Illinois Coal Gasification Hits A Lump In the Road

Nebraska based Tenaska, Inc. ran over another lump in the road to construction and operation of its proposed $3.5 billion coal gasification plant in Taylorville, Illinois, when Illinois EPA acquiesced in USEPA’s request for reconsideration of the emissions permit for the proposed facility earlier this week. The 716 megawatt generation facility is proposed to provide power for 600,000 homes. Illinois EPA’s initial permitting determination failed to require carbon dioxide emissions from the plant to be sequestered, based on IEPA’s determination that carbon capture and sequestration is not feasible at the site. USEPA says carbon capture technology is feasible, and asked IEPA to reconsider any site specific uncertainties before omitting a sequestration requirement from the permit.

Meanwhile, Tenaska faced another failure in the Illinois legislature to cram down 30 year take or pay power purchase agreements on the utilities which would buy power from the proposed plant. During the regular legislative session, Tenaska even floated the idea of initially operating the power generators with cheap natural gas until the legislature can agree on compromise take or pay requirements for the electric utilities. Massive opposition to coal gasification from environmental groups and to 30 year take or pay contracts from the Illinois business community sunk the legislative proposal, and Tenaska’s lobbyists went back to Omaha when the legislative session ended with no resolution to their four year campaign.

Coal gasification may be an energy technology whose time has come, but it hasn’t come to Illinois just yet.

State of the Union – What’s In It for the Construction Industry?

President Obama is a Chicago bred politician, and as such he knows road building contractors are some of the most generous political donors among business people. Yet, in his State of the Union speech, he only glanced briefly in their direction. And, while clean energy construction also got a brief nod, there was nothing specific in the speech for either construction industry sector to hang its hat on. Furthermore, events in the House of Representatives since the speech ended make any hope of significantly increased infrastructure spending legislation look bleaker than ever.

True, Obama did vaguely refer to a budget that will invest “especially [in] clean energy technology,” and proposed taking subsidy dollars from oil companies and using them to set “a new goal: by 2035, 80% of America’s electricity will come from clean energy sources.” Does this mean his plan is to raise oil and natural gas prices to levels which will make “clean” electricity economically competitive?

Obama proposed that the executive branch should seize control of the allocation of federal infrastructure funding from Congress by throwing down the gauntlet with this bold and impractical challenge: “If a bill comes to my desk with earmarks inside, I will veto it.” That should serve to bring federal expenditures for infrastructure construction to a screeching halt. Unless, of course, he means the earmarks will already be inserted into his proposed budget legislation.

During the middle of the address, Obama said a few things which sounded promising for the construction industry. “The third step in winning the future is rebuilding America.” He mentioned high speed rail – for which billions were appropriated in the stimulus package – and which is already meeting resistance from newly elected Republican governors in some of the states which won high speed rail stimulus grants. He promised to “put more Americans to work repairing crumbling roads and bridges.” However, three pages down the teleprompter, he also proposed to “freeze annual domestic spending for the next five years.”

In the tempest of House leadership changes, and the absence of detailed proposals from either side of the aisle, it is difficult to say what these remarks will translate into in terms of appropriations legislation, other than to predict, “not much.” The federal Highway Trust Fund reauthorization legislation is now in the hands of the House Transportation and Infrastructure Committee, which just held its first organizational meeting this morning under the leadership of Chairman John L. Mica of Florida and Highways and Transit Subcommittee Chairman John J. Duncan, Jr. of Tennessee. No one yet knows what is on the Committee’s agenda, or for that matter on the Obama administration’s agenda, by way of fulfilling Obama’s State of the Union promise that long term Highway Trust Fund reauthorization legislation will be “fully paid for, attract private investment, and pick projects based on what’s best for the economy,” other than Congressman Duncan’s statement that “Increasing the gas tax is not the solution to addressing our infrastructure needs.”

Yes, we knew that two years ago when the Democrats ruled the House. So far, neither side of the aisle has put forth a viable alternative to higher motor fuel taxes, however. Congressman Duncan’s subcommittee website says “We must eliminate unnecessary bureaucratic red tape so that infrastructure projects can be built in half the time and taxpayer funds can be spent more efficiently.” Are they talking about eliminating environmental impact reviews?

In a statement issued just this morning, Duncan announced that “Today the House of Representatives passed a resolution to roll back non-security spending to 2008 levels.” At that pace, no motor fuel tax increase would be required to replenish the Highway Trust Fund.

So, despite the rhetoric, or perhaps because of it, I can be confident of only one thing: there won’t be any significant increase in infrastructure funding at the federal level any time soon.

Another Blow To Illinois Clean Energy

The waning hours of the lame duck Illinois Senate session struck another blow against clean power generation in Illinois as the Illinois Senate defeated by a vote of 33-18 a bill authorizing Tenaska, Inc. to proceed with construction of the proposed $3.5 billion coal gasification/carbon capture and sequestration power plant near Taylorville. Over the last five years the State of Illinois has invested $23 million of the $40 million spent by Tenaska in planning and development expenditures for the proposed project.

Taylorville Mayor Greg Brotherton, who hung around the statehouse during the final vote in the wee hours of Wednesday morning, remains optimistic Tenaska may find other sources of funding to complete construction of the facility, though he expressed exasperation at the workings of the Illinois legislature. “It was a learning experience for me the past five or six weeks, and seeing how the legislature works, it’s just unreal,” Brotherton exclaimed.

Mary L. Renner, Director of the Taylorville/Christian County Economic Development Corporation, said the Energy Center site remains viable for other energy related development even if Tenaska pulls out of the carbon capture/coal gasification project. “To be able to draw this kind of attention says a great deal for the natural resources there,” said Renner.

Opponents of the bill asserted that the legislation would have required Illinois electric utilities to purchase power from the newly built facility at above market prices for the next 30 years in order to recover the state subsidized cost of building and operating the environmentally conscious, greenhouse gas limiting facility. “It would have been damaging to the state’s job-creation climate,” said Philip O’Connor, chairman of the Coalition to Stop Tenaska’s Overpriced Power.

Tenaska vice president Bart Ford said his company is not yet prepared to say it will walk away from its own $40 million dollar investment in the project, despite the Illinois Senate’s resounding defeat of the authorizing legislation. “We are currently evaluating our next course of action,” said Ford. “We believe there is a great deal of support in Illinois for the idea of clean coal power.”

The apparent collapse of this local effort at greenhouse gas control puts Illinois in the company of several European carbon capture and sequestration projects which have faltered due to the unfavorable economic factors involved in bringing carbon capture technology up to commercial scale.

Climate Change Coal Compromise Soothes Baucus

Montana Senator and Finance Committee Chairman Max Baucus is backing down from his considerable disappointment expressed during hearings earlier this week on the Kerry/Boxer climate change measure, now that incentives have been written in for “early actors” who adopt carbon sequestration technology at their coal fired power plants if they can capture 50% of greenhouse gas emissions. Montana has the largest coal reserves of any state in the nation, but they are mostly undeveloped because transportation costs for Montana coal price it out of the market in rust belt states with numerous coal fired power plants. Construction of new, efficient, carbon capturing coal fired power plants could develop a big new market for Montana coal.

Pennsylvania’s Arlen Specter and Ohio Coal Association President Mike Carey are both still opposing the Kerry Boxer bill because they say it will be a job killer in their states. Senate Environment and Public Works Chair Boxer has scheduled a markup of the Kerry/Boxer bill in her committee beginning Tuesday, following three days of hearings featuring 54 witnesses on the bill this week. Republican members of the committee have said they will delay the measure by boycotting the markup, which would deny Boxer the quorum required under Senate rules for conducting a markup of the bill.

Secretary Chu Announces Clean Coal Grants, Faces Congressional Grilling

Last week energy Secretary Steven Chu announced the release of $2.4 billion in grant funds for development of clean coal technology, remarking to a meeting of the Clean Coal Council that the U. S. has the world's largest deposits of coal. Of the money released, $800 million is for efforts to reduce sulfur, nitrogen and mercury pollution, $1.5 billion for carbon capture projects, and $50 million for identification of geologically suitable CO2 injection sites.

Yesterday, Chu faced a grilling from Senators regarding their pet energy projects, including questions from Byron Dorgan of North Dakota about flat funding of clean coal research, and reduced funding for fuel cell technology; from Robert Bennett of Utah about nuclear power reactor development; from Lamar Alexander of Tennessee about failure to include nuclear power in the definition of "renewable energy," from Thad Cochran of Mississippi about strategic petroleum reserve storage in Mississippi subterranean salt domes, from Diane Feinstein of California about wind farms in the California desert, and from Washington's Patty Murray about cleaning up Defense Department nuclear weapons sites. I am guessing we can look for Senate earmarks to may of these projects.

Obama '10 Energy Budget Has Billions For Construction

In March 11 testimony before the Senate Budget Committee, Energy Secretary Steven Chu described his department's plans to allocate the $26.3 billion in proposed appropriations for his department. Energy Department priorities for the near future include financial support for increasing energy efficiency of government buildings and private homes, construction of biofuel refineries, clean coal power plant projects, wind and solar energy construction, and upgrades to the electric power transmission grid.

Ranking Member Judd Gregg expressed exasperation that $50 billion in loan guarantees for nuclear energy construction had been stripped from the stimulus legislation, and accused the Obama administration of reducing financial commitments to the Yucca Mountain disposal site for spent nuclear power reactor fuel materials as a back door method of restricting construction of new nuclear electric power plants. Chu responded that nuclear energy, offshore oil drilling and clean coal power plants all have a place in the administration's plans, but that priority was placed on clean coal technology development because "India and China will not turn their backs on coal" as a source of energy for generating electricity.

Whatever differences there may be between the administration and congress regarding the nuances of energy development priorities, the construction industry will see substantial government investment in energy infrastructure throughout the Obama presidency.

Illinois Commits $18 Million For Clean Coal Power Plant

Illinois legislation approved today commits $18 million in state funding to environmental studies required preceding construction of a clean coal power plant near Taylorville, which would be the first commercial scale application of carbon dioxide capture technology to reduce climate change from plant emissions. Half the carbon dioxide emissions of the coal burning plant will be injected deep underground, either at the plant location, or after pipeline transmission to assist offshore oil recovery in the Gulf of Mexico. The new law will require Illinois electric utilities to purchase 5% of their electricity from the new plant.