Need for Local Permits and Approvals Presents Challenge for Siting New Gas-fired Power Plants

M. Joel Bolstein
Dechert, Price & Rhoads
Philadelphia, Pennsylvania

The results are now in from Vice President Dick Cheney's Energy Task Force, and all federal agencies have been ordered by the President to expedite their review of energy- related permits. Although the President has the power to shape national energy policy, when you look closely at the process for siting power plants it is clear that the federal government is largely on the sidelines. Companies that want to build new power plants need to use traditional tools of environmental due diligence and develop strategies for building local support and obtaining local approvals.

After the developer has chosen the site for its proposed power plant, it is prudent to perform an environmental due diligence evaluation to identify potential impediments to development. These impediments fall into three categories:
1) site contamination issues, 2) site development issues, and 3) permitting issues. Site contamination issues include the presence of contamination at the site that might give rise to potential liability being imposed on the owner or operator of the property, including third party toxic tort claims under common law and cleanup costs for contaminated soil and groundwater imposed under federal and state law. Site development issues include the presence of wetlands, endangered species, areas of historic or archeological significance, flood plain restrictions, and other unique environmental conditions or constraints that might be impediments to constructing the plant.

As in all transactions, there are ways for a developer to minimize the risks when it acquires a contaminated property. Those risks can be quantified and managed, by appropriately structuring the transaction to shift any risks that are unacceptable to the developer back to the seller. Non-contractual protections include obtaining liability relief under applicable state brownfield laws, or entering into a prospective purchaser agreement with the federal government. In addition environmental insurance policies can be used to limit the exposure of a power plant site developer by capping cleanup costs.

Another area of due diligence is assessing the need to obtain environmental permits for the project. The developer's environmental consultant should analyze the applicable air pollutant control requirements. This will help determine whether or not the facility will require NOx allowances and offsets. Under federal law, new major sources of nonattainment pollutants must obtain construction permits and emissions reduction credits to achieve net decreases in air emissions. There is a market for emissions reduction credits, but such credits may be limited in quantity and availability. The due diligence should also determine the need for PSD pre-application air monitoring. Most new gas-fired power plants will be required to obtain a PSD permit prior to beginning construction. On many occasions, the pre-application and monitoring can require one year or more of data.

The environmental due diligence should also focus on identifying the water needs for the project. This will include locating local water supplies, evaluating available water allocations, identifying means for conveying water to the plant, and determining what permits are required for any waste water discharges. One additional environmental permitting issue to consider is whether any concerns about environmental justice are triggered by siting the plant in a community that is primarily minority and low income. This is an issue that has come up more frequently in recent years as the courts wrestle with the question of whether citizens can file private actions to enforce Title VI of the Civil Rights Act.

In devising a public relations strategy, the developer should strive to meet the following objectives: 1) obtaining any local approvals that are required for the project, such as zoning and land use; and 2) minimizing community opposition to the project. The tools that the developer will need to meet these objectives include: 1) a local lawyer to handle zoning;
2) consultants to address concerns that the local community has regarding environmental issues; and 3) a public relations firm for media support and creating educational materials.
There are a multitude of issues that any developer of a power plant should be prepared to address as part of its public relations strategy. The most frequently asked question is how and why the developer chose this site to locate its proposed power plant. The developer should also be prepared to respond to any concerns raised about potential environmental impacts of locating the plant in a particular community. Citizens that get their drinking water from groundwater are often concerned that the facility will have an impact on their water wells. The public often asks questions about air emissions and whether or not emissions generated by the power plant will have an impact on public health. The developer should gather all the information that it has prepared in conjunction with the air permit applications and make that information available to the public to demonstrate that there will be no adverse impact. The developer would also be advised to anticipate potential nuisance concerns raised by local citizens. Often times, public nuisances are the things that local citizens are most concerned about. For example, how much noise will the plant generate? To the extent possible, the developer should explain how the plant will be designed to minimize noise, e.g., the use of noise barriers, equipment enclosures, and other means to limit noise.

All states have some form of local zoning or land use regulation. The most significant thing to remember about zoning is that the decision makers are local citizens subject to local pressures, i.e., they have to live in the community where their decisions will affect the quality of life. Given that, a developer should not attempt to handle zoning issues without the help of a skilled zoning lawyer, preferably someone who is well connected and well respected in the local community. Developers should pay as much attention to zoning and local community concerns as they do to obtaining environmental permits and approvals. It does no good to have a stack of environmental permits when zoning approval has been denied.

Moving a project from the drawing board to operation is a multi-task project that requires the skills of a well-assembled team, including those with environmental, legal and public relations expertise. Now that the President's Energy Task Force has determined that thousands of new power plants will be needed over the next decade to keep up with growing demand, many new projects will be proposed. Some will succeed and some will fail. Those that succeed will do so because the developer understood that the siting process requires extreme care in identifying the best site and developing strategies for building local support and obtaining local approvals.