Competition, criticism dim power plant's chances.

Byline: Joe Harwood The Register-Guard

Building a power plant in Oregon is much like running a 100K ultramarathon.

Many competitors show up at the start. But the rugged permitting process, the obstacles thrown on the course by opponents and the risky wilderness of a cutthroat, deregulated market thin the pack drastically by the time survivors cross the finish line.

And in the race in Oregon to win permits for natural gas-fired generating plants, the controversial West Cascade Energy Facility - the proposed 900-megawatt gas-fired plant that would sit about two miles north of Coburg - is running dead last.

Developers have eight natural gas-fired electricity plants on the drawing boards in the state.

Regulators have already approved three, although none of them has begun construction.

The five others remain in various stages of the application process. Right now, the Coburg project is the laggard - which should give comfort to the project's growing roster of opponents, most of whom are worried about the 1,151 tons of air pollution the plant would emit each year.

Power industry experts agree that not all of the dozen generating facilities now proposed in Oregon and Washington - including the Coburg project - will ever move off the drawing board.

"It's fairly certain that some plants already approved or in the (approval) process will never get built," said David Stewart-Smith, director of energy resources at the Oregon Department of Energy.

That hasn't deterred critics, however. They continue to snipe at the project in newspaper advertisements, and to monitor the mountain of paperwork that Eugene-based developer Gary Marcus has submitted to state power-plant siting regulators and to air pollution authorities.

For entrepreneurs such as Marcus, the work all adds up to a tremendous risk: Spend hundreds of thousands of dollars trying to win permits, only to never see your project built.

Marcus said he knows he's far behind the already-approved projects in Umatilla and the St. Helen's area.

But he professes not to worry. He doesn't believe there will be demand for power generated by his plant until at least five years from now. And construction of the $485 million facility, in which Marcus has partnered with South Dakota-based Black Hills Corp., could be a decade or more down the road.

"It could be 10 or 15 years before this plant is fully built out," Marcus said.

The extended time horizon is due to factors that include the two-year-plus process of applying to regulators, surviving a likely appeal to the Oregon Supreme Court by opponents if officials approve the project, and finding buyers for the plant's electricity in a region accustomed to relatively cheap hydropower, at a time when natural gas prices appear to be trending upward for the long haul.

The current rush to build gas-fired generating plants follows the energy crisis that gripped the West Coast from mid-2000 through the spring of 2001. That supply shortage rocketed open-market power prices to historic highs and forced utilities in Lane County and elsewhere to increase rates. The combination of drought - which reduced hydroelectric generation - and unlawful market manipulation by energy resellers such as Enron caused the shortage.

Average spot prices generally fluctuated from $100 to $300 per megawatt hour during the crisis. In comparison, spot-market prices in the spring of 2000 bounced around in the $15-$30 per megawatt hour range, said Lance Robertson, a Eugene Water & Electric Board spokesman. Spot prices are now $30 to $35.

Jockeying for a position in order to cash in when demand surges, energy developers are eyeing locations on the west sides of Oregon and Washington for gas-fired power plants.

For developers such as Marcus, the trick is to have in hand all necessary permits when energy prices start to climb and utilities scramble for power sources. Construction of a generating plant, depending on size and design, takes 12 to 24 months, Marcus said.

Of the three approved plants in Oregon, only Portland General Electric's 650-megawatt plant and the 520-megawatt project that Westward Energy LLC wants to build are likely to start construction this year, said Phil Carver of the Oregon Department of Energy. Both are near St. Helens.

The addition of 1,200 megawatts of generating capacity to a regional market that is running a surplus of power could dampen demand for the other proposals, experts said.

The Northwest is using about 20 percent less power compared to four years ago, said John Harrison, a spokesman for the Northwest Power and Conservation Council. The surplus is due to the closing of several aluminum smelters, which freed up about 2,500 megawatts, and gas and wind projects that have gone online with about 3,000 megawatts over the past four years.

The surplus means that the average gas-fired plant in the Northwest is running at just over 51 percent of capacity, said Steve Weiss, a senior policy associate with the Seattle-based Northwest Energy Coalition. With the steep run-up in natural gas prices this year, some plants with long-term gas purchase contracts are finding that they can make more profit selling their gas on the open market than using it to spin turbines, Harrison said.

"In terms of supply, we have plenty of power at the moment, so the issue for wholesale power developers is to find long-term customers," Harrison said.

Without customers willing to sign 10- to 20-year contracts to buy power from a proposed generating facility, banks are loathe to lend the $300 million to $500 million needed to build a plant, said Stewart-Smith.

Forecasts for power usage indicate the Northwest won't need additional generation facilities until 2010 at the earliest, Harrison said.

Terry Morlan, an economist with the Northwest Power and Conservation Council, predicts average power demand will grow by about 1.4 percent a year in the 2005-2025 period.

However, an economic boom or a continuing string of low-water years that hamper hydro generation could quickly eat up that surplus, Harrison said.

Those long-term demand predictions are fine with Marcus. "We are looking 20 years out," Marcus said. "We're building this to provide an inventory for the future."

Though Marcus is seeking a permit to build a plant with 600 megawatts of base load and another 300 megawatts for times of peak demand, he said he isn't planning to construct the facility all at once.

"This plant is modular, so it can be built in 50-megawatt units," he said. He envisions initially installing two 50-megawatt "peaker" turbines that would be used when seasonal demand, and prices, are high. A few years later, if he can find a buyer to sign a long-term supply contract, Marcus would install the first 300-megawatt combined-cycle turbine.

Marcus said his buyers will be local utilities, although none have thus far expressed interest. That could pose a problem for Marcus and his partner, Black Hills Corp.

"We are not going to build anything unless we can presell it," Marcus said.

As for building the plant and selling its output to power-hungry California utilities, the regional transmission system that would carry electrons southward is already at capacity, said Tony Rodrigues, a transmission account executive for the Bonneville Power Administration.

"The transmission down to California is already fully subscribed," he said. "We have a lot of people waiting in line to use that path, and he (Marcus) is not one of those people."

Rodrigues, Stewart-Smith and Weiss all said the location of Marcus' plant is a good one, and siting it near Coburg would make the power system in the Southern Willamette Valley much more reliable.