Indiana Utility Regulatory Commission and Coal and Citizens Energy Group and Energy & Environment and Utilities

Steam plant ups reliance on coal

September 3, 2007

Citizens Gas & Coke Utility shuttered its coke manufacturing plant earlier this summer, much to the relief of neighbors and health officials who warned that its benzene emissions were a cancer threat. But regulatory filings show closing the plant at Keystone Avenue and Prospect Street could result in more pollution downtown.

Citizens estimates it will need to burn an additional 86,000 tons of coal annually at its Perry K steam plant at West Street and Kentucky Avenue to make up for the loss of relatively clean-burning coke oven gas once supplied by the coke plant.

Coke gas was a valuable byproduct of the coke ovens and amounted to nearly one-third of Perry K's fuel for boilers that make steam. The gas was ideal: cleaner than coal, about as clean as natural gas and cheaper than both.

The 114-year-old plant produces steam for about 250 downtown-area customers, including Eli Lilly and Co. and IUPUI. It supplies the nation's second-largest district steam system, behind only New York City's. Most of the steam is used for heating, with about 60 customers using it for cooling.

Citizens estimates the increased annual fuel costs of coal, plus six additional employees for coal operations, is $1.1 million. It will be passed on to steam customers in the form of base rates and fuel adjustment charges.

Nitrogen oxide emissions from coal-fired boilers are "three to four times greater than the emission rate from the gas-fired boilers," a Citizens executive said in testimony filed with the Indiana Utility Regulatory Commission.

Citizens officials downplay the pollution issues stemming from ramping up coal burning at Perry K. Citizens staff told the Indiana Office of Utility Consumer Counselor that the coal the utility is burning has low concentrations of other hazardous chemicals such as mercury and chlorine.

"Concentrations were so low that the plant could meet the inorganic and mercury [federal emissions standards] without installing any more pollution control devices than the plant contains currently," an OUCC staff member told the commission.

And benzene emissions aren't an issue at Perry K.

The biggest concern for Citizens, according to the OUCC filing, is meeting particulate-matter standards.

Ozone problem

Particulates are a concern because of respiratory problems and because they are the basis for the formation of ground-level ozone. Since the mid-1990s, Indianapolis has failed to meet federal ozone standards. Further noncompliance could bring mandates for vehicle-emissions testing, more expensive fuel and restrictions that would limit the expansion of industry.

Citizens denies particulates will be a problem.

"While Perry K is planning to burn additional coal going forward, recent upgrades to the plant's pollution equipment should mitigate or actually reduce the plant's particulate emissions," said Citizens spokesman Dan Considine.

Citizens recently filed for a new permit with the Indiana Department of Environmental Management. It does not seek to increase emissions but rather discloses new pollution-control and boiler-efficiency improvements, the company said.

A copy of the permit was not immediately available and was still under IDEM review. Citizens has been burning extra coal at its downtown plant since the coke plant shut down July 23.

City officials have strived to improve air quality here. Just this month, they launched the "Clean Air Partnership," a program that encourages local businesses to take measures such as modifying their fleets to reduce pollution and encouraging employees to carpool.

That's on top of the "Knozone" initiative that recommends the public take such actions as riding the bus and not filling gas tanks or mowing grass until after 6 p.m.

Other efforts include Mayor Bart Peterson's initiative to plant more trees, which capture carbon dioxide and can reduce air temperatures. Traffic signals are being changed out with light-emitting diodes--and streetlights with more efficient high-pressure sodium bulbs--to reduce the demand on Indianapolis Power & Light's coal-fired power plants.

David Menzer, who handles energy issues at Citizens Action Coalition, said he wonders whether Citizens' greater use of coal will negate some of those efforts.

He's dubious as to Citizens' claims of flat or declining pollution growth because of new pollution controls.

"It would think it would almost have to [pollute more], and almost certainly put more carbon dioxide into the air."

Pollution controls adequate?

Citizens said some of the improvements at Perry K include low-nitrogen-oxide burners and the reuse of a scrubber-type device installed 11 years ago when Indianapolis Power & Light owned Perry K. That device was abandoned when one boiler was converted by IPL to natural gas.

An OUCC staff member said in a filing with IURC that it was her opinion Citizens' Perry K plant will meet new federal emissions standards that go into effect this month.

She added: "However, [the new federal air standards] are unlikely to be the last environmental regulations to significantly impact the Perry K plant. [Citizens] is aware of developing environmental regulations but does not have a plan currently in place to address the very real possibility of more stringent emissions standards."

She also noted the space limitations of the Perry K plant, on a triangle-shaped piece of land south of Victory Field and the RCA Dome.

One contingency raised by the OUCC: Move the plant. The agency said Citizens staff indicated it would be "technically feasible" to locate a new plant near the trash-to-energy plant operated by Covanta Energy at 2320 S. Harding St. Covanta currently supplies much of Citizens' steam.

"The OUCC believes the company's investigation of land purchase options in the next several years would be in the public's interest," testified Joan Soller, director of the OUCC's electric division.

Citizens said it "has not seriously studied relocating or replacing the existing steam facility" for a variety of reasons, including "prohibitive costs, environmental constraints and infrastructure challenges."

"A new facility to replace Perry K with its current mix of fuels would likely cost several hundred million dollars, which would be difficult to finance without long-term commitments from the steam customers," said Citizens' Considine.

Moving the plant farther from its central location downtown also would add energy inefficiencies and high costs for additional distribution piping, Considine added.

"A lot of people have thought for years that we ought to look at moving that plant," said Mayor Peterson. "Perhaps it's because people see it as somewhat inconsistent with the modernization of downtown."

But the mayor said the plant still provides an essential service for heating and cooling downtown office buildings and industrial plants and that the costs of replacing it could indeed reach into the hundreds of millions of dollars.

"I think you sort of make a virtue out of a necessity and just recognize it as a symbol of what it takes to run a city."

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