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Courier-Press: Official with Rockport coal-to-gas plant says contract changes would kill the deal January 22, 2013

Posted by Laura Arnold in 2013 Indiana General Assembly, Indiana Utility Regulatory Commission (IURC), Vectren.
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Dear IndianaDG Readers:

The Leucadia Indiana Gasification plant proposed for Rockport, IN is likely to be a “hot potato” this session of the Indiana General Assembly. Sen. Eckerty has introduced SB 510. The digest for SB 510 is as follows:

Substitute natural gas contracts. Defines “guarantee of savings” with respect to retail end use customers of substitute natural gas (SNG). Amends the definition of “purchase contract”. Defines “savings shortfall”. Requires the Indiana finance authority (IFA) to submit a final purchase contract, including amendments, and any other agreements with a producer of SNG to the utility regulatory commission (IURC). Requires the IFA to determine on a three year cycle if retail end use customers are provided a guarantee of savings or a savings shortfall under a purchase contract. Requires the IFA to electronically submit its findings to the IURC. Requires the IURC to verify and approve the findings and, if there is a savings shortfall, order a producer of SNG to provide a refund.

There appears to be a delay still in House Bills appearing in the system, therefore, Rep. Crouch’s bill is still not available from the Indiana General Assembly website. Eventually, you should be able to find the bill she has introduced HERE.

Also be sure to read the second article from the IBJ for more background on this issue.

When there is more information about this issue you will be able to read it here.

Laura Ann Arnold

Lawmakers questioning wisdom of 30-year deal to buy plant’s gas at fixed price

By Eric Bradner, Evansville Courier & Press, Posted January 18, 2013 at 5:57 p.m., updated January 18, 2013 at 10:06 p.m.

INDIANAPOLIS —State lawmakers’ attempts to rework the deal Indiana struck with developers of the proposed Rockport coal-to-gas plant would kill the nearly $3 billion project, one of its top officials said Friday.

As a shale gas boom drives down natural gas prices, two Republican lawmakers say they question the wisdom of the Indiana Finance Authority’s 30-year contract to buy and then resell the plant’s synthetic gas at a fixed rate.

Both have filed bills that would drastically alter its terms. The bills would trigger the ratepayer protection mechanisms included in the contract every three years, rather than waiting until the end of the deal.

That would stop the plant in its tracks, said Mark Lubbers, a former

Gov. Mitch Daniels aide who is helming the Rockport effort for Leucadia National Corp.

“Any ‘true-up’ of savings before the end of the contract term makes the project unfinanceable,” he said.

The House and Senate utility committees could consider the two measures at a rare joint meeting, the chairmen of those committees told the Courier & Press on Friday.

“We can tell you that we have had many conversations regarding the Rockport coal gasification plant with our Senate and House colleagues. We’re currently considering holding a joint hearing on the issue, although no final plans have been set,” Sen. Jim Merritt, R-Indianapolis, and Rep. Eric Koch, R-Bedford, said in a joint statement.

Lubbers meanwhile doubled down on what he said is a rock-solid deal for Hoosier gas customers over the long term, saying Indiana needs a second plant — this one in Lake County — that would convert petroleum coke, rather than coal.

“Two plants would provide better consumer protection and keep even more Hoosier energy spending in Indiana,” Lubbers said.

His stance sets the stage for what could emerge as a critical battle in the opening weeks of the first term of new Gov. Mike Pence, who has not taken a stance on the project.

In 2009 lawmakers gave the Indiana Finance Authority the green light to hammer out a 30-year contract with Leucadia’s Indiana Gasification LLC to buy its synthetic natural gas and then resell it through the state’s utilities.

That deal, signed by Gov. Mitch Daniels, set a rate of between $6 and $7 per MMBtu for the life of the contract. It would have utilities tie 17 percent of ratepayers’ bills to that Rockport price, rather than their open market rate.

It appeared to be a steal when natural gas prices topped $13 per unit as recently as 2008. Since then, though, a nationwide shale gas boom has sent prices plummeting to near $3 per unit now.

And now that Daniels is gone, some lawmakers are looking for ways out of the deal.

“The market has changed, conditions have changed, and so we need to take a fresh look at this situation and there needs to be some changes that will protect the ratepayer,” said Rep. Suzanne Crouch, R-Evansville.

Crouch and Sen. Doug Eckerty, R-Yorktown, filed the bills that the utility committee chairmen are considering granting a joint hearing.

The Indiana Finance Authority’s deal required Leucadia’s Indiana Gasification LLC to set $150 million aside in an escrow account to reimburse ratepayers for any losses at the end of the 30-year deal.

The measures Crouch and Eckerty are pushing would shorten that window, requiring Indiana Gasification to pay ratepayers back for any losses every three years — a move that would harm Indiana Gasification’s bid for a federal loan guarantee.

Opponents of the Rockport plant include Evansville-based

Vectren Corp., which estimates the deal could cost Indiana ratepayers $1 billion in extra gas prices over its first eight years, and a host of environmental groups.

“When this thing was conceived, it was a good idea. Natural gas was volatile, there was an unknown long-term supply, and we were just coming off three or four years of the most volatile natural gas prices we’d seen in 25 years,” said Mike Roeder, Vectren’s vice president of government affairs and communications.

“The concept made a ton of sense, and so no legislator should feel any guilt about a vote from back then because it was a reasonable idea. But what has changed is shale gas.”

Lubbers, who has argued that recent years’ volatility in natural gas prices make the case for a project with fixed rates, said he will continue defending the project if state lawmakers consider the two bills this year.

“On the one hand, we are always grateful for a platform to talk about the plant and the contract. It is extraordinary public policy — the first time consumers have ever been guaranteed savings for any energy product; the first time consumers have ever had a lien on energy utility assets; a huge step forward in clean coal technology. It is a big idea and makes Indiana a real leader,” he said.

“On the other hand, after an 18-month negotiation that produced more consumer protection than the legislature or we ever envisioned, and an 11-month (Indiana Utility Regulatory Commission) consideration resulting in unanimous approval of the contract, to have it politically challenged by a self-interested utility is disappointing.”

The state’s contract with Indiana Gasification is also the subject of a court battle.

The Indiana Court of Appeals reversed the state’s utility regulatory commission’s approval of the deal last year, pointing to a problem that the Indiana Finance Authority and Indiana Gasification said would be easily fixed.

But Vectren has sought to use that opening to force the deal back onto the starting blocks, requiring it to be vetted and approved by the Indiana Utility Regulatory Commission all over again.

Bill could be hurdle for proposed $2.8B synthetic gas plant

Chris O’Malley, January 15, 2013, Indianapolis Business Journal

The company that plans to build a $2.8 billion synthetic gas plant in Indiana could face another hurdle if a bill introduced by a state senator is successful at the Statehouse.
Under the legislation, state utility regulators could order Indiana Gasification LLC to make refunds to gas customers every three years if the price of synthetic gas it produces from coal is greater than the market price of natural gas over the period.

Senate Bill 510, by Sen. Doug Eckerty, R-Yorktown, is aimed at alleviating concerns raised by consumer groups and some lawmakers about legislation passed in 2010 that helped enable the plant proposed for Rockport, near the Ohio River.

That legislation allowed the Indiana Finance Authority to act as a purchasing intermediary for synthetic gas produced at the plant. The authority would sell the gas on the open market. Whether gas customers would receive discounts, or see their bills increase, would depend on whether the authority made or lost money on its sales.

It’s estimated that Indiana Gasification could produce gas between at a cost of $6 and $7 per MMBtu, a common measurement used by the energy industry.

When the Rockport plant was proposed, natural gas was selling for around $13 per MMBtu, Eckerty said in a prepared statement Tuesday. Butwith an abundant supply of natural gas now available, the fuel recently was selling at $3.10.

“With these changes in mind, many state officials – including myself – believe it is not in Hoosiers’ best interests for the state to put taxpayers at risk by subsidizing substitute natural gas,” Eckerty said.

Natural gas prices have plummeted in recent years, with mass extraction of natural gas from shale deposits. Evansville-based gas and electric utility Vectren projects the synthetic gas made at the proposed plant would cost customers $1 billion in the first eight years, or up to $375 for an average retail customer.

Critics say under the current contract with the state, natural gas customers may not see Indiana Gasification’s promised $100 million in savings until the end of the 30-year contract.

Legislators who passed the original measure did not intend for such savings to be realized so late, said Kerwin Olson, executive director of Citizens Action Coalition.

“This is a good proposal. It clarifies the Legislature’s original intent,” Olson said of the new bill. “It helps to erase the generational discrimination.”

Indiana Gasification has found fault with opponents’ insistence that natural gas prices will remain low over the long-haul, noting that natural gas prices historically have been volatile.

That volatility is a certainty was citied by the Indiana Utility Regulatory Commission in its approval of the deal.

Indiana Gasification also insists that the proposed plant will diversify the state’s supply of gas and help lessen volatility.

Currently, the gas supply contract between Indiana Gasification and the Indiana Finance Authority is mired in litigation.

Last October, the Indiana Court of Appeals reversed regulator approval of the gas-purchasing contract deal, but on narrow grounds. It found the legislation authorizing the purchases never was intended to result in certain industrial customers’ sharing in the costs or benefits of the purchases, as would residential customers.

Indiana Gasification said a simple, 37-word deletion of language in the contract would satisfy the court. But Vectren has filed an objection, arguing that the contract was essentially made null and void by the court last October and that the regulatory process should start over again.

The proposed plant operator counters that Vectren already lost on many of its arguments and that the tactic is meant to cause delays that could jeopardize financing of the project.

Eckerty’s bill could potentially void the disputed contract between Indiana Gasification and the state finance authority “because it makes retroactive changes to current statute that would modify the terms of that contract,” said a bill analysis by Indiana Legislative Services Agency.

Indiana Gasification officials did not immediately offer comment on the bill.


Resolution of Rockport issue should allow HB 1072 Conference Committee with solar pv property tax exemption to move forward; “Knock on wood” March 9, 2012

Posted by Laura Arnold in 2012 Indiana General Assembly, Indiana Utility Regulatory Commission (IURC), Uncategorized, Vectren.
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Dear Blog Readers:

There has been no action on the HB 1072 Conference Committee since its initial meeting on 3/6/2012 while state legislators and the Daniels Administration discussed the tax credit for the Indiana Gasification, LLC SNG plant at Rockport, Indiana. Now with the alternative course of action outlined in the newspaper article below, state lawmakers are expected to take action on a Conference Committee Report for HB 1072.

HB 1072 as it passed the Senate contained the extention of the property tax exemption for solar pv. I am hopeful that this language will remain in the Conference Committee Report (CCR) which needs to be signed today. After the four conferees sign the CCR then it returns to both the House and the Senate for final roll call votes. Please note that another Conference Committee meeting is not required for the conferees to merely sign the CCR. Before the CCR on HB 1072 can be voted on the floor though it must go both to the House Rules Committee and the Senate Rules Committee. Hopefully, the time clock will not run out but this issue may not be resolved until the final hours or hour of the 2012 session. “Knock on wood.”

Laura Ann Arnold

Lawmakers dropping Rockport issue as session nears its end

  • By Eric Bradner
  • Evansville Courier & Press
  • Posted March 8, 2012 at 2:23 p.m., updated March 8, 2012 at 3:45 p.m.

INDIANAPOLIS —Developers of the Rockport, Ind. coal-to-gas plant do not need state lawmakers’ help to get a 20-year, $120 million tax credit, after all.

Instead, the Indiana Department of Revenue – an agency under the watch of Gov. Mitch Daniels, a champion of the $2.6 billion plant – will rule on whether the tax credit applies. The agency’s likely answer: Yes.

It’s a work-around to avoid asking reticent legislators to once again change the law to help push forward a plant that Daniels calls a great deal, but Vectren Corp. and other Indiana utilities say will drive ratepayers’ bills upward.

Key Republican fiscal leaders said the Daniels administration had opted to try for that “administrative fix” to forestall potential lawsuits over the tax credit, instead of pressing lawmakers on the issue as the 2012 legislative session reaches its end.

Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said legislation related to the tax credit won’t make its way into a bill.

“Everybody likes to let the legislature solve all their problems for them rather than figure out if they’ve got another way to do it sometimes, and I think maybe that’s what happened in this case,” Kenley said.

The Rockport plant’s proponents said working through the Indiana Department of Revenue is fine with them.

“There was never any doubt in our minds that we qualified under the existing law,” said Mark Lubbers, an Indiana consultant for Leucadia National Corp., the Rockport plant’s developer, and a former top Daniels aide.

“Given the fact that Vectren is spending every dime of ratepayer money they can to slow us down, we wanted to clarify the language in a way to mitigate their next nuisance lawsuit.”

Opponents took another view.

“I thought we overthrew the monarchy back in 1776,” said Kerwin Olson, the head of the Citizens Action Coalition, an environmental advocacy group that has opposed the Rockport project.

After negotiations with utilities such as Vectren broke down, Daniels had the Indiana Finance Authority negotiate a 30-year contract to purchase 38 million dekatherms of synthetic natural gas annually from the Rockport plant, and then resell that to Hoosier ratepayers.

The contract, approved by the Indiana Utility Regulatory Commission in November, was a huge boost for Rockport’s developers because it guaranteed their product would have a buyer.

However, during this year’s session, Vectren has used the question of whether the tax credit, which would give the Rockport plant an approximately $6 million per year incentive to purchase Indiana coal, is applicable as a chance to lobby lawmakers to reconsider the whole project.

Their argument: A recent shale-gas boom has driven natural gas prices on the open market down to $2.50 per dekatherm – much lower than the $6.64 per dekatherm average rate over the life of the contract that the Indiana Finance Authority expects to pay the Rockport plant.

Indiana utilities wouldn’t have a financial stake, but 17 percent of all Hoosier ratepayers’ bills would be tied to the Rockport plant’s prices, and utilities would be required to act as an intermediary and bill for that 17 percent.

Thus, Vectren officials have complained, they expect to be blamed by ratepayers if the cost of Rockport’s synthetic natural gas proves higher than the other natural gas the utility is delivering.

Still, Daniels said he expects natural gas prices to fluctuate over time, as they have in recent years. He said Hoosiers are guaranteed savings over the life of the contract, and that it would also help create jobs in Southwestern Indiana.

By dodging the step of having the Indiana General Assembly approve language related to the tax credit before Friday’s adjournment, the Daniels administration keeps lawmakers from stepping into a court battle, as Vectren and others are challenging the IURC’s approval of the Rockport plant.

“I’m pleased that there seems to be a recognition among many legislators that there are questions about this project,” said Mike Roeder, Vectren’s vice president of government affairs and corporate communications.

He said the utility will have to regroup before determining how next to try to prevent the Rockport plant’s construction.

“We’ve been laser-focused on this legislative language because frankly, that’s what the other side believed they needed. They’ve changed strategy, and so we’ll have to evaluate that,” Roeder said.

“This has been as much about the project as it is about the credit. It’s just caused us to say to legislators for several weeks, ‘We don’t think you should give them the tax credit, and by the way, you might just want to take a whole new look at the project.’”

Lubbers said the tax credit is important to another step toward the project’s completion: Securing a federal loan guarantee from the U.S. Department of Energy.

“We have to go through the process, but our case is extremely strong and we feel very comfortable. This kind of ruling has the force of law and will keep the next nuisance lawsuit from Vectren from slowing us down,” Lubbers said in an email.

“Additionally, our financing team feels that this ruling will provide all the assurance we need for the Department of Energy loan guarantee commitment. So, all good.”

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.

Indy Star: Gas plant backed by Governor Daniels hits snag February 14, 2011

Posted by Laura Arnold in 2011 Indiana General Assembly.
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Editor’s Note: For more information about this bill visit: SB 72.

To see how your State Senator voted on SB 72: Roll Call 0089.PDF_SB 72 defeated 21-28

Original story: http://www.indystar.com/article/20110214/BUSINESS/102140332/Senate-vote-crimps-pipeline-plan-gas-plant-backed-by-governor?odyssey=tab|topnews|text|IndyStar.com

7:10 AM, Feb. 14, 2011  

Without pipeline’s OK, $2.6B Rockport project could be doomed

Written by Ted Evanoff

Indiana’s Senate has handed Gov. Mitch Daniels a setback on the big coal gasification plant he wants to see built at Rockport.

Senators rejected a measure that would have cleared the way for a special pipeline sought by investors to move carbon dioxide away from the southwestern Indiana plant to buyers on the Gulf Coast.

The vote last week marked an unusual defeat for the Republican governor, whose party dominates the Senate.

The bill’s Republican sponsor, Sen. Beverly Gard of Greenfield, said some lawmakers who voted against the bill didn’t understand its significance.

Without legislation allowing eminent domain for such pipelines, lead investor Leucadia National Corp. doubts it could secure the federal guarantees on construction loans for the $2.6 billion gasification plant it has proposed at Rockport.

This week, the top Leucadia official in Indiana, Mark Lubbers, once a chief adviser to Daniels, is expected to confer with company and legislative leaders about bringing the eminent domain measure back to the General Assembly.

Backers were stunned when the bill failed Tuesday on a vote of 28-21, with 16 of the chamber’s 37 Republicans opposed.

The defeat is considered a setback for investors and a coal industry counting on a grand energy strategy backed by some of the wealthiest names in American finance, including Goldman Sachs and General Electric Financial.

Plans call for rendering millions of tons of sulfurous Midwestern coal into natural gas, using GE gasifiers in some of the proposed plants in Indiana, Illinois and Kentucky.

Linking those gasification plants would be a seamless pipeline. The resulting carbon dioxide waste would flow across half a dozen states to the Mississippi storage caverns of Denbury Resources.

The Texas-based company sells tons of C02, as the waste is called, to gas drillers probing under the Gulf of Mexico.

Indiana would be a key part of the circuit. Carbon dioxide from Tenaska Corp.’s proposed plant in Taylorville, Ill., would run to Rockport and then to Erora Group’s proposed Cash Creek plant in western Kentucky, reports the trade journal Midwest Energy News.

The Illinois and Kentucky pipelines have not been built. The Rockport project is further along. But the absence of a pipeline could scuttle it.

“If the governor’s office wants this, it’s going to have to figure out what to do next,” said Gard, sponsor of defeated Senate Bill 72.

“I had no warning 72 was going to go down,” Gard said. “This whole deal was brokered by the governor. The Democrats have a problem with that. And the ultra-conservatives don’t like anything that says eminent domain.”

The term refers to an entity such as the state taking away private land, for a price, for use in what it deems to be a larger good, such as roadways.

“Eminent domain, that’s the part that bothered me,” said Sen. Allen Paul, R-Richmond. “I don’t think it’s right you go on someone’s property and take it.”

Democrats contend the measure was poorly explained, particularly by Denbury representatives.

“I felt like we were being sold a bill of goods without an explanation of why they wanted it,” said Sen. Karen Tallian, D-Portage.

A member of the Energy and Environmental Affairs Committee, where Senate Bill 72 originated, Tallian said Denbury, a pipeline operator, wanted eminent domain asserted almost anywhere in the state it chose to run a pipeline.

But the company never gave her a satisfactory reason for why it had no specific route or needed statewide rights, she said.

Nor was there a reason the bill would have handed Indiana’s Department of Natural Resources responsibility for eminent domain involving carbon dioxide pipelines, Tallian said. Present laws rest that responsibility with the Indiana Utility Regulatory Commission.

“There is an authority in the state who oversees pipelines. That’s IURC. This bill went around that and gave it to DNR,” Tallian said. “Why we needed all these strange, out-of-the-normal patterns, I don’t know.”

With the measure killed in the Senate, Leucadia consultant William Rosenberg said Lubbers and officials from Denbury and Leucadia will have to find a way to bring the matter up again.

Lubbers could not immediately be reached for comment.

Rosenberg, of E3 Gasification in Cary, N.C., called the measure essential. Loan guarantees from federal officials are unlikely if no plan is in place for keeping the carbon dioxide — a greenhouse gas — out of the air.

“I think this is the cleanest and most environmentally sound project ever proposed” using coal, said Rosenberg, a former energy adviser to President George H.W. Bush. “But the project cannot be built without this pipeline. We’re going to have to go back to the legislature and discuss this with the people.”

Although Daniels is widely considered a key supporter of the Rockport project, an aide to the governor declined to weigh in on the bill’s defeat.

“We don’t have a position on this bill,” said Jane Jankowski, Daniels’ spokeswoman.

In defeating the measure, the Senate handed Leucadia its second setback since the Rockport plant was proposed in 2006.

Back then, Indiana gas utilities and industrial users of gas refused to buy any of the Rockport gas, saying ample supplies were available on the open market.

When the project was collapsing, Daniels shored it up in 2008. His initiative would put the state in the natural gas business. That controversial plan is now being considered by the Indiana Utility Regulatory Commission.

Under the plan, the Indiana Finance Authority, a state agency, would buy almost all the Rockport gas at a wholesale price of about $6 per million BTU and resell it on the open market.

If the market price is below $6, the loss would be passed to Indiana’s 1 million gas-burning households in the form of higher natural gas bills. If the gas sells for more than $6, the finance authority would split the profits with Leucadia’s subsidiary, Indiana Gasification LLC.

The state’s share of the profits would be used to lower the residential gas bills across Indiana. Estimates place the household savings at about $100 per year in the event gas prices, now about $800 per year for the typical home, rise to $2,000.

Daniels favors the plan, saying gas prices are destined to rise nationwide, and the 3.2 million tons of coal consumed by Rockport each year would support about 200 mining jobs, which in turn could help revitalize southwest Indiana.

Federal incentives have encouraged plants that gasify coal into liquid fuel. Across the nation, investors and utilities proposed 31 such projects in the past few years. Of those, 12 are under discussion by regulators in various states, eight are producing or under construction, and 11 have been canceled, chiefly because of costs, according to a Sierra Club review of federal reports.

Leucadia, run by two of America’s wealthiest men, Ian Cumming and Joseph Steinberg, brought in Rosenberg as a consultant to look at the gasification proposal for Indiana. He had worked with Lubbers in the late 1980s in Indiana as a consultant for another company.

At that time, Lubbers advised then-Gov. Robert Orr on scrapping the Marble Hill nuclear plant. This time around, Rosenberg figured Indiana was ready to proceed on Rockport and the eminent domain measure.

“It was assumed the votes were there,” Rosenberg said. “It was a surprise to us when it wasn’t.”

Call Star reporter Ted Evanoff at (317) 444-6019

Leucadia National Corp.

What: New York-based diversified holding company engaged in various businesses, including manufacturing, telecommunications and land-based contract oil and gas drilling.

2009 revenues: $1.1.billion.

President: Joseph S. Steinberg.

Employees: More than 3,000.

Indiana Gasification

What: Formed by Leucadia to run the Indiana coal-gasification plant at Rockport.

Developers: E3 Gasification and Johnston Development Co.

Leadership: William Rosenberg is president of Cary, N.C.-based E3 Gasification and a former U.S. Environmental Protection Agency and Federal Energy Administration administrator, as well as former chairman of the Michigan Public Service Commission. Bennett Johnston of Louisiana is chairman of Johnston Development. He is a former U.S. senator and former chairman of the Senate Committee on Energy and Natural Resources.

Sources: Company report, Evansville Courier & Press

State of Indiana reaches deal on coal gasification plant – CNBC December 17, 2010

Posted by Laura Arnold in Indiana Utility Regulatory Commission (IURC), Uncategorized.
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Source for article reprinted below. State reaches deal on coal gasification plant – CNBC.

Editor’s Note: There are several different versions of this story floating around. I have decided to re-print the AP version of this story published by CNBC, however, I thought readers might want to read and compare the other versions including from the front page banner story in today’s Indianapolis Star. Tell me what you think? Laura Ann Arnold




Published: Thursday, 16 Dec 2010 | 4:59 PM ET

INDIANAPOLIS – The state’s finance authority said Thursday that it reached a 30-year deal to buy synthetic natural gas from a coal-gasification plant planned for southern Indiana, marking the first time the state has entered into such a venture.

Opponents called the deal an entitlement program and “socialism for corporations,” but Republican Gov. Mitch Daniels said the deal will save Indiana’s natural gas users money by locking in low rates and ensuring a steady supply of synthetic natural gas made from Indiana coal.

“We’re out to pay Hoosiers instead of people elsewhere for the energy we need,” Daniels said. “We’re out to protect ratepayers against the likelihood of higher long-term gas prices. We’re out to put people to work in rural Indiana. And we’re out to become a leader in the high-tech field of cleaner energy. This project does all that.”

Under the deal, the Indiana Finance Authority will spend an estimated $6.9 billion over 30 years to buy synthetic natural gas from Indiana Gasification LLC, a subsidiary of Leucadia National Corporation. The IFA will buy the gas once production begins — as early as 2015 — and will then sell the synthetic gas to the market, where it will be delivered to consumers through existing utilities. If contract prices are lower than market prices, the savings will be split between the company and ratepayers. If contract prices are higher than market prices, ratepayers would be protected by $150 million set aside by the company to cover higher prices.

The company will be responsible for building the $2.65 billion plant planned for the Ohio River town of Rockport in Spencer County. The state would share in profits from byproducts of the coal-gasification process such as sulfuric acid and rare gasses, and the company would give Indiana vitreous slag for free, a byproduct that can be used to build roads.

Officials said Indiana Gasification assumes all the risk for construction of the plant and its operations — so if the plant is not built or does not end up producing synthetic natural gas as planned, the state is not out anything.

“There’s no risk to us,” said Jennifer Alvey, the state’s public finance director.

But Kerwin Olson, the program director for the Citizens Action Coalition of Indiana, questioned why the state needed to get involved at all.

“Our position from the get go has been if Leucadia wants to build this plant and sell their gas into the market, go for it,” he wrote in an e-mail to The Associated Press. “But the bottom line is they can’t because it is too risky and Wall St. won’t finance it based on its own merits.”

“The state is delivering Leucadia a market to which they are not entitled,” he wrote.

Alvey said the finance authority’s involvement would mean all natural gas users in Indiana would benefit, not just those from one utility company who might choose to buy the synthetic natural gas. Daniels pointed out that the contract allows the state to direct the gas for use wherever it deems necessary in a state of emergency, meaning the state could still get natural gas even if supplies were interrupted elsewhere because of a hurricane, act of terrorism or other event.

The governor’s office estimates that the plant — first talked about in 2006 — would create 1,000 construction jobs, 200 full-time jobs at the plan and 300 mining jobs.

The roundabout method of using the finance authority as an intermediary partner between the state’s gas utilities and the coal-gasification plant was created after utilities dropped out of negotiations for the synthetic gas contracts in 2008 amid concerns the long contracts would harm their credit.

In 2009, the Indiana General Assembly passed a law that allowed the finance authority to negotiate long-term contracts with the plant, which would turn coal into synthetic natural gas, stripping it of pollutants and carbon dioxide to create a gas similar to real natural gas.

Now that the finance authority has completed negotiations, it will file a petition with the Indiana Utility Regulatory Commission for approval of the project agreements. Indiana Gasification is negotiating a loan guarantee with the U.S. Department of Energy, and an environmental impact study must be done. Depending on the timing of those elements, construction of the plant could begin in early 2012.

Copyright 2010 The Associated Press.