Mar 3 - McClatchy-Tribune Regional News - Steve Jordon Omaha World-Herald, Neb.

An Omaha company's plan for the nation's first large-scale "clean coal" power plant faces technical, financial and environmental hurdles, including challenges from groups that want to restrict the burning of coal whenever possible.

Tenaska Inc. of Omaha says its proposed Trailblazer Energy Center would capture as much as 90 percent of its carbon dioxide, showing the way for the power industry to reduce greenhouse gas emissions.

Petroleum companies would buy the recovered gas to squeeze oil out of underground rock formations, and the process would qualify for tax incentives enacted by the State of Texas and possibly for federal financial incentives.

The plant needs those added revenue sources because of the extra expense -- about $500 million -- of installing and operating the carbon-capture system. The end price, counting interest, would top $3 billion.

Last week, the Texas Commission on Environmental Quality began a nine-month technical review of Tenaska's air-quality application, putting the proposal further along than any other plan.

But even Tenaska says financing, building and operating the plant will be a learning process, starting with efforts to convince financial houses that the plant will yield profits in line with its big expenses.

David Fiorelli, president of business development for Tenaska, said one of the primary justifications for government incentives is that plants such as Trailblazer would add to the industry's knowledge, making the carbon-capture system more widely available for new plants or to retrofit old ones.

"You've got to start somewhere," he said, and the proposed incentives "were put in there to specifically encourage early adopters to step out and prove the technology."

Smaller coal-fired plants and natural gas plants have used the system for years, but there's a "power penalty" involved: Trailblazer's carbon-capture and pipeline system would use more than 20 percent of the plant's electricity. That would leave 600 megawatts to sell, enough to power about 600,000 homes.

Trailblazer would generate nearly 7 million tons of carbon dioxide a year, but that would be cut by 85 percent to 90 percent, to between 700,000 and 1 million tons a year.

That's dramatically less than any other large fossil-fuel plant, Fiorelli said. Although coal has its opponents, it's plentiful, cheap and domestic, he said, costing one-fifth as much as natural gas even counting the 1,000-mile train ride from Wyoming to Texas.

Yet it's difficult to clean up coal-burning power plants. FutureGen, a planned clean-coal demonstration plant in Illinois, was intended to resolve questions of whether such a plant could operate both cleanly and at a profit.

But cost estimates for the project rose from under $1 billion to $1.8 billion. The U.S. Energy Department, which was supposed to provide nearly three-fourths of the funding, backed out.

Tenaska's plan also has uncertainties, said David Schmalzer, who manages fossil energy research at the Argonne (Ill.) National Laboratory. For example, the system might not take out as much carbon dioxide as predicted.

"All the building blocks are reasonably well-known, but the (Tenaska) folks are proposing to put together more of the blocks in a bigger integrated widget than historically has been done," said Schmalzer, who has seen only general information on the plant and not technical data.

He also noted that carbon dioxide from the plant also would go to produce more petroleum products -- which in turn is burned and produces carbon dioxide. And some car- bon dioxide may escape during the oil recovery process, he added.

It's a financial risk to base the plant's financing on government incentives, he said. "If you build it and the regulatory regime changes, then you could have a large investment that is crippled or couldn't hope to be economically productive."

It's unclear how the plant's potential financial backers would resolve that uncertainty, he said.

The Sierra Club's Mark Kresowik of Waterloo, Iowa, shares none of Schmalzer's uncertainty about the feasibility and value of Trailblazer.

"This is just terrible," said Kresowik, an organizer in the group's national campaign against coal.

"I don't see the place for this if we want to maintain reasonable energy bills for people," he said. "Essentially what we're saying here is, if we want to quadruple the cost of electricity for consumers, then this is the direction we should go. Do we want to use our money to maintain that, or to invest in renewable energy and create more jobs?"

He said the carbon-capturing system Tenaska envisions wouldn't be economical in areas with no ready market for the captured carbon dioxide, so it's wrong to supply government incentives to encourage such projects.

Tenaska's Fiorelli said the company doesn't oppose energy conservation and alternative fuel.

"But I don't believe that they alone will be able to answer the energy needs of the country," Fiorelli said. "I think we need to pursue all available avenues, particularly those that are a domestic source of energy like coal."

The power industry believes federal climate legislation this year or in 2009 will provide incentives to build or clean up coal plants. Trailblazer would start commercial operation in 2014.

Fiorelli said Tenaska could have waited to see how federal legislation evolves.

"We elected instead to go ahead and start now to develop a project that we believe will work under . . . the climate legislation," he said, "rather than wait until the legislation passes and wish we had started two years earlier."