Clean-Coal Project Slammed by Watchdog Gets Late U.S. Reprieveby
Millions in federal government support hang in the balance
Project had faced midnight deadline to line up financing
A Texas clean-coal project was given more time to persuade the Obama administration to keep backing it, even after Summit Power LLC missed a midnight deadline to line up financing and a government investigator warned the endeavor was on shaky ground.
The Energy Department had planned to yank its support for the Texas Clean Energy Project on Friday, if Summit failed to provide firm commitments from lenders and investors to finance the whole project. But before the agency announced its decision, developers cited a regulation to launch an informal dispute resolution process that buys more time for talks.
The Department of Energy said in an e-mailed statement that while it "has a responsibility to the taxpayer," it also is governed by existing laws, and "that includes the right of a company to seek an informal dispute resolution."
"We have been working with the project as we understand how important it is to move this technology forward," the Energy Department said. "We will continue to work with the company to figure out the best next steps."
The last-minute lifeline shows how difficult "clean coal" can be to shake. The Texas Clean Energy Project was once viewed as a promising potential showcase of how carbon capture technology could clean up coal-fired power generation, but it has come under increasing scrutiny. In April, the Energy Department’s acting inspector general said he was “concerned about the viability of the project" and questioned the continued government support.
Clean coal skeptics cast the latest delay as fresh evidence of the problems standing up carbon-capturing technology that has proved stubbornly difficult to commercialize.
"This has officially reached the point of absurdity," Lukas Ross, a climate and energy campaigner at Friends of the Earth, said by e-mail. "This project should have been killed a long time ago, and no loophole should be allowed to keep it on life support."
Other projects have encountered delays and and cost overruns, such as Southern Co.’s Kemper coal plant in Mississippi, which spurred a Securities and Exchange Commission probe as well as a lawsuit by ratepayers. Southern announced Friday it had started producing syngas using coal at the facility but Kemper isn’t expected to be fully in service until the third quarter of 2016. Meanwhile, NRG Energy Inc. is adding carbon capture to a coal plant near Houston, Texas -- a project the company once said would be "very profitable" at $100 oil.
Since awarding cooperative agreement to Summit in January 2010, the Energy Department has spent $118 million on the project and given it “multiple extensions," according to the inspector general’s report.
Summit plans to capture carbon dioxide emissions at its proposed facility in Penwell, Texas, with the gas sold for enhanced oil recovery techniques that allow energy companies to push more crude out of nearby fields. Changing market conditions have strained that business model. The collapse in crude prices has diminished the value of carbon dioxide for enhanced oil recovery at the same time that gas has become cheaper than coal for power generation.
In the meantime, project costs have ballooned to $3.9 billion, more than twice the $1.9 billion they were estimated at six years ago.
Project director Bret Logue said by e-mail that Summit is actively discussing the path forward with the Energy Department. "TCEP is an important low-carbon energy project and represents a significant investment, both public and private," Logue said.
Carbon-capture proponents say the technology is necessary to combat climate change and capture greenhouse gas emissions from gas- and coal-fired power plants as well as ethanol plants, steel-making facilities and other manufacturing operations.
"As the United States and the world transition to lower-carbon sources of energy, there is a growing market for carbon capture technologies that keep coal and other fossil fuels part of our energy mix," the Energy Department said in an e-mailed statement.
Although carbon capture technology has already been deployed at refineries and other industrial facilities as well as a power plant in Saskatchewan, Canada, the pipeline of new projects is shrinking, said Howard Herzog, a senior research engineer in the Massachusetts Institute of Technology’s Energy Initiative.
Herzog described the technology as earnestly needed to help the world bridge the large gap between carbon-cutting commitments nearly 200 countries professed in Paris and what’s really needed to stabilize the climate. "The right denies the magnitude of the climate problem," he said during a Thursday presentation to the U.S. Energy Association. "The left denies the magnitude of the climate solution."
Still, cleaning up coal-fired power has long proved politically alluring to both Republican and Democratic lawmakers. Newly introduced Senate legislation would extend the so-called "Section 45Q" tax credit for sequestering carbon dioxide. The measure was applauded late Thursday in a joint statement by ClearPath Action, the Coal Utilization Research Council and coal producers Peabody Energy, Cloud Peak Energy and Arch Coal, which called it "simply unrealistic to just rely on wind and solar power to lower carbon emissions."