Electric co-op sues Sierra Club for trying to stop coal-fired generators

By Michelle Massey, East Texas Bureau | Oct 1, 2008

MARSHALL – The East Texas Electric Cooperative claims the actions of the Sierra Club to stop the co-op from constructing coal-fired generators will only result in higher electric bills for rural customers, according to a recent lawsuit.

The ETEC is a not-for-profit rural electric cooperative that provides the generation and transmission of electric services to rural customers in East Texas and Louisiana. ETEC provides electricity to the Sam Rayburn G&T Electric Cooperative, Tex-La Electric Cooperative of Texas Inc. and Northeast Texas Electric Cooperatives.

These groups, including the ETEC, own interests in four coal-firing generating facilities: "Pirkey" in Texas, "Dolet Hills" and "Nelson 6" in Louisiana, and "ISES II" in Arkansas.

The Sierra Club initiated litigations and sent communications to federal agencies in an attempt to halt all construction of coal-fired generation facilities. In addition to other claims, the litigations allege violations of the National Environmental Policy Act and the Freedom of Information Act.

East Texas Electric Cooperative Inc. filed suit against Sierra Club, U.S. Department of Agriculture, Rural Utilities Service, Edward T. Schafer and James M. Andrew on Sept. 25 in the Marshall Division of the Eastern District of Texas.

ETEC filed suit against the defendants for violations of the Administrative Procedure Act, including the abuse of discretion and arbitrary conduct.

The co-op participates in a government program enacted by the Rural Electrification Act of 1936, which guarantees government loans to bring electricity to rural Americans. ETEC uses the money for construction and expansion of electric generation facilities, distribution lines and other physical structures necessary to generate and carry electricity.

Beginning in 1994, the United States Department of Agriculture's Rural Utilities Service has been responsible for the administration of the loan program. ETEC is a borrower in good standing with the Rural Utilities Service.

Although the Department of Agriculture's agency is under statutory mandate, the plaintiffs argue that the Sierra Club has initiated litigations and sent communications in an effort "to bring to a complete and immediate halt all construction of coal-fired generation facilities, regardless of the level of Rural Utilities Service involvement."

Such efforts include a letter to the Secretary of Agriculture and Rural Utilities Service Administrator alleging both agencies "are in violation of federal law by approving investments in a number of new coal-fired power plants across the nation absent any review under National Environmental Policy Act."

The plaintiff states that the Sierra Club demanded that the agencies "cease and withdraw all approvals for such coal-fired projects."

The plaintiff believes the Sierra Club's actions have made the Rural Utilities Service "either unable or unwilling, or both, to perform functions committed to its discretion by statute."

Prior to the environmental group's actions, the Rural Utilities Service determined whether a loan applicant has sufficient control and responsibility to alter the development of a proposal such that the agencies' action will be considered federal action under the National Environmental Policy Act.

The plaintiff states that the agency routinely granted amended or modified various lien and security documents. However, after the Sierra Club's actions, the plaintiff argues that the agency is denying routine requests and returning loan applications with the stated reasoning of "that the RUS will no longer provide funds for the construction of baseload electric generation facilities."

The plaintiff states the explanations are "contrary to law and pretextual" and "with no statutory or budgetary justification."

ETEC borrowed $80 million from the Rural Utilities Service to apply toward the purchase of ownership interests in coal or gas-fired generation facilities in Osceola, Ark., Harrison County, Tex., Hempstead County, Ark. and in Warren County, Miss.

As alleged by the plaintiffs' complaint, the agency determined that ETEC did not have sufficient interest to control or alter development and thus, an environmental analysis under the National Environmental Policy Act was not necessary. In anticipation of the loans, ETEC borrowed money from a third party. The loan applications were pending for over two years, when the applications were returned.

Because of these actions, the plaintiff states that it will need to pass on the cost of financing expenses to the rural consumers in the form of higher electricity bills.

The lawsuit is seeking for a declaratory judgment that its loan applications were lawful and applicable to the Rural Utilities Service's regulations.

Attorneys William Burchette and Christopher Mackaronis and Mark Davis of the law firm Brickfield, Burchette, Ritts & Stone PC and Jason Searcy, Joshua Searcy, and Amy Bates Ames of Jason R. Searcy and Associates PC are representing the plaintiff.

U.S. District Judge T. John Ward will preside over the litigation.
Case No: 2:2008cv00364

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