Power plant scrapped on regulatory "uncertainty"

Mon Feb 2, 2009 7:49pm EST

By Bruce Nichols

HOUSTON (Reuters) - A group of Montana electric cooperatives on Monday dropped plans to build a new coal-fired power plant, the first apparent casualty in President Barack Obama's regulatory push to build cleaner power sources.

Environmental groups said the cancellation is likely the first since Obama took office with a promise to fight global warming by meeting U.S. energy needs while reducing carbon-dioxide emissions.

U.S. utilities emit about 40 percent of the nation's heat-trapping carbon dioxide -- the largest single source.

Obama has pledged to cut U.S. emissions by 80 percent by mid-century, which will require utilities to turn to greener energy sources like wind and solar.

Regulatory uncertainty over the direction of U.S. carbon regulations has stopped coal plant building in its tracks and spurred many utilities to consider nuclear plants and green projects to produce low-emission electricity.

An official with one of the Montana electric cooperatives did not refer to Obama explicitly, but told a local radio station that an "aura of uncertainty" around U.S. regulations means that the 250-megawatt Highwood Generating Station planned to be built near Great Falls, Montana, "just simply cannot be accomplished."

"This looks like the first coal plant to reverse direction since the Obama administration took over," said John McManus at Earthjustice, a California-based environmental group that had pursued a lawsuit to stop the plant.

Other coal plants on the drawing board in Kansas and New Mexico could see a similar fate, the group said.

Instead of a coal plant, the Montana electric cooperatives will consider powering the plant with natural gas, which gives off far fewer greenhouse gases than coal. The site could also be used to construct windmills, officials said.

Obama, formerly a U.S. senator from the coal-producing state of Illinois, has said coal will be a necessary part of meeting U.S. energy needs, but he also has said U.S. utilities must find ways to minimize coal's impact on the environment.

The Highwood cancellation was the second setback for coal in Montana in recent days.

U.S. Air Force officials last week dropped plans for a coal-to-liquid fuel plant at Malmstrom Air Force Base at Great Falls. The project was part of a plan to provide a non-petroleum-based fuel source for the Air Force