Daniels: $1.5 Billion IN Gasification Plant - Tri-State News, Weather & Sports

Daniels: $1.5 Billion IN Gasification Plant

New Media Producer: Kerry Corum

Governor Mitch Daniels announced plans to build a $1.5 billion coal gasification plant - the first in the country to make pipeline quality natural gas from eastern coal.

Several sites are being considered in the southwestern corner of Indiana.

The plant, to be completed in 2011, would create 300 new jobs to mine Indiana coal, 125 permanent jobs at the plant and nearly 1000 construction jobs for four years, beginning in 2008.

The project is being developed by Indiana Gasification, LLC, and will include a methanation process to produce pipeline quality substitute natural gas (SNG).

It would produce 40 billion cubic feet of SNG annually - enough to supply 15 to 20 percent of Indiana's residential and commercial gas demand.

Its use is projected to save consumers more than $3.7 billion over the next 30 years, versus the price of conventional natural gas, according to a study by Carnegie-Mellon University faculty.

According to the letter of intent for 30-year supply contracts, about two-thirds of the SNG produced would be purchased by Indiana's three largest gas utilities, Vectren Corporation, NIPSCO (Northern Indiana Public Service Company) and Citizens Gas.

NIPSCO would purchase the remainder for its service territory, to meet seasonal demands.

Daniels says the developer and three utilities agreed to permit smaller commercial and municipal gas utilities to participate in the transaction on the same terms.

Negotiations are underway with several coal producers, for a long-term contract for Indiana coal.

For the project to proceed, the following steps are necessary:

  • On Friday, Indiana Gasification and the three utilities will file a joint petition with the Indiana Utility Regulatory Commission to seek approval of the gas contracts following public hearings.
  • Indiana Gasification will file an application with the Department of Energy later this year to obtain a federal loan guarantee under the 2005 Energy Policy Act to back $1.2 billion of debt.
  • Final terms of the gas purchase contracts will be negotiated.
  • Legislation in the 2007 General Assembly that would assure the state's regulatory approval may be relied on by the financial markets - similar to language that already exists for electric plants.
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