Monday, July 26, 2010

Sierra Club Celebrates Little Gypsy Victory After A Two-Year Battle

Just thirty miles west of New Orleans along State Highway 48 is the town of Montz, Louisiana. It is the home of Little Gypsy, a natural gas plant that supplies energy to the residents of Louisiana. In 2007, Entergy Louisiana LLC announced its plans to retrofit the plant to burn coal and petroleum coke (a byproduct of oil refining) instead of natural gas in order to diversify the fuel mix.

Entergy designed the plans for Little Gypsy with the intent of both varying Louisiana’s electricity sources as well as mitigating the continually rising costs of natural gas for consumers. However, as the nation experienced significant economic changes, finance and environmental legislation became two important factors for the repowering project.

In 2007, Entergy had originally estimated the retrofit to cost approximately $1 billion. In October 2007, their proposal was approved by the Louisiana Public Service Commission (LPSC), despite objections made by the Sierra Club. Sierra Club representatives were among the first to predict the financial problems that would inevitably bring the construction plans to a halt. We filed a complaint with the US Environmental Protection Agency (EPA) in January 2008 concerning Entergy’s failure to adequately assess future costs and emission regulations. Two months later, we followed up with an additional request to the LPSC to reconsider the permit as well.

In June 2008, Sierra Club along with the Louisiana Environmental Action Network, the Alliance for Affordable Energy and the Gulf Restoration Network filed suit against the LPSC’s approval of Entergy’s plans under the Clean Air Act for exceeding the regulations for toxic emissions including mercury, lead and arsenic.

Researchers from the Histecon Associate group, hired by the Sierra Club and affiliates to assess the Little Gypsy construction plans, say that the cost of coal is increasing at a rate of 16% per year. In early 2009, Entergy reported that new environmental regulations, increased costs of construction and labor, and inadequate financing options, Little Gypsy project would be estimated to cost an upwards of $1.76 billion. However, this estimate only includes environmental regulations that have been put in place within the first few months of the Obama administration. In addition to the existing regulations, extensive greenhouse gas emission regulations are expected to be implemented. Considering that coal plants are the number one source of human derived greenhouse gas emissions, these regulations could increase the cost of the retrofit by another one-third to one-half.

These substantial fiscal changes convinced Entergy that the benefits of the retrofit to the company and consumers would not be realized for another 13 years or more. Not only are the benefits becoming more distant in the future, but they are also decreasing in relevance. The rising natural gas prices Entergy sought to avoid have since stopped and began to fall with the discovery of the Haynesville shale formation, leaving the company with one less reason to convert Little Gypsy.

After filing several additional petitions opposing the Entergy permits to the Louisiana Department of Environmental Quality (LDEQ) and Environmental Protection Agency, the LSPC ordered Entergy to review their construction plans to convert Little Gypsy on March 11th, 2009. Less than one month later, Entergy Louisiana LLC formally asked the LPSC for permission to suspend the project for a minimum of three years, at which point the project will be eligible for review. Sierra Club representatives believe that the delay is long enough to allow the continually increasing costs of coal to put the project on hold indefinitely.

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