Community outreach helps gas plant developers avoid delays
Opposition from environmental groups and communities is the biggest challenge to meeting deadlines when building natural-gas power plants in the United States, specialists in the development and legal aspects of the sector have told FC Gas Intelligence.
Developers should consider two to three years to get the necessary permits, power-purchase agreement and financing in order to start construction, according to lawyer Thomas J. Moore, Partner in Mayer Brown's Houston office. But he said it was difficult to forecast timelines for development in this sector because of the risk for permit challenges in court and the years of delays a lawsuit can cause.
Objection to new power plants from environmental groups and communities have always been a concern in the US, Moore said. Noise and air pollution are among the complaints and motives for litigation around the country.
“Very early on in any analysis of construction of a power plant in the US, you have to consider your ability to get the necessary environmental and land-use permits...to locate the power plant where you want locate it,” he said.
Land and environmental permits in the US to build a power plant can be harder to acquire in certain states and counties where there are already documented air quality problems.
“I was involved in a power plant project in the San Francisco Bay area, and the process was held up for litigation for five years," said Moore, who declined to disclose the project's name. "Although ultimately the power plant was permitted, the developer had to take into account the fact that in that location it was going to draw criticism, and that criticism would have a dramatic impact on the cost and timeframe.”
Focus on communities to avoid opposition
New Jersey-based Footprint Power decided to build its business model to develop new power plants by involving the community and all the stakeholders early on in the planning, to avoid delays.
Founded in October 2009, Footprint Power is currently developing its first project with a focus on buying old coal-fired power plants, shutting them down, and building new more efficient technologies such as natural-gas plants and other less-polluting solutions.
“What distinguishes us is our outreach and our work with communities,” said Peter Furniss, CEO. “To create motive around this transition from the old to the new is critical to everything that comes after.”
That first project is the replacement of a 65-year-old coal-fired power plant into a new natural gas combined-cycle power plant in Salem, Massachusetts, with 674 megawatts of installed capacity.
Footprint acquired Salem's coal-fired plant in 2012, and operated it until it shut down in 2014.
In order to avoid delays, the company started to simultaneously apply for permits for the new natural-gas power plant and permission to sell power capacity through an auction.
“We knew we were going to have very little time once we got the deal done. So we were getting our permits, working with the old plant and working with the community to make sure that the community was accepting what we were planning to do,” he said.
Despite all the planning and effort, Salem’s new power plant was delayed by one year. Footprint was able to resolve several court appeals from environmental groups, but an appeal by four members of the community in the area still delayed the process.
“When we won the auction we were already six months along in our permit application process, so we should have been able to meet that timeline, but as it turned out, we had some appeals,” Furniss said. “It was a very significant delay, but we have worked together to get to where we need to be.”
The company was able to delay the power-purchase agreement to meet the start of the plant and will not lose revenue, added Furniss, who noted that the plant's total investment of $960 million has not changed.
Furniss advises other developers to consider a timeline of six to seven years to get all the necessary permits, build their power plant and start producing power.
“Each project is very different, and they each need individual attention. The needs of the communities, the need for a power grid and the environmental needs will all be different,” he said. “Our model is built around providing individual attention and flexibility in order to get projects done.”
Footprint Power is already looking at other opportunities to pursue after it finishes construction in Salem.
“Getting our first project done was particularly hard because we didn't have a track record,” he said. “But now that we have that track record, I think it is going to be much easier to execute.”
By Anna Flávia Rochas