Air Quality Permits For Coal-Fired 
Utility Plants: 
"IGCC" And "BACT" In Kentucky 

By: Maureen D. Carman
Wyatt, Tarrant & Combs, LLP

    Considered by environmental groups as a bellwether for other coal-powered utility plant operations in the country, Peabody Energy's proposed 1,500-megawatt ("MW") Thoroughbred Energy Coal Plant in Muhlenberg County, Kentucky has recently won state approval for a revised air quality permit. 
    On April 11, 2006, Secretary of the Environmental and Public Protection Cabinet ("EPPC") Lajuana S. Wilcher issued Findings of Fact, Conclusions of Law, and Final Order ("Order") in Sierra Club, Valley Watch, Inc., et al. v. Environmental and Public Protection Cabinet and Thoroughbred Generating Company, LLC, DAQ-26003-037 and DAQ 26048-037, establishing that in Kentucky under the particular facts, the permitting authority did not have to consider alternative designs, including integrated gasification combined cycle ("IGCC") for coal-fueled processes when it considers an air quality permit for coal-fired plants.
    This general approach is consistent with the Environmental Protection Agency's ("EPA") recently stated view that federal law does not mandate that the basic design of a project must be redefined when considering available control alternatives for air quality emission standards. 
    By way of example, in a December 2005 letter, the EPA stated it will not require applicants, who are proposing a coal-fired steam electric generator, to consider redesigning it to be a natural gas-fired combustion turbine just because emissions are different.
    Thoroughbred represents promising news for coal companies and utilities. Coal-fired plants are still competitive while IGCC technology is getting its chance to prove commercial viability. IGCC is a clean coal technology that combines two technologies, coal gasification and combined cycle, with the low cost associated with coal. This technology is still in the preliminary stages, however.
    The EPA and now Kentucky have determined that an air permit in support of a coal-fueled power plant can be evaluated on the Clean Air Act's Best Available Control Technology ("BACT") without necessarily requiring that IGCC technology be considered.
    One difficulty with this case is that it took so long to be resolved. The EPPC's Department of Air Quality ("DAQ") conducted an eighteen month permit review process with opportunity for public comment. The facility is known as a "mine-mouth" facility because the fuel consists of coal from a mine nearby. The permit was issued on October 11, 2002 and thereafter revised. 
    Petitioners filed this state administrative action on the air quality permit to construct and operate the 1,500-MW pulverized coal-fired electric generating facility. After a lengthy hearing, the Hearing Officer filed a report on August 9, 2005, reasoning that the Secretary of the EPPC should remand the permit to the DAQ for, among other things, further resolution of the best available control technology, the BACT finding, under the Clean Air Act.
    The case has been a "complex and controversial permitting and review process, including several federal agencies, sister state comments, resulting in a 370-page Hearing Officer's report." (Order, page 2.) Specifically, the Hearing Officer found that the Cabinet did have authority to require an applicant to perform a BACT analysis on IGCC and another design technology. Moreover, she stated that it would be contrary to the Clean Air Act for a permitting agency not to be able to consider redefinition of a source of emissions. (Order, page 29, citing Hearing Officer's Report.)

    On April 11, 2006, however, the Secretary issued the Order revising the permit but not remanding it for further review, as recommended by the Hearing Officer. 
    The Secretary ordered two significant changes to the permit: (1) to limit mercury emissions to comply with the new federal Clean Air Mercury Rule ("CAMR"), and (2) to change the NOx limit to correct the permit. The Order established that BACT must be determined in the review process for an air quality permit. The regulatory authority should review the application as well as other sources of information to identify the best (most effective) available technology with "practical potential" for an application to the emissions unit and the regulated pollutants being considered. (Order, page 4.) In this case the Secretary explained that a technology is considered "available" if it can be obtained "through commercial channels" or is "otherwise available within the common sense meaning of the term." (Order, page 4-5.)
    In finding that the petitioners challenging the permit had not met their burden except as to the NOx determination, the Secretary stated as follows: An available technology or control is "applicable" if it can reasonably be installed and operated on the source type under consideration. A technology or control that is available and applicable is technically feasible. DAQ should then select the feasible control option or technology that is the most effective, after taking into account the energy, environmental and economic impacts associated with the various technology and control options.
(Order, page 5.)
    Ultimately, the Secretary found that the DAQ did not act in a manner contrary to fact or law in failing to include IGCC and another design in its BACT analysis. 

(Order, page 30.) Stating that IGCC had never been established by any permitting authority as the best available control technology for a coal-fired power plant at the time the permit was issued, the Secretary found that IGCC was "not commercially available and applicable at the time DAQ issued the permit." (Order, page 31.) 
    The opinion suggested that there were no existing generating facilities in the world which compared in size to the proposed Thoroughbred plant. 
    Other state agency positions have been challenged as well. Petitioners, including Clean Wisconsin, challenged the State of Wisconsin's determination to exclude IGCC from its BACT analysis. The Wisconsin Department for Natural Resources excluded IGCC from its BACT analysis and a Wisconsin administrative law judge upheld the exclusion.
    Environmental groups have argued that IGCC is the cleanest way to use coal and as a result must be promoted. They say that to do otherwise is a violation of the Clean Air Act. 
    As EPA, Wisconsin and now Kentucky have demonstrated, a requirement to consider certain alternative design coal-fueled processes is premature at best and not mandated by law. 
    With a growing body of precedent, this air quality permitting issue continues to be in the spotlight for coal companies, interest groups and generators of electricity in the United States. cl

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