2009.08.03 Press Release
Lawsuit Uncovers Financial Risks of Holcomb Expansion
Contact: Amanda Goodin, Earthjustice -- (206) 343-7340 x20
Stephanie Cole, Sierra Club KS -- (402) 984-1122
Lawsuit Seeks Environmental Analysis by Rural Utilities Service of Holcomb Coal-Fired Power Plant Expansion
Washington, DC - As Sunflower Electric aggressively pushes for expansion of a coal-fired power plant at Holcomb, Kansas, the Sierra Club, represented by Earthjustice, filed court papers last Friday seeking to stop any additional action in support of the expansion project. The court challenge is to the federal Rural Utilities Service (RUS), which has effective oversight over Sunflower's business decisions, including the expansion. Groups say federal financing and approval of new power plants should investigate cleaner, smarter options. An extensive review of financial documents reveals a long and troubled financial relationship between Sunflower and RUS.
Sunflower Overbuilds Holcomb I, Attempts Similar Risks with Holcomb II
Sunflower has essentially been forced to accept strict oversight and control by the owner of its loans; the federal government.
In the early 1980s, RUS, a little known arm of the Department of Agriculture, committed $543 million in loans and guarantees so Sunflower could build its existing 360-MW coal-fired power plant. Soon after the construction of Holcomb 1, Sunflower experienced severe financial difficulties and defaulted on its debt service payments, due largely to having built a bigger plant than there was a market for. In 1987 RUS and Sunflower entered into an agreement to restructure Sunflower’s debts. Even with the restructuring, Sunflower could not meet its debt service obligations and Sunflower's balance of debt ballooned. RUS and Sunflower entered into another debt restructuring agreement in 2002. RUS conditioned the refinancing on Sunflower handing over significant authority and control of its business operations to RUS. Under the governing loan documents, Sunflower had to obtain RUS approval for any significant project or decision, which led to considerable friction. "The plan to add another dirty coal plant is essentially a project sponsored by the Rural Utilities Service. We believe the RUS has a duty to review all environmental impacts of the proposed new, polluting coal project. Why should taxpayers take both the financial and environmental risks while Sunflower rolls the dice again on a high-risk project?" said Stephanie Cole, Sierra Club KS.
"Federal agencies with significant interest in projects are by law required to evaluate the environmental impacts of such projects. Sunflower has been financially propped up by the US taxpayer for decades and those taxpayers deserve to know if the project is sound, or a boondoggle that hurts the environment and the health of Kansans," said Jan Hasselman of Earthjustice who is representing the Sierra Club in the legal action taken on Friday, July 31. The lawsuit argues that RUS must conduct an environmental impact statement (EIS) evaluating the impacts of - and alternatives to - Sunflower's expansion before authorizing the project to proceed and before signing off on Sunflower taking on any more debt. Because the expansion would generate vast amounts of global-warming gasses and other harmful pollutants, the project must be fully examined by RUS before moving forward and an environmental impact statement must be written. There is no dispute that RUS failed to do an EIS before authorizing Sunflower to take on even more debt in order to repeat a mistake a of the past; building too much generating capacity. The project's air permit was rejected by the Kansas Department of Health and Environment in October 2007.
Former Governor Kathleen Sebelius repeatedly vetoed legislation seeking to force this project on the citizens of Kansas, but the new Governor recently inked a deal that seeks to allow the project to go forward.
Read the motion here [redacted to protect business information]
Contact: Amanda Goodin, Earthjustice -- (206) 343-7340 x20
Stephanie Cole, Sierra Club KS -- (402) 984-1122