AEP unit to begin coal plant in Arkansas

HOUSTON (Reuters) - Arkansas environmental regulators on Wednesday issued a final air permit to allow a unit of American Electric Power Co utility to begin construction of the 600-megawatt John W. Turk Jr. coal-fired plant.

An air permit from the Arkansas Department of Environmental Quality was the final regulatory approval needed by AEP's Southwestern Electric Power Co (SWEPCO) to begin construction of the $1.5 billion coal-fired plant in Fulton, Arkansas.

Building will begin immediately on the plant, now expected to be operational in late 2012, SWEPCO said in a release. Site work began earlier this year while the company worked to gain approval to recover plant costs from utility regulators in Arkansas, Louisiana and Texas.

Escalating construction costs and uncertainty about the costs of potential climate-change legislation have led utilities to cancel dozens of proposed coal units in the past two years. Even so, more coal plants are being built in the United States now than in two decades, according to a government report.

Because coal plants emit more carbon dioxide than other power plants, they face opposition from a variety of environmental groups, landowners and religious groups that want utilities to cut greenhouse gas emissions while increasing use of renewable power and energy efficiency programs.

SWEPCO said the Turk plant will be one of the first U.S. coal plants to use ultra-supercritical technology which operates at higher temperatures to improve efficiency and reduce emissions.

The site includes an area for the inclusion of equipment to capture CO2 in the event of future regulation, the environmental agency said.

"Coal is essential to meeting the growing energy needs of our region and our country, and we will put new technology to work at Turk that will generate electricity more efficiently with less environmental impact," said SWEPCO president Paul Chodak, in a statement.

Turk has 473,500 customers in three states.

SWEPCO has completed the 340-MW Mattison natural gas peaking plant in northwest Arkansas and is building a 500-MW gas-fired unit at the Arsenal Hill Power Plant in Shreveport.

Turk's air permit, tentatively approved earlier by the air division of the Arkansas Department of Environmental Quality, was delayed while the agency held a second public hearing to allow public comment on SWEPCO's plan to control mercury emissions.

(Reporting by Eileen O'Grady; Editing by Christian Wiessner)