The Indiana Finance Authority and Indiana Gasification LLC, which is developing a $2.5bn coal-fueled gasification plant on the Ohio River, on March 7 asked the Indiana Utility Regulatory Commission for a quick decision denying a petition for review filed by the Indiana Industrial Group (IIG).
The commission on Nov. 22, 2011, approved a contract for the Indiana Finance Authority to buy substitute natural gas from the project. The authority would then re-sell that syngas to the public. A number of gas companies that would be involved in selling that syngas to the public, including units of Vectren Corp. (NYSE:VVC), have also appealed the ruling, saying the syngas over time may be much more expensive than regular natural gas.
Unhappy with the commission’s final order, IIG, which the authority and Indiana Gasification called “an ad hoc group with revolving-door membership,” filed a petition for reconsideration with the commission on Dec. 12, 2011. IIG’s petition simply repeated generalized concerns and arguments that had been raised repeatedly throughout the commission’s proceedings and addressed by the commission in its 106-page final order, the authority and Indiana Gasification said.
Meanwhile, on Dec. 21, 2011, Indiana Gas and Southern Indiana Gas and Electric, both d/b/a Vectren Energy Delivery of Indiana, initiated an appeal of the final order by filing its notice of appeal with the commission.
On Jan. 17, the IIG filed a motion with the Indiana Court of Appeals requesting that the court stay the appeal of the commission’s final order and remand to the commission for a ruling on IIG’s petition for reconsideration. On Jan. 20, the commission’s Chief Reporter timely filed a notice of completion of clerk’s record with the Court of Appeals, choosing not to request an extension of time and essentially acknowledging the commission’s belief that this matter was ripe for appeal, IIG’s petition for reconsideration notwithstanding.
On March 5, the Court of Appeals issued an order granting IIG’s motion for temporary stay of the appeal and remand to the commission and directing the commission to formally rule on IIG’s petition for reconsideration within 30 days. This matter is ripe for briefing and determination on appeal once the commission formally denies IIG’s petition for reconsideration, the authority and Indiana Gasification argued. The authority and Indiana Gasification requested the commission enter an expedited order formally denying IIG’s petition for reconsideration.
On March 8, the IIG filed arguments with the commission that said the authority and Indiana Gasification now want the commission to suspend the ordinary process of reasoned decision-making and proceed in a rush to a decision on the IIG’s petition for reconsideration. “IFA and IG appear to have forgotten that the petition for reconsideration seeks a commission determination on a highly material issue that was actively litigated in the underlying proceeding but left undecided in the commission’s final order,” IIG added. “The Industrial Group properly seeks to establish the application of the statutory term ‘retail end use customer’ as defined by the legislature. The judiciary clearly wishes to give the commission another opportunity to address that issue. The commission should make its determination with the same deliberation it gives to any important question placed before it. The IFA/IG motion for expedited denial is misguided and should be denied.”
This project, located very near American Electric Power‘s (NYSE:AEP) Rockport coal-fired power plant, would consume up to 3.5 million tons of feedstock per year. Indiana Gasification has said that would likely be Indiana coal, though it doesn’t rule out using cheaper non-Indiana coal coming into the plant from Ohio River barge origins. Petroleum coke is seen as a possible supplemental feedstock.
Leucadia backs other gasification projects, as well
Indiana Gasification is an affiliate of Leucadia National, a diversified company into everything from wine to beef production. In its Feb. 27 annual Form 10-K report, Leucadia noted another gasification project it is working on.
“The company is currently evaluating the development of a gasification project which would be built in Louisiana by the Company’s wholly-owned subsidiary, Lake Charles Cogeneration LLC (‘LCC’), for an estimated total cost of between $2,300,000,000 and $2,600,000,000,” said the Form 10-K. “LCC has been awarded $1,561,000,000 in tax exempt bonds to support the development of the project, which would be issued by the Lake Charles Harbor and Terminal District of Lake Charles, Louisiana, $128,000,000 of investment tax credits and received a $260,000,000 federal government grant for carbon capture and sequestration. … The Lake Charles Cogeneration project is a new chemical manufacturing facility that plans to use proven quench gasification technology to produce various products from petroleum coke, a low grade solid fuel source. LCC is evaluating the primary product options to be produced by the Lake Charles Cogeneration project, including methanol and hydrogen, and has signed two letters of intent for the majority of its production. LCC has also entered into a 20-year contract for the sale of its entire carbon dioxide by-product stream which would be used for enhanced oil recovery.”
The Form 10-K said that in July 2009, two of the company’s other prospective gasification projects, one in Indiana and the other in Mississippi, were selected by the U.S. Department of Energy to proceed to detailed due diligence and negotiations of terms and conditions necessary for the DOE to issue conditional commitments for loan guarantees aggregating up to $3.6bn. While these commitments represent important milestones in the selection process, the guarantees are subject to detailed and extensive due diligence by the DOE and no assurance can be given that a loan guaranty for either project will ultimately be given, Leucadia added in the Form 10-K.