Indiana high court hears arguments on Indiana Gasification project

The Indiana Supreme Court on Sept. 5 heard oral arguments in a long-running dispute over the coal-fueled Indiana Gasification LLC project and whether it’s product substitute natural gas would be too expensive for Indiana gas customers.

Said a case synopsis on the high court’s website: “The Indiana Utility Regulatory Commission approved a contract between the Indiana Finance Authority and Indiana Gasification, LLC for the purchase of substitute natural gas. The Court of Appeals reversed, concluding the contract defines retail end use customer contrary to statutes authorizing the contract. Indiana Gas Co. v. Indiana Fin. Auth., 977 N.E.2d 981 (Ind. Ct. App. 2012), vacated. The Supreme Court has granted petitions to transfer the case and has assumed jurisdiction over the appeal.”

The October 2012 appeals court decision said that Indiana Gasification’s (IG) proposed plan was to build, own, and operate the plant, which it estimated would cost $2.7bn to develop. IG expected to receive $800m of that amount in the form of private capital from Leucadia National. IG also expected to receive a federal loan guarantee from the U.S. Department of Energy (DOE) for the remaining $1.875bn.

Depending upon its financing, legal proceedings, and environmental permitting requirements, IG had planned to commence construction of the plant in the third quarter of 2012 and to begin delivering SNG in the first quarter of 2016.

The IG plant, located near American Electric Power’s coal-fired Rockport power plant on the Ohio River, would basically use Indiana coal. Critics, though, had pointed out that the IG plant, with easy barge access on the river, could take coal from other states and that IG wasn’t guaranteeing that this coal would be from Indiana.

In January 2011, the Indiana Finance Authority (IFA) and IG executed a contract, which details the sale and purchase of the SNG that IG plans to produce at the plant. The contract provides that the IFA will buy up to a fixed annual amount of 38 million mmBTUs of SNG from IG for 30 years, to be measured from the day SNG production at the plant begins. That deal was later approved in November 2011 by the Indiana Utility Regulatory Commission.

But various parties, including gas distributors like Indiana Natural Gas, appealed that approval, saying the IFA contract would put consumers at too much of risk of having to pay above-market prices for gas in the future.

The designed annual usage in the Rockport SNG plant would be about 3.85 million tons of Illinois Basin coal, with the possibility of substituting a portion of this with petroleum coke. 

SNG production would be about 47 million mmBtu (about 38 million mmBtu will be sold to the IFA). Sulfur in the feedstock would be processed into sulfuric acid, which IG will sell into the industrial market. Heat generated during the gasification process would be used to produce steam for steam turbines that could produce about 300 MW to meet essentially all on-site power needs, with a utility interconnection for minor power balancing.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.