BILLINGS -- A $1.5 billion coal-to-liquids plant pushed by Gov. Brian Schweitzer suffered another setback when a state official struck down an air quality permit that backers of the plant hoped to use for the project.

The ruling by a Department of Environmental Quality hearing examiner, Katherine Orr, means supporters of the Bull Mountain coal-to-liquids plant near Roundup would have to seek a new permit from scratch, said Evan Barrett, Schweitzer's chief economic development aide.

That marks another in a string of blows for the project since Bull Mountain was announced by Schweitzer last October.

Bull Mountain Development LLC has had trouble getting financiers to buy into the deal. That forced the company in February to shut down its coal mine near Roundup. Meanwhile, early investors in the mine have been hounding the company with lawsuits, saying they did not receive promised returns.

The hearing examiner's ruling follows Bull Mountain's attempt to shorten the permitting process by dusting off and modifying a 2003 air quality permit for another project -- a conventional coal power plant on the same site that has since been scrapped.

Orr said that earlier permit is void because the DEQ improperly extended it in 2005, after the company failed to meet a deadline to start construction.

The DEQ's 2005 decision had been challenged by the Montana Environmental Information Center, which is fighting the project because of its potential to generate greenhouse gases blamed in global warming.

Orr's decision, dated July 12, can be appealed to the DEQ's Board of Environmental Review. If upheld, it could then be appealed in state district court.

Bull Mountain attorney Joe Gerbase said the company had not yet reviewed Orr's ruling and had no immediate comment.

Anne Hedges, a program director for Montana Environmental Information Center, said her group's successful challenge of the DEQ permit should be taken as a warning to the coal and utility industries.

"Every plant that wants to use coal and wants to increase global warming pollutants in Montana and across the nation is going to face the same obstacles," she said. "They are going to have a really long road ahead of them."

Barrett downplayed the ruling, saying it would delay the project by months at most. He said the governor's office remains supportive of coal-to-liquids plants.

"We have a fundamental difference with MEIC. They'll probably try to stop any (coal-to-liquids) project. We want to do it, but do it right," he said.