Article published Feb 29, 2008

Highwood air permit invalid, groups say

By JOHN S. ADAMS Tribune Capitol Bureau

HELENA — Two environmental groups said Thursday that the state air-quality permit for the proposed coal-fired Highwood Generating Station is invalid in light of a recent federal court ruling and must be redone.

In a letter to Montana Department of Environmental Quality Director Richard Opper, the groups said that because the Highwood plant's permit does not comply with the federal Clean Air Act's mercury emission requirements, construction of the plant cannot lawfully begin.

The letter comes just a day after news that the USDA's Rural Utilities Service told Southern Montana Electric Generation & Transmission Cooperative that the federal agency could not finance any of the $720 million to $790 million project. SME was hoping to finance 85 percent of the plant's construction with a RUS loan.

The RUS recently suspended funding coal-fired or nuclear power plants while it responds to questions from Congress about how the agency plans to deal with greenhouse gas emissions and other environmental issues.

The Highwood plant is proposed by the city of Great Falls and five rural electric utilities, which together form SME. The rural co-ops said they pursued the project because they expect to lose part of their principal power supply from the Bonneville Power Administration this year — and all of it in 2011.

SME General Manager Tim Gregori said on Wednesday that the RUS decision was not a surprise and doesn't spell the end of the project. SME is pursuing alternate financing, Gregori said, adding that he is optimistic about SME's chances.

The project still faces other hurdles.

Environmental groups have appealed the air-quality permit before the Montana Board of Environmental Review, an environmental impact statement prepared by DEQ and RUS is the subject of a federal lawsuit and the Cascade County commission probably will face a lawsuit if it gives final approval to rezoning land for the plant.

Anne Hedges, of the Montana Environmental Information Center, said the mercury issue comes at a bad time for SME.

"I think the Highwood Generating Station is in big trouble," Hedges said Thursday. "I think the mercury issue is the least of its problems. I think they are trying to find financing in a world that isn't interested in financing coal plants, and the uncertainty that this mercury issue creates for them will make it even more difficult to get financing."

Gregori did not return a call for comment Thursday.

In the letter to Opper, attorneys for MEIC and Citizens for Clean Energy, which both oppose the proposed plant, asked the DEQ to conduct a "maximum achievable control technology" analysis for the Highwood plant. That analysis would set higher enforceable emission limits for mercury and all other hazardous air pollutants emitted by the plant.

The request for the analysis comes in the wake of a federal appeals court ruling earlier this month that struck down a Bush administration mercury rule.

"What we're reminding the DEQ is that coal-fired power plants are on the DEQ's list of facilities that emit harmful toxins in large amounts. That means they are subject to the Clean Air Act's requirements for control technologies," said Abigail Dillen, an attorney for the two environmental groups.

On Feb. 8, a federal appeals court ruled that the federal Environmental Protection Agency's mercury emission limits and cap-and-trade rule are illegal.

Mercury is a powerful neurotoxin that accumulates in fish and poses the greatest risk of nerve and brain damage to pregnant women, women of childbearing age and young children. Emissions of mercury nationwide total about 48 tons a year, according to the EPA, most of it in the form of air pollution that eventually winds up in waterways.

Under the Clinton administration, the agency adopted provisions in the Clean Air Act that required coal- and oil-fired power plants to control mercury emissions using stringent MACT standards. The EPA modified those rules under the Bush administration by removing coal- and oil-fired power plants from the list of mercury sources whose emissions could be regulated.

In 2006, the DEQ adopted its own mercury rule that was stricter than the Bush administration rules, but environmentalists say the agency didn't go far enough. The recent court ruling reaffirmed that mercury must be controlled using MACT, they say. In the meantime, the DEQ adopted a rule that calls for mercury controls using the "best available control technology," a lower standard of emission controls.

Implementing the more stringent MACT standards could come at a considerable increase in cost for SME.

"A MACT analysis will require them to invest more money in going back and doing the analysis of what the best facilities in the nation are actually achieving. Then they are going to have to figure out how they are going to achieve those same standards," Hedges said.

She added that the activated carbon technology that the Highwood plant intends to use will probably be a part of the system that would be required after a MACT analysis is completed. However, the more stringent mercury and hazardous-air-pollutant controls will require a more expensive application of the technology, she said.

The EPA has not developed a specific federal MACT standard, but Dillen says that doesn't exempt power plants from having to achieve the more effective emission controls.

"In the absence of any particular standard by EPA, agencies have to conduct a case-by-case analysis to make sure they are achieving the best possible reductions of hazardous air pollutants, and that includes scary stuff like mercury," Dillen said.

Hedges added that SME could probably complete a MACT analysis in three to five months.

According to DEQ spokeswoman Lisa Peterson, Opper had not reviewed the letter as of Thursday afternoon. Peterson added that the letter was forwarded to the agency's Air Resources Management Bureau for review.

Reach Tribune Capitol Bureau Chief John S. Adams at 442-9493, or jadams@greatfallstribune.com