The project, about 30 miles northwest of Louisville, Ky., also would produce more than 11 tons of chemicals listed as hazardous air pollutants, the application states.
Liberty's permit application begins a months-long review process by state regulators, although the company still must submit water-quality applications to the state and the Army Corps of Engineers.
The 32-megawatt Milltown operation is one of several Liberty expects to develop in the Midwest. The plant would burn wood waste from sawmills, furniture factories and land clearing to generate power. It also would burn some switch grass and corn stover.
But nearby residents, environmental activists and others are concerned about how the plant would contribute to local air and water pollution.
The Crawford County Commissioners voted unanimously this spring to ask federal authorities to conduct a full environmental impact study of the project.
Liberty's goal is to obtain a state air permit in early 2010 and to fire up the burners by 2011. The state has 120 days from the submission to issue a permit.
In the next few months, the Indiana Department of Environmental Management's staff will write a permit setting out the details of the project, including emissions limits.
Liberty estimates that levels of each type of air emission would be below a key threshold for air pollution: 250 tons a year. That would let the plant avoid classification as a "major source" of pollution and a more involved review process.