EDWARDSPORT, Ind. -- Dec 27 - USA TODAY

From the top of a hill here in coal country, you can see distant swells of smoke curling up from coal-fired power plants along the flat horizon. Even here, in a town of only 348 residents, a small coal plant has operated off and on since World War II.

But that plant might soon be replaced by a new kind of coal plant, one that could signal a critical turning point in the future of coal and how the United States reconciles its conflicting energy and environmental needs.

Duke Energy, the Charlotte, N.C.-based utility, is now awaiting an air permit from Indiana for a $2 billion, 630-megawatt coal plant, large enough to power about 200,000 homes a year. Considered only average-size as traditional plants go, it would become the world's largest coal-fired power plant to use a new, cleaner technology called integrated gasification combined cycle, or IGCC.

"It's a technology that has the ability to take air pollution out of the debate over coal," says John Thompson, director of the Coal Transition Program at the Clean Air Task Force, a Boston-based environmental group that supports the plant. "The day that plant opens, the 500 or so coal plants in the U.S. are obsolete."

Unlike conventional coal-fired power plants, often called "pulverized" coal plants because they crush coal to a powder before burning it to make electricity, the Edwardsport plant would turn coal into a gas before burning it. "Gasification" makes removing pollutants easier.

According to the Environmental Protection Agency, such gasification plants emit about 65% less mercury and 75% less sulfur dioxide than conventional plants, while nearly eliminating particulate matter, the fine particles linked to heart and lung disease.

But perhaps more important, coal-power experts say, the Edwardsport plant's gasification design would enable Duke to capture the plant's carbon-dioxide emissions, then inject them underground where they cannot affect the atmosphere, a process known as carbon capture and sequestration. Coal-fired power plants account for a third of U.S. CO{-2} emissions, the primary gas blamed for global warming, about as much as every plane, train and automobile in the country combined. Yet, most energy experts say the nation can't meet its energy demand for decades, at least, without a lot of coal.

Deploying coal gasification technology at power plants such as Edwardsport could be a crucial first step toward solving that conflict, supporters say, because capturing CO{-2} from conventional coal plants is likely to be prohibitively expensive.

"If those (pulverized coal) plants go ahead, it is extremely unlikely carbon will ever be captured from them," says Doug Cortez, who heads a clean energy consulting firm in California. But with gasification plants, it's more likely, he says.

Still, the Edwardsport plant and the widespread adoption of the cleaner coal gasification technology face opposition from unlikely bedfellows. Some environmentalists oppose any type of coal plant because, they say, coal is too harmful to the environment every step of the way, from the mines to the smokestacks. And utilities have generally avoided gasification, favoring conventional plants, because, they say, the cleaner technology is unreliable and too expensive.

Roberto Denis, senior vice president of Sierra Pacific Resources, a Nevada utility that has proposed a 1,500-megawatt conventional coal plant, says he's uncomfortable with the gasification technology and doubtful it can work as well as pulverized coal plants.

"We'll watch (the Edwardsport project) with great interest, but we don't have the luxury of working through the technology evolution," Denis says.

Is coal a necessary evil?

Howard Herzog, principal research engineer for the Massachusetts Institute of Technology's Energy Initiative, says coal, which already generates 50% of the nation's electricity, is here to stay -- like it or not.

"Coal is abundant and cheap, and we have increasing energy demand," he says "We can wish all we want, but people are going to do what it takes to keep the lights on. And that means coal."

Others, such as environmentalist John Blair, who lives about an hour south of Edwardsport and is fighting the plant, say more coal isn't inevitable. "The plant is not needed, because we have incredible (energy) efficiency potential in this state," Blair says. "That's cheaper than a new coal plant."

Even worse, says Bruce Nilles, who directs the Sierra Club's anti-coal campaign, is that investment in new coal plants -- gasification or not -- will drain resources from cleaner options. "No investor in their right mind will put money up for renewable energy, because there will be no market for it."

Only about 2% of U.S. electricity comes from non-hydropower renewables such as wind power. "The fact is, we don't have a good alternative to fossil fuels at this time," Herzog says. "People want the world the way they want it, but we have to look at the facts."

But James Hansen, NASA's chief climate scientist, says new conventional coal plants shouldn't be part of the energy picture. In October, he submitted testimony against a coal plant proposed in Marshalltown, Iowa, saying, "The only practical way to prevent CO{-2} levels from going far into the dangerous range ... is to phase out the use of coal except at power plants where the CO{-2} is captured and sequestered."

Thompson thinks the Edwardsport plant would help make that phase-out eventually possible, because the project could spur adoption of gasification power plants that enable CO{-2} capture and sequestration.

Others disagree. An MIT study this year says research could make it more economical to capture carbon from pulverized coal plants and that it's too early to pick a single technology winner.

Is coal gasification ready?

Depends on who you ask. Only two small coal gasification power plants operate in the USA today: Tampa Electric's Polk Power Station in Polk County, Fla.; and the Wabash River Power Station in West Terre Haute, Ind., jointly owned by SG Solutions and Duke. Each has been running for more than 10 years.

Yet, including recent delays and cancellations, none of the 24 coal-fired power plants now under construction in 17 states is a gasification plant, according to an energy department report.

Utilities proposing conventional plants usually say gasification power plants can't be depended on to operate as consistently, or to generate as much electricity, as pulverized coal plants of the same size.

Frank Maisano, a spokesman for New York-based Sithe Global Power, which has proposed a 750-megawatt pulverized coal plant in southeastern Nevada, says the gasification technology is "frankly not really ready ... to meet demand where there is huge growth," because it hasn't been commercially proven. He estimates Sithe's proposed plant will be 10% to 15% more reliable: It will operate more consistently because it won't have to work through the technical kinks that he says a new gasification plant would.

But the plant manager at the Wabash gasification plant, Richard Payonk, says coal gasification power plants are "absolutely" reliable and can be scaled up in size. "A lot of the critics of the (gasification) technology are using old data" about its reliability, he says.

An underlying concern is how much more a gasification plant costs to build and operate.

Cortez says recent studies show a coal gasification power plant would cost 10% to 20% more than a conventional plant. On a $2 billion plant, say, that's an extra $200 to $400 million.

Maisano puts the cost premium even higher, at 30% to 40% for Sithe's Nevada plant.

Whatever the premium is, "there is a sticker shock," Cortez says. That scares utilities, particularly when many question whether coal gasification power plants can be as productive as the cheaper alternatives.

Plans for at least eight clean coal plants have been canceled, rejected or delayed by regulators this year. Rising construction costs, regulatory uncertainty and environmental opposition are all factors.

Supporters of coal gasification say the potential cost of regulations limiting CO{-2} emissions from coal plants should be taken into account in comparing the costs of conventional and gasification coal-fired power plants. If it was, Cortez says, the coal gasification plants would be at least as cost competitive as their conventional rivals because they'd emit less CO{-2} and have the ability to capture CO{-2} at a much lower price.

Utilities continue to build conventional plants instead. That's why, Thompson says, it's paramount that federal and state policy use tax credits to close the price gap between conventional plants and the first few gasification power plants.

The Edwardsport plant wouldn't be possible without the $460 million in local, state and federal tax credits it will receive, says Jim Stanley, president of Duke Energy Indiana. The federal 2005 Energy Policy Act authorized $800 million in tax credits for coal gasification projects to promote clean coal; $133.5 million was awarded to the Edwardsport project.

Both Tampa Electric and Mississippi Power got tax credits of the same size for coal gasification power plants. The Mississippi project is in the early stages of development. Tampa Electric canceled its project in November because the company couldn't forecast the costs associated with potential federal and state regulations on carbon-dioxide emissions.

Thompson says the most effective action the federal government could take to encourage the widespread adoption of coal gasification plants would be either to tax coal plants' CO{-2} emissions or to institute a nationwide cap on them and lower it over time.

Such legislation would make it costly to emit CO{-2}, driving utilities to invest in gasification and carbon capture equipment to reduce emissions, he says.

Dan Lashof, climate director at the Natural Resources Defense Council, a New York-based environmental group, says carbon-constraining legislation is "inevitable" in the next five years. The bill sponsored by Sens. Joe Lieberman, I-Conn., and John Warner, R-Va., includes a cap on CO{-2} emissions that would be lowered over time. The bill has been approved by two committees and will now go to the Senate floor.

The EPA has declined to require new coal plants to use gasification, though the Clean Air Act requires they use the "best available" pollution controls. EPA spokeswoman Margot Perez-Sullivan says the agency views gasification technology as "an alternative design" of coal plants rather than a way to control pollution, so, legally, the agency cannot require it.

Thompson says that is the wrong interpretation. The Clean Air Act, he says, requires new, cleaner technologies, such as gasification, to be used as pollution controls when they become available.

Environmental groups have filed at least 25 court challenges to conventional coal plant proposals across the country, many charging the gasification should be required under the law.

Where to put the CO{-2}?

After coal is gasified and the CO{-2} is captured, it still must go somewhere. The Department of Energy has estimated that North America has room underground to store 3.5 trillion tons of CO{-2}. In theory, the USA could store all its power plant emissions for centuries.

In fact, oil and gas companies have been injecting CO{-2} into depleted oil fields without incident for decades. The CO{-2} dislodges trapped oil and gas, increasing the fields' yield and profitability.

For example, since 2000, Dakota Gasification in Beulah, N.D., has been gasifying coal, capturing the CO{-2} and pumping it to clients in Canada, where it is injected into oil fields.

But to make a significant dent in CO{-2} emissions, the country will likely have to sequester the captured CO{-2} in what are called saline formations, porous rock one to two miles under the Earth's surface.

The Energy Department, in partnership with universities, private companies and others, is spending about $2 billion over 10 years to study carbon sequestration and build the world's first IGCC plant that captures and stores carbon.

But for now, saline storage hasn't been demonstrated on a large scale, and there is no regulatory framework for monitoring the CO{-2} and determining who would be liable if something went wrong. The EPA is developing rules for the process.

Many consider large-scale carbon sequestration the only technological hurdle left in the entire process, and want to wait until it is proven. But Thompson says coal gasification power plants must get up and running now. "That is the most important starting point," he says. "The clock is ticking." (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.