Dear IndianaDG Readers:
The Leucadia Indiana Gasification plant proposed for Rockport, IN is likely to be a "hot potato" this session of the Indiana General Assembly. Sen. Eckerty has introduced SB 510. The digest for SB 510 is as follows:
Substitute natural gas contracts. Defines "guarantee of savings" with respect to retail end use customers of substitute natural gas (SNG). Amends the definition of "purchase contract". Defines "savings shortfall". Requires the Indiana finance authority (IFA) to submit a final purchase contract, including amendments, and any other agreements with a producer of SNG to the utility regulatory commission (IURC). Requires the IFA to determine on a three year cycle if retail end use customers are provided a guarantee of savings or a savings shortfall under a purchase contract. Requires the IFA to electronically submit its findings to the IURC. Requires the IURC to verify and approve the findings and, if there is a savings shortfall, order a producer of SNG to provide a refund.
There appears to be a delay still in House Bills appearing in the system, therefore, Rep. Crouch's bill is still not available from the Indiana General Assembly website. Eventually, you should be able to find the bill she has introduced HERE.
Also be sure to read the second article from the IBJ for more background on this issue.
When there is more information about this issue you will be able to read it here.
Laura Ann Arnold
Lawmakers questioning wisdom of 30-year deal to buy plant's gas at fixed price
By Eric Bradner, Evansville Courier & Press, Posted January 18, 2013 at 5:57 p.m., updated January 18, 2013 at 10:06 p.m.
INDIANAPOLIS —State lawmakers’ attempts to rework the deal Indiana struck with developers of the proposed Rockport coal-to-gas plant would kill the nearly $3 billion project, one of its top officials said Friday.
As a shale gas boom drives down natural gas prices, two Republican lawmakers say they question the wisdom of the Indiana Finance Authority’s 30-year contract to buy and then resell the plant’s synthetic gas at a fixed rate.
Both have filed bills that would drastically alter its terms. The bills would trigger the ratepayer protection mechanisms included in the contract every three years, rather than waiting until the end of the deal.
That would stop the plant in its tracks, said Mark Lubbers, a former
Gov. Mitch Daniels aide who is helming the Rockport effort for Leucadia National Corp.
“Any ‘true-up’ of savings before the end of the contract term makes the project unfinanceable,” he said.
The House and Senate utility committees could consider the two measures at a rare joint meeting, the chairmen of those committees told the Courier & Press on Friday.
“We can tell you that we have had many conversations regarding the Rockport coal gasification plant with our Senate and House colleagues. We’re currently considering holding a joint hearing on the issue, although no final plans have been set,” Sen. Jim Merritt, R-Indianapolis, and Rep. Eric Koch, R-Bedford, said in a joint statement.
Lubbers meanwhile doubled down on what he said is a rock-solid deal for Hoosier gas customers over the long term, saying Indiana needs a second plant — this one in Lake County — that would convert petroleum coke, rather than coal.
“Two plants would provide better consumer protection and keep even more Hoosier energy spending in Indiana,” Lubbers said.
His stance sets the stage for what could emerge as a critical battle in the opening weeks of the first term of new Gov. Mike Pence, who has not taken a stance on the project.
In 2009 lawmakers gave the Indiana Finance Authority the green light to hammer out a 30-year contract with Leucadia’s Indiana Gasification LLC to buy its synthetic natural gas and then resell it through the state’s utilities.
That deal, signed by Gov. Mitch Daniels, set a rate of between $6 and $7 per MMBtu for the life of the contract. It would have utilities tie 17 percent of ratepayers’ bills to that Rockport price, rather than their open market rate.
It appeared to be a steal when natural gas prices topped $13 per unit as recently as 2008. Since then, though, a nationwide shale gas boom has sent prices plummeting to near $3 per unit now.
And now that Daniels is gone, some lawmakers are looking for ways out of the deal.
“The market has changed, conditions have changed, and so we need to take a fresh look at this situation and there needs to be some changes that will protect the ratepayer,” said Rep. Suzanne Crouch, R-Evansville.
Crouch and Sen. Doug Eckerty, R-Yorktown, filed the bills that the utility committee chairmen are considering granting a joint hearing.
The Indiana Finance Authority’s deal required Leucadia’s Indiana Gasification LLC to set $150 million aside in an escrow account to reimburse ratepayers for any losses at the end of the 30-year deal.
The measures Crouch and Eckerty are pushing would shorten that window, requiring Indiana Gasification to pay ratepayers back for any losses every three years — a move that would harm Indiana Gasification’s bid for a federal loan guarantee.
Opponents of the Rockport plant include Evansville-based
Vectren Corp., which estimates the deal could cost Indiana ratepayers $1 billion in extra gas prices over its first eight years, and a host of environmental groups.
“When this thing was conceived, it was a good idea. Natural gas was volatile, there was an unknown long-term supply, and we were just coming off three or four years of the most volatile natural gas prices we’d seen in 25 years,” said Mike Roeder, Vectren’s vice president of government affairs and communications.
“The concept made a ton of sense, and so no legislator should feel any guilt about a vote from back then because it was a reasonable idea. But what has changed is shale gas.”
Lubbers, who has argued that recent years’ volatility in natural gas prices make the case for a project with fixed rates, said he will continue defending the project if state lawmakers consider the two bills this year.
“On the one hand, we are always grateful for a platform to talk about the plant and the contract. It is extraordinary public policy — the first time consumers have ever been guaranteed savings for any energy product; the first time consumers have ever had a lien on energy utility assets; a huge step forward in clean coal technology. It is a big idea and makes Indiana a real leader,” he said.
“On the other hand, after an 18-month negotiation that produced more consumer protection than the legislature or we ever envisioned, and an 11-month (Indiana Utility Regulatory Commission) consideration resulting in unanimous approval of the contract, to have it politically challenged by a self-interested utility is disappointing.”
The state’s contract with Indiana Gasification is also the subject of a court battle.
The Indiana Court of Appeals reversed the state’s utility regulatory commission’s approval of the deal last year, pointing to a problem that the Indiana Finance Authority and Indiana Gasification said would be easily fixed.
But Vectren has sought to use that opening to force the deal back onto the starting blocks, requiring it to be vetted and approved by the Indiana Utility Regulatory Commission all over again.
Bill could be hurdle for proposed $2.8B synthetic gas plant
Chris O'Malley, January 15, 2013, Indianapolis Business Journal
The company that plans to build a $2.8 billion synthetic gas plant in Indiana could face another hurdle if a bill introduced by a state senator is successful at the Statehouse.
Under the legislation, state utility regulators could order Indiana Gasification LLC to make refunds to gas customers every three years if the price of synthetic gas it produces from coal is greater than the market price of natural gas over the period.
Senate Bill 510, by Sen. Doug Eckerty, R-Yorktown, is aimed at alleviating concerns raised by consumer groups and some lawmakers about legislation passed in 2010 that helped enable the plant proposed for Rockport, near the Ohio River.
That legislation allowed the Indiana Finance Authority to act as a purchasing intermediary for synthetic gas produced at the plant. The authority would sell the gas on the open market. Whether gas customers would receive discounts, or see their bills increase, would depend on whether the authority made or lost money on its sales.
It’s estimated that Indiana Gasification could produce gas between at a cost of $6 and $7 per MMBtu, a common measurement used by the energy industry.
When the Rockport plant was proposed, natural gas was selling for around $13 per MMBtu, Eckerty said in a prepared statement Tuesday. Butwith an abundant supply of natural gas now available, the fuel recently was selling at $3.10.
“With these changes in mind, many state officials – including myself – believe it is not in Hoosiers’ best interests for the state to put taxpayers at risk by subsidizing substitute natural gas,” Eckerty said.
Natural gas prices have plummeted in recent years, with mass extraction of natural gas from shale deposits. Evansville-based gas and electric utility Vectren projects the synthetic gas made at the proposed plant would cost customers $1 billion in the first eight years, or up to $375 for an average retail customer.
Critics say under the current contract with the state, natural gas customers may not see Indiana Gasification’s promised $100 million in savings until the end of the 30-year contract.
Legislators who passed the original measure did not intend for such savings to be realized so late, said Kerwin Olson, executive director of Citizens Action Coalition.
“This is a good proposal. It clarifies the Legislature’s original intent,” Olson said of the new bill. “It helps to erase the generational discrimination.”
Indiana Gasification has found fault with opponents’ insistence that natural gas prices will remain low over the long-haul, noting that natural gas prices historically have been volatile.
That volatility is a certainty was citied by the Indiana Utility Regulatory Commission in its approval of the deal.
Indiana Gasification also insists that the proposed plant will diversify the state’s supply of gas and help lessen volatility.
Currently, the gas supply contract between Indiana Gasification and the Indiana Finance Authority is mired in litigation.
Last October, the Indiana Court of Appeals reversed regulator approval of the gas-purchasing contract deal, but on narrow grounds. It found the legislation authorizing the purchases never was intended to result in certain industrial customers’ sharing in the costs or benefits of the purchases, as would residential customers.
Indiana Gasification said a simple, 37-word deletion of language in the contract would satisfy the court. But Vectren has filed an objection, arguing that the contract was essentially made null and void by the court last October and that the regulatory process should start over again.
The proposed plant operator counters that Vectren already lost on many of its arguments and that the tactic is meant to cause delays that could jeopardize financing of the project.
Eckerty’s bill could potentially void the disputed contract between Indiana Gasification and the state finance authority “because it makes retroactive changes to current statute that would modify the terms of that contract,” said a bill analysis by Indiana Legislative Services Agency.
Indiana Gasification officials did not immediately offer comment on the bill.