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An air quality permit for the Roundup Power Project is invalid because it was improperly issued by the Montana Department of Environmental Quality, according to a recent finding by a state hearing officer.

The permit for a proposed twin 390-megawatt coal-fired electrical plant in the Bull Mountains south of Roundup was extended and then replaced using an improper process and one not based on any regulatory procedure in Montana or federal laws or rules, said Katherine Orr.

Orr, a hearing examiner for the Montana Board of Environmental Review, issued her recommendations Friday in a case brought by the Montana Environmental Information Center. Orr's recommendations will be considered for a final decision by the board at its July 27 meeting. The board's decision may be appealed to state district court.

MEIC challenged the permit saying the DEQ had a duty to revoke the permit after determining it had expired because the company had not started construction within 18 months of issuance as required.

"The company doesn't have a valid air quality permit. And they can't rely on that permit any longer if they want to build a plant there. They have to start at the beginning," Anne Hedges, MEIC's program director, said Monday.

"The department illegally extended this permit. The old permit was invalid. There's timelines, and the timelines mean something," Hedges said. "You just can't say, after something expires, it can be extended."

Bull Mountain Development Co., the owner of the project, had argued that its permit was properly issued and amended to adjust the construction timeframe because there were new, more stringent pollution limits in the amendment.

Officials for the proposed power plant say Orr's findings may be moot because they are changing the project to a gasification process that converts coal to natural gas, which can be used to generate power. The process is known as Integrated Gasification Combined Cycle, or IGCC.

Helena attorney Steve Wade, who was traveling Monday and had not read Orr's findings, said he filed papers with Orr saying he thought the challenges were moot. "The way I look at it is, the conversion is going on," Wade said.

Bull Mountain has notified the department of its intention to convert to gasification and has engineers preparing designs for department review, Wade said.

John Baugus Jr., a partner in the project, said Monday that a conventional, coal-pulverization plant "is not plausible right now. We weren't going to do that for the last year and a half anyway." Building a coal gasification plant is much cleaner, he said.

In December, Bull Mountain applied for a modification to the permit for a 500-megawatt IGCC power plant. The application is pending further information from Bull Mountain, Wade said.

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The IGCC plant will cost about $1 billion, another attorney for the project said earlier. The twin conventional plants were estimated to cost $900 million when first announced in 2001.

The department issued an air permit for the twin conventional plants in July 2003. Construction was required to begin within 18 months. In July 2005, the DEQ notified Roundup Power that it had not started construction and that its permit was invalid as of June 12, 2005.

In November 2005, the DEQ proposed issuing an administrative amendment with conditions accepted by Roundup Power. The amendment and conditions became final in December 2005 with another permit that the department said replaced the one that became invalid. The conditions included more stringent emission limits for sulfur dioxide, particulate matter and mercury.

The replacement permit gave the company until December 2006 to begin construction or it would expire. Construction did not commence. A DEQ official said in March that the permit was no longer valid but that it had not been revoked.

Orr said the permit amendment process was used inappropriately to extend the permit and to issue a replacement permit. "There is no provision (in Montana rules) for retroactive extension by amendment of an authorization to construct after the authorization has become invalid," she said.

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