Washington (Platts)--26Jan2009

The US Environmental Protection Agency's Appeals Board late last week
told environmental groups and the state of New Mexico that it would review the
agency's decision granting an air permit for the proposed Desert Rock
coal-fired power plant near Farmington, New Mexico.

In a January 22 decision, the board said it would review EPA's approval
because it was presented with "a number of significant regional interests,
with potential tribal and interstate implications."

The objections to the planned 1,500-MW Desert Rock plant typify the
current dilemma facing developers of coal-fired power plants. Longer
permitting processes and lengthy litigation add years to plant development
times, raising costs.

The EPA board also said it would stay or suspend any further decisions on
the question of whether, or if, the Desert Rock facility must use the best
available control technology to cut carbon dioxide emissions. The board made
that decision after Region 9, the office that issued the permit, decided to
remove information from the permit that outlined its reasons for not
controlling CO2 emissions. Region 9 said it withdrew that section of the
permit so it could obtain additional analyses, notice and comment.

Lastly, the board established a briefing schedule that would allow New
Mexico, environmental groups and any other interested parties to file briefs
related to the case. A schedule for oral arguments will be released shortly.

In July 2008, EPA's Region 9 office approved a Prevention of Significant
Deterioration permit for the construction of the facility, to be built on land
belonging to the Navajo Nation. The facility is being developed by Sithe
Global Power and the Dine Power Authority, an entity of the Navajo Nation.

Several environmental groups have been trying to block the plant, citing
the potential for air pollution and degradation of the environment. They are
arguing that the plant will use too much water, and that EPA could have
required the developers to pursue other energy alternatives, rather than a
coal-fired plant.

In August 2008, the board received four petitions for review following
EPA's permit decision, with various groups alleging that EPA failed to analyze
the impact of the facility on the state.

The plant was originally scheduled to come online in 2012. It would have
two supercritical coal boilers, if built as planned. It would provide 400
permanent jobs on the Navajo property, plus about 1,000 construction jobs.
-- Regina Johnson, regina_johnson@platts.com