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Indiana Governor Daniels pushed and pushed for clean coal plant May 2, 2011

Posted by Laura Arnold in 2011 Indiana General Assembly, Uncategorized.
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Editor’s Note: You need to read the next two articles from the Sunday, May 1st NWI Times to get the complete gist of what is going on here with the Indiana Gasification project in Rockport Indiana. Hearings are going on today and later this week on this project before the Indiana Utility Regulatory Commission (IURC) in Cause No. 43976. Is it no surprise that Governor Daniels can’t seem to find time to support true renewable energy and distributed generation policies here in Indiana?  Laura Ann Arnold

Original article: http://www.nwitimes.com/business/local/article_49cc116c-d8e9-5b59-8049-621b4848316b.html

By Keith Benman keith.benman@nwi.com, (219) 933-3326 

nwitimes.com | Posted: Sunday, May 1, 2011 12:00 am |

The Daniels administration effort to support the financing for a clean-coal energy plant in southern Indiana has taken more turns than a country road winding into the heart of coal mining country.

Much of the time it has been two steps forward and one step back, as legislation needed to establish the plant was passed, tweaked and sometimes defeated in the General Assembly. There also were years of negotiations with Leucadia National Corp., the New York investment firm behind the project.

“We spent four years working on this deal and we walked away several times trying to make certain we had a really solid deal from the standpoint of the ratepayer as well as the state,” said Gov. Mitch Daniels, in a Times interview two weeks ago. “But to tell you the truth, I feel better about it today than I did before.”

But where Daniels and his allies see their plan as a valiant effort to provide a market for coal and clean up the environment, opponents see nothing but an attempt to pad the pockets of investors and a key ally of the governor.

“Ratepayers are receiving nothing in this deal other than a charge tacked on their bills that will benefit Leucadia investors,” said Kerwin Olson, a utility campaign organizer with the Citizens Action Coalition. “They are using a captive rate base to implement their business plan.”

Critics such as Olson are quick to point out the involvement of Mark Lubbers, Daniels’ former Statehouse political director, who is working for Leucadia as its Indiana Gasification project manager.

In an interview with The Times, Lubbers said he already had left his Daniels administration post when he was first contacted about the Indiana Gasification project in early 2006. He said his wife, then a state senator, recused herself from voting on Indiana Gasification legislation in 2007 and after.

He responded with outrage to critics’ charges he has leveraged his 35-year friendship with Daniels to benefit himself, allies or Leucadia.

 “The people who push this innuendo are sneaky and evil,” Lubbers wrote in a follow-up e-mail after the interview. “They lurk around at the edges of good and honest work attempting to damage it by collateral character assassination.”

Plan hinges on high natural gas prices

Politics aside, Daniels and other supporters acknowledge the deal is a complex one.

In essence, it has the state’s more than 1.7 million utility customers, including those at NIPSCO, paying for losses the Indiana Gasification plant would incur when natural gas prices are low. Conversely, utility customers would get a split of the profits produced when natural gas prices are high.

Natural gas prices were very high when Daniels first announced plans for the plant in October 2006. Natural gas futures were trading around $7.15 per million British thermal units, according to U.S. Energy Information Agency data. Earlier that year, the price had gone as high as $10.63.

Since then, natural gas prices have plummeted. This year, natural gas futures never even approached $5 per million Btus. They currently are trading around $4.20.

Those plummeting prices have significantly changed the profit picture for Indiana Gasification and the state’s utility customers. If prices remain that low, the state’s utility customers could see regular surcharges on their bills.

The plan’s winding road

It is now estimated the plant to be located in Rockport, east of Evansville near the Ohio River, will start production in 2015 if it receives regulatory approval.

When Gov. Daniels first announced plans for the plant in 2006, the state’s major natural gas utilities signaled they were ready to buy synthetic natural gas from the plant through 30-year contracts.

Daniels said jobs created by the project would amount to about 1,000 construction jobs, 125 plant-operator jobs and 300 coal mining jobs. The plant is projected to use 3.5 million tons of coal per year.

But in late 2008, the state’s major utilities withdrew from the deal, scratching the plan for the plant.

Since then three pieces of legislation have been passed to re-enable the project. Two set up the current plan for having the state’s utility customers, including those at NIPSCO, subsidize potential losses. A steady revenue stream must be assured for the plant so Indiana Gasification can obtain a nearly $1.9 billion construction-loan guarantee from the U.S. Department of Energy.

The plan also ran into an obstacle in the Indiana General Assembly earlier this year, when the Senate rejected legislation allowing for construction of a pipeline to carry carbon dioxide produced at the plant to Gulf of Mexico oil drilling operations.

Despite such setbacks, the governor and proponents say they will prevail and the plant will get built.

“I don’t think of this as a little regional thing,” Daniels said. “We have always thought of this in the context of an overall energy and jobs policy that is about everybody.”

Indiana Gasification timeline

The state’s support for the Indiana Gasification synthetic natural gas project has traveled a long and twisting road.

Oct. 27, 2006: Gov. Mitch Daniels announces plans for a $1.5 billion coal gasification plant to be operating by 2011. NIPSCO and other utilities sign letters of intent to buy synthetic natural gas from the plant for 30 years. Petition for approval filed with Indiana Utility Regulatory Commission.

Feb. 24, 2007: House Bill 1722 passes in the General Assembly, allowing state’s utilities to purchase synthetic natural gas from Indiana Gasification and to fully recover the cost from customers.

March 12, 2008: Gov. Daniels signs Senate Bill 223, expanding definition of synthetic natural gas and enabling utilities to charge customers in “Choice” programs for the gas.

Nov. 25, 2008: Indiana Gasification withdraws its petition for approval with IURC after NIPSCO and other utilities withdraw from negotiations to buy synthetic natural gas.

March 24, 2009: Gov. Daniels signs SB 423, allowing the Indiana Finance Authority to buy synthetic natural gas from Indiana Gasification and recover its costs through the state’s utility customers.

July 2009: Indiana Gasification project selected by the U.S. Department of Energy for due diligence on a $1.875 billion loan guarantee.

Early 2010: Legislative amendment allows for a third-party marketer to purchase Indiana Gasification synthetic gas from IFA.

Dec. 16, 2010: IFA votes unanimously to enter into a 30-year contract for purchasing synthetic natural gas from Indiana Gasification. IFA and Indiana Gasification submit petition to IURC for approval.

Feb. 11, 2011: SB 72 allowing for eminent domain for a carbon dioxide pipeline is defeated on Senate floor. Indiana Gasification parent company Leucadia National Corp. says project can’t go forward without pipeline.

March 13, 2011: Illinois Gov. Pat Quinn vetoes legislation that would have established a Leucadia coal gasification plant on Southeast Side of Chicago.

April 18 to 25, 2011: IURC holds public hearings on Indiana Gasification proposal in three locations around state.

Yet to come:

May 2, 2011: Evidentiary hearing starts before IURC in Indianapolis.

Sources: NIPSCO testimony in Indiana Gasification case before IURC; NiSource news release Oct. 27, 2007; Governor’s office news release Dec. 16, 2010; Indiana Utility Regulatory Commission.

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