Coal Plant Shutdown: Owners and Operators Need Vision – Part I

McCarter & English, LLP

McCarter & English, LLP

Coal plant owners and operators can make a plant shutdown easier by planning now for the site’s future. This plan, or Vision, can help expedite shutdown efforts, reduce costs, improve relations with the local community, and avoid regulatory and legislative entanglements.

Those entanglements are real, and are what recently had the Colstrip Generating Station back in the news. Concerned about the negative impact the plant closure will have on the local community, Montana state legislators are looking at ways to keep two of the coal-fired generating units active until 2022, when Colstrip operators are obligated to shut down pursuant to a consent decree. Environmentalists are not the only ones who are unhappy about this development. Talen Energy, a co-owner of the plant, has not commented on the legislative efforts except to say it is losing money by operating.

It is not surprising that state legislators are getting involved in plant shutdowns. The loss of a coal plant – often the largest employer in town – is not much different economically than the loss of any other large employer. The host community must adjust to the loss of local tax revenue, jobs, local wages and downstream economic activity, and the state will collect less corporate business and personal income taxes. At the same time, the community is left with a former industrial site, sometimes located on prime waterfront property or other valuable real estate, that may be contaminated and take many years to redevelop.

A shut down coal plant may not benefit the owner or operator either. For years the community viewed the plant with pride and goodwill; now they may ridicule, deride or even curse it. Nuisance ordinances begin to pop up. Regulators begin to make the environmental problems more expensive. If the legislature gets involved, the owner or operator may have to operate at a loss (even if that loss is ultimately recoverable from the rate base). Exit becomes painful, if it occurs at all. But it doesn’t have to be that way. Coal plant operators with a Vision can make exiting from the site occur sooner and at less cost.

The first step is a Vision. A coal plant shutdown could be a series of events: throw the breakers, knock down the plant, address the soil and groundwater contamination, and sell the facility. Or it can be integrated: use the crushed concrete foundations as barriers to control stormwater flow across the property or to fill areas where contaminated soil must be removed. Erect a new building over low-level contamination. Use a parking lot to seal up coal ash.

But how do you fit the pieces together? The answer is a Vision, a well-thought-out plan for the eventual reuse of the plant property that includes both the process of shutdown, cleanup, and redevelopment, and the steps to address the negative impact on the community of the shutdown. Development of the Vision is an essential first “next” step after the decision to close. The Vision will impact all the other decisions that follow – by regulators, community leaders, neighbors, labor unions and environmentalists. Consequently, it will be important to include all these groups in the process to ensure their input and buy-in.

The Vision must be far-reaching in scope and time. It took a 10-year battle with environmental and community groups before NRG Energy agreed to close the Fisk coal plant in Chicago. Plans for the 60-acre site have evolved from a vertical garden to a transit authority bus garage, but to date, a final decision on reuse has yet to be made. Consider also that the English Station coal plant in New Haven, Connecticut closed in 1991. Redevelopment of the waterfront site still awaits remediation of asbestos and PCB contamination.

There are success stories however. The Pratt Street Power Plant in Baltimore became a central element of the Inner Harbor redevelopment and now houses a Hard Rock Cafe and a Barnes & Noble store. The Chester Generating Station along the Delaware River is now “The Wharf at Rivertown,” and the Philadelphia Union soccer team plays in the stadium constructed on adjacent station property. In San Antonio, the Mission Road Power Plant is becoming the Energy Partnerships Innovation Center.

A Vision can even be visionary. As reported in The New Yorker, Aero Farms, a pioneer in urban vertical farming, tore the rusting corrugated steel off the frame of an abandoned steel distribution facility in the heart of Newark, New Jersey, and now has 70,000 square feet of floor space growing many thousands of square feet of bok choy, arugula, watercress and kale only a few hours from store shelves in New York City.

The success stories illustrate the benefits of having a well-developed plan. In our next Alert we will discuss how a successful Vision must bring key stakeholders into the process and be developed early.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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