The Peril and Promise of Power Plant Redevelopment

December 9, 2013

By John Rees

As the unemployment rate hovers just above 7%—the lowest level in five years—regions throughout the US are hoping next year will usher in an era of greater economic resiliency. For many communities, however, a new series of challenges associated with heightened federal environmental regulations may dominate the New Year. In 2011, the Environmental Protection Agency (EPA) issued several rules increasing the regulation of air pollution. After a protracted series of court battles, the rules are slated to go into effect in 2014. Although the new regulations don’t explicitly call for the closure of power plants, the cost of modernizing many old facilities to meet the new air pollution requirements are cost prohibitive. According to an Associated Press analysis, at least 30 power plants will close in the next two years. Additionally, another 35 plants are at risk for closure.

PowerPlants

Although plant closures are expected throughout the US, a disproportionate number are located in coal country (Virginia, West Virginia, and Kentucky). For many of these communities, the closure of a single electric generation facility will drastically reduce tax revenues and eliminate many relatively high-paying jobs. In Glen Lyn, Virginia, for example, the closing of an American Electric Power plant is expected to result in the loss of 25% of the town’s $1 million budget. Additionally, the Tennessee Valley Authority (TVA) announced last week that it is closing 8 coal-fired generation units. At one TVA site in Drakesboro, Kentucky, 200 jobs will be eliminated in a community already suffering from double-digit unemployment.

Thus far, the federal government has not publicly announced any programs to help alleviate the economic impact on communities shouldering the burden of increased environmental regulations. The response to Base Realignment and Closures (BRAC), however, offers an instructive model of how the government can assist communities negatively impacted by changes in federal policy.

In some instances, decommissioned power plants offer opportunities for new industrial development. Located alongside the Ohio River and featuring several railroad spurs and proximity to interstate 65, the Cane Run Generation Plant near Louisville, Kentucky will likely prove an attractive site for companies looking for multimodal access. Other generation facilities, including one located in Alexandria, Virginia, would be ideal sites for creative mixed-use redevelopment. In New Braunfels, Texas, for example, the former Comal Power Plant has been transformed into lofts, offices, and retail outlets.

By combining the resources of federal agencies (especially the EPA and EDA) with private investors, communities can help ensure that the closure of a power plant does not preclude prosperity in 2014 or in the years ahead.