Proposed Coal Plant's Water Plan Stirs Debate

BAY CITY — Behind a locked gate, on a flat, 1,200-acre parcel of land beside Texas’ Colorado River, cows graze and maize crops grow.

Four years from now, developers hope to begin operating a giant power plant here that will burn coal and petroleum coke. The $2.5 billion White Stallion Energy Center, they say, will help meet Texas’s growing need for electricity, and also provide jobs in a county with an 11.5 percent unemployment rate.

But the plans have stirred considerable controversy both locally and around the Colorado River basin. Texas is more welcoming of new coal plants than many other states, but nonetheless, plenty of people worry about air pollution and the huge amounts of water needed to operate a power plant.

“This is the beginning of the end of Matagorda County if that goes through,” said Robert Malina, who with his wife, Eva, retired eight years ago to a home a few miles from the proposed site. A yellow sign by the entrance to their property reads: “Stop White Stallion Coal Plant.”

The water consumption of the plant has recently been in the spotlight. Last week the board of the Lower Colorado River Authority, a state organization that controls substantial amounts of water along the river, postponed a decision on whether to grant a 40-year water-purchase contract to the plant. LCRA officials say there is enough water for the plant, which would contribute $55 million up front to finance the construction of a downstream reservoir off the main Colorado River. The contract would entitle White Stallion to an amount of water each year equivalent to about 15 percent of what Austin used in 2009.

“We don’t want to take any water out of the Highland Lakes,” said Randy Bird, the chief operating officer of White Stallion and one of the plant's backers, in an interview before the LCRA decision. He was referring to two upstream reservoirs that serve as crucial water sources for rice farmers and cities like Austin. But many LCRA customers, as well as people living around the Highland Lakes, are wary of a large new water user along the Colorado River, especially in light of the severity of the current drought, which has caused lake levels to fall well below normal.

"Right now, we certainly don't need the energy — what we need is the water," said Janet Caylor, who owns two marinas on Lake Travis. The LCRA is currently working on a 10-year plan to manage water demand in the Highland Lakes, with input from various "stakeholders" — including lake residents, cities, rice farmers and environmentalists — and all of those groups are very concerned about White Stallion, Caylor says.

Many rice farmers are worried about the plant, but they would also see some benefits from the coal plant's water contract, owing to the construction of a downstream reservoir that could capture and hold more water. "To the extent that that reservoir increases the water supply, we'll be in better shape," said Ronald Gertson, a Wharton County rice farmer who represents farmers at the LCRA water discussions. However, he added, "there's a lot of details to work out on that."

Coal plants around the state have come under fire from environmentalists. This week San Antonio announced it would close a 1970s-era coal plant it operates, a rare occurrence for Texas. However, a handful of other proposed coal plants have air-quality permits, a crucial go-ahead from Texas environmental regulators.

White Stallion officials say they still hope to start construction by early fall, and the LCRA board will reconsider the water contract on Aug. 10. But the plant hit another snag last month, when a Travis County judge ordered further review of the air-quality permit that Texas regulators had awarded it in December. Mr. Bird says he is considering how to respond to the judge’s order, but retains construction authority. As of last week, the plant also needed a few other permits, including one for disposal of wastewater into the Colorado River, and another construction permit from the Army Corps of Engineers (White Stallion officials could not be reached on Thursday to discuss whether any of those permit applications had gone through).

Meanwhile, the controversy continues. “There could hardly be a worse position for a coal-fired power plant for Houston air quality,” said Matthew Tejada, executive director of Air Alliance Houston. He said that the summer air blowing toward Houston from the Gulf is currently fairly clean, and the plant would harm that — just as federal environmental regulators are tightening various air-quality standards.

Bird said Houston’s ozone status would not be affected. The plant would be built with the newest commercially viable emissions technology possible, White Stallion officials say. However, they do not plan to sequester the carbon or use “coal gasification” techniques that would make the plant cleaner, albeit at significant cost.

White Stallion has been negotiating with various entities who might buy its power, according to Bird, who noted that a water contract was, in addition to the air permit, a crucial step in obtaining full financing for the project. Some big banks are interested, he said, but are waiting for the plant to get more of its permits before they commit. Bird said that the plant had four other backers in addition to himself, though he declined to name them.

White Stallion argues that Texas needs the electricity their plant would produce is much needed in Texas — and indeed, peak electricity demand on the Texas grid is projected to grow by nearly 50 percent over the next 20 years, according to the Electric Reliability Council of Texas, the grid operator. Some of that increased demand might have been met with more nuclear power, but plans to double the number of reactors at the South Texas Project, a large nuclear plant just a few miles from the White Stallion site, are on hold in the wake of the nuclear disaster in Japan. (STP has a long-term contract with the LCRA allowing it to divert up to 102,000 acre-feet of water annually from Colorado River, but it uses far less, thanks largely to an on-site reservoir.)

Meanwhile, people who live near the White Stallion plant remain worried about the impact on human health, and animal habitats. Matagorda County has huge numbers of birds — its Christmas bird count often includes more species than any other county across the nation. The Malinas and other plant opponents are worried that the mercury and other emissions will harm the birds, and keep tourists away.

Matt Largey of KUT 90.5 FM, Austin's NPR station, contributed to this article. This is the final piece in a five-part series on the LCRA, "Water Fight," that is running this week in The Texas Tribune and on KUT.