Court rejects coal group lawsuit over TVA’s Paradise partial shutdown decision

Saying that the Tennessee Valley Authority properly followed its environmental review procedures in deciding to shut two of three coal units at the Paradise power plant and build a gas-fired replacement at the site, a federal judge on Feb. 3 dismissed a July 2014 lawsuit filed by the coal industry against that TVA decision.

The Feb. 3 order was by Judge Joseph McKinley Jr. out of the U.S. District Court for the Western District of Kentucky. The plaintiffs in the case included the Kentucky Coal Association and several other parties. They had filed a complaint seeking a declaration that the Tennessee Valley Authority violated the National Environmental Policy Act (NEPA), the Administrative Procedures Act and the TVA Act by conducting a faulty environmental assessment (EA) process, improperly issuing a Finding of No Significant Impact (FONSI) to culminate that environmental review, and failing to prepare and issue a more detailed environmental impact statement (EIS) concerning the project. This suit was over TVA’s November 2013 decision to retire Paradise Units 1 and 2 and to construct a new gas-powered facility and accompanying gas transport infrastructure.

On Dec. 19, 2014, the court denied a motion for preliminary injunction that would have halted the coal unit shutdown and gas unit construction process, finding that plaintiffs had not met a heavy burden to show that a preliminary injunction should be granted. In September 2014, TVA moved for judgment on the administrative record arguing that it properly analyzed its decision to replace two coal-fired units at Paradise with natural gas generation under NEPA and that TVA’s action was neither arbitrary nor capricious under NEPA or the Energy Policy Act of 1992.

Said the Feb. 3 ruling: “Despite Plaintiffs’ differing calculations, the EA specifically analyzed how much generation TVA needed if it retired Paradise Units 1 and 2 based on net dependable capacity, as opposed to nameplate capacity as advocated by Plaintiffs. TVA determined that 800 MW of generation was needed. The record reflects that the net dependable capacity of the gas-fueled plant is approximately 1,025 MW; therefore, under TVA’s calculations, no shortfall is expected. Further, while reaching a different result than Plaintiffs’ experts, TVA considered power generation shifts and determined that gas generation is suited to meet ‘swing’ energy needs because it can easily provide more or less power as needed. In contrast, the coal-fired units cannot easily adapt to energy-use fluctuations. TVA’s determination regarding the amount of generation needed is not arbitrary or capricious.”

The decision also said: “Plaintiffs contend that retiring Units 1 and 2 will increase the costs for TVA customers by $500 million to $1.7 billion and that installing the new gas fired generation at Paradise will require $600 million more in capital than retrofitting Paradise 1 & 2 with environmental upgrades. TVA’s analysis with respect to the costs related to replacing Paradise Units 1 and 2 with gas generation satisfies the arbitrary and capricious standard of review. A substantial part of Plaintiffs’ argument centers on a cost comparison between retrofitting the coal-fired units and installing gas generation units. However, the least-cost planning program directs TVA to take into account ‘necessary features for system operation, including diversity, reliability, dispatchability, and other factors of risk.’ Accordingly, the lowest system cost is not necessarily the ‘cheapest’ option. In the present case, relying upon the 2011 [integrated resource plan], TVA offers a reasoned explanation, based on the evidence, for the particular outcome in question, and therefore its decision is not arbitrary and capricious.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.