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Wednesday, November 25, 2009

Ind. Law - Still more on: Governor signs first bill of 2009 session

Per this ILB entry from March 25, 2009, the first bill signed in the 2009 session was in support of a company called Indiana Gasification LLC. The AP reported at the time:

Daniels said federal agencies forecast that over the long term it will be cheaper "perhaps by a very large margin" to produce synthetic natural gas from coal rather than buying actual natural gas because of market fluctuations.

But opponents of the bill contend that it could actually lead to higher bills for natural gas users.

National stories, however, have been about the production of natural gas from shale, leading to items like this one from the NY Times quoted in this Oct. 10, 2009 ILB entry:
The projections suggest that the new method of producing gas “is the biggest energy innovation of the decade,” said Daniel Yergin, chairman of the Cambridge consulting group. “And the amazing thing is there was no grand opening ceremony for it. It just snuck up.”

Over the last five years, production of gas from shale has spread across wide swaths of Texas, Louisiana and Pennsylvania. All the new production has produced a glut of gas in the United States, helping to drive down gas prices and utility costs.

Meanwhile, the Indiana-financed natural gas from coal project continues, and is now looking at a $1 billion project to build a pipeline to pump CO2 from Indiana to the Gulf Coast, according to a story today by Dan Shaw in the Evansville Courier & Press:
After a Rockport, Ind., plant turns coal into natural gas, it will send the carbon dioxide produced as a byproduct to the Gulf of Mexico via a pipeline.

Once there, the CO2 will be pumped into wells to force up more oil than could be obtained through normal drilling. That’s the idea at least, says William Rosenberg, a leader in the company undertaking the project, Indiana Gasification LLC. * * *

Indiana Gasification has a contract to sell its CO2 to Denbury Resources Inc., a Plano, Texas-based company, he said. Under the plans, Denbury will pay for building the pipeline from the Gulf Coast, a project estimated to cost more than $1 billion. The company, an independent oil and gas company, will pump the gas from the Rockport plant and use it to force oil out of wells.

By selling the excess oil, Denbury will bring in enough revenue to pay for both the pipeline and the cost of transporting the CO2, Rosenberg predicted. There may even be enough money left over to return to Indiana Gasification as a profit, which would help to keep the rates paid by utility customers low, Rosenberg said.

But the Rockport plant won’t generate enough CO2 itself to support the pipeline. Another company will have to enter into a similar agreement. Rosenberg said companies in Illinois, Indiana and Kentucky have shown interest in that prospect. * * *

The Department of Energy is now considering whether it will guarantee loans Indiana Gasification takes out to build the project. Rosenberg said he hopes to obtain the federal government’s promise to pay off $1.87 billion in debt should the plant fail.

Before awarding the guarantee, the Department of Energy must study whether the plant will emit loud noises, pollute nearby water and air, worsen flooding and affect the underlying geology, among other possibilities. Its conclusions will go into an environmental-impact statement, likely to appear in 18 to 24 months.

Before then, the public will have at three opportunities to comment on the plan, including Dec. 3. Though Rosenberg looks forward to getting the loan guarantee, that step won’t be the last governmental approval needed for the project.

Just as important will be a contract with the Indiana Finance Authority, which will determine exactly how Indiana Gasification will be compensated for making natural gas out of coal. Under current plans, utility companies throughout the state will have to deliver the gas produced at the Rockport plant.

The cost of that fuel will make up part of every bill sent to a utility customer, Rosenberg said. The price they pay — like any utility rate — will be controlled by the Indiana Regulatory Commission.

Rosenberg said he hopes to sell natural gas for $7.50 a therm, an amount that can fluctuate with the cost of coal and labor. He acknowledged that price is higher than the same therm can be bought for today. At the close of the market Monday, natural gas was being sold for $3.79 a therm.

[More] The Indianapolis Star has just posted an AP story headlined "Price of Duke Energy's coal-gasification plant soars."

Posted by Marcia Oddi on November 25, 2009 07:51 AM
Posted to Indiana Law