WATERLOO - Plans for the Elk Run Energy Station in Waterloo have gone up in smoke, pleasing its opponents and disappointing business groups.

Elk Run Energy Associates, an affiliate of LS Power Inc., announced today the company will halt further development of the proposed $1.3 billion, 750-megawatt coal-fired power plant on Waterloo's northeast side.

"We're not pursuing the site for development anymore," said Mark Milburn, assistant vice president of LS Power. "The decision was based on our view of the projected energy market; the load growth is slowing in the region due to the downturn in the economy."

Milburn said the company will instead focus its development efforts more advanced projects in Arkansas, Arizona, Georgia, Michigan, Nevada, New Jersey, Texas, Virginia and other locations.

The project would have been the largest economic development project in the city's history but was opposed by environmental groups, citing air and water pollution and long coal trains tying up traffic through the city. Supporters said the plant would have to meet stringent state and federal environmental standards.

The news follows an announcement Friday that Texas-based Dynegy Inc. and LS Power had dissolved their joint venture to develop the $1.3 billion Waterloo plant and five others across the U.S.

"The development of new generation is increasingly marked by barriers to entry including external credit and regulatory factors that make development much more uncertain," Dynegy Chief Executive Officer Bruce Williamson said in a news release.

But Milburn said it was the slowing economy and falling demand, which lead to the decision.

"The dissolving of the joint venture with Dynegy Inc. was an independent issue," he said. "With that joint venture not in place we have 100 percent control over all of our projects."

Asked if the company may consider the Cedar Valley for future development, perhaps with "clean coal" technology, Milburn replied: "I can't speculate on what we might do in the future."

"Certainly this site as a lot of great features that attracted us, and we'll certainly keep it on our radar screen," he said. "Elk Run Energy has been a proud member of the greater Cedar Valley community, and appreciates the unwavering support of so many individuals and organizations throughout the development process."

Don Shatzer, a member of Community Energy Solutions, which opposed the Elk Run Energy project, was pleased with the announcement.

"This thing has been a three-year roller coaster ride for everybody involved," Shatzer said. "There were a large number of people involved fighting this coal plant.

"We didn't stop the coal plant; all we did was prolong the construction," he added. "What finally ended this whole thing was the financial crisis.

"I think Waterloo and Black Hawk County can be very thankful this project didn't get started nine months or a year ago," he said, noting it could have left a partially developed plant without necessary financing.

The project, projected to create 1,200 construction jobs and 100 permanent jobs, had been supported by a number of business organizations.

"It is a very major disappointment for us that we won't benefit from the investment or the temporary or permanent jobs," said Steve Dust, chief executive officer of the Greater Cedar Valley Alliance economic development group. "We documented very well what the benefits were going to be."

While the area still has sufficient electric generating capacity to sustain future development, Dust said, "Any time you have a huge facility, or a developer deciding not to move forward with a project of this size, it brings some attention to you that you don't want.

"And I think Iowa needs to be cognizant of this as a state," Dust said. "It's also disappointing it's the Iowa project that got pulled," while LS Power project in other states are going forward, including another upper Midwestern facility proposed in Michigan. He suggested a protracted regulatory process here may have slowed the project to a point where it became vulnerable when market demand eased.

With this development coming on the heels of opposition which swayed Monsanto to locate a large corn seed production plant in Buchanan County instead of Black Hawk County, and PFGBest Inc.'s ultimately successful struggle to locate a facility north of Cedar Falls, Dust suggested Black Hawk County officials also need to take stock of what role they want to play in economic development.

The county Board of Supervisors officially took no position on the plant while the county Board of Health called for a statewide moratorium on coal-fired power plants, based on board-commissioned study by a University of Northern Iowa professor on LS Power proposal's environmental impacts.

Shatzer said CES will still be active promoting clean energy, such as wind and solar power. It will continue fighting Alliant Energy's proposed coal-fired Marshalltown plant.

"We are for clean energy solutions, not dirty polluting coal plants. We have so much potential in this state with wind and solar power.

"We have to change this whole mentality that cheap power is here to stay," he added. "The whole attitude toward coal plants is changing nationally."

The city and economic development groups had been touting the potential benefits of the project, including a projected $3.15 million in annual property taxes and 100 new jobs.

The four-year construction of the plant, which had been scheduled for a 2013 opening, would have brought in up to 1,200 workers at the peak of construction, with an estimated payroll of more than $200 million.

The company has been awaiting regulatory approval before construction could begin on property that the city has annexed and zoned for the project along Newell Road east North Elk Run road =m east of Eagle Ottawa tannery and of John Deere's East Donald Street Tractor Works.

Waterloo Mayor Tim Hurley, who has steadfastly supported the project, expressed disappointment Tuesday.

"Some are going to claim the decision to pull out was a victory of sorts," Hurley said. "But it's a loss to the city, the region and the state.

"I believed in this project. I'm just not one who believed in all of the evil things that would happen if the coal plant located here.

"I think it was a needed project and would have been very beneficial," he added. "I'm sorry to see that project go, but I respect LS Power's business decision."

Hurley said the city staff has already begun discussing the de-annexation of the land brought into the city for the project. And LS Power must began cancelling its options to purchase the 494 acres slated for the plant.

"We said in the beginning, if this project does not go we had no interest in hanging onto that land," he added.

Carrie La Seur, president of Plains Justice, a public-interest law center based in Cedar Rapids, also hailed the decision. Plains Justice had assisted the opposition to the Elk Run Energy project.

"We congratulate LS Power and Dynegy for recognizing that developing new coal power is just too financially risky for their stockholders, but Iowa ratepayers should know that Alliant Energy's proposed new Marshalltown coal plant saddles them with the same imprudent financial risks," La Seur said in a news release.

Courier News Editor Pat Kinney contributed to this story.

Contact Tim Jamison at (319) 291-1577 or tim.jamison@wcfcourier.com