE NEWS
Government Suspends Lending for Coal Plants: Risks Cited To Economy, Environment (by Steven Mufson, Washington Post, March 13, 2008)