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US companies rediscover coal-fired power plants

John and Rachel Bogard are used to living off the grid in this desert hamlet, generating their own electricity with solar panels. They have been doing so for nearly 30 years.

But now the grid is rushing toward them, in the form of a source of electricity even more futuristic than solar power: coal.

Sure, coal sounds dirty and dated, the kind of energy source that went out of fashion with big Buicks and bell-bottom jeans. But a coal project here in northern Nevada is one of more than 100 coal-fueled plants that are vying for approval around the country, the largest increase in such projects since the 1970s.

The reason for coal's resurgence is an intensifying fear in the US that supplies will become scarce in electricity's other main fuel source, natural gas. And coal is a lot cheaper.

Altogether, energy companies in the US have announced plans to build more coal-fired power plants in the last 12 months than they did in the last 12 years. If all those projects get off the ground, utilities would invest more than US$100 billion.

The electricity industry's back-to-the-future approach to coal is soon expected to pit dozens of communities around the country against energy companies that are planning coal-based expansion strategies in their midst.

The Bush administration has significantly shifted policy away from three decades of federal efforts to reduce the nation's dependence on coal, which is significantly cleaner than it once was but still dirtier than natural gas.

Now the administration is supporting the push for a new wave of coal-fueled energy, with the US Energy Department investing US$2 billion in ventures intended to make coal less polluting.

But until coal-fired plants become even cleaner, clashes over their impact on air quality are expected to multiply. Because of restrictions elsewhere, many of these coal-fired power plants will be put in places with pristine air quality and relatively relaxed pollution restrictions.

Gerlach's is situated near Nevada's border with California, an energy-hungry state where environmental standards make it nearly impossible to build coal-fired plants, making it attractive for the builder, Sempra Energy. Gerlach, which has fewer than 200 residents, is at the crossroads of rail lines that can haul coal from Montana strip mines and an electricity transmission line that can send the power southward to Los Angeles and San Diego.

Gerlach has a "combination of ideal factors," said Marty Swartz, a director for project development at Sempra. As for Gerlach itself, he said, the project would generate about US$30 million in tax revenue for Washoe County, which encompasses this hamlet as well as Reno, a two-hour drive south.

Prospects of new wealth for the town have done little to calm people's nerves here.

"If it's such a great deal, then let them build the thing in California," Bogard, 56, the owner of a pottery business, said. "I'm not sure if anyone involved with this realizes what a nightmare it is to have a plant spewing coal fumes go up in their backyard. This would simply destroy our life out here."

The tensions arising from Sempra's plan, known as the Granite Fox Power project, and from similar plans for other coal-fueled plants are an inevitable outcome of energy policies pursued during the 1990s. During that period, nearly every new electricity plant was built to be run on natural gas, which is cleaner burning and was generally thought at the time to be in ample supply in North America.

But in the last five years, natural gas prices have skyrocketed as imports from Canada slowed and domestic production failed to keep up with demand. Prices have shot up to more than US$6 for each thousand cubic feet from just US$2 in 1999.

Coal, meanwhile, has remained relatively cheap, and the US has the world's largest reserves. As a result, while it costs more to build a coal-fired plant than it does to build one to use natural gas, the running cost of a gas plant has soared in comparison with a coal plant. A typical coal-fired power plant spends US$0.02 per kilowatt-hour to fuel its operations, compared with US$0.05 per kilowatt-hour for a plant fueled by natural gas.

In the partly deregulated power-generating business, much of that electricity can be sold at prices reflecting the cost of the most expensive source.

"Running a coal-fired plant in these times is a gold mine," said Robert McIlvaine, a coal industry consultant in Northfield, Illinois, who does research on new power plants around the country.

So far, McIlvaine has tracked announcements to build 118 coal-fired plants, including four others in Nevada besides Sempra's Granite Fox project. The Granite Fox plant alone is expected to supply 1,450 megawatts of generating capacity, making it one of the US' largest; it would generate enough electricity to meet the needs of a city the size of San Francisco.

Sempra, in San Diego, has adopted a two-pronged approach to dealing with high natural gas prices. It has pursued ambitious projects to bring natural gas from Indonesia and other nations to Baja California, Mexico, and Lake Charles, Louisiana.

The other Sempra prong is coal, which has attracted less attention. In the past year, Sempra, together with an investment fund connected to the Carlyle Group, spent more than US$400 million to acquire a large amount of coal-fired energy generating capacity in South Texas.

Sempra is also trying to build a 750-megawatt coal-fired plant in Idaho. But its most ambitious move into coal is here in Gerlach, where Sempra wants to invest more than US$1 billion over the next five years, creating roughly 800 local construction jobs.

Despite the expected economic lift, people in Gerlach are divided over the coal-fired plant.

Giovanni Bruno Selmi, an Italian immigrant who arrived here in 1946, said he supported the project, especially if it would provide tax revenue.

"Money talks here, like it does everywhere in the world," said Selmi, 81, the owner of Bruno's Country Club, which houses one of Gerlach's three bars along with a diner and a small hotel.

Still, like Bogard, some of the people who came to Gerlach to distance themselves from the bright lights of the city are concerned over the potential environmental impact of a coal-fired plant. And they worry that a large industrial complex would ruin the aesthetics of a quiet natural swath of northern Nevada's desert flats.

Executives at Sempra said they planned to begin holding meetings in Gerlach early next year to discuss the benefits of the plant once a preliminary series of environmental and weather tests was completed.

Swartz, the Sempra executive in charge of the project, said county commission officials appeared to favor it now that they had been reassured that coal-burning methods today were far cleaner than those at plants built a generation ago. Construction could begin as early as next year if Sempra wins county approval, he said.

But it will not be without a fight. Environmentalists, working with some local residents, have begun marshaling opposition.

"No matter how clean the technology for coal-fired plants, they still contribute to pollution by dumping tons of material in the air basins and beyond," Susan Lynn, executive director of Public Resource Associates, a nonprofit organization that works on land policy issues, wrote in a recent letter to Nevada's public utilities commission.

Lynn also said Sempra's pro-ject would block opportunities for renewable energy companies in the area. Sempra, however, insists that its project would allow wind and biothermal energy companies to piggyback access on the transmission line extending to Southern California.

Sempra recognizes that it needs to move quickly if it hopes to win approval for Granite Fox. Prices for coal, particularly coal from the eastern US, have climbed this year in part because of robust demand for fuel in China.

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