The Environmental Protection Agency says a preliminary review of the Nemadji Trail Energy Center fails to account for the project’s full climate impact and that the utilities seeking to build the plant should be required to reduce greenhouse gas emissions as a condition for receiving federal funding.

Doing so would show “leadership in line with the federal policy priority to reduce climate risks and could also reduce regulatory risks for ratepayers,” the agency said.

La Crosse-based Dairyland Power Cooperative and two Minnesota utilities are seeking a loan from the U.S. Department of Agriculture’s Rural Utilities Service to finance the $700 million plant, which they say will help them transition away from coal-fired power.

A draft environmental review released earlier this year estimates the 625-megawatt plant would produce the equivalent of more than 2.7 million tons of carbon dioxide each year but would actually reduce net carbon emissions by displacing electricity from coal-fired power plants.

The EPA says the review fails to quantify all the plant’s greenhouse gas emissions or quantify the potential costs to society, which the agency estimates could be more than $2 billion, nor does it consider the plant’s disproportionate impact on Native American tribes.

The review doesn’t account for methane — a far more potent greenhouse gas than carbon dioxide — leaked during the production, processing and transportation of gas before it reaches the plant, which the EPA says makes it unclear whether the project would actually result in lower emissions.

The agency also says net emissions projections should account for the increasing reliance on wind, solar and other carbon-free energy sources — not just the “business as usual” model.

Echoing the concerns of environmental advocates, the EPA cautions that failure to fully consider alternatives — such as wind and solar — or the cost of future carbon mitigation measures could expose ratepayers to unnecessary financial risk.

“Investing in long-lived combustion turbines due to inaccurate expectations about the costs of alternatives may lead to higher overall costs,” the agency wrote. “Moreover, long-lived fossil assets may become uneconomic faster than expected if alternatives and mitigation are not fully considered.”

Dairyland spokesperson Katie Thomson said the utility “has fully complied with state and federal approval and permitting requirements and extensive environmental reviews.”

Thomson said Dairyland is evaluating technologies that could allow “fuel flexibility” but contended the plant will provide flexible on-demand generation to complement intermittent sources like wind and solar.

A second look

Initially proposed in 2017, the plant has been the subject of court challenges in both Minnesota and Wisconsin.

Earlier this year Dane County Circuit Judge Jacob Frost rejected arguments that the Public Service Commission failed to consider the full environmental impact when it issued a permit for the plant. That ruling is now under appeal.

Last year the Minnesota Supreme Court ruled that state utility regulators do not have the authority to consider the environmental impact of a plant built in another state, though the plant faces ongoing regulatory scrutiny as part of Minnesota Power’s long-term resource plan.

After initially concluding the plant would have no substantial environmental impact, the USDA agreed to conduct an additional review in response to comments from environmental groups including the Minnesota Center for Environmental Advocacy, the Sierra Club and Clean Wisconsin, who say it’s incompatible with accepted climate science and the Biden administration’s stated positions on fossil fuels.

The Intergovernmental Panel on Climate Change has said investments in fossil fuel infrastructure are incompatible with pathways to head off the most disastrous impacts of climate change.

The environmental groups say momentum against the plant is “strong and growing” and have launched a social media campaign calling on USDA Secretary Tom Vilsack to deny federal funding.

“In a climate crisis, the last thing we should do is add more pollution by building new fossil fuel power plants,” said Evan Mulholland, director of the Minnesota Center for Environmental Advocacy’s healthy communities program. “The EPA’s comments show that the current plan for the Nemadji Trail Energy Center is reckless.”