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Thompson River Co-Gen
Thompson River Co-Gen: A Power Plant with a Past . . . and an Uncertain Future
(May 2008)
History
In 2001, the Montana Department of Environmental Quality permitted a 12.5 megawatt (MW) power plant on the banks of the Clark Fork River, just upstream from the community of Thompson Falls. Permit #3175-00 authorized TRC to burn either wood waste (from the neighboring Thompson River lumber plant) or coal. Many in the community felt deceived when they learned that the principal fuel would be coal (which would arrive by rail, traveling 500 miles from the Bull Mountain Mine near Roundup), rather than the locally-generated and cleaner-burning wood waste. Air quality concerns about mercury and other emissions were particularly acute in this narrow mountain valley in western Montana.
In September 2003, the company requested an amendment to its permit to allow for a larger 16 MW plant. After sending numerous “deficiency letters” itemizing various problems with the new proposal, DEQ finally granted this second permit (#3175-01) in November 2004. The plant began operating the next month. In April 2005, TRC was back before the State asking for additional permit changes, which were granted in May 2005 (#3175-02).
During the course of this permitting, in July 2004, DEQ conducted an onsite inspection. It learned that TRC had already begun construction on its revised plant—498 days before it would eventually receive a permit to do so. For this type of violation, Montana law authorizes penalties up to $10,000 per day—nearly $5 million in this instance. In July 2005, DEQ and TRC agreed to a penalty amount of $106,400, to be paid in three installments.
Meanwhile, the plant owners had submitted yet another application to relax the permit conditions (#3175-03). This application was denied on May 19th, 2005, but TRC submitted a revised request on May 26th. In August 2005, DEQ issued permit #3175-04.
In September 2005, DEQ issued a second violation letter, for failure to comply with numerous permit conditions. Two days later, the plant ceased operations, and by the end of the month TRC had laid off 13 workers and shuttered its facility. By February 2006, DEQ had calculated a penalty amount of $1,894,200.
Lessons Learned?
There are several lessons to be taken from this sorry chronology. The first is the disturbing pattern of violations and the company’s strategy for dealing with them. Rather than altering its equipment or practices to remedy the problems, TRC continually opted to amend its permit—to make the permit comply with the pollution, instead of the reverse—a strategy that DEQ tacitly endorsed with its issuance of four separate permits for the same plant. That some of these permits were issued while enforcement actions were still pending is particularly distressing. (DEQ argues that Montana’s permitting laws do not give it any flexibility in this regard—that “permitting” and “enforcement” are separate activities.) Montana is quite obviously in need of a strong “bad actor” law—no company should be granted a new or modified permit while still owing the State penalty payments for previous violations.
Unfortunately, the permitting issues are only one example of TRC’s overall deplorable conduct. Equally offensive is the $10.5 million low-interest loan made by the State Board of Investments to TRC based on representations that all its permits were in place and being complied with. In fact, the water use and water discharge permits were NOT in hand, and the plant was also out of compliance with its air pollution permit. A quick check on the world wide web reveals that shady dealings are not unprecedented for the TRC plant co-owner Barry Bates. In 1999, a federal district court in Colorado agreed with the United States Securities and Exchange Commission that Barry Bates was guilty of fraud, and unfit to continue his profession as a stockbroker. More recently, in April 2007 Bates was found guilty of income tax evasion, fined $300,000, and sentenced to three months of house arrest and five years probation.
Recent Events
By September 2006, local citizens had had enough. The Citizens Awareness Network joined forces with Women’s Voices for the Earth and the Clark Fork Coalition to appeal the permit (#3175-04) to the Board of Environmental Review (BER). A contested case hearing was conducted in May 2007, and in April 2008 the administrative hearings officer made a recommendation to the BER that the permit be remanded to DEQ. The agency would be expected to conduct a more thorough analysis of pollution control technologies, so the public could be more adequately protected from the plant’s emissions—particularly during start-up, shut-down, and other periods of “non-steady state operation.” The BER is scheduled to act on the recommendation at its May 30th meeting.
The most recent chapter in this sordid tale began in November 2007, when DEQ announced a settlement drastically reducing TRC’s fine from $1,894,200 to $200,000. The new figure was based on TRC’s alleged inability to pay, but the financial information to justify that claim was never provided to DEQ. (Even if it had been, basing fines on whatever is convenient for the violator is an alien concept for most people, and clearly the wrong policy.) Shortly after DEQ received the financial report from Industrial Economics (the use of an independent third party allowed the company to protect its financial documents from disclosure to the agency AND the public), the plant was taken over by Wayzata Investment Partners, a hedge fund group based in Minnesota.
The financial report included statements made by TRC that appear to be contradicted by the facts—specifically, that no sale was being contemplated. For this and other reasons, the Clark Fork Coalition, MEIC, and numerous Thompson Falls area residents wrote a letter to the Governor asking him: 1) to help launch an investigation of whether TRC violated the law; and 2) to review the laws and policies that allowed DEQ to take such a lenient approach with the company. The Governor responded promptly, pledging to do both things. After receiving the Governor’s letter, the Attorney General immediately launched an investigation. MEIC will continue to monitor this project, to assist local citizens in their efforts to preserve their quality of life, and to push for meaningful enforcement of Montana’s environmental laws.
IN THE NEWS
- Schweitzer seeks probe of power plant (by VINCE DEVLIN - Missoulian - 02/24/08) THOMPSON FALLS — Gov. Brian Schweitzer has asked Attorney General Mike McGrath to conduct a criminal investigation into whether the former owners of a Thompson Falls power plant provided fraudulent information to the state in order to obtain a massive reduction in fines for continually violating air quality standards....
- Governor seeks investigation of former plant owner (by The Associated Press - 02/22/08)
- Governor urged to investigate power deal (by JOHN S. ADAMS Tribune Capitol Bureau) HELENA — Two environmental groups and 14 Sanders County residents are asking Gov. Brian Schweitzer to investigate whether the former owner of a Western Montana power plant deceived regulators last fall to avoid paying a stiff state fine. In a letter faxed to the governor's office this week, representatives from the Clark Fork Coalition and the Montana Environmental Information Center. . . .
SEE ALSO
(November 30, 2007) Thompson River Co-Gen, LLC Resolves Clean Air Act Violations