The Progressive


A project of Common Dreams

For Immediate Release
Amanda Goodin, Earthjustice 206-343-7340 x20
Lauren McGrath, Sierra
Club 859-309-0214

Sara Pennington, Kentuckians For The Commonwealth, 606-276-9933

Tom Sanzillo, TR Rose
Associates 518-505-1186

Kentucky Coal Plant Funding Challenged

Power cooperative owes US taxpayers over $1 billion, yet avoids federal environmental oversight


Late Tuesday, regional and national organizations
challenged a decision by the federal Rural Utilities Service (RUS) to
allow the East Kentucky Power Cooperative (EKPC) to waive federal debt
obligations and seek private financing for a new 278-MW coal-fired power
plant at the J.K Smith Power Station in Clark County, Kentucky. The
Sierra Club and Kentuckians For The Commonwealth are represented by
Earthjustice in this matter.

EKPC already owes over
$1.3 billion for older power plants; more than $1 billion of this debt
is held, or guaranteed, by the Rural Utilities Service - and the
American taxpayers.
"Coal plants are
financially risky in today's market, especially given the host of new
pollution regulations in the pipeline," said Tom Sanzillo, Senior
Associate of TR Rose Associates, a New York based financial
consulting firm (and author of an April 2009 report of the credit
condition at EKPC). "Recognizing this, RUS has stopped putting federal
dollars at risk into new coal plants. Yet the agency continues to rubber
stamp approval for cooperatives like EKPC to get
deeper in debt and to assume ratepayers will continue to pay endless
rate increases for bad deals."
According to Billy
Edwards, Sierra Club Member and business owner living near the proposed
plant, "East Kentucky Power has the opportunity to lead by investing in
cost saving energy efficiency and renewable
options, but they're not willing to evaluate any options beyond coal -
the most risky of their options."
Before EKPC can seek
private financing the cooperative needs RUS to sign off on the debt
request, much in the same way a homeowner would need bank approval
before taking out a second mortgage. RUS gave this
approval without thoroughly analyzing EKPC's perilous financial
situation or environmental impacts and risks of the new coal plant--a
decision that leaves taxpayers exposed to unnecessary financial risk.
Under the terms of the
RUS's $900 million lien accommodation, if the cooperative fails to pay
back its debt, the private lenders get paid out of the share that was
the government's, and if there is not enough
money to satisfy all the debt, the government (and the taxpayers) will
bear the loss.
"The government has
proposed to overlook massive outstanding debt by the East Kentucky Power
Cooperative and allow the cooperative to take on even more debt with
the proposed coal plant," said Amanda Goodin
of Earthjustice, a lawyer in the case. "When the U.S. taxpayer
essentially owns the debt of a regional power provider, it must abide
the same laws of the land that apply to the granting of all federal
By failing to consider
the environmental impacts of the plant before granting the lien
accommodation, RUS is in violation of the National Environmental Policy
Act. The failure to consider the environmental consequences
of the lien accommodation also violates the Rural Electrification Act.
A similar case is
pending in Holcomb, Kansas where plans to expand the Sunflower Coal
Plant also face dubious debt arrangements under the federal RUS program.
A similar case is
pending in Holcomb, Kansas where plans to expand the Sunflower Coal
Plant also face dubious debt arrangements under the federal RUS program.