At a time when many new energy projects have been slowed down or cancelled due to the falling oil prices, rising construction costs, and burdensome legal obstacles, the trend against such projects appears to be turning.  The State of Ohio recently granted Baard Energy the last of its required construction permits for a new coal-to-liquid (CTL) facility with an estimated price tag of $5 billion dollars.  The proposed Ohio River Clean Fuels (ORCF) facility, located in Wellsville, Ohio, would produce 53,000 barrels of liquid fuel per day, using coal and biomass as feedstock, and would come on-line in 2012. 

Supporters argued that the facility would generate thousands of new jobs for Ohioans during the construction process and hundreds more high quality jobs during its operation.  Opponents argued that the facility would release between 14 and 18 million tons of carbon dioxide annually, and that issuing a permit would be unlawful without imposing a binding obligation on the company to capture or sequester such emissions.  In the end, the state agreed with supporters of the facility, both granting the permit and providing a $500,000 grant to support acquisition of property under a “Job Ready Sites” program through the Ohio Department of Development.  

That aspect of Ohio’s decision was particularly notable following only a week after a highly-publicized decision by EPA’s Environmental Appeals Board (EAB) remanding a coal-facility permit to EPA to determine whether carbon dioxide controls were required when permitting a new coal-fired powerplant.  Some analysts predicted that activity on pending state and federal permits would stop while EPA resolved its policy.  Ohio, which is aggressively pursuing coal to liquid and other alternative energy projects that can stimulate the state’s economy, declined to wait for EPA guidance before approving the ORCF facility, rejecting any notion that it was obligated to consider carbon dioxide emissions in its permitting decision at present.  EPA has since fallen in line behind Ohio, with EPA Administrator Johnson issuing a controversial guidance memorandum interpreting the Clean Air Act to not require permitting authorities to consider emission limits for carbon dioxide.  Administrator Johnson’s interpretation, likely to be challenged by environmental groups, should provide substantial support to Baard Energy in any challenge to the permit filed with Ohio’s Environmental Review Appeals Commission (ERAC). 

The next challenge for Baard Energy is to ensure that the project can remain financially viable in the current financial environment.   

For further information about this topic, please contact Akin Gump.