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.

Future of coal-to-gas plant rests with Quinn

By Jamey Dunn

A year ago today, Gov. Pat Quinn signed legislation meant to clear the way for construction of a plant on the southeast side of Chicago that would convert coal to natural gas. Now, the governor’s pen may yet again decide the future of the controversial project.

Under the original plan, four utility companies would have covered construction costs and purchased gas from the plant, which would be owned by Leucadia National Corp. But Peoples Gas and North Shore Gas backed out of the project, leaving only Ameren and Nicor. The Illinois Commerce Commission (ICC) ruled this week that the two remaining companies would not be required to pay for all the costs but only cover a percentage equal to the amount of gas they are each required to buy. “The commission determined that in accordance with the law, Nicor and Ameren Illinois would each be responsible for 42 percent of the capital costs and operational expenses, for a total of 84 percent of the total, since they are required to take 84 percent of the substitute natural gas plant’s output,” said a written statement from the ICC.

Construction is scheduled to start in 2015, and the plant would be built on the polluted site of the former LTV Steel plant. It is designed to trap most of its emissions underground instead of releasing them into the air.

But according to Chicago Clean Energy, a subsidiary of Leucadia, the project is now in jeopardy. The group says the plant cannot be financed unless there is guarantee that all the construction costs are covered. Supporters of the project are calling on Gov. Pat Quinn to sign Senate Bill 3766, which would override the ICC’s ruling and require the two utilities to pay all the construction cost.

“The Chicago Clean Energy project is the most significant economic investment that the southeast side has ever seen,” Ted Stalnos, president of the Calumet Area Industrial Commission, said during a recent rally in favor of the project. “Let’s clean up that site. Sign this bill. Let’s put people back to work.” Chicago Clean Energy plans to clean up the site before building the plant there. “The southeast side of Chicago is currently a jobs desert, an opportunity desert. We need this investment,” said Dan McMahon, business representative for Carpenters Union Local 272. The plant is expected to create an estimated 1,000 construction jobs and 200 permanent jobs after it is built.

But others representing industry throughout the state say the plant would be bad for business because it would increase rates far beyond the current cost of natural gas. “It’s not fair for rate payers in the Ameren and Nicor territories to subside 100 percent of the cost,” said Mark Denzler, vice president and chief operating officer of the Illinois Manufacturing Association. “Gov. Quinn, who is the founder of [the Citizens Utility Board (CUB)], now solely has the power of whether to sign one of the biggest rate increases in history or not.” Jim Chilsen director of communications for CUB, a Chicago-based consumer advocacy group, agrees. “We’re not universally opposed to projects like these, but we are concerned that the way that the legislation is structured that it is extremely unfair to suburban, central and southern Illinois consumers who could be forced to pay up to triple costs.”

He says the fact that Quinn founded CUB does not necessarily give the group a leg up when it comes to persuading Quinn to veto the bill. “The governor, he has a long history of consumer advocacy. He listens to all sides of an issue. I don’t think that we necessarily have an advantage.” However, he said that the governor should take notice that business groups, environmental groups and consumer advocacy groups, which are not often unified on an issue, have teamed up to ask Quinn to reject the plan. “I think that’s a pretty powerful message. I think that the facts speak for themselves.”

A spokeswoman for Quinn said the governor is reviewing the bill. 

Proponents say there are no guarantees that natural gas prices will stay low. They argue that 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,” said Chicago Democratic Sen. Donne Trotter, who sponsored the legislation enabling the project. Trotter argues that the plant would bring desperately needed jobs to the area.

 Environmental groups say that the southeast side, which has a history of dangerous pollution, should not have to take an environmental risk to have economic development. (For more on the environmental history of the area, see the current Illinois Issues.) “They are looking for jobs,” said Becki Clayborn, a representative of the Illinois chapter of the Sierra Club’s Illinois Beyond Coal Campaign. “But because the community has seen it time and time again, they are not buying it.” Local environmental groups hope that the area can bolster its economy through renewable energy projects and by becoming a recreation destination.

Mattoon drops out of FutureGen 2.0

By Jamey Dunn

Mattoon has dropped out of the revamped FutureGen 2.0 carbon capture project, which is intended to trap greenhouse gases from coal-fired electrical generation underground to slow global warming.

Mattoon was chosen in 2007 as the site for a first-of-it-kind “clean coal" power plant, which would sequester its carbon emissions underground and theoretically become a proving ground for a relatively untested technology. But politics and rising construction costs stalled the project, and many in the area had grown skeptical about whether the plant would ever be built.

Their skepticism was confirmed last Thursday, when U.S. Sen. Richard Durbin unveiled a new plan, dubbed FutureGen 2.0, which does not include the plant. Instead, the plan calls for an out-of-commission Ameren plant in Meredosia to be retrofitted for a new technology known as “oxy-burn,” which involves burning coal in pure oxygen. Carbon emissions from that plant would have been pumped through a subterranean pipeline and stored underground in Mattoon.

The American Recovery and Reinvestment Act allocated about $1 billion for coal research, which many assumed would go toward construction of the Mattoon plant. However, the U.S. Department of Energy estimated the construction costs could be as high as $2.3 billion.

Durbin said that during the time the plan has been on hold, private industry has started to test the technology that would have been studied there. So, he said there was no longer a strong enough justification for a new plant with such a high pricetag.

Durbin added, “So we had to find another way to create this opportunity for Coles County and Illinois, … one that fit into the existing budget.”

The new plan would have constructed a training center on or near the site where the Mattoon plant would have been built. Workers there would learn how to retrofit power plants for “oxy-burn” and build pipelines to transport carbon.

Angela Griffin, president of Coles Together — a county economic development group that has worked closely on the project —said that she first heard of the new plan when Durbin announced it on Thursday. She said an outpouring of public sentiment against the town’s potential involvement in the plan came soon after. The DOE gave Mattoon until Friday as the deadline for a decision.

Griffin sent a letter to Durbin today to inform him that the town would not be a part of the new plan. From the letter:

While I have nothing but the highest level of regard for the time and effort that you and the FutureGen Alliance expended to make this project viable, our challenges with FutureGen 2.0, as proposed by the Department of Energy, are too big to overcome.

I want to emphasize that the concept of carbon capture and sequestration has nothing whatsoever to do with the reasons we have chosen not to pursue what is known as FutureGen 2.0. As a citizenry, we embraced that technology and believe it to be a safe and practical approach to removing CO2 from the atmosphere.

The simple fact remains that we agreed to host what was presented as the world’s first near-zero emissions research and demonstration facility – the latest in power generation technology paired with underground storage for the facility’s greenhouse gas emissions. Hosting the original FutureGen was something this community embraced with great pride. Ours would be a distinct and honorable mission in an emerging scientific field. Mattoon was to be a focal point for smart, forward-looking solutions in a carbon constrained world.

Unfortunately, our role in FutureGen 2.0 does not support that effort. If FutureGen 2.0 moves ahead with the revised structure described today, it must be without Coles County.

Sen. Dale Righter, a Mattoon Republican, said that the people of the area have been disappointed by developments in the project before, so they are suspicious of the new proposal. “What [the DOE and Durbin] underestimated is that the local officials and their constituents, they have a memory.”

Righter said that promises of potential benefits to the area, such as job creation and the construction of training facility, seemed to be shaky, and residents were concerned that they would not pan out.

He said he would have preferred to have a public hearing on the issue, but the accelerated timeline and lack on a detailed plan made it difficult to bring the issue directly to the people of the area. “A public hearing means that you present what you know, and then you get the public’s input on it. It was tough to know what is real and what was fiction.”

However, Griffin said that no matter how much explanation was given, the town would not have signed on. “Not in this format. Time would not have changed the decision here. This project is not right for this community. … There is a feeling of betrayal, I think, from the residents. They had sacrificed a lot to partner on this project, and we felt we weren’t being taken seriously as a partner.”

Durbin said in a written statement that the plan will move ahead without Mattoon: “This week, I will ask the Department of Energy to solicit other Illinois communities to take on the role envisioned for Mattoon. Both my office and the Department of Energy have heard from a number of communities throughout the state expressing their interest. I wish cost overruns, project delays and rapid advances in science in other parts of the country had not necessitated a change in the FutureGen project. But we must face reality.”

Tuscola officials have voiced interest in taking Mattoon's place in the project. Tuscola was a runner-up for the original FutureGen plant.

FutureGen moves on without Mattoon plant

By Jamey Dunn

A drastically revamped version of the FutureGen project is moving forward without construction of a planned "clean-coal" power plant in central Illinois.

U.S. Sen. Richard Durbin announced today the U.S. Department of Energy will go ahead with a plan he called “FutureGen 2.0.” Instead of building a new plant to research a technology called gasification in Mattoon, an existing shuttered Ameren plant in Meredosia would be retrofitted to use a different so-called clean-coal technology referred to as oxy-combustion or “oxy-burn.”

Carbon dioxide emissions from the plant in western Illinois would be pumped through a 175-mile subterranean pipeline through Decatur and then down to Mattoon, where they would be sequestered deep underground in the same basin that the original FutureGen plant would have used to store emissions. Durbin said there is a chance that carbon emissions created by the Archer Daniels Midland plant in Decatur would also be pumped to Mattoon. He added that other carbon producers, such as power plants and oil refineries, might sequester their carbon at the Coles County site in the future.

The original FutureGen project was awarded to Mattoon in December 2007. The Bush administration stalled the project almost immediately after the announcement. As time passed, estimated costs for the plant grew. As of last year, U.S. Energy Secretary Steven Chu pegged the cost to build the plant at more than $2.3 billion. The American Reinvestment and Recovery Act included $1 billion funding for the project, but the feds continued to hold out on a final decision, and some financial backers dropped out.

Durbin says that during this time, the need for testing the technology that the Mattoon plant was planned to demonstrate has diminished. He says while the feds dragged their feet, private industry has made strides in testing the clean-coal technology that, at the time of the plant’s announcement, was billed as the first-of-its-kind.

“It became [a method] that was being proved out on a commercial basis,” Durbin said.

Durbin added: “So we had to find another way to create this opportunity for Coles County and Illinois. … One that fit into the existing budget” He called the “oxy-burn” process, where pure oxygen instead of air is used to burn coal, “the future.”

"The technology for repowering and retrofitting plants derived from FutureGen 2.0 will lead to a decade-long project of repowering and retrofitting the 52 coal-fired power plants in Illinois," a written statement released by Durbin said.

The federal government plans to sink $1.2 billion into retrofitting the power plant at Meredosia in Morgan County, as well as building the pipeline and the carbon dioxide storage facility. Federal officials are counting on support from the FutureGen alliance, a group of investors who backed the original project. Durbin says they responded favorably to the proposal. A representative of the alliance did not respond and had not returned a telephone call as of press time.

He says that the project is scheduled to start next year, but he does not have an estimate on a completion date. Durbin estimates it will create 1,000 construction jobs and 1,000 other jobs with business and suppliers serving the project. Meredosia would gain 47 to 50 full-time permanent positions when its plant reopens.

Durbin said there are also plans to build a training center on or near the site where the Mattoon plant would have been built, where workers would learn how to retrofit power plants for “oxy-burn” and build pipelines to transport carbon. Although money for the center has not been appropriated, he says it would come from funds funneled through the Department of Labor for “green” energy training programs.

Durbin acknowledged that the announcement might be disappointing to Coles County residents but said that many had already given up on the long-embattled project. He said that economically, the new plan could actually do more to benefit the area. “Ultimately, the number of jobs we are going to create — permanent jobs — is going to be more.”

Angela Griffin, president of Coles Together — a county economic development group that has worked closely on the project — declined to comment on the announcement. She said she just learned of the changes to the plan today. “We need to digest what we have heard.”

FutureGen gets new backer

By Jamey Dunn

FutureGen, a “clean” coal plant proposed for construction in Mattoon, got backing today from an Illinois utility company. Exelon, based in Chicago, has joined the group of investors, known as the FutureGen alliance, that support the project.

As originally proposed the plant would use a first-of-its kind combination of technology to capture carbon emissions created from burning coal and trap them underground. (For more information on clean coal and FutureGen see Illinois Issues May 2009.)

The project stalled in January 2008, when former President George Bush’s administration pulled support because of concerns about growing costs and increasing risks to taxpayers. A federal report by the Government Accountability Office, however, later indicated that accounting errors overestimated the cost by $500 million.

“People were upset. Upset that we went through five years of competition for this coal research project and they pulled the rug out from under us as soon as Illinois won,” U.S. Sen. Dick Durbin said at a Chicago news conference.

The project awaits approval of more than $1 billion in stimulus funds from the U.S. Department of Energy. Including the cost of materials, recent estimates have said the total price could exceed $2 billion. The feds asked the alliance to find cost savings to reduce that price and more private investors to back the plan. Durbin said that is why support from Exelon helps the plant’s chances for moving forward.

“Exelon — in joining the FutureGen alliance — not only brings more credibility to the project, more resources to the project, they bring their expertise to the project and move us closer to approval,” Durbin said.

Two investors, Electric Power Co. and Southern Co, dropped out of the project last year, citing concerns over rising costs. With Exelon on board, the alliance is up to 10 members.

The goal of the plant is to capture 90 percent of the carbon emissions by the third year of a five-year test period, according to the Department of Energy.

“We can’t ignore the scientific consensus that suggests that we have to find a way to control carbon emissions if we are to move forward in combating global warming and climate change,” said Doyle Beneby, senior vice president of Exelon Power. “It’s clear that we need to do everything we can as an industry to make sure that coal continues to become part of the energy mix here and part of the mix in a low carbon future.”

A decision from the DOE is expected in February. Check back for further details.

May issue: A break from the past

Read the latest Illinois Issues magazine to see how Senate President John Cullerton is "reigning in the Senate." The Democratic leader has revived a bipartisan spirit, but how long that lasts depends on upcoming polarizing votes.

Also read what's at stake when the federal government takes its census of Americans.

And learn how Illinois is waiting for the federal government's signal about whether "clean coal" technology is worth the risk.

Available in the print edition only are stories about Illinois' infrastructure needs and costs, as well as the push for legalization of medical marijuana.