Jack McCurdyNovember 2011
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Dynegy Sues, Seeks to Use Estuary Water Indefinitely for MB Power Plant

by Jack McCurdy

Synopsis: Dynegy, the owner of the Morro Bay Power Plant, has filed suit to overturn a new state policy aimed at eliminating the use of bay, estuary, and ocean water for cooling the 19 power plants along the California coast, a process which kills untold numbers of marine life, including a great many from the Morro Bay National Estuary, designated an impaired water body. 

Dynegy, the current owner and operator of the 51-year-old Morro Bay Power Plant, has sued to overturn the state policy adopted last year requiring California's 19 coastal plants—including Morro Bay—to phase out the use of bay, estuary, or ocean water for cooling their generators, which kills untold numbers of small marine life that are drawn into the plants through the intake of millions of gallons of water a year.

Although Dynegy two years ago recognized the pending state policy's intent to phase out once-through cooling (OTC) and said it was prepared to comply with the policy's requirement that the Morro Bay plant be converted to another type of cooling technology by 2015 or else cease operations, and even though earlier this year it filed a required but vague plan to comply with the policy, now it wants to get court approval to continue using the larvae-ladened water indefinitely.

The suit and subsequent arguments appear to contain numerous unsubstantiated claims, contradictions, errors in fact, and inconsistencies about the state's OTC policy as well as the Morro Bay plant, the laws and regulations covering its operation, and its impacts on the Morro Bay National Estuary, from which intake water is and has been drawn for a half century.

The suit (see pdf. attachment) makes no mention of the fact that the killing of the fish and crab larvae may threaten the life of the estuary, which is designated as an Environmentally Sensitive Habitat Area and is officially listed as an impaired water body under Section 303(d) of the Clean Water Act. Nor does it mention that the estuary is the lifeblood of the community of Morro Bay and Los Osos and that much of the county depends on its recreational appeal as a tourist attraction.

In reviewing Duke Energy's now-abandoned plan to replace the plant with a new, larger, and more environmentally-damaging one, the California Energy Commission (CEC) staff nine years ago noted that the fish population in Mount Hope Bay in Massachusetts had collapsed a few years before when the Brayton Point Power Plant began operating and withdrawing water from and discharging used water into the bay. As a result, the plant agreed to switch to closed-cycle cooling, which will use only a very small amount of water from the bay that is recycled in the plant, as in a car radiator. The switch reportedly is expected to be completed as early as next spring.

The point of the CEC staff report's reference to what happened to Mount Hope Bay was that, given the fact that it is an impaired water body, the Morro Bay Estuary also could face the same disaster, with unpredictable consequences that could threaten nearby property values, businesses and community health, not to mention the fishing industry.

The staff report also made clear that even if a new plant were not built, the continued use of OTC by the existing plant would constitute a serious risk to the estuary. It said the plant's "cooling system is located in a sensitive estuarine environment, (and) any increase in water use represents a significant impact under CEQA (California Environmental Quality Act). However, even if water use did not increase, the cooling water impacts from once-through cooling will increase over time because the local and regional estuarine resources are in decline."

The first hearing on the Dynegy suit is scheduled for next January 20 in Sacramento Superior Court. In addition to the Morro Bay plant, Dynegy operates the Moss Landing Power Plant north of Salinas. A co-plaintiff with Dynegy is GenOn Energy, which operates four coastal plants.

In response to the suit against the State Water Quality Control Board (SWQCB), which enacted the OTC policy, state Attorney General Kamala D. Harris said in a reply brief (see pdf. attachment) filed on October 27 that "the policy is valid and necessary for the health of California's coastal waters, was properly adopted and the petition (by Dynegy et al) should be denied."

She pointed out that "the intake systems have a direct, negative impact on coastal fishing resources by trapping fish, shell fish, and other aquatic life on intake screens, injuring or killing these organisms (impingement) and drawing smaller organisms, such as larvae and eggs, in through the screens and subjecting them to high temperatures and pressure changes, resulting in death (entrainment). The power plants are generally old and inefficient at producing electricity . . . and continue to rely on outdated cooling systems."

On October 27 a number of environmental organizations filed a Friend of the Court brief opposing the Dynegy Suit. (See Draft Opposition.docx)

Meantime, Dynegy is facing possible bankruptcy of at least some of its holdings after years of mounting debt, dwindling income and collapsing Dynegy stock prices. (See: Reuters) Whether any kind of bankruptcy involving Dynegy would affect its Morro Bay and Moss Landing plants was unclear.

Perhaps the most significant contradiction and misstatement in the Dynegy suit concerns a key citation of language in the U.S. Clean Water Act, the basic federal law that controls power plant cooling and severely limits their use of water from natural bodies—rivers, steams, lakes, bays, estuaries, and the ocean. Landmark federal court decisions aimed at enforcing those limits of OTC over the past seven years have been based on interpretations of the Clean Water Act.

Here is how the Dynegy suit quoted the Clean Water Act:

The Federal Water Pollution Control Act ("Clean Water Act")(33 U.S.C. §§ 1251, etseq.) provides that the location, design, construction, and capacity of cooling water intake structures should reflect the best technology available ("BTA") for minimizing adverse environmental impact, including impacts to aquatic organisms that may be harmed during the OTC process.(33 U.S.C. 1326(b).)("section 316(b)")

This is what the Clean Water Act actually says:

Sec. 316. Thermal Discharges.
(b) Any standard established pursuant to section 301 or section 306 of this Act and applicable to a point source shall require that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.

There are two major differences in these quotes from the Clean Water Act, both of which favor Dynegy:

1. Dynegy's quote says cooling water intake structures "should" reflect the best technology available. The Act itself says "shall" require such intake structures.

2. Dynegy's quote embellishes the Clean Water Act by adding that minimizing adverse environmental impact includes impacts to "aquatic organisms that may be harmed during the OTC process." Then, Dynegy goes on elsewhere in the suit to argue that there are no documented adverse impacts to aquatic organisms. So its addition of the language about aquatic organisms being harmed sets up its argument that there is none, and, therefore, OTC reduction is not required under the Clean Water Act. Its argument appears to rely on the fact that no studies and findings of such impacts are cited in the OTC policy.

However, there have been many studies establishing such impacts on marine life over the years, and court decisions have often cited that evidence, especially the 2004 and 2007 decisions of the United States Court of Appeals for the Second Circuit, which for the first time required the phase out of OTC at all plants in the nation since the Clean Water Act was adopted in 1972. Essentially, the court concluded that the Clean Water Act has never allowed the virtually uncontrolled use of natural water to cool plants that has gone on for more than 50 years without being required to use BTA, which the Clean Water Act specifically mandates.

The 2007 decision covering existing power plants like Morro Bay said:

"Power plants and other industrial operations withdraw billions of gallons of water from the nation’s waterways each day to cool their facilities. The flow of water into these plants traps (or 'impinges') large aquatic organisms against grills or screens, which cover the intake structures, and draws (or 'entrains') small aquatic organisms into the cooling mechanism; the resulting impingement and entrainment from these operations kill or injure billions of aquatic organisms every year."

It was based on studies of OTC impacts that were submitted to that court.

Dynegy argues that the "law (Clean Water Act) does not require the retirement or total conversion of these facilities to other cooling technologies."
But, in fact, the Second Circuit court did interpret the Clean Water Act to require conversion of plants to minimize (defined as "to the smallest possible amount or degree" by Dictionary.com) and to do that through the use of the best technology available. Obviously, plants must use BTA or cease operation, under the decision. And that court decision was upheld by the U.S. Supreme Court (except for one part of it), which makes it prevailing law.

How does that Second Circuit decision define best technology available? The decision says: "the most effective technology must be based . . . on the optimally best performing Phase II (existing power plant) facilities," that is among all the operating plants. In addition, it says, a power plant owner "may permissibly choose between two (or more) technologies that produce essentially the same benefits performance" but "does not essentially differ from the performance of the best performing technology whose cost the industry reasonably can bear," which it calls the "benchmark" standard.

Such best technologies obviously can be reasonably borne by the industry because of the fact that they are in use in California, the nation and around the world. PG&E, for example, converted its plant in Humboldt County from OTC to closed-cycle cooling voluntarily.

The U.S. Supreme Court did reverse the Second Circuit decision on one important point. The Second Circuit court had decided that cost could not be considered in determining whether BTA were to be used—except to choose among the best technologies—because the Clean Water Act does not allow it. But the Supreme Court held that cost-benefit (cost of a technology compared to its benefit) could be applied optionally but could not be required by courts for governmental agencies, such as the SWRCB.

The Second Circuit noted that Congress, in adopting the Clean Water Act, did not provide for cost to be considered in requiring BTA. But the Supreme Court ignored that Congressional mandate, resulting in the court, in effect, rewriting law instead of interpreting it, which is why members of courts are labeled "activist judges" when they "make" law instead of interpreting existing law.

The Dynegy suit claims"the OTC policy also will have unjustified and significant consequences for energy production in California" and that the plaintiffs' power plants, "together with the other OTC facilities subject to the Policy, are vital to the reliability of California's energy supplies . . . California relies on the OTC power plants to generate approximately 30% of the State's electricity."

However, the Energy Commission's 2010 report on energy generation in California shows that only 4.5% of the state's energy now comes from gas-fired OTC plants, like Dynegy's and GenOn Energy's plants, and 15.6%, if power from the state's two nuclear plants are added. Reliance on those gas-fired and nuclear plants is steadily declining as the rise in renewables gains momentum. Energy from those gas-fired plants is mostly needed during summer months when demand is highest.

In the case of Morro Bay, state agencies concluded during the development of the OTC policy that the Morro Bay plant is the only one of the 19 plants that is not needed to help meet state demands for power, termed "electric grid reliability." Despite this lack of need, Dynegy was given until 2015 to either convert the Morro Bay plant to BTA or stop using OTC, which would mean closing, as Dynegy has acknowledged.

Energy from other plants are still needed, the agencies concluded, which is why they are being phased out as other sources of energy develop, giving most of them years to switch to BTA and some, like the Diablo Canyon and San Onofre nuclear plants, up to 13 years, even though their OTC kills by far most of the aquatic life among OTC plants.

Dynegy contends that it cannot develop BTA at the Morro Bay plant because it is infeasible, and it cites the CEC decision approving Duke's plan for a new plant in 2004, which did favor continued use of OTC to building a new plant with closed-cycle cooling. But that decision was never finalized and, therefore, does not represent a legal precedent. In the suit, Dynegy frequently cites that decision in justifying what it terms BTA as being impractical with the cost exceeding the benefit. And it acknowledges that the decision was never "docketed," which means made final. And yet it says this:

"The CEC has not docketed its decision regarding Morro Bay. (Cal. Code Regs., tit. 20, § 1720.4.) Nonetheless, it represents the CEC's final determination in that case, and the fact that the decision has not been docketed does not prevent the determinations in the decision from being considered final. (See Sandoval v. Superior Court (1983) 140Cal.App.3d 932, 936.)"

So, Dynegy argues, the decision, which it maintains should guide the OTC policy as applied to Morro Bay, is not legally final but it can be considered final for use in deciding BTA for the Morro Bay plant, a seemingly obvious contradiction.

(Since the CEC decision is not final, it can only be considered opinion. If so, other opinion—that of the CEC staff, which spent years researching the Duke Project and how it would affect Morro Bay—would also need to be considered as well. And the staff, in lengthy, in-depth analyses concluded that closed-cycle cooling would be effective and preferable to OTC, would not have any significant environmental impacts, and would add only 8% to the estimated $600 million cost to build a new plant. The CEC ignored all these findings by its own professional staff. (See Slo Coast Journal - December 2009)

A recent California Supreme Court decision on the Moss Landing plant held that the SWRCB has the legal authority, not the CEC, to determine BTA for coastal power plants in the state. Since the Morro Bay case was never considered by the regional or state water boards (Duke sold the plant and left the state before they could), the CEC decision approving Duke's proposal for building a new plant is moot, under the state Supreme Court decision.

The suit argues that the SWRCB should have conducted a cost-benefit analysis of its policy requiring BTA in light of a 2009 U.S. Supreme Court decision and a California Supreme Court decision a few months ago in a long-running case involving OTC at the Moss Landing plant. Yet, it contradicts itself by acknowledging that the US. Supreme Court decided "it is permissible under section 316(b) to consider costs and benefits in determining the BTA to minimize adverse environmental impacts." Permissible, that is, but not mandatory to compare costs and benefits.

The suit also challenges the policy on procedural grounds, such as when the SWRCB adopted the policy on May 4, 2010, after accepting amendments from board members and then did not allow public comment on the amended policy.

The suit was filed late last year, but it was not clear at that time whether Dynegy et al would pursue it. Some thought it might be an effort to intimidate the SWRCB, which was moving to require power plants to comply with the policy. Then the plaintiffs filed detailed arguments in August, which indicated that they intended to pursue the litigation. Copies of those arguments were just made available by the SWRCB.

GenOn Energy, the co-plaintiff, operates the Mandalay, Ormond Beach, Contra Costa, and Pittsburg power plants.


Note: Jack McCurdy is co-president and co-founder of the Coastal Alliance on Plant Expansion (CAPE), which opposes the Dynegy suit. This article was not written on behalf of CAPE and does not necessarily reflect its views.

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