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ANCHORAGE - When the north wind blows in Seward, dust flies off a large pile of coal and covers the town's scenic boat harbor in black grit.

"It is just very, very, very dirty. It piles up against homes. I get reports of it in windowsills, inside locked cars, inside boats. Folks come back after the winter and find piles of it inside their locked up boats," said Russ Maddox with the Resurrection Bay Conservation Alliance.

That local group has tried for years to fix the problem, and now three conservation groups are threatening to file a lawsuit against Alaska Railroad Corp. and Aurora Energy Services LLC, alleging they are discharging coal without a permit into Resurrection Bay - a popular destination for summer tourists.

Trustees for Alaska, a public interest law firm representing the Alaska Center for the Environment, Alaska Community on Toxics and the Alaska chapter of the Sierra Club late last month issued a 60-day notice of intent to sue.

The groups accuse the railroad and Aurora Energy of violating the federal Clean Water Act.

Brian Litmans, attorney for Trustees for Alaska, said the notice gives the railroad time to fix the problem or get a federal permit to discharge coal into the bay.

Litmans said when the wind blows from the north, plumes of coal dust rise off the pile and settle on the water. When the coal is scooped up off the pile and loaded onto the conveyor belt, more dust is put into the air. Even more dust is generated when the coal is loaded onto ships.

Besides the dust, coal chunks fall off the conveyor belt and into the bay, he said.

"We think it is really time to implement the engineering and other fixes that can prevent this problem from continuing in the future," said Pam Miller, executive director of the Alaska Community Action on Toxics.

Inhaling coal dust is associated with serious health problems, including pulmonary disease, bronchitis and emphysema, she said.

The Alaska Railroad has owned the Seward Coal Loading Facility for six years and operates it in partnership with Aurora Energy, which is an affiliate of the Usibelli coal mine near Healy.

The coal is taken by rail to Seward where it is stored until a conveyor belt loads it onto ships headed for Chile, China and Korea.

Wendy Lindskoog, the railroad's assistant vice president, said the corporation takes environmental stewardship seriously and has made numerous improvements to the coal loading facility, and more are planned.

More than $1 million has been spent on safety, operation and environmental improvements since the railroad took over, she said.

Among them: seals on openings to control dust, dust control bars along the conveyor belts and stacker reclaimer, a new transfer chute on the ship loader to minimize incidental spillage, skirting along the ship loader belt and ensuring the dust control system works in freezing weather.

The facility was built in 1984 as a state economic development project to engage in the world coal market. The coal was transported from Healy to Seward under a contract with Suneel Alaska Corp., the purchaser of coal for the Korean market.

In 2003, the railroad received a federal grant to buy the operation. Hyundai ran it until January 2007, when the railroad entered into an operating agreement with Aurora Energy Services in Seward.

When Suneel Alaska Corp. ran the facility, it was permitted as a coal-processing center and was allowed under a permit to emit 87 metric tons of coal dust annually, Maddox said.

When the railroad took over, it was reclassified as a storage facility, even though nothing changed in its operation, he said. As a storage facility, the railroad doesn't need a coal dust permit.

Two air quality violation notices have been issued since the railroad took over the operation, Lindskoog said. One was in April 2007 and the other one was in March 2008. The railroad and AES are negotiating with the Alaska Department of Environmental Conservation to resolve the violations, she said.