Discussions on Repowering Project Get Heated During First Public Hearing

Rick Rigel, ARPA General Manager

Looking for responsibility, looking for blame, looking for a way out summed up the questions and mood of the 70 to 80 residents who were on hand for the first of three public information meetings, hosted by ARPA, Arkansas River Power Authority, regarding that board’s two main options for the future of the Lamar Repowering Project.  The first meeting was held Wednesday, June 11 at the Lamar Community Building.

Bob Freidenberger, ARPA President

Following a brief overview of the history of the Lamar Repowering Project, ARPA General Manager, Rick Rigel, explained how a series of problems developed during the construction period resulting in cost overruns turning a gas fired power plant into a coal burning operation.  Rigel displayed two options the ARPA board and member cities are considering.  One is to continue to seek to develop a plant that can deliver sufficient power without exceeding air quality permit limits, but there are numerous additional costs built into that cold standby plan which has no guarantee of success regarding the boiler operation.  The plant won’t even be able to come back online until 2025, once a court imposed injunction on the operation has expired and a long-term power purchase agreement with Twin Eagle Resource Management LLC has run its course.   The other plan is to decommission the entire plant and sell off equipment to recoup some of the losses.  Value estimates run between $8M and $1.3M, given what may be a glut on the market for coal fired plants in 2024 due to new emission and greenhouse gas regulations.

Multi-Purpose Room, site of First Public Hearing

Many in the audience appeared to want the ARPA board to declare the operation a failure and walk away from the project and the $156M in construction bonds that funded the development of the operation.  Regardless of which of the two options are selected, Rigel said the debt service for the construction bonds will still have to be paid off by municipal customers of ARPA, as well as increased costs if the plant is placed in cold standby for ten years.  Rigel explained that defaulting on the bonds would only place them in receivership with a chance that increased costs would be associated with that move.  He did say there might be a chance to restructure the bonds at some point in the future.  Rigel added that consultants and some legal advisors have been invited to the two future meetings, June 25 and June 30, to help explain some of the legal ramifications of the construction bonds.  Rigel said both meetings will begin at 7pm, but in light of the large morning turnout, he may rethink where those meetings will be held.  The first meeting is set for the Lamar Community Building and the one on the 30^th is scheduled for the Cultural Events Center.

Rigel also explained that recouping any lost funds through performance bond lawsuits on any construction errors is slim.  “We don’t really have many options as the only entity we can sue is Babcock and Wilcox,” he explained.  Rigel said ARPA has brought a lawsuit against the boiler manufacturer for several reasons.  “But as it turns out,” he told the audience, “All the contractors and sub-contractors associated with the construction did their jobs according to their contract expectations.  The only suit where we could recoup some of the money is through Babcock and Wilcox and we’re doing that since we initiated the lawsuit this past February.”  In response to a question from the audience about just putting the whole operation up for sale, Rigel said, “In all likelihood, we wouldn’t really get much response in light of a downturn in future coal usage, plus, at this point, the plant still can’t achieve its emissions levels, so I can’t think it would be bought anytime soon.”

ARPA board members, many of whom were not serving on the board when the project began, said their communities have felt the negative impact of the cost overruns.  Richard Stwalley of Las Animas said the project was too much of a financial burden for his community and they didn’t want to have to spend any more funding on it.  Ron Clodfelter, also from Las Animas, said, “This project isn’t working and we have to just bury the dead horse.”  David Willhite, one of the two ARPA members who voted in favor of the project over a decade ago, told the audience,” This has been one of the biggest mistakes I’ve ever made.”  Bob Friedenburger, ARPA President, explained that every study conducted on the switch from natural gas to coal was made in the best interests of the residents, given the information that showed gas prices would continue to develop large ‘spikes’ in future costs, while coal prices would show a ‘bump’ increase by comparison.   Rigel added that making a switch back to gas wasn’t a consideration as the original equipment no longer existed.  When asked about the future job status of current employees at the plant, Rigel said that Lamar Light Plant Superintendent, Houssin Hourieh, would make a statement once a course of action had been determined.

Doug Thrall, owner/manager of the Rodeway Cow Palace Inn, made a recommendation for the ARPA board, suggesting that, recognizing that the Lamar Repowering Project will never function as planned, the board direct Rick Rigel to write a letter stating, “We, ARPA, will cancel all contracts with its member cities, and assign the existing contracts that we have to those cities and authorize Rick Rigel to take that letter back to the bond holders and insurance companies and lay it on the insurance company’s table and say it’s time for you guys to step up and pay these bonds.  We’re not going to do that.”

Other levels of frustration with the project, especially the cost of the construction bonds, were voiced during the meeting.  Over the past several years, residents have complained that their increased utility bills were a result of the construction cost overruns for a project that hasn’t functioned since late 2011 and they will continue to be billed under present circumstances for the life of the bonds.  That issue is expected to be covered in greater detail during the June 25th and 30th meetings.

By Russ Baldwin