Emergency Application — West Virginia, et al., Applicants v. Environmental Protection Agency, et al.

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EXHIBIT 18

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Attachment A

to the Declaration of Christopher D. Friez

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EXHIBIT 19

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EXHIBIT 20

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DECLARATION OF STACY TSCHIDER

1.

My name is Stacy Tschider. I am the Chief Executive Officer (CEO)

for Rainbow Energy Center, LLC (“Rainbow”) and Nexus Line, LLC (“Nexus

Line”). As CEO, I oversee and direct all aspects of operations and development at

Rainbow and Nexus Line. Nexus Line is a 436-mile-high voltage direct current

transmission system that runs from Underwood, North Dakota to Dickinson,

Minnesota. Rainbow is the owner and operator of Coal Creek Station, a 1,151 MW

coal-fired power plant, and participates in the Midcontinent Independent System

Operator (“MISO”) electricity market. This Declaration is based on my personal

knowledge as CEO and analyses conducted by my colleagues.

2.

I am submitting this Declaration on behalf of Rainbow in support of

Petitioner’s motion to stay the rule promulgated on April 25, 2024 by the U.S.

Environmental Protection Agency (“EPA” or “Agency”) and officially published in

the Federal Register, titled “New Source Performance Standards for Greenhouse

Gas Emissions from New, Modified, and Reconstructed Fossil Fuel-Fired Electric

Generating Units; Emission Guidelines for Greenhouse Gas Emissions from

Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable

Clean Energy Rule” (“Final Rule”).

3.

The Final Rule theoretically presents two ways for Rainbow to comply.

First, Rainbow could install carbon capture and sequestration (“CCS”) by 2032.

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Second, Rainbow instead could fully convert Coal Creek Station into a natural gas

plant that no longer could burn coal by January 1, 2030. Either way, such timelines

assume that every step of the process encounters zero delays. Such seamless

transition would be unlikely for a project of significant scope demanded by this Final

Rule, which has numerous components that range from necessary feasibility studies,

permitting, to actual construction in an area already struggling with labor shortages.

4.

Absent a judicial stay, Rainbow’s ability to comply with the rule within

the allotted timeframe is uncertain and that uncertainty inflicts immediate significant

harm by chilling Rainbow’s ability to generate revenue now. As a business that

primarily relies on long-term power purchase agreements to recover its investment

costs, end-use power customers are already questioning whether Coal Creek Station

could continue to operate past 2032 under the compliance timelines set by the Final

Rule. The perception of uncertainty alone risks having consumers shy away from

contracting with Rainbow. Business opportunities that Rainbow loses now, inflict

harm for decades as the required contracts are for 10- to 20-year terms.

5.

Additionally, forcing a compressed regulatory timeline for CCS sends

the perverse message that companies should skip or shortcut various due diligence

measures to meet the deadline set under the Final Rule. Foregoing key studies would

impose significant operational risks that Rainbow cannot afford and will not take on.

EPA should not force companies to choose between compliance and safety.

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RAINBOW AND COAL CREEK STATION

Rainbow and Coal Creek Station’s Operations

6.

Rainbow is an electric power company headquartered in Bismarck,

North Dakota. Rainbow has owned and operated Coal Creek Station since May 1,

2022.

7.

Coal Creek Station has been generating and distributing energy in

North Dakota and the upper Midwest region of the United States since 1979. Coal

Creek Station produces up to 1,151 megawatts of electricity per hour by combusting

over seven million tons of beneficiated lignite (coal originally purchased from

Falkirk Mining Company which then gets beneficiated in-house with a patented

pollution control technology, “DryFiningTM,” further described below). It directly

employs over 200 people at its facility near Underwood, North Dakota.

8.

Since it began its commercial operation in 1979, Coal Creek Station has

continuously improved its methods for controlling air pollution. Coal Creek Station

stands out from other coal-fired power plants that it has been acknowledged by the

federal government multiple times for its environmental stewardship.1

9.

As just one example, the Department of Energy (“DOE”) selected Coal

Creek Station to participate in a government-industry partnership, where Coal Creek

1

See, e.g., 76 Fed. Reg. 58,570, 58,584 (Sept. 21, 2011) (discussing Coal Creek

Station’s involvement in the Clean Coal Power Initiative).

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Station “will help U.S. coal-fired electricity generating plants to meet both existing

environmental objectives as well as those emerging in the near future.”2 The

resultant multi-pollutant control technology, “DryFiningTM,” improves the heating

value of the coal while removing constituents that cause harmful pollution, mainly

nitrogen oxide (NOx) and sulfur dioxide (SO2). This technology is the first of its

kind and remains a pioneering technology in the industry.

Rainbow and Coal Creek Station’s Commitment to CCS

10.

In fact, as EPA notes in the Final Rule, Rainbow has been developing

plans to install CCS equipment to capture and permanently sequester the carbon

dioxide (CO2) emitted from Coal Creek Station. Rainbow plans to permanently

sequester the captured CO2 into suitable geological formations located within nearby

land. Rainbow has been actively pursuing CCS at Coal Creek Station ever since

Rainbow purchased the plant in 2022.

11.

With an estimated annual CO2 capture rate of 8.5 million metric tons,

Coal Creek Station’s CCS facility would be a multi-billion-dollar investment that

would become one of the largest CCS projects in the world.

12.

The U.S. Congressional Budget Office (“CBO”) estimates that CCS

projects for power generation (and other industrial processes) cost between $50 and

2

National Energy Technology Laboratory, Topical Report No. 27, at 4 (June 2012)

(provided as Attachment A to this Declaration).

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$120 per ton of CO2,3 which means CCS operations for Coal Creek Station would

cost at minimum $1.164 million every day ($50 times 8.5 million, divided by 365).

And while such figure is the publicly available proxy, it is likely that the CBO study

did not account for post-Covid inflation, borrowing costs, amortization periods (and

the resultant payback period), and the life cycle of the plant—making the realistic

cost estimate even higher.

13.

From a planning perspective, CCS project costs would include

construction of the carbon capture facility, balance of plant equipment at Coal Creek

Station, and CO2 pipelines and injection well infrastructure. Such components would

include engineering, leasing activities, permitting, procurement, transportation,

technical advisory and commissioning supervision, commercial expense,

contingency fees, general and administrative expenses, chemicals, license fees,

construction, and commissioning.

14.

Rainbow must also consider operation and maintenance costs. These

would include, for example, staff costs, annual maintenance, insurance, taxes,

chemical consumption, waste disposal, and electricity.

15.

Rainbow has completed its initial front-end engineering design study

(“FEED study”) with the Energy & Environmental Research Center at the University

3

CBO, Carbon Capture and Storage in the United States (Dec. 2023),

https://www.cbo.gov/publication/59832.

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of North Dakota (“EERC”), the state’s leading expert on CCS. The FEED study,

co-funded by Rainbow and the North Dakota Industrial Commission, cost over $16

million, and is now being followed with a separate bridge study to optimize the

process design.

16.

The storage area is being studied for suitability as a CO2 storage facility

under a $47 million DOE grant (titled “CarbonSafe”), the study being led by EERC

and supported by Neset Consulting. But while DOE’s CarbonSafe grant supports

the planning for the storage part of CCS (developing a plan for a CO2 storage

facility), Rainbow has not secured DOE funding for either the storage infrastructure

or the “capture” part of Rainbow’s CCS project.

17.

And at this time, the Section 45Q tax credit for carbon sequestration

under the Inflation Reduction Act would be inadequate. To start, the direct pay

option under the tax credit provides little value due to the timing of the cash receipt

(which could take up to 18 months in payment); with a project of this scale, the cash

flow could not properly service the debt obligations. Additionally, the tax credit has

not kept pace with inflation and supply chain constraints, and the stipulations

attached (such as compliance with the prevailing wage and apprenticeship program)

further increase costs. These cost constraints would only increase as every other

fossil fuel-fired power plant moves to comply with the Final Rule, as demand for

workforce and equipment would concurrently surge.

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18.

To summarize, Rainbow’s CCS project would be a multibillion-dollar

investment. Government subsidies (such as DOE grants and tax credits) only

alleviate some of the projected costs to the investment. Moreover, in Rainbow’s

experience, participation in government grants slows the project timeline because of

the additional regulatory approval requirements and the time it takes for the release

of funds. It is uncertain, and in fact made less likely by the existence of the Rule,

that other means of defraying the necessary costs could be found in time to comply

with this rule. The Final Rule’s compressed timelines and lack of flexibility create

a barrier to the installation of the very technology it claims to promote.

MERCHANT GENERATION AND THE POWER MARKET

19.

Investment costs, such as those affiliated with CCS or other emission

control methods, present unique challenges to Rainbow due to Rainbow’s particular

status and role as a “merchant power producer” in the power/electricity market.

Traditional Electric Utility Structures

20.

By way of background, customers in many parts of the United States

consume electricity provided by either investor-owned utilities or public utilities

(which, for purposes of this discussion, include municipal utilities and public utility

districts). Both of these utilities operate under a vertically integrated monopoly

framework. The utility company owns the generation and transmission necessary to

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serve its end-use customers, manages the system operations to serve its customers,

and is the only entity that provides the electric distribution and supply.

21.

Because of their vertically integrated monopoly structure, these utilities

are also heavily regulated by the government to ensure that the interests of the

consumers are preserved. Typically, the state’s energy/utility commission would be

the entity regulating the utility’s operation from generation to distribution and enduse sale of power (whereas the federal government, through the Federal Energy

Regulatory Commission, would regulate interstate transmission).

22.

Such regulatory measure includes rate-setting. Through a rate-setting

order, the state energy/utility commission would dictate the rate (i.e., electricity

price) the utilities could charge to their end-user consumers.

23.

The flip side of this process is that the state commission sets the rates

at a level so that the regulated utility could cover its cost of service plus a reasonable

“rate of return” (profit) on the capital the utility invested on its plants, whether that

be the original construction or improvements to the facility. Setting the rate at a

guaranteed rate of return ensures that these power plants are built in the first place,

and that utilities have an incentive to invest and in turn improve their services to the

end-use consumers.

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24.

In other words, investor-owned utilities and public utilities may be able

to recover the costs for installing CCS (if their state regulators approve); they would

redirect their costs by charging an increased rate to the end-use consumers.

The Merchant Power Producer

25.

In contrast to what has been discussed above, Rainbow (through Coal

Creek Station) is a privately owned “merchant power producer.” Rainbow is not an

investor-owned utility, nor is it a public utility. Unlike the traditional structure of

many utility companies, Rainbow does not have a vertically integrated monopoly

system where it controls everything from electricity generation all the way to

distribution of power to the end-use consumers who, often times, could not switch

electricity providers. Instead, merchant power producers would sell all the generated

power into the wholesale open market.

26.

Rainbow’s unique status as a merchant power producer has two

significant implications for the Final Rule.

First, Rainbow has no “captive

ratepayer.” While investor-owned utilities and public utilities have a set customer

base (similar to how normal household consumers cannot select/switch their utility

company), Rainbow has none. Rainbow does not have a monopoly over its end-use

consumers; the market (and its participants) could always favor a different electricity

producer if Rainbow’s power production costs are too high.

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27.

Second, unlike investor-owned utilities and public utilities which have

a chartered right—guaranteed by the state government—to recover costs (usually

through rate-setting orders as discussed above), Rainbow cannot recover any capital

or operational costs from its end-use customers. Rainbow has no “rate base,” i.e.,

the right to earn a specified rate of return backed by the state energy commission,

and never will as a merchant power producer.

28.

Because merchant power producers cannot pass on their costs to end-

use customers, Rainbow can recover its capital or operational costs—such as the cost

of installing and running CCS—in only two ways.

29.

First, Rainbow could enter into power purchase agreements with

customers at a set price negotiated at the time of the contract. Rainbow currently

has eight operative power purchase agreements with various end-use power

customers in the upper Midwest and is likely to execute at least three more by midMay of 2024.

30.

Rainbow enters into both “energy agreements” and “capacity

agreements.” That is—Rainbow currently has both (1) power purchase agreements

which specify how much electricity Rainbow will generate and transmit to the point

of sale (energy agreement), ranging anywhere from 50 to 350 MWh, and (2) power

purchase agreements which specify how much electricity Rainbow guarantees it will

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generate or supply if requested on the spot to make sure peak demand is met

(capacity agreement), ranging anywhere from 10/kW-month to 350/kW-month.

31.

Second, Rainbow could sell power at a wholesale level to the regional

transmission organization market, which in Rainbow’s case would be MISO. Of

note, this market is also heavily influenced by the federal government with subsidies

that deflate prices to low rates.

32.

Here, Coal Creek Station provides approximately 1,050 MWs of

“seasonal capacity” to the MISO market. MISO needs such dispatchable generation

(providing power on demand) so that electricity reliability is preserved during the

various seasons, including summer and winter when electricity demand is higher.

33.

In both strategies, since merchant power producers lack monopoly

status in the electricity open market, Rainbow is more vulnerable to market

conditions and the needs/demands raised by the end-use consumers. One of the key

concerns created by the Final Rule that already has been raised by a potential

customer is whether Coal Creek Station can provide power in the long term given

the risk it might be unable to comply with the regulatory deadlines. This, in turn,

risks disruption (at worst, cessation) in Coal Creek Station’s operations.

CONTROL REQUIREMENTS UNDER THE FINAL RULE

34.

The Final Rule sets aggressive compliance timelines for a considerable

infrastructure project. This raises serious risks that Coal Creek Station could not

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complete its project, whether that be installation of CCS or full conversion into a

natural gas plant. Perhaps even more harmful in the near term, the tight regulatory

timeline sends a market signal to potential customers of Coal Creek Station’s power

that, when they consider or negotiate any contracts, they must seriously account for

the possibility of Coal Creek Station’s operational disruption for failure to comply

with the Final Rule.

Compliance Deadlines

35.

Coal Creek Station is an existing coal-fired power plant that intends to

operate past January 1, 2039. Accordingly, it can maintain its ability to operate only

if it meets one of the two compliance requirements.

36.

First, pursuant to Section 60.5775b(c)(1)(i) of the Final Rule, Coal

Creek Station could install CCS equipment and capture and permanently sequester

90% of the CO2 emitted by January 1, 2032.

37.

Second, pursuant to Section 60.5880b of the Final Rule and further

supported in the preamble to the Final Rule, Coal Creek Station could fully convert

into a gas-powered unit that no longer retains the capability to fire coal after

December 31, 2029.

38.

Either of those deadlines could be extended by up to one year under

Section 60.5740b(a)(11) of the Final Rule. At the same time, the extension request

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must demonstrate (with documented information) that the owner/operator cannot

comply due to circumstances beyond their control.

39.

Theoretically speaking, the state plans regulating emissions of existing

sources may account for the plant’s “remaining useful life and other factors”

(commonly referenced as “RULOF”) to either loosen the compliance requirements

(such as a less stringent best system of emission reduction and relatedly a less strict

emissions limit) or adopt a longer compliance schedule. However, the preamble to

the Final Rule indicated that RULOF accommodations would only be available

when there are “fundamental” differences between the power plant’s unique

circumstances and the information EPA considered in determining the applicable

emissions limit or the compliance schedule. Even if RULOF is invoked, “the

particularized compliance obligations must differ as little as possible.” Therefore, it

would be unlikely that the state plan approved by EPA would relax the compliance

deadline significantly.

40.

For the following reasons, Rainbow faces serious concerns as to

whether it could meet either compliance deadline (even accounting for any

extension).

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Timeline Complications for CCS

41.

Rainbow is about two years into its CCS project since it recently

completed its initial FEED study. Notwithstanding this head start, Rainbow still

faces significant concerns about meeting its compliance deadlines.

42.

All CCS projects, including what Rainbow plans, require many years

of development, engineering, testing, permitting, and construction to become a

reality.

Because CCS has not yet been widely adopted by the industry, the

technology is at a high risk of exceeding the planning execution schedules.

43.

To illustrate in general terms, a bridge study (following the FEED

study) for 6 months, a permit preparation and application for 6 months, an agency’s

review of the permit for 2 years following submission, and construction of the carbon

capture facility for 5 years already would put the project at 8 years from the date of

this declaration (i.e., project completion in 2032) for carbon capture without storage.

44.

Separately, Rainbow must conduct a storage characterization study for

18 months, develop a storage plan for 2 years, and undergo a 2.5-year storage

permitting process to have storage certainty prior to constructing the carbon capture

plant. In that same timeframe, Rainbow would also need to construct the storage

facilities.

45.

All the above timeline assumes the best-case scenario, where funding

has been fully obtained, and the plant will encounter zero unexpected regulatory or

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construction delays. Complications that Rainbow has already experienced refute the

optimistic projection that no delays will occur. As one example, the FEED study

itself was originally intended to be completed by October 2023; yet the study was

extended to March 2024 due to the addition of scope to further examine redundancy.

And following the substantial completion of the FEED study, Rainbow must

undergo a bridge study to further examine the risk of long-term amine degradation

(in which the substance capturing CO2 would degrade), optimization of the process

design, and the cost estimates produced in the FEED study to look for opportunities

to improve the business case for CCS. By way of reference, Project Tundra, one of

the CCS projects EPA has referenced to demonstrate feasibility, also had to do more

than one FEED study that caused significant delays in project completion.

46.

As another example of unexpected delays, Rainbow has been seeking a

permanent geological sequestration site for the CO2 in the land near Coal Creek

Station. In that process, the collection of critical 3D seismic data—originally

planned for the winter of 2023/2024—got pushed back to the winter of 2024/2025

due to delays in federal regulatory approvals (required only due to Rainbow’s

participation in DOE’s CarbonSafe grant program) and uncharacteristically warm

weather. Of note, because of construction schedules and engineering requirements,

these foundational studies and permit procurement (for both capture and storage)

could not be conducted concurrently.

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47.

The above two incidents are delays that were completely unplanned

when Rainbow was developing and executing its own CCS project timeline. As with

any large infrastructure project, additional sources of unexpected delays could arise

at any moment during project development.

48.

For example, during the construction and engineering phase labor

shortages could occur, especially given that Coal Creek Station is in a remote

location in North Dakota. Alternatively, since the Final Rule forces all coal-fired

steam generating units and newly constructed stationary combustion turbines to

install CCS around the same time, multiple plants will be competing against each

other for the same labor and equipment resources to meet the same deadline of

January 1, 2032.

49.

Ironically, the compressed regulatory timeline under the Final Rule

itself could also be a source of CCS project delays. This is because when it confronts

the potential risk of being unable to comply with the Final Rule, now Rainbow must

undergo a separate “business case” study to assess whether proceeding with a CCS

project (or any other facility improvement project) would make economic sense

compared with shutting the plant down or fully converting to a natural gas plant.

Similarly, Rainbow must now also reassure investors that proceeding with CCS is a

viable investment strategy that Rainbow could recover through its operation as a

merchant power producer. In simpler terms, preparing the business case and securing

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funding for CCS takes even more time now that CCS projects must proceed under a

set regulatory deadline or else face significant non-compliance consequences.

50.

Finally, since Rainbow is still in the process of evaluating securing

additional government funding for its CCS project, it must account for the time it

would take for the government to review and approve such grants. For example,

DOE funding could be stipulated on certifying compliance with the National

Environmental Policy Act, a review process that is well known to take significant

time.

51.

All the above scenarios of unforeseen complications (pertaining both to

unexpected delays already occurred and to realistic scenarios for project delays

given the scope of Coal Creek Station’s CCS project) directly refute EPA’s position

that CCS is feasible under the Final Rule’s timeline. While EPA has cited two

examples, Project Tundra and Petra Nova, as the basis to determine CCS by 2032 is

feasible, the former has not been executed yet, and the latter took approximately

seven years and $195 million in DOE funding, only for the project to still not meet

the 90% CO2 sequestration rate expected under the Final Rule.

52.

Additionally, while EPA also referenced Rainbow’s CCS project

webpage as a basis to determine that CCS is the best system of emission reduction,

this webpage was published in 2022, the same year that the original FEED study for

CCS began. But since then, the rate of inflation has far outpaced any of the tax

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benefits provided by the 45Q tax credit. Long lead times and increased pricing for

specialized technical equipment also increased the expected capital expenses (and in

turn, projected timeline) compared to the original projection made in Rainbow’s

webpage. And as already discussed, additional studies to evaluate CCS’s economic

feasibility had to be conducted. EPA’s representation of a feasible CCS timeline

based on Rainbow’s webpage has been refuted by previous delays and required

revisions to project timeline estimates.

Timeline Complications for Conversion to Natural Gas

53.

The timeline for Coal Creek Station to fully convert to a steam

generating plant that exclusively fires natural gas and cannot fire coal is likewise too

short. Whether such conversion is even possible to begin with is unlikely due to

other environmental concerns with such a project. And even if it were, a conversion

by 2030—2 years sooner than the CCS compliance pathway—appears infeasible.

54.

To start, the challenges Coal Creek Station must go through for a CCS

project—initial feasibility studies, permitting, materials procurement, and actual

construction and/or retrofitting—would apply to the natural gas conversion project

as well. Likewise, the conversion project would encounter the same funding

problem, where Rainbow must assess the business case for the project, potentially

convince outside investors that Coal Creek Station is a profitable investment that

will survive, and go through regulatory procedures (e.g., compliance certifications).

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And unlike CCS projects, tax incentives would not exist for a natural gas conversion

project, presenting a separate cost recovery challenge.

55.

The overall supply (and resultant) price of natural gas could also inflict

uncertainty if demand increases at such a dramatic price. As other facilities evaluate

these same compliance options, availability of natural gas could decrease

dramatically, in turn increasing cost while reducing supply. The intrinsic volatility

of natural prices could impact the ability to make a feasible business case for

conversion of Coal Creek Station.

56.

Coal Creek Station faces an additional challenge in that natural gas is

not a readily accessible resource in the area. Even if the facility itself could convert

to a natural gas-firing plant, Coal Creek Station must also build a pipeline that spans

greater than 50 miles just to access the nearest natural gas reserve. Even more

challenging, the nearest natural gas reserve is across the Missouri River, so part of

the pipeline must be built under a body of water. This requires significant additional

environmental assessments and permitting.

57.

Before any pipeline project could even start, Rainbow must engage in

route and landowner participation. Based on Rainbow’s experience, negotiations to

obtain and eventually record the proper easements from landowners (potentially

purchases) would already take years to complete. Landowner fatigue and Not In My

Back Yard (“NIMBY”) sentiments have been a significant problem for decades to

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the point that the North Dakota State Legislature needed to pass a pipeline restoration

and reclamation oversight program in the 64th Legislative Session in 2015 to address

ongoing concerns from landowners as it related to developing pipelines on their

property.

58.

Only then would it make sense for Rainbow to obtain the permits, of

which a cross-river natural gas pipeline project would require many. Listing just

two for purposes of this Declaration, Rainbow would need to seek a transmission

facility permit and a pipeline safety permit from the North Dakota Public Service

Commission. This does not even account for the fact that, since the pipeline must

be built under a river, additional studies would need to be conducted to make sure

that the surrounding ecosystem is not disrupted or that there is no unauthorized

discharge under the Clean Water Act. For example, Rainbow may also need to

obtain a Section 404 Clean Water Act permit if the pipeline project is expected to

discharge dredge or fill materials into the water.

59.

Again, a best-case scenario where the construction timeline encounters

zero labor shortages, zero public pushback, and zero material-procurement

chokeholds would mean the constructing a pipeline of such length on land could be

completed in 4 to 5 years. But a natural gas pipeline construction of this nature also

risks vocal, heated public opposition, and the general constituents’ aversion to

construction projects of this kind. For example, like with the Dakota Access

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Pipeline, one anti-pipeline protest gone wrong or one sour public relations event

could mean the entire project gets mired in lawsuits or regulatory hearings, which

could add a year or two of additional delay. Worse, the complications discussed

above are magnified by the fact that the pipe must cross a river.

60.

Indeed, EPA’s representation that constructing these natural gas

pipelines will be easy starts from the wrong premise. EPA’s preamble to the Final

Rule discusses how it would be “reasonable to assume that most plant owners would

develop sufficient pipeline capacity to deliver the maximum amount of desired gas

use in any moment.” Far from such representation being accurate here, Coal Creek

Station never seriously considered pipeline capacity planning because the plant is

far away from an accessible natural gas reserve, because natural gas prices are

intrinsically volatile, and because contractually the plant has been bound to operate

exclusively on the lignite mined nearby for the life of the plant.

61.

Rather, Rainbow would be required to cease the CCS investments it

already engaged in, conduct an internal study to assess whether 100% natural gas

conversion would be the proper course of action, and then go through the requisite

timeline (along with all the challenges and delays referenced above) that deviates

significantly from what EPA expects.

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RAINBOW’S IMMEDIATE, IRREPARABLE HARMS

62.

Absent a judicial stay, Rainbow would be harmed in the next 2 years

primarily for 2 reasons. First, Rainbow will incur significant business opportunity

losses; with the Final Rule currently in place, Rainbow is already experiencing

significant challenges in (re-)negotiating its long-term power purchase agreements.

Second, and relatedly, Rainbow will lose broad swaths of on-site generation

opportunities specifically relating to data centers that need power purchase

agreements now but are withholding because Coal Creek Station’s future is

uncertain.

Rainbow’s Power Purchase Agreements

63.

As explained previously, Rainbow’s power purchase agreements have

largely been successful. Under these power purchase agreements, Rainbow will

provide power from Coal Creek Station to various end-use power customers located

throughout the upper Midwest for at least seven more years.

64.

The last power purchase agreement terminates in May 2031.

65.

Rainbow expects that general demand for additional power purchase

agreements will only increase, including long-term power purchase agreements that

may extend into 2032 and beyond. For example, Rainbow has observed significant

market interest in Rainbow’s generation for the next 10 to 15 years from other enduse consumers.

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66.

But given that these power purchase agreements are long-term

commitments to provide and receive electricity at a set price, the certainty of a power

plant’s longitudinal operability is essential. To illustrate, it makes less sense for an

electricity consumer to enter into a 15-year power purchase agreement with Coal

Creek Station if the consumer knows Coal Creek Station risks operation

disruption/cessation around year 8 (2032) due to CCS non-compliance, or mid-way

through the contract.

67.

With the introduction of the Final Rule, Rainbow is already

experiencing customer and potential-customer pushback even though these entities

are greatly interested in Rainbow’s power generation. Rainbow is already receiving

customer inquiries as to whether Coal Creek Station could meet the Final Rule’s

2032 compliance deadline. In another scenario, Rainbow is already receiving

inquiries where customers and potential customers are asking if the original longterm agreements that had been under discussion should be shortened, with the

service to terminate prior to 2032.

68.

In other words, the Final Rule is fundamentally disrupting Rainbow’s

business and the ability for Rainbow to sell its product in the open market; such

disruptions will be ongoing and are irreparable because lost customers would be

locked into long term contracts with other providers. Rainbow’s bargaining position

has been, and will continue to be, severely weakened. As one illustration, due to the

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regulatory uncertainty created under the Final Rule, Rainbow would be forced to ask

for “contingency” or “out” provisions where it could terminate or exit the agreement

if Coal Creek Station must cease operations for not meeting CCS deadlines.

Naturally, such provisions would decrease Rainbow’s bargaining leverage—

potentially conceding on price, perhaps even eliminating Rainbow from

consideration by the current and potential customers.

69.

Such disruptions are significant to how Rainbow runs its business, both

in the short term and the long term. Currently about 60% of the electricity sold by

Rainbow is through power purchase agreements that go up to 2031. Accounting for

the 2 additional opportunities Rainbow is close to executing, that share goes up to

67%. At minimum, the Final Rule risks slashing Rainbow’s electricity sales by half

because Rainbow simply could not enter into power purchase agreements in which

the terms of service would go past 2032.

70.

To be clear, the current perception that power purchase agreement

customers (and potential customers) have on Rainbow’s compliance feasibility

would be essential because the long-term agreements are under negotiation in the

present. If these entities decide to execute long-term power purchase agreements

with other electricity generators, whether Rainbow gains regulatory certainty two

years later becomes irrelevant. After all, these agreements are 10- to 15-year terms.

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This means that Rainbow cannot secure those contracts back for the next decade or

so; it would be a 15-year economic loss that must be accounted for now.

Rainbow’s Loss of On-Site Generation Customers

71.

Similar to the forfeiture of long-term power purchase agreements,

Rainbow would equally lose the opportunity to pursue on-site generation

opportunities with potential customers. Electricity consumers have been reaching

out to Rainbow so that, instead of going through the MISO wholesale market, Coal

Creek Station could directly provide electricity service.

72.

Specifically, Rainbow is in the process of negotiating power contracts

with data centers and cryptocurrency mining facilities, which consume significant

amounts of electricity for an extended period.

73.

These data center entities are seeking 20-year contracts where Rainbow

could provide certain amounts of power in 5-year increments. For now, negotiations

are ongoing where the data centers subscribe to 40 to 200 MWs of direct electricity

service; but eventually, the amount of power under discussion would significantly

exceed 200 MWs.

74.

However, these long-term contract opportunities are similarly under

jeopardy by the Final Rule. Either data centers would be disinclined to enter into a

power purchase agreement that they perceive will be cut short due to risk of noncompliance with the Final Rule, or the terms of the agreement would be condensed,

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Attachment A

to the Declaration of Stacy Tschider

National Energy Technology Laboratory, Topical Report No. 27

Published in June 2012

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EXHIBIT 21

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EXHIBIT 22

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EXHIBIT 23

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