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Published: Friday, 6/29/2007

Amendment may aid Toledo's quest for energy

BY JIM PROVANCE
BLADE COLUMBUS BUREAU

COLUMBUS - Toledo residents may have moved closer to benefiting from steam power generated by the proposed $800 million FDS Coke Plant.

Under an amendment added to Ohio's just-passed state budget, the project could qualify for federal tax-exempt financing if it sells energy generated by the plant to a tax-exempt municipal utility rather than to FirstEnergy Corp.

"I don't know what their intent is, but from our perspective, their driver is to get to the lower interest rate," said Mark Shanahan, executive director of the Ohio Air Quality Development Authority. "The only way they can do that is to sell it to a muni.

"If they sell to FirstEnergy, they give up 1 to 2 interest points," he said. "Their driver is the total cost of the project."

The plant is in early financing talks with the authority. Mr. Shanahan stressed the budget amendment would apply to any similar project and not just the coking plant.

A spokesman for the project could not be reached for comment.

The anonymous backers of the U.S. Coking Group plan to apply for approval from the Public Utilities Commission of Ohio to build a 135-megawatt power plant to be fueled by steam generated by the coking plant.

Toledo City Council approved creation of a municipal electric utility on March 28, 2006, in hopes it could buy and distribute power more cheaply to residents and businesses than FirstEnergy does.

"It's the logical thing to do," state Rep. Peter J. Ujvagi (D., Toledo) said. "If we are going to take some environmental hit, then the community and citizens ought to be in a position to benefit from lower-cost energy considering we're one of the highest-cost energy areas of the state."

The plant could go to auction to seek the best price for its power from any federal tax-exempt municipal utility or it could negotiate its own long-term contract.

There is no guarantee a Toledo utility would win the contract. But if it garners state-exempt status, it could at least compete. Bond counsel for the authority requested the amendment to ensure Ohio law would recognize such a commodity contract.

"There are very significant tax consequences to that," Mr. Ujvagi said. "[The coking plant] could build that part of the operation with tax-free bonds."

The amendment, arcane language dealing with "commodity contracts," was added unnoticed to the $52.3 billion, two-year budget by the Senate two weeks ago. The amendment was separate from another authorizing the director of the Ohio Environmental Protection Agency to modify in midappeals the pollution permit initially issued for FDS in 2004.

The budget sailed through both chambers Wednesday, and Gov. Ted Strickland is expected to sign it by tomorrow.

The Ohio Environmental Council has been a fan of the authority, which helps to finance industrial air-quality projects. But the group questions its involvement with this project.

"We'd hoped the agency would want to enable a truly clean project," spokesman Jack Shaner said. "The electricity production no doubt looks very clean, but the electricity production is tied to the coke plant.

"Thanks to the separate back-pedal amendment, the strong mercury limits in former director [Chris] Jones' permit are now in doubt," he said. "It would be a real disappointment if we enable a weakening of that permit and end up with more mercury pollution in the name of clean energy."

FDS Coke Plant LLC recently submitted paperwork to have its permit, issued in 2004, modified. The proposal largely mirrors revisions FDS received from EPA in 2005 before the Environmental Review Appeals Commission invalidated the changes on the grounds EPA lacked authority to modify it in midappeals.

The latest proposal adds the steam-generated power plant to the mix.

"Director Chris Korleski doesn't expect a rubber stamp," EPA spokesman Dina Pierce said. "We will look at it as we look at all permits. This is not going to be automatically approved just because it was approved by a prior director."

Staff writer Tom Henry contributed to this story.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.



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