The Indiana Supreme Court on Dec. 17 affirmed an order of the Indiana Utility Regulatory Commission approving a contract for the purchase of substitute natural gas (SNG) from the coal-fed Indiana Gasification LLC project.
After the Indiana Court of Appeals voided the contract because a definitional term deviated from the required statutory definition, the contracting parties amended the contract to correct the error. “We hold that the contract, as amended, renders the definitional issue moot and summarily affirm the Court of Appeals as to all other claims,” the Supreme Court wrote in its Dec. 17 ruling.
In 2009, the Indiana General Assembly passed the Substitute Natural Gas Act, authorizing the Indiana Finance Authority (IFA) to contract for the purchase of SNG to be delivered to “retail end use customers.” Under the SNG Act, the purchase contract must provide a guarantee of savings to those retail customers and be approved by the IURC.
In January 2011, IFA executed a contract with Indiana Gasification for the purchase of SNG. Several regulated gas utilities, including Indiana Gas and Southern Indiana Gas and Electric, objected to the contract at the commission, saying there was risk in future years of above-market gas prices under this contract. After an evidentiary hearing, the IURC found the contract guarantees the required savings and approved the contract. Various groups then appealed that order.
In October 2012, the Court of Appeals issued its decision holding, in part, that the commission did not exceed its jurisdiction when it approved the contract. But the court reversed the IURC’s approval of the contract because the contract’s definition of retail customers applies to industrial transportation customers. That prompted the contract amendment, which the Supreme Court has now cleared.
Indiana Gasification’s (IG) plant has an estimated cost of $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.
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.
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 would 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 on-site power needs, with a utility interconnection for minor power balancing.