Quinn's veto could snuff out plans for coal-to-gas plant

By Jamey Dunn

Gov. Pat Quinn rejected legislation that would have cleared the way for a coal and petroleum coke gasification plant on the southeast side of Chicago.

Last summer, Quinn approved a plan to build the plant, which would be owned by Leucadia National Corp. Construction and built on a polluted brownfield site on the southeast side of Chicago. The project was scheduled to begin in 2015, but Quinn’s veto of Senate Bill 3766 puts the future of the plant in question.

Two utility companies that originally signed onto the project, Peoples Gas and North Shore Gas, bowed out. The two remaining utilities, Ameren and Nicor Gas, have argued that they would be stuck with too large of a share of the cost of construction. Both utilities would be required to buy gas from the plant, but they do not want to cover the construction expenses that the two utilities that left the project would have paid. The Illinois Commerce Commission sided with Ameren and Nicor and rejected contracts that would have locked the utilities into a 30-year deal with the Leucadia plant, which has been dubbed the Chicago Clean Energy project. Senate Bill 3766 would have overridden the ICC’s ruling, but Quinn vetoed the bill this afternoon. Leucadia representatives have said that the project would not move forward without approval of the bill.

Business organizations and consumer advocates argued that the project would increase natural gas rates for customers across the state. ‘We’re not universally opposed to projects like these. However, Leucadia forced suburban and downstate to pay more than their fair share, and that’s unacceptable for consumers,” Bryan McDaniel, director of government affairs for Citizens Utility Board, said in a written statement. “CUB applauds Gov. Quinn’s continued leadership on behalf of consumers across Illinois.”

 The controversy put Quinn in an awkward position. He supported the plant and the jobs it would bring to an economically depressed area of the state. However, he founded CUB and has presented himself as a consumer advocate for decades.

 In his veto message, Quinn said he still supports the project but that it must be revamped. “In September of 2011, two of the gas utilities opted out of procuring the synthetic gas, leaving the remaining two utilities with far greater purchase obligations. In response, the developers argued before the Illinois Commerce Commission that Ameren and Nicor customers should be paying for 95 percent of the costs of the facility, while only receiving 84 percent of its output. That is not a fair deal for ratepayers. We can do better,” Quinn’s message stated. “In addition, our country is in the midst of a natural gas boom, which is coupled with dramatically decreasing demand. As a result, current natural gas prices are at historic lows, and many indicators suggest prices will remain low for years to come. These new facts require further scrutiny, and a revisiting of the economics of this 30-year project. I support the Chicago Clean Energy project, but it must be implemented in a way that protects the consumers of Illinois.”

Proponents say there are no guarantees that natural gas prices will stay as low as they are now. They say having a consistent source of natural gas in the state for the next 30 years would help protect customers from volatility. “Prices fluctuate — gas station prices — and so do natural gas prices, as well,” Chicago Democratic Sen. Donne Trotter, who sponsored the legislation enabling the project, said in July. Hoyt Hudson, project manager of Chicago Clean Energy, wrote in guest column published in the State Journal-Register, “The Chicago Clean Energy project guarantees a predictable price in one of the nation’s most volatile commodity markets — natural gas — while creating thousands of jobs and providing consumers with clean energy.”

“After earning strong, bi-partisan support for this bill from the Illinois House and Senate, and having enjoyed support from communities throughout Illinois, we are deeply disappointed in the governor's decision,” said a prepared statement from Chicago Clean Energy. “We know that this $3 billion investment in Illinois was good for the state's economy, its environment, its workers and its consumers. While we find the governor's decision unfortunate, we look forward to continuing our work at our other facilities throughout the country."

 Trotter and Hudson could not be reached for comment.