Published on Thursday, September 13, 2007.
Last modified on 9/13/2007 at 1:51 pm

Roundup power plant back to square one

By The Associated Press

Backers of a proposed $1.5 billion coal-to-liquids plant near Roundup have dropped their bid to use a dated air quality permit for the plant, a project beset by financial difficulties and legal challenges.

Steve Wade, an attorney for plant developers Bull Mountain Development, wrote in a Sept. 11 letter to state officials that the Billings company "will pursue the project through a new permitting effort."

A company representative said the new effort will be tied to lining up additional financing for the plant. That prospect so far has eluded the company despite strong political backing from the administration of Gov. Brian Schweitzer.

Bull Mountain's difficulties reflect the broader challenges facing coal-fueled power plant proposals, as concern over their contribution to climate change gains public traction. That has left investors jittery about sinking money into costly projects that could face new regulations in coming years.

In his letter, Wade blamed the decision to seek a new permit on "obstructionist groups" - a reference to environmentalists. He wrote that they had caused the project "lengthy unnecessary delays."

The Montana Environmental Information Center had challenged the company's attempt to use for the project a 2003 air quality permit from another plant.

That permit was for a conventional coal-fired power station previously proposed by Bull Mountain at the same site. Modifying it for the coal-to-liquids plant could have shaved months off the regulatory process.

In 2005, the Schweitzer administration allowed Bull Mountain to extend the 2003 permit despite the company's failure to meet a deadline to begin construction. A state Department of Environmental Quality hearing examiner ruled in July that the extension was improper.

"Given all the challenges, they decided they would just start new," Wade said.

Montana has the largest coal reserves in the nation, and Schweitzer has made national headlines for his backing of Bull Mountain and other coal-to-liquids projects. The Democrat claims such projects could end the nation's reliance on foreign fuels while future technologies could lessen coal's contributions to global warming.

The Roundup project would use a process known as integrated gas combined cycle technology, or IGCC, to convert coal into a gas rather than ignite it. A portion of the synthetic gas would be converted into 22,000 barrels of diesel fuel daily, with the remainder used to generate about 300 megawatts of electricity.

But environmental groups contend coal-derived diesel could produce as much or more of the greenhouse gases blamed in climate change compared to conventional fuels. The technology needed to capture greenhouse gases coming from an IGCC plant are not yet commercially available.

"It is very preliminary and on the scale that it needs to be done, it's simply not there," said Anne Hedges with the MEIC.

She predicted Bull Mountain will never submit a new application: "The tide is turning even in a coal state. The momentum is with public health and protecting against global warming."

Bull Mountain also has struggled to resolve a string of lawsuits, from early investors disgruntled with their minimal returns and environmental groups wary of the plant's air pollution potential.

The new permit application is not likely to be filed until the company lines up additional financing, said another Bull Mountain attorney, Joe Gerbase.

Company representatives have said in the past that they were on the verge of lining up an investor who would assume a central role in the project. Gerbase said on Thursday those efforts continue. He would not offer specifics.

He said it could be up to four years following submission of the application before the project goes online. But he said a new application would allow the company to better defend itself against future litigation, by providing more detailed air quality and environmental studies.

"We can just add to it and build on it, thus giving more credibility to a second application," he said.