GILLETTE - This year Basin Electric Power Cooperative proposed a coal gasification project in South Dakota that would burn Powder River Basin coal, and applied for a federal tax credit for such investment.

But at least as far back as September, industry leaders and members of congress - including Sen. Craig Thomas, R-Wyo. - recognized a technical oversight in the particular federal tax credit that Basin had applied for. The law essentially disqualifies any project using Powder River Basin coal.

When the U.S. Department of Energy announced recipients of the first $1 billion in the federal tax subsidy last week, Basin Electric's application was denied, and company officials said they hadn't been aware of the technical error related to Powder River Basin coal. Yet Thomas's office was already working on a bill to fix the technical error, and Thomas introduced the bill on Tuesday.

Called for reaction Wednesday, Basin Electric spokesman Daryl Hill said his company was still unaware of the technical discrepancy or any congressional work to correct the technical error that put Powder River Basin coal at a disadvantage.

"This is the first we've heard of it," Hill said.

Among several stringent criteria to meet the "clean coal" coal gasification tax subsidy is to capture 99 percent of sulfur from the power plant's flue emissions. Because Western sub-bituminous coal has a lower sulfur content, plants using Powder River Basin coal would have to scrub sulfur emissions to a much smaller volume than plants using Eastern coal.

On Tuesday, Thomas introduced a bill seeking to correct that general standard in the coal title of the Energy Policy Act of 2005, bring all U.S. coal to a level playing field.

"The 99 percent sulfur removal standard was a problem in the Tax Title and Coal Title of the Energy Policy Act," Thomas said in a prepared statement. "It's only reasonable to have a standard that all coal types can meet."

Thomas co-sponsored another bill to fix the same standards in the Tax Title of the Energy Policy Act.

Hill said Basin will still work with GE Energy and Bechtel to develop an integrated gasification combined cycle, or IGCC, power plant, but it may not choose that technology to meet its projected load growth. Basin needs to add up to 600 megawatts within eight to 10 years to serve increased demand among its cooperative members on the Eastern grid.

"At this point we haven't selected the technology for that (600-megawatt) resource. We'll make that decision sometime next year," Hill said.

The IGCC process combines coal, oxygen and steam at high pressures to produce a synthetic gas, which is burned in a combustion turbine to produce electricity. The process involves much lower emissions of sulfur dioxide, mercury, particulates and nitrogen oxides.

Energy reporter Dustin Bleizeffer can be reached at (307) 682-3388 or dustin.bleizeffer@casperstartribune.net.