Photograph courtesy of Valley Watch
In a move reminiscent of totalitarian capitalism Chinese-style, the Daniels administration and the Indiana State Legislature plan to force Indiana consumers to pay for an economically questionable "syngas" plant in Rockport, with the company's owners assuming no risk. Citizen and environmental groups are opposing the plan.
When the Indiana Gasification (IG) plant was proposed for Rockport by the Mitch Daniels administration in November 2006, the price of natural gas was on the rise at around $9 per million BTUs (mmbtu). Suddenly taking coal's hydrocarbons and converting them to usable "syngas" (synthetic gas) seemed to make sense, at least until you got to the details.
That is, presumably, why the legislature passed a law telling the state's gas utilities that they had to negotiate 30-year contracts with IG on a "take-or-pay" basis that forced Indiana ratepayers to use its syngas no matter what the cost.
Then, while negotiations were still taking place, IG trotted before the Indiana Utility Regulatory Commission (IURC) with its proposal. Sadly for them, the utilities soon discovered that even with prices for natural gas on the rise, the required price for syngas was just too high to be competitive with even volatile natural gas, which by early 2008 had risen to $13-plus.
Then something big happened. New drilling technology, called hydro fracturing, quickly developed for securing natural gas. The result was huge "discoveries" of natural gas in both the western and the eastern regions of the United States.
Gas producers found they could produce nearly unlimited supplies of natural gas if the price remained somewhere between $4 and $5/mmbtu.
"Here we have a company that wishes to take zero risk to develop a technology that has never been competitive since its first use in the 19th century."
Indiana Gasification had a problem. The cost just to produce its inferior "syngas," which ultimately emits far more global-warming-causing carbon dioxide than natural gas, was at least 50 percent higher than natural gas. And that price did not include capturing and sequestering the enormous carbon emissions caused by burning coal as feedstock or retiring any of the massive, multibillion-dollar debt to build such a facility.
Indiana gas utilities ultimately walked away from the venture, and soon thereafter Indiana Gasification withdrew its IURC petition, knowing it had another plan.
IG had secured support from State Rep. Russ Stilwell, D-Boonville, and State Sen. Brandt Hershman, R-Monticello, for a bill that resembled the totalitarian-capitalism business model of communist China than the United States.
Since they could not gain utility approval for their project, they decided that legislative fiat forcing the state to purchase their more expensive syngas was in order. Our pro-coal State Legislature readily agreed and passed a measure that puts the state in the business of buying all the syngas output of the plant and forces gas utilities to pass it along to Hoosier gas customers, who would then pay a hefty premium for the privilege of using coal-derived gas instead of natural gas.
But IG officials weren't done inserting their financial snout into the public trough. They also sought to incur nearly zero risk in their project by securing a "loan guarantee" from the federal government so that they were protected from the risk of pursuing an ill-fated venture, as well as forcing Indiana customers to buy their product at a premium.
Socialized risk, privatized profits. Totalitarian capitalism at its best.
"It wants to do it in one of the most polluted small towns in America."
On Dec. 3, the U.S. Department of Energy (DOE) will hold a hearing in Rockport, population, 2,068 -- a community that already emits more toxic pollution than New York, Atlanta, Chicago, Pittsburgh, Philadelphia, Indianapolis, Seattle, Los Angeles and San Diego, population 34 million -- combined. The purpose of the hearing is to take public comment on what should be included in the environmental impact statement required before the federal government issues the dubious loan guarantee.
So here we have a company that wishes to take zero risk to develop a technology that has never been competitive since its first use in the 19th century. It wants to do it in one of the most polluted small towns in America, and of course it hopes to make millions on the backs of Hoosier gas customers, who will pay considerably more for their product than the "free market" would allow.
The sad thing is that this is being done with the blessings of state politicians like Republican Gov. Mitch Daniels, who like to call themselves conservatives and oppose any sort of effort to help clean, renewable energy by saying those sources should make it in the private sector instead of relying on what they call "socialized" energy.
There is obviously something terribly wrong with this picture.
"And of course it hopes to make millions on the backs of Hoosier gas customers."
Unfortunately, citizens remain in the dark as to what exactly is being proposed. Indiana Gasification has yet to file a construction permit application with the Indiana Department of Environmental Management. And a Freedom of Information Act request that Valley Watch and Sierra Club filed with DOE in June regarding IG's loan guarantee application has gone unanswered, although DOE is required by federal law to respond within 10 working days.
We suspect the secrecy is due to the fact that both DOE and IG know that this project is not viable economically unless they can find a "patsy" like the State of Indiana to take their risk for them.
However, several groups are determined to keep this atrocity from happening. Valley Watch, Sierra Club, Citizens Action Coalition and the newly formed Spencer County Citizens for Quality of Life will continue to stand in their way in an effort to bring both environmental and health justice to the region, as well as continuously seeking to hold a line on rates Hoosiers must pay for their electricity and gas.
John Blair is a Pulitzer Prize-winning journalist and teacher who serves as president of Valley Watch. He can be contacted at .