Ely leaders are betting that their eastern Nevada city will get an economic boost with the development of one or two giant coal-fired power plants in a few years.
For now, though, Ely is the battleground between Nevada's investor-owned utilities, which want to build a 1,500-megawatt power plant, and LS Power Group, an independent power company based in East Brunswick, N.J., that proposes to build a 1,600-megawatt plant.
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Some analysts believe that only one coal plant will be built. Analysts also think Nevada Power Co. and Sierra Pacific Power Co. have the edge, because the two utilities in November persuaded the Public Utilities Commission to approve the first $300 million in expenditures for their $3.8 billion Ely Energy Center and a related transmission line.
The Nevada utilities have rejected proposals to enter long-term contracts for power from the LS Power project.
LS Power has said that it enjoys a three-year head start in developing a power plant at Ely. The Nevada Division of Environmental Protection in December issued a draft air permit for LS Power's proposed White Pine Energy Station, but the state environmental division just started reviewing the utilities' application for an air permit.
If LS Power gets approval of an air permit first, it could build a plant that uses less restrictive pollution controls than the Nevada utilities, analysts say. That's because the LS Power permit will consider pollution from fewer existing sources.
If the Nevada utilities' project is approved after that of the private company, however, it would need to meet higher standards for pollution reduction because the LS Power project will be considered an existing source of air pollution even before its project is completed.
However, LS Power may have lost some of its lead in the race to build a coal-fired power plant.
The U.S. Environmental Protection Agency on March 8 wrote to the Nevada Division of Environmental Protection arguing that Nevada should require LS Power to provide more documentation about the technology it plans to use to reduce sulfur dioxide emissions.
The federal agency also called for more analysis of the White Pine plant's effect on visibility.
Eric Crawford, LS Power's project development director, called the EPA letter "pretty routine."
But Charles Benjamin, an attorney and a Nevada official with Western Resource Advocates, a nonprofit environmental law and policy organization, disagreed.
"This is a statement that the draft air permit (issued by state officials) does not meet the EPA standards," Benjamin said.
The Nevada environmental division "has got to go back to LS Power and say, 'You have to change what you're doing in terms of your emissions,' " Benjamin said.
Said Crawford: "My understanding is that these are just comments (EPA made) with NDEP. This is not a recommendation not to issue the permit," Crawford said. "I don't think they are saying that they are serious issues."
Benjamin countered: "I think it is serious with EPA. It's always serious with EPA. The draft permit from NDEP is deficient."
Although LS Power has already heard from the EPA, Roberto Denis, senior vice president of Sierra Pacific Resources, the parent company for Nevada Power and Sierra Pacific Power, doubts he will.
"Our plant will not have any (problems) that are pointed out in that EPA letter," he said.
Air pollution issues aren't the only challenges the competing projects have in common.
Both projects will require construction of a 250-mile transmission line to deliver electricity from Ely to the population centers in Southern and Northern Nevada. Both also would rely on Union Pacific to deliver coal from the Powder River Basin of Wyoming and Montana to generate electricity at the plants.
The Nevada utilities plan to spend $40 million of their $3.8 billion budget rebuilding 100 miles of the Nevada Northern Railway to connect with an existing Union Pacific rail line.
Critics fear that Congress may enact a law requiring the nation to limit carbon dioxide emissions and other greenhouse gases that some scientists contend cause global warming. As a result, the Nevada utilities and LS Power might be forced to buy credits so they can operate pulverized coal plants, which produce massive amounts of carbon dioxide.
That potential cost could reduce the savings expected from using relatively low-cost coal, rather than natural gas, to generate power.
Denis said Nevada Power will produce no more carbon dioxide from the Ely project and its planned wind farms than it would if Nevada Power were forced to continue using old, inefficient coal-fired plants at the Reid Gardner Station northeast of Las Vegas and the now-closed Mohave Generating Station in Laughlin.
Carbon dioxide issues also loom for the LS Power plant. Innovest Strategic Value Advisors, an investment advisory firm, has announced a study that suggested Dynegy shareholders were taking a big risk of carbon dioxide related expenses in merging with LS Power, because Congress is expected to adopt legislation to limit carbon dioxide pollution.
Companies that need to exceed the limit could buy credits from other companies to comply, thus increasing the cost of coal-fired generation. Innovest did the study for the National Environmental Trust.
Benjamin calls carbon dioxide pollution his group's major concern about the coal-fired plants. He cites a consensus of scientists who believe carbon dioxide and other greenhouse gases are causing global warming, damaging the environment.
"It's really our children and grandchildren who will bear the brunt of this (global warming)," Benjamin said.
Scot Rutledge, executive director of the Nevada Conservation League, another environmentalist group, said he worries that the plants will sully Ely's clean air with sulfur dioxide, nitrogen oxide and mercury pollution.
"Air quality is one of the things that makes Ely such a special place," he said.
Benjamin argued that energy conservation and renewable energy could eliminate the need for a coal-fired plant.
"Nevada is blessed with renewable resources that are just beginning to be tapped -- geothermal energy, solar energy and wind energy," Benjamin said. "If these coal plants are built, it will kill the demand for these renewable technologies."
Denis, though, sees no viable alternative to building a coal-fired plant. Nevada's utilities are too reliant on natural gas, the cost of which has spiked in recent years. Power costs jumped as natural gas costs jumped.
Nevada Power gets 75 percent of its electricity from its own gas-fired power plants and those of other power generators. That causes electric rates to soar when gas prices surge.
Denis would prefer to get 40 percent of Nevada Power's electricity from gas-fired plants and 40 percent from coal-fired plants to reduce the utilities' reliance on gas for power generation.
The utilities consider technology for converting coal into gas, which some environmentalists favor, as an unproven and a risky investment.
Denis said he favors renewable energy projects and conservation, but he said that they alone will not satisfy the power needs of Nevada's booming population.
