Investigations Politics

A controversial biomass plant proposed for Eastern Kentucky has moved closer to extinction following a ruling Thursday by the state Public Service Commission.

The PSC rescinded an order that allowed the $1.26 billion wood-burning project to proceed. The move came in response to a state court of appeals decision last month that deemed the plant unnecessary and likely to cause an undue economic burden on the region’s residents.

“As a result, it has no future, thankfully,” said Michael Kurtz, the Cincinnati attorney representing Kentucky Industrial Utility Customers Inc., an association of major energy-consuming companies that had filed suit to contest the PSC’s decision.

“The plant could only be financed and built if the businesses and poor people of Eastern Kentucky were forced to subsidize this grossly uneconomic project,” Kurtz said, adding that the project would have helped only “politically-connected developers.”

In 2014, WFPL’s Kentucky Center for Investigative Reporting explored campaign donations and political maneuvering behind the project, which included false promises as well as legislation tailored solely to ease the way for the plant. (Read “How Politics, Misinformation, Money Fueled a Power Plant in Kentucky’s Coal Country“)

The PSC, which regulates utility rates and services, had approved an agreement in October 2013 under which Kentucky Power Co. would have purchased all electricity produced by the ecoPower Generation-Hazard LLC plant for two decades. The agreement also allowed Kentucky Power to recover from its customers more than $1.2 billion in costs.

The plant was to be built in an industrial park in Perry County, 11 miles northwest of Hazard.

But the Kentucky Court of Appeals ruled last month that PSC approval of the power-purchase agreement between Kentucky Power and ecoPower constituted “a complete abdication of its statutory responsibility to ensure that the rates for public utilities in this Commonwealth remain ‘fair, just and reasonable,’” as required by law.

The court directed the PSC to rescind its approval.

While the agreement would have created “a handful of regional jobs, almost every household and business in the 20-county service area would be subjected to a sizable rate increase for the next 20 years,” the appeals court said in its ruling.

“All told, the citizens of these 20 counties in Eastern Kentucky, many who live at or below the poverty line, are being asked to fork out over a billion dollars so that Kentucky Power can diversify its energy portfolio in the event the [U.S. Environmental Protection Agency] mandates renewable energy at some yet unknown future date.”

Either the PSC or Kentucky Power could have appealed the court ruling, but neither chose to do so before it became final on Aug. 15.

Gary Crawford, ecoPower’s chief executive officer, did not respond Friday to requests for comment on the project’s status in light of the court and PSC decisions. In a 2014 interview with KyCIR, Crawford said a final decision on the project’s fate wouldn’t come until the legal issues were resolved.

Kentucky Power issued a statement Friday expressing its support for “alternative fuels” and its desire “to participate in this initiative.”

“We will continue to pursue other alternative fuel options in the future, said Greg Pauley, Kentucky Power’s president and chief operating officer. “We have decided that we will live with this new PSC order but continue looking at alternatives that are in the best interest of our customers.”

Gary Crawford, CEO ecoPower; Len Peters, Secretary of the Kentucky Energy Cabinet; David Drake, board member for ecoPower and a former Energy Cabinet Secretary; Richard Sturgill, ecoPower founder and chairman; with Gov. Steve Beshear at a bill signing ceremony for SB 46.

Gary Crawford, CEO ecoPower; Len Peters, Secretary of the Kentucky Energy Cabinet; David Drake, board member for ecoPower and a former Energy Cabinet Secretary; Richard Sturgill, ecoPower founder and chairman; with Gov. Steve Beshear at a bill signing ceremony for SB 46.

KyCIR’s 2014 report detailed how ecoPower and state Sen. Brandon Smith of Hazard had successfully pushed through a new state law the previous year, giving the project special treatment. Their efforts included misleading letters of support signed by Smith and other prominent Eastern Kentucky politicians.

Smith later received thousands of dollars in campaign donations from people associated with ecoPower, including Richard Sturgill, a wealthy businessman and Hazard native who formed the company in May 2009 to build the plant.

Just 10 days after then-Gov. Steve Beshear signed Smith’s bill into law, ecoPower had a customer for its electricity: Kentucky Power, which serves approximately 170,000 customers in the 20 Eastern Kentucky counties.

Following PSC approval of the power-purchase agreement, Sturgill, Crawford and several other ecoPower employees and family members donated a total of $6,500 to Smith’s 2014 re-election campaign, KyCIR found. None had ever given him as much as $100 previously.

Smith did not respond to requests from KyCIR for comment Friday on the latest turn of events and the project’s future.

Reporter R.G. Dunlop can be reached at rdunlop@kycir.org or (502) 814.6533.

This story was reported by WFPL’s Kentucky Center for Investigative Reporting

R.G. Dunlop is an investigative reporter whose work has exposed government corruption and resulted in numerous reforms.