The plant, which is being developed by GTL Energy USA Ltd., would process lignite into briquettes and increase its energy value by removing water from the coal. Lignite, used to fuel electric power plants, normally has water content of 30 percent or more.
North Dakota's Public Service Commission informed GTL Energy in August that the project did not need a mining permit. It is to be near South Heart, in Stark County, where two other companies are developing a new mine and factory to turn coal into synthetic gas.
Lawyers for the Dakota Resource Council, of Dickinson, wrote a letter to the Office of Surface Mining in Denver, asking the federal agency to block any construction until regulatory questions are answered.
The Public Service Commission's conclusion that the coal drying plant does not need a mining permit "is in error, contrary to plainly stated law and (federal) regulations, and therefore warrants immediate... review and intervention," the letter says.
The commission did not provide public notice or hold a hearing before it made its decision, the attorneys said. Their letter asks the Office of Surface Mining to respond next week because the attorneys believe construction of the coal-drying project is about to begin.
Robert French, the president of GTL Energy USA Ltd., did not respond immediately to an e-mailed request for comment. The company's chief financial officer, Blake Williams, said the dispute was between the Dakota Resource Council and state regulators.
"GTL Energy has complied with all regulatory requirements to date and will continue to cooperate with all applicable authorities," Williams said in an e-mail message.
Susan Wefald, the Public Service Commission's president, said the commission decided in a separate case last year that a coal drying operation did not require a state mining permit.
In that instance, Great River Energy and the North American Coal Corp. had formed a joint venture to dry lignite for use in Great River's Coal Creek electric power station, PSC filings say.
The drying facility was on the grounds of the Coal Creek plant. A North American subsidiary, the Falkirk Mining Co., supplies lignite to Coal Creek.
In GTL's case, Jim Deutsch, the PSC's land reclamation director, applied the same reasoning in determining the company's coal drying plant did not require a mining permit, Wefald said.
Deutsch said the plant will not be operated in connection with the proposed new coal mine near South Heart, and is not considered a coal preparation facility. The factory may dry coal from other mines besides the proposed South Heart mine, Deutsch said.
The Dakota Resource Council lawyers, Carrie La Seur, president of Plains Justice, of Cedar Rapids, Iowa, and Brad Bartlett, a managing attorney for the Energy Minerals Law Center of Durango, Colo., disputed the PSC's conclusions.
A federal rule "clearly (requires) permitting of coal processing facilities at mine sites," the attorneys said in their letter to the Office of Surface Mining.
The developers of the coal gasification factory, Great Northern Power Development LP and Allied Syngas Corp., hired GTL Energy last April to provide the coal drying technology for their plant.
The process, which is called beneficiation, increases the coal's energy value and allows it to burn more cleanly, project officials say. Water extracted from the lignite will also be used in the gasification plant's operation, officials say.
Richard Voss, a Great Northern Power Development executive who has been a spokesman for the gasification project, did not respond Friday to telephone and e-mailed requests for comment.
GTL Energy USA Ltd. is a unit of GTL Energy Ltd. of Adelaide, South Australia. Allied Syngas is part of Allied Resource Corp., of Wayne, Pa. Great Northern Power Development LP is based in Houston.