ATLANTA -- Plans to complete a Morgantown, W.Va, coal-burning plant financed by $80 million of tax-exempt bonds have been thrown into doubt by a local court ruling that forbids the plant from using city streets to transport materials.

Ruling Friday on a lawsuit filed in 1989 by an environmental group against the plant's developer, Morgantown Energy Associates, Judge George W. Hill of the Circuit Court of Monongalia County said that fuel brought to the facility and ash leaving it could only be transported by barge on an adjacent river.

Judge Hill's decision in favor of the Mon Organization for a Viable Environment follows a three-year battle the group has waged to stop construction of the $167 million, 67-megawatt, coal-fired cogeneration plant. The facility, being built near the city's downtown area, is designed to supply steam heat to West Virginia University. Monongahela Power Co. has agreed to buy the excess electricity produced.

The ruling means possible delays in finishing the facility and increased costs of operation if it is completed. Morgantown Energy had planned to complete the plant by early next year.

These problems are shared by holders of $80 million of tax-exempt bonds sold by West Virginia Public Energy Authority in September 1989 to help fund the facility. The issue, underwritten by a syndicate led by Goldman Sachs & Co. and Wheat, First Securities Inc., is backed by a letter of credit from the New York City branch of Swiss Bank Corp., rated triple-A by both Moody's Investors Service and Standard & Poor's Corp. Debt service on the bonds is also backed by the fees that would be charged to the university and the power company.

If the developer lets the ruling stand it must heed instructions from Judge Hill that a loading facility be located outside of Morgantown, and that coal and ash be transported to the dock without clogging city streets.

In addition, West Virginia's air pollution commissioner said yesterday, the developer must now apply for a revision of its pollution permit.

"The permit would definitely be affected by the ruling," said Dale Farely, director of the state Air Pollution Authority. "There would have to be at least a revision of the permit to address the problem of loading fly ash onto a boat."

Mr. Farely said that reviewing an application for the permit itself would take at least three months, adding that the review could not begin until detailed plans on dealing with the problem are submitted by the developer.

"We have just got the ruling and have not made any decision on how to respond," D. Teed Wafle, Morgantown Energy Associates' plant manager for the project, said yesterday. "We hope to make a decision next week that could involve a legal response," including an appeal, he added.

Mr. Wafle said that following the judge's order could cause numerous financial and engineering tangles, including the building of a special barge and a "substantial" increase in the costs of hauling ash. "We know of no one who has successfully loaded and shipped ash by boat," he said.

Judge Hill based his ruling on West Virginia laws referring to public nuisances, finding that "the overwhelming weight of the evidence establishes beyond a reasonable degree of certainty that the facility, if so serviced and used, has been clearly shown to be a nuisance 'beyond all ground of fair questioning,' and that there is an alternative method available for servicing the facility..."

But although the judge prohibited the defendant from "using the streets and highways of Morgantown" to haul fuel and ash and requiring it "to use the navigable waters of the Monongahela River, so conveniently located adjacent to the facility," he did not forbid completion of the plant.

In addition, Judge Hill did not rule on the environmental group's contention that the coal-burning operations of the facility would cause hazardous air pollution.

"The court finds that the weight of evidence does not establish that proposition to a reasonable degree of certainty as required by law for the enjoining of a prospective nuisance," Judge Hill wrote.

William Byrne, an attorney with the environmental group, hailed the ruling. "We are pleased the judge ruled that the power plant is a nuisance to the community," he said. "Now the developer will have to abate that nuisance."

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