Blog: CSU will have no choice but to shut down Drake

Mon, Dec 3, 2012


By John Hazlehurst and Amy Gillentine

What’s going on with Drake, Neumann Systems Group, Colorado Springs Utilities and the Sierra Club? Is it possible that CSU will be forced to abandon the Neumann project and close the Drake power plant in response to a potential lawsuit from the Sierra Club?

We think so – and here’s why.

On Sept. 17, the Sierra Club filed a detailed notice of intent to sue “…the owners and operators of the Martin Drake Power Plant and Ray D. Nixon Power Plant for repeated and continuing violations of the federal Clean Air Act.”

The notice, in the form of a certified letter sent to Utilities CEO Jerry Forte, specified 37  violations, occurring between 1986 and 2012. The club alleges that, in the operations of both Drake and Nixon, CSU violated “…the Colorado State Implementation Plan (“SIP”), the Clean Air Act’s prevention of significant deterioration (“PSD”) requirements, and the operating permits issued to Drake and Nixon.”

CSU acknowledged receipt of the notice to sue, which was also sent to every voting member of the Utilities Board (but not to Mayor Steve Bach), but did not respond to any specific allegations in the letter.

On Nov. 19, the utilities board met for more than two hours in closed session. Bach, a non-voting member of the board, was also present. It was the first such meeting that Bach has attended since he took office in 2011.

No board member would talk to us about the subject of the meeting, either on or off the record. Dr. Dave Neumann, CEO of NSG, also declined to speak about the subject or about suggestions that the NeuStream could be stopped.

But based on conversations with other authoritative sources, we believe that CSU will have no choice but to suspend or cancel the Neumann project and eventually shut down Drake.

The violations of the Clean Air Act alleged by the Sierra Club may be largely technical in nature, but they are in fact violations. But that might not matter. If the club pursues a lawsuit, CSU and the city would likely lose the suit. Such an outcome could be financially ruinous, resulting in hundreds of millions in fines, legal liabilities, and other suit-related costs.

It’s reasonable to assume that CSU and the Sierra Club have yet to come to a final agreement. It’s even more reasonable to assume that CSU will immediately defer any further investment in Neumann Systems anti-pollution equipment until the suit is settled.

And that will be disastrous for NSG, a local company that employs 55 people with average salaries of more than $70,000. The company, which also has several laser patents, relies on CSU for the bulk of its financial resources. It also has a $10 million Department of Energy grant to use the NeuStream System to sequester carbon dioxide.

Neumann says that CSU can stop the work for a specific period of time, under the terms of the contract. But Utilities has to pay for the consequences of the stoppage, as well as any money to re-start the project. However, he says Utilities can also end the contract for any reason it chooses, or for a specific cause. The contract ties Neumann’s hands, and now he can only wait for a decision.

Unfortunately for Neumann – and for Colorado Springs residents and businesses who love their cheap, efficient downtown power plant – the Sierra Club is in the driver’s seat. If even a half -dozen of the alleged violations can be proven, CSU will be between a rock and a hard place.

It may not seem fair – after all, these are “merely” technical violations. It can be argued that none of them had any significant impact on actual emissions from the power plants. The city hasn’t been cited by the Colorado Department of Public Health and Environment or the Federal Environmental Protection Agency for any violations of the Clean Air Act.

And some people close to the issue say that the worst that could happen is that a judge would speed up the time that CSU has to comply with nitrogen oxide regulations, now set to start in 2023. That will cost millions – but only about $60 million added to the $121 million that CSU is paying NSG to comply with sulfur dioxide sequestration rules, due to start in 2017.

But violations they are, and the city knows to its sorrow that a Sierra Club lawsuit is as serious as a heart attack.

Twelve years ago, the Sierra Club filed a suit against the city and the United States Forest Service, alleging continuing and severe violations of the Clean Water Act in the operations of the Pikes Peak Highway, The city and USFS promptly settled, obliging the city to spend close to $15 million to pave the highway and remediate past environmental damage.

It’s a situation analogous to that of an NFL defensive back called for pass interference in the end zone. He might not have actually pushed the receiver, but he put his hand on the receiver’s shoulder and didn’t look back for the ball – and the official dropped the flag.

In life, as in football, you have to know the rules. If CSU was sloppy and careless in its regulatory filings, which seems to have been the case, they’ll get penalized. The penalties may seem arbitrary and capricious, the Sierra Club’s allegations may seem frivolous and immaterial, but that’s too bad.

Welcome to the NFL.


1 Comments For This Post

  1. Jerry Emanuelson Says:

    I had intended to reply to this column last Monday, but I have literally had a hard time believing the bizarre assertions that I was reading.

    I have also been incredulous at the horrible local reporting of this matter of the Drake power plant in other media, although I haven’t been able to monitor all of the reports.

    Essentially the Hazlehurst/Gillentine column advocates the destruction of nearly a third of the electric power generating capacity of Colorado Spring Utilities. They and other reporters on other media all claim that coal is the only fuel for these power plants. This is patently false.

    I have believed for decades, and the Colorado Springs Utilities specifically states of the Drake power plant, that “Each of the three generating units is able to produce electricity using coal or natural gas.”

    There were good reasons in the past for using coal when the price of natural gas was high and volatile, and while coal was cheap and easily obtained from Wyoming by direct rail service. Now, the situation is radically changing. Very expensive natural gas export facilities are being planned because of the current natural gas glut in the United States, which is expected to continue for the coming years. According to a December 7 article in the Washington Post, other countries are importing natural gas at a cost of 3 to 5 times the United States price. If we do not want an abundant and fairly clean fuel, other countries will gladly take our energy source at many times the price.

    The Sierra Club has been trying to block the use of coal for energy production. I can find no such legal war being waged against the use of natural gas. Although natural gas is a carbon containing fossil fuel, unlike coal, a very large fraction of its energy comes from hydrogen.

    Natural gas is not only a cleaner fuel in general, but it produces far less greenhouse gases than coal. Natural gas is the perfect bridge energy source until resilient and renewable energy sources can be developed at economical cost, and advanced energy storage techniques can be developed. Full economical development of those resilient and renewable energy sources is going to take many more years.

    Because of the central location of the Drake power plant, it has higher efficiency and reliability in its distribution systems than remotely located power sources. Distant power sources are also subject to occasional “rolling blackouts” in addition to being subject to all kinds of fairly rare, but quite catastrophic, disaster scenarios (from severe solar storms to terrorism to ice storms and wind storms). Because of the Drake power plant, this is something that we have not had to face, but many others have, and this will continue in the future.

    When I was a child, electricity was a mere convenience. It has very slowly evolved to become a necessity upon which our very lives depend. None of the basics that we require for life can now be obtained without electricity. Our food, our water, our sewer services and our communications all require electricity. The knowledge and infrastructure for a pre-electric society now exists only in museums. Even natural gas is usually moved by electric pumps. I would like to see all of those pipeline pumps replaced by natural gas powered pumps.

    Jerry Emanuelson