The city of Lima, Ohio, filed testimony March 9 with the Ohio Power Siting Board that backs a request by Lima Energy Co. for a 30-month extension, until September 2014, of a construction deadline for the long-stalled Lima gasification project, which would produce both electricity and synthetic natural gas for the pipeline system.
Construction of the project had begun in 2004, but that work was halted in 2006 when the original developer, privately-held Global Energy, ran out of money. The project has since been taken on by USA Synthetic Fuel, a publicly-traded entity run by most of the top management of Global Energy.
The project was originally configured as a 540-MW integrated gasification combined cycle power plant. But USA Synthetic now plans to add extra gasification capacity to produce synthetic natural gas for the pipeline system. Petroleum coke would be the plant’s primary feedstock, with Ohio coal as a backup.
In its March 9 filing, the city of Lima reminded the board of the substantial change of conditions that has occurred in the economy, energy and financial markets since the project was certified by the board in May 2002. “These market changes were not peculiar to Lima Energy and they adversely impacted the entire power generation industry – stifling the financing and continued construction of new power generation projects by ingrained electric utilities and independent power producers alike,” the city pointed out. “Simply stated, the interruption and delay in development and construction of the Lima Energy Company project was beyond the control of Lima Energy Company. Yet in the face of these adversities Lima Energy Company has continued to invest substantial personnel and economic resources necessary to maintain the viability of this project pending the return of normal market conditions enabling the continued development of this needed facility.”
The city of Lima is of the firm opinion that cancellation of Lima Energy’s certificate of public need and convenience at this time is not a suitable alternative to the requested 30-month extension requested by Lima Energy. It said that opponents don’t want the board to act until the project gets a new air permit. “The purpose advanced by those opposing the requested extension is to require Lima Energy secure a new Air Permit to Install (‘PTI’), which Lima Energy has already committed itself to obtain, and which – in any event – it must obtain to complete the project,” the city noted. “One must ask: What is the risk and possible harm associated with a brief thirty (30) month extension in the currently issued certificate of public need and environmental compatibility? Simply stated: Where there’s no harm, there’s no foul in granting the requested extension.”
As the board is well aware, FirstEnergy Corp. (NYSE:FE) announced in January that its subsidiaries would retire six coal-fired plants with a combined capacity of 2,689 MW by Sept. 1, 2012, the city pointed out. These include four plants located in Ohio: Bay Shore Units 2-4 in Oregon; the Eastlake plant in Eastlake; the Ashtabula plant in Ashtabula; and, the Lake Shore plant in Cleveland. American Electric Power (NYSE:AEP) has also announced plans to comply with new U.S. Environmental Protection Agency air standards by retiring 6,000 MW of coal-fueled power plants, some of which are in Ohio. Completion of the Lima Energy project would in some respects off-set power market and economic losses from those coal shutdowns, the city added.
On March 1, Lima Energy filed with the commission its rebuttal of opposition to the deadline extension by the Sierra Club and Natural Resources Defense Council. Lima Energy said there is no legal requirement that it get an air permit for the project before any board extension is granted, as the environmental groups contend. Lima Energy said it plans, after the board presumably grants the extension, to apply for a new permit for the project to take into account project changes made over the last few years.
USA Synthetic maps out $2.15bn Lima Energy project
USA Synthetic Fuel (USASF) has said in recent SEC filings, including a Jan. 18 Form S-1 filing, that it is still trying to raise money for the Lima Energy project. The Lima Energy Project will be developed in three phases: Gas 1, Gas 2 and Combined Cycle Gas Turbine, which is the power production phase. The project costs are expected to be approximately $497m (Gas 1), $1.02bn (Gas 2) and $627.3m (Combined Cycle Gas turbine), for a total for all three phases of approximately $2.15bn.
“Over the next four years, we expect to need $497.0 million for full construction of Gas 1, $1.02 billion for full construction of Gas 2, $627.3 million for full construction of CCGT, and $2.3 billion for the full construction of Cleantech Energy Project,” said the Form S-1. “We intend to supply the funds necessary for the Lima Energy Project through a combination of equity and debt, primarily through the issuance of [Ohio Air Quality Development Authority] bonds or other nonrecourse debt financing specific to the Lima Energy Project, and the funds necessary for the Cleantech Energy Project through a combination of asset contributions and debt, primarily non-recourse debt financing specific to that project. Lima Energy is currently seeking financing of $400 million to be provided by the OAQDA through the issuance of $400 million of bonds in a private placement on behalf of the State of Ohio for the purpose of providing debt financing for Gas 1. The OAQDA bonds, if issued, will be non-recourse to USASF. However, there can be no assurance that the placement of the OAQDA bonds will be completed in a timely manner or at all. We expect that the debt financing component for Gas 2 and CCGT will consist primarily of the issuance of additional series of OAQDA bonds or other project-specific nonrecourse debt financing. However, we may not be able to obtain adequate debt financing for Gas 2 or CCGT, or for any of our projects, on terms consistent with our expectations to support our development and construction plan in a timely manner.”
Cleantech is a minemouth coal gasification project that the company is trying to develop in the Wyoming end of the Powder River Basin.