Construction of Oak Creek, Wis., Coal Plant Could Begin Soon

Construction could begin in less than six months on the first coal-fired power plant to be built in Wisconsin in 20 years.

Work on Wisconsin Energy Corp.'s $2.15 billion Oak Creek project, approved late last year by state energy regulators, must get under way by March so the plant can open as planned in May 2009.

But the fight isn't over against the coal plant, the most controversial element of Wisconsin Energy's power-plant expansion program announced four years ago. Wisconsin Energy says the plant is crucial to help meet growing demand for electricity.

Some thought the fate of the project was determined in November when the state Public Service Commission gave its approval.

"The bottom line is we talk to a lot of people that weren't involved in this, and they feel it's a done deal," says Steve Bulik, a leader of Citizens for Responsible Power, a group fighting the project.

Approvals are still needed on several fronts before construction can begin, including:

--The state Department of Natural Resources. Three separate cases must be resolved among the utility, its opponents and the agency.

--The U.S. Army Corps of Engineers, which also has jurisdiction over U.S. waterways, because the plant will be on the shore of Lake Michigan. That agency and the utility have been exchanging correspondence, a public comment period has passed, but the agency recently scheduled a new public hearing.

--A Dane County judge. Judge David Flanagan is presiding over a case that pits the commission and the utility against a host of coal opponents -- from competing energy company Calpine Corp. to Racine-based S.C. Johnson & Son Inc., the key financial backer of the opposition.

Compared with last fall, the current activity is quiet and behind the scenes. Then, opponents and the utility ran high-profile campaigns for and against the project, including television commercials describing the merits and pitfalls of burning coal.

Wisconsin Energy contends, and the state commission agreed, that new coal plants are needed to help meet rising demand for electricity in the state. Natural gas-fired plants, the fuel of choice for nearly every power plant built in the United States in recent years, have contributed to rising and volatile natural gas prices.

Opponents continue to press the case that coal plants remain the most polluting form of generating electricity, even if new plants emit less than the ones already generating electricity in the state.

SC Johnson Wax has hired lawyers from Madison and New York, as well as expert witnesses, to present the case to state administrative law judges who will decide the fate of the environmental permits.

Another opponent, Calpine Corp. of San Jose, Calif., notes that the economics of the project have changed since last year, due to rising spot prices of coal. Calpine contends that its plan to use natural gas-fired plants in Fond du Lac and Kaukauna would be cheaper than the significant capital investment required for coal plants.

But the commission decided that natural gas -- the fuel of choice for power plants that are needed only intermittently when demand is high, such as hot summer days -- wasn't suitable for a power plant that would be required to run around the clock.

In recent developments, both sides claim small victories. A ruling by the U.S. Environmental Protection Agency likely means that the utility will not be required to install cooling towers to cool water used in the coal-burning process before it is returned to Lake Michigan.

Opponents are expected to challenge that. A decision by an administrative law judge last month leaves open, for now, the question of whether the company's air pollution controls will be sufficient. Lawyers for SC Johnson Wax and Clean Wisconsin will be allowed to provide testimony that the company should be required to use coal gasification -- a less polluting but more costly form of generating electricity from coal.

The coal plants are part of a broader expansion plan announced by Wisconsin Energy in 2000 that includes new natural-gas-fired plants in Port Washington and increased acquisition of energy from wind turbines over the next 10 years.

The first natural gas-fired unit -- being built at the home of a coal plant that will be shut down -- is expected to open next year.

Opponents are hoping for a protracted legal battle. They are heartened that the Army Corps of Engineers has scheduled a public hearing for later this month in Oak Creek on the project, and that the state Department of Natural Resources has yet to issue one of the key water permits for the project.

"I don't see how they can have all their approvals by the end of the year," said Pamela McGillivray, lawyer for Clean Wisconsin, one of the project's opponents.

In a presentation last week to investment analysts who follow the utility industry, company Chief Financial Officer Allen Leverett said opponents would stir some attention in the coming months, but the company will prevail.

"You'll be hearing a lot more about these challenges," he said. "I feel like we're as well-positioned as we can be at this stage. Nothing has come up in the proceedings that we didn't anticipate going in."

Opponents appear nearly as optimistic.

"We Energies needs approvals and favorable court decisions on everything that is either being challenged or decided," said Eric Uram, Midwest regional representative with the Sierra Club in Madison. "For the opponents of those power plants, we only need to win on one."

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