United States Steel Corp. officials expect to start up a second module in Gary during late summer to produce a substitute for a critical raw material to make steel.
But environmental regulators and sources familiar with the Gary Works operation say the company may be struggling to get its first carbon alloy synthesis production module and related equipment to full operation.
U.S. Steel announced in 2010 it would begin a more than $220 million project to build two modules to produce an alternative to traditionally manufactured coke. The first production module went into operation in October.
The company is licensing the right to build coke substitute production modules using proprietary technology from Plano, Texas-based Carbonyx Inc.
Based on air permits the company received to move forward with the project, Indiana Department of Environmental Management spokesman Rob Elstro said U.S. Steel is currently not in compliance with it.
Within 180 days of the startup of the module, Elstro said the permit called for U.S. Steel to send results to IDEM from "stack tests" from two different kilns the module uses to create the coke substitute. The tests are done to detect emission rates of harmful pollutants such as nitrogen oxide, sulfur dioxide and fine particulate matter.
Prior to the closing of the testing window, which expired Thursday, Elstro said U.S. Steel requested more time to complete the tests until production reaches what would be considered normal operating levels.
IDEM is considering its response to the letter. The Environmental Protection Agency has not had communications with U.S. Steel about its Carbonyx project in recent months.
U.S. Steel spokeswoman Courtney Boone said the company typically doesn't provide updates on operations outside of information shared during quarterly conference calls with analysts.
Pittsburgh-based U.S. Steel said the two modules would have the ability to supply 500,000 tons of Cokonyx, a carbon alloy substitute, when they reach full production. The price tag for the project remains at $220 million. The company is permitted to build four modules.
Carbonyx spokesman Gary Pollard didn't return a call seeking comment.
The Carbonyx project has suffered several delays and operating malfunctions that have delayed the first module from reaching full operation, sources with knowledge of plant operations told The Times.
Gary would be the home of the largest commercial application of the Carbonyx technology in North America. A smaller pilot operation for the technology exists in Ardmore, Okla., but one source said it has been difficult to obtain the proper chemistry needed for finished products at the production scale U.S. Steel requires. Engineering challenges and a lack of promised safety training for workers have hurt the operation as well, a source said.
"U.S. Steel made a very bad deal," the source said. "They basically wrote a check to Carbonyx and said, 'run this plant.'"
In a Tuesday conference call with securities analysts, U.S. Steel Chairman and CEO John Surma said the project in Gary is among others the company is pursuing to reduce carbon costs, which he said is the company's biggest market exposure.
The company has worked in the last few years to increase the amount of natural gas used as a substitute for coke in blast furnaces. The natural gas has a lower cost to the coke it buys on the merchant market. U.S. Steel held a celebration Thursday at its Clairton Plant in honor of the startup of the "C" coke battery as the centerpiece of $500 million in operational improvements made.
The facility developments and the improvement in coke usage rates mean the company is capable of producing enough coke to meet its needs in North America, Surma said.
Steelmakers use coke in blast furnaces that is derived from metallurgical coal. The expected benefit from the Carbonyx process is that a semi-crystalline carbon material can be produced from blends of lower-value coals, which are less typically expensive, to reduce iron.