March 17, 2007

MEMORANDUM FOR

Richard Fristik, USDA Rural Development, Utilities Programs, 1400 Independence Ave. SW, Mail Stop 157, Room 2237, Washington, DC 20250-1571

SUBJECT: Citizens for Clean Energy, Inc (CCE) Agricultural Impact Analysis of HGS Great Falls, MT application and request for Supplemental EIS.

1. References. US Departments of Agriculture (USDA), Energy (DOE) and US Environmental Protection Agency (EPA); Montana Department of Environmental Quality (DEQ); Governor Schweitzer; Montana Environmental Information Center; www.25 x 25.org; www.aeromt.org; American Wind Energy Assoc (AWEA); National Center for Appropriate Technology (NCAT); MT Public Service Commission; MT Board of Investments, USDA Natural Resource Conservation Service; www.purdue.edu; www.aeromt.org; RW Beck Study, Feb 20007 (available online via city website, www.ci.great-falls.mt.us)

2. Background. This response was prepared by agricultural professionals, both active and retired, consisting of Richard D. Liebert, cattle rancher, BS, Agriculture, Purdue University, MBA, Touro University; Darrell Lassila, organic Farmer on Salem Road near the proposed site; Ken Morrow, former land appraiser and farmer from Fort Benton and Lloyd Smiley, retired rancher and farmer, Great Falls, MT. I also sit on the MT Farmers Union 25 x 25 Committee. This is the agriculture-working group of the Governors Climate Change Advisory Committee.

3. CCE requests a supplemental EIS is completed to address several deficiencies and inaccuracies contained in the FEIS. Our findings will address these specifically as related adverse impacts on soil, loss of prime farmland and Major funding changes and increases that are not consistent with sound RUS funding policy that should be designed to aid farmers and ranchers, NOT harm our agricultural communities and producers. If a supplemental EIS is not conducted, we request this application be denied RUS funding, especially if will also harm another federal treasure, the Lewis & Clark NHL.

4. ISSUE: Lack of USDA and EPA soil contamination analysis of farmland in the Highwood Generating Station FEIS and additional adverse impacts.

(A). Soil can become contaminated when small particles are released from a smokestack and are deposited as they fall out of the air. (EPA, www.epa.gov). The EIS does not go far enough to consider the accumulation of contaminants from ALL sources in addition to the chimney, such as fly ash, coal dust and additional airborne contaminants, and met only the letter of the law with the air modeling analysis, which implies there would be virtually NO contamination. This conclusion in the FEIS does not address the adverse impact on crop production as the contamination accumulates, and although the GHS technology is superior to the dirtier old tech pulverized coal plants, it is false to assert that there would not be ANY deposition at all remember gravity?

(B). Acid rain or acid depositions results from sulfur dioxide and nitrogen oxide emissions. Sulfur is present in coal as an impurity. Devices called scrubbers can chemically remove the sulfur dioxide before it leaves the smokestack and plants can choose to burn coal with lower sulfur content or use newer technologies to also remove mercury and carbon dioxide (gasification). (EPA, www.epa.gov/superfund/students)

The HGS plant does make an effort to reduce these emissions as mandated, BUT the FEIS still does NOT address the effect on soil Ph, and the FEIS fails to offer any assessment and comparisons, such as found in the Steubenville study by the EPA regarding emissions in Ohio. Federal Acid Rain legislation features that address cap and trade do not diminish the direct adverse impacts on our community here, and fails to address accumulation of contaminate deposition, particularly acid deposition.

(C). FEIS lacked USDA and EPA professional (meaning agricultural) staff oversight regarding soil contamination effect of crop and pasture viability, and all other work outsourced to consultants and deferred to the Montana Department of Environmental Quality (DEQ). Only two USDA employees actually participated directly and none from the EPA. (FEIS, Jan 2007).

Not one person in the direct preparation staff had any agricultural background or qualifications in soil science, agronomy, agricultural economics or general agriculture to make a sound professional assessment regarding accumulation of contaminant deposition and long and short-range effects.

We also found App. D, List of Persons/Agencies consulted to be deficient, as not one internal agency of the USDA was listed with a specific point of contact regarding agricultural economics, soil science or agronomy. Neither was the Montana Departments of Agriculture nor Livestock consulted on the adverse impacts of this proposed HGS action. We find that negligent. Not one person in this particular appendix is an agricultural professionals but biased toward the HGS Salem Road, especially city/county employees who could be subject to undue influence’ by supervisors who heartily endorse this project. What farm and ranch organizations and producers were directly consulted on this industrial attack on our farming community? Why was the Great Falls Industrial Park so easily dismissed, considering it had less adverse impacts than the HGS Salem site? This is not that what industrial parks are zoned for. Industrial plants like HGS-Salem should not to reduce prime farmland acreage? We can only speculate, but we believe this site was pre-ordained, considering the fact that the Montana Power Company’s Resource 89 project was intended for that generally vicinity near Salem Road back in the eighties.

(C). FEIS states impact of farmland at the Salem site would be adverse and most likely non-significant, but potential to be significant. The FEIS failed to address Cascade County Industrial Park expansion of additional industries and effects on farming operations and land use (FEIS 2007; Cascade County Commission minutes, 29 Dec 07) This FEIS did not identify SME's future intentions to build a second plant and mine coal locally in Cascade County if too expensive to haul coal, so those potential impacts entirely ignored (Billings Gazette, 2005, SME comments to Yellowstone Valley co-op) Consideration of a local coal mine also addressed in RW Beck study, Feb 2007 (on City of Great Falls website, www.ci.great-falls.mt.us) leading to further loss of farmland and pasture in the Golden Triangle along with more land lost to a second plant if expanded into the proposed Cascade County Industrial Park and TIF.

Conclusion. Citizens for Clean Energy would recommend that the USDA and EPA be correct these deficiencies and perform their statutory duties with due diligence to protect farmers and ranchers and preserve human health and the environment. These essential duties cannot be entirely left to contracted consultants. A supplemental EIS needs to be conducted.

5. ISSUE: Effect on organic farming. Organic farming is a ‘valued-added’ agricultural enterprise, which requires more protocols than just limiting pesticide applications and particular amendments to the soil. This innovative farming practice is promoted by the USDA and MT Dept. of Agriculture. Organic farmers are required by their national AND international marketing protocols to contact their neighbors to determine their own farming practices to reduce external impacts.

Legislation has not kept up with America’s development of organic exports, and the perception that we are growing organic products next to an Industrial Park could cast a very negative marketing perception to foreign buyers who value purity of the product, like organic grains, by-products and meats. At this moment, Japan and Korea have very meticulous standards and have rejected TONS of U.S. beef based on one tiny bone chip, so that type of perception is adverse to agriculture and something Senator Baucus has been working to improve. .

The USDA should do all in its powers to not contribute to harming marketing and perceptions of US farm products in the global economy which is moving to reduce greenhouse gas emissions from fossil fuels, particularly in Japan which initiated the Kyoto Protocol. What USDA study has been done to assess foreign consumer confidence in our value-added products?

6. ISSUE: Lack of Soil Sampling. Soil samples should be taken in the projected emission fallout area of the HGS to support SME's assertion of no impacts should this plant ever be built. There is a sound precaution, and just because its not mandated due to lack of vision, diligence or economics, does not mean it should not be done, particularly when organic and natural farm and ranch operations are depending on a good reputation of integrity and purity which this plant will not bring to the immediate community and Golden Triangle, the North Central Montana area surrounding Great Falls.

7. ISSUE: Adverse impact on farmland and land use. The FEIS stated that there is potential for adverse impacts to become significant. Why is the USDA considering using USDA RUS funding to create adverse conditions to farmers and ranchers who are doing all they can to provide America and the world the best and cheapest farm products? Why would the USDA want it’s funding to reduce land market values and property assessments? Granted the county would gain some economic value, but at what cost to our farming community, both in quality of life, economic prosperity and our Golden Triangle values and reputation? What price did the USDA put on that? Certainly there are enough studies to show the results of adverse impacts from industrial development and what compensation will the USDA offer farmers and ranchers, the very people the USDA is supposed to be support, NOT creating adversity for us. Additionally, water/sewage, rail and transmission lines will be disruptive and impose further adversity on farm/ranch productivity.

8. ISSUE: The Federal Farmland Protection Act. This is sound and well-intentioned legislation but incompletely considered in this FEIS. The loss of farmland goes beyond the 840 acres of one farm family, as the HGS effects dozens of other farm family enterprise surrounding the proposed site, many who have joined lawsuits against the counties arbitrary and capricious decision to approve the GHS site-zoning petition.

The HGS site would be the camels nose under the tent and Cascade County itself proclaimed its intentions for Industrial expansion and development through a Tax Increment Financing (TIF) district (established in Dec 2006 and contradicts the county’s own growth policy) designed to attract industrial development far beyond the coal plant (addressed in RW Beck study, Feb 2007), such as a cement and wallboard plants and more. These additional industries would create more adverse impacts on farm and ranch operations such as more contamination and debris in the air, transportation and operational disruptions, and even further loss of farmland classified as prime farmland of statewide importance. SME also has intentions for a second power plant if feasible and has considered a local coal mining operation, which has potential to create even more adverse loss of invaluable farmland if such activities were considered in the Great Falls and Golden Triangle area.

The FEIS does not address how many acres could be lost due to many adverse factors, and these combined should certainly raise the impact to greater significance. Professional USDA staff with academic and professional backgrounds in soil science, agronomy, and agricultural economics should have been directly engaged in the FEIS preparation by name.

There should be enough examples of industrial impact and expansion to examine and compare, and what has the FEIS done to meet the spirit of the Federal Farmland PROTECTION Act? Are there examples of successful and un-successful situations where coal plants have been established in pristine and virgin farming communities? What welfare and prosperity gains resulted and did farmers, ranchers and their families gain employment at the industrial sites that consumed farmland?

9. ISSUE: USDA Rural Utility Service (RUS) loan and load forecast speculation and massive HGS cost increase. The reason why this is addressed here is because the USDA is involved here, and a poor decision affects all farmers, ranchers and rural Americans. It is very questionable how the reduced number of customers can payback our federal government for a plant that be $720 million, and coal and rail transport increases (coal@$12 a ton, and rail$9 or more per ton). SME's inexperience at coal-fired electrical generation also needs to be considered in addition to the legal actions filed against HGS plus future legislation that will penalize carbon pollution such as a carbon tax and/or cap and trade.

a. Load Forecast is a crucial criterion in assessing the borrowers ability to pay back the loan (funded from the Federal Financial Bank). Put simply, its a measure of energy demand for a customer base of 120,000 Montanans projected by Southern Montana Electric, which includes the speculative integration of 57,000 Great Falls customers.

b. The City of Great Falls cannot be part of this load forecast as the Default Supply bills, HB 346 and HB 448 (which would have allowed Great Falls to provide electricity to residents) are dead according to the Montana legislative (laws.leg.mt.gov) 2007 website. Similar bills failed in the 2005 legislative session but the RUS still speculated.

c. In addition to load forecast and payback, the RUS is placing more emphasis on using renewable energy and conservation as loan evaluation criteria.

d. This application is one of the largest ever considered for coal-fired plant that can only serve less than 70,000 customers. Total HGS plant cost forecast has soared (RW Beck study, Feb 2007) beyond normal RUS contingencies (industry contingencies range from 5-10%, not 40%) is $540 million, of which $180 million is being financed by revenue bonds through the City of Great Falls. Governor Schweitzer (who does hold degrees in agronomy and soil science) even considered this plant ‘old technology and not fundable (Great Falls Tribune, 28 Jan 07). He advocates conservation, renewable energy and coal gasification as better ways to use and generate energy.

SME’s load forecast contradicts U.S. government’s own Census Bureau data and it’s questionable how RUS can fund a project that includes an urban metropolis like Great Falls as a SME partner. There are some gray areas of RUS funding urban/rural demographics, but the RUS charter should be focused toward rural America, especially since Secretary Johanns (USDA) and Secretary Bodman (DOE) declared a joint effort to enable a new Rural American Renaissance so let us see if there is action beyond the rhetoric. Some staffers I spoke with in the RUS electric division were unaware of this significant promise.

Incidentally there exists no contract with SME and the City of Great Falls which could pose a problem, as this RUS application needs to consider the risks and delays involved with 25% of this project being funded by the private sector, a sector that is increasingly skeptical of pulverized coal burning and turning to coal gasification as a better investment that is more capable of carbon capture and sequestration.

e. The largest plant ever financed by the RUS was Antelope Valley, ND operated by Basin Electric, 1.3 billion dollars and generates 900MW. To invest $540 billion dollars (and diverted from renewable energy efforts that are directly helping farms, ranches and rural communities) to generate only 250MW in a merchant plant would be poor judgment and a bad return on investment on behalf of taxpayers.

f. RUS Funding of electrical generation. The White OMB guidance to the UDSA RUS was to not fund electrical generating facilities within the FY2007 and 2008 budgets, and focus on transmission, renewable energy and conservation practices. It was stated that electrical generation would be better developed through the commercial sector, like now proven IGCC which Senator Baucus of Montana was successful in getting 20% commercial tax credits for investors.

Conclusion. Citizens for Clean Energy would recommend that the USDA RUS staff be questioned about this risky loan and suggest that SME could instead invest in renewable energy, conservation and transmission lines to get affordable base load power from Basin Electric or other providers. Congress could enact tax breaks for electric co-op owned coal gasification plants as Senator Baucus did for commercial coal gasification plants in the 2005 Energy Bill. Senator Baucus (supported by Senator Jon Tester, a Montana organic farmer) has introduced legislation to expand the USDA EQUIP program to include on the farm renewable energy generation. Both senators support the national renewable energy initiative, which we assume the USDA supports or does it?

10. ISSUE: FEIS Renewable Energy Alternatives rejected. Thanks to citizen input to the DEIS, SME-HGS considered additional practical renewable energy solutions.

Renewable Energy, net-metering and Transmission Alternative. SME would serve itself better if it truly embraced renewable energy and net metering (enable farms and ranches to produce their own energy, thus reducing grid demand), and the wind/solar dominant alternative a very feasible option that was summarily dismissed due to excessive bias toward HGS-Salem.

SME and Basin Electric should work together to improve transmission (a good use of RUS funds as stated by the White House) and establish power purchase agreements for base load to complement SME’s own wind, solar and hydro alternative with serious conservation and efficiency to reduce load forecast demand. This would be a wise use of USDA RUS funding, not toward a plant squander vital RUS assets need to revive Rural America, not the coal industry.

Wind turbines are FACT in Montana and solar energy would not cause adverse impacts associated with HGS pollution. Wind and solar energy generation would provide lease payments to SME co-op members in their own service area, which SME asserted would be feasible in 30% of its service area. Innovative hydroelectric generation (like the water battery concept used in California) should have been considered. The hydroelectric portion of the new alternative was based on traditional brick dam construction, and did not look at other techniques beyond the traditional dams already on the Missouri River.

The DEIS was wrong in its gross overestimate of how many acres it would take For a wind farm, from over seventy square miles to fourteen is a big discrepancy, so that leads me to the conclusion on the lack of serious renewable energy interest at all in this process.

56 acres of solar energy generation is absolutely feasible at numerous sites that could be co-located near major transmission lines just like wind farms are being sited now.

Even 5MW could be considered with newer hydroelectric water battery concepts that were not considered. In addition to on farm renewable energy generation that would reduce the grid load forecast, SME (including ECP) should expand rebates to using CFL bulbs, as the national trend now shows Phillips Corporation determined to reduce use of traditional bulbs and other countries and states banning them entirely. Even the hard-nosed business culture of Wal-Mart and Sam's Club has gone green, replaced all their bulbs with CFL.

It is a sound business approach and SME should offer CFL bulb rebates like Northwestern Energy does. Colleen Balzarini, executive director of Electric City Power (ECP), told me that they did not have the money to provide rebates, which is puzzling, as they are offering cheap (subsidized) power to customers. Its a small step but has great impact to help reduce load forecast.

Furthermore, SME and Basin Electric should use RUS funding (as the White House OMB has suggested) to improve and expand transmission capabilities for both parties to establish a power purchase agreement (summarily dismissed in just one paragraph in the FEIS, without elaboration or documentation) that Basin Electric could offer to SME. Even SME praised Basin (Great Falls Tribune, 4 Mar 07) as a great organization, so why would not SME place any trust in their ability to work with Basin Electric to get the base load generation that would complete a sound portfolio

SUMMARY AND RECOMMENDATIONS: The USDA should not approve any Record of Decision (ROD) unless a supplemental EIS is conducted to address the deficiencies and oversights discovered in the FEIS and not just in agriculture, but in all subject areas. My fellow farmers and ranchers do understand the energy needs of our fellow producers living in the SME co-operative areas and their desire for cheap power, something we here in the Great Falls area have had to deal with and wish we had their currently priced power which is cheaper than what we pay Northwestern Energy.

We do appreciate the profound improvements to quality of life and production thanks to the 1936 Rural Electrification Act (REA) through transmission lines to our remote farms and ranches, but NOW it is time to focus on Farm Renewable Energy generation in the spirit of the REA that Senator Max Baucus is proposing with Senator Jon Tester support. This initiative would literally empower rural Americans and reduce energy demands to the grid and promote conservation and efficiency as well, and net metering.

However, this proposed action does NOT promote quality of life, promote the general welfare or health or our agricultural community directly. We strongly believe the Rural Utility Service should not be funding coal-fired generating facilities and leave that to commercial enterprises, which are investing Confidently in coal gasification plants such as IGCC. Commercial investors realize the value of coal gasification and are very reluctant to invest in old tech and soon to be obsolete pulverized coal facilities, as even CFB is just an enhanced method of burning unlike gasification which removes virtually all of the toxins and is more adaptable to carbon capture and sequestration.

IGCC technology IS commercially feasible and in FACT proposed at the Great Falls Energy Center to be developed by the Montgomery group of Texas, which will start with a natural gas combined cycle (NGCC) of 250MW and expand to Integrated Gasification Combined Cycle (IGCC) after the NGCC.

Victor Hugo said, No idea can be defeated whose time has come and that idea IS renewable energy (RE). RE (wind and solar farms with leases for SME service area members) combined with an accurate load forecast, enhanced conservation and efficiency, innovative hydro-electric applications and a power purchase agreement with Basin Electric (a joint RUS funded effort between SME and Basin Electric) to meet base load demand is the Way Ahead for SME and Electric City Power (ECP) of Great Falls could act on it’s own and enable local renewable energy generation with wind/solar generation around Great Falls and also pursue innovative hydro-electric upgrades with PPL and beyond.

Feel free to contact me at 406-736-5791, e-mail: wwranch@3rivers.net, which I can access while deployed on upcoming Army training activities.

Very Respectfully,

Richard D. Liebert