Abby L. Harvey
GHG Monitor
2/6/2015
Nearly eight months out from the spending deadline for $1 billion in American Recovery and Reinvestment Act funds dedicated to the FutureGen 2.0 oxy-combustion carbon capture and storage retrofit project, the FutureGen Alliance announced this week that the Department of Energy has pulled federal funding to the project. Explaining DOE’s decision to withdraw support for the project, Assistant Secretary of Energy for Fossil Energy Chris Smith said late this week, “It was simply clear that the alliance was not going to be successful at getting to financial close in a timeframe that was going to be consistent with being able to expend those funds before the deadline as established by law.” Further, Smith placed a second project on the chopping block, Hydrogen Energy California, stating that “the challenges that we see with FutureGen are also going to largely apply to HECA.”
The FutureGen Alliance urged DOE to reconsider its decision in a Feb. 3 letter to Secretary of Energy Ernest Moniz. “We are profoundly disappointed with the Department’s recent decision to suspend development funding for FutureGen 2.0, the world’s first coal-fueled power plant with oxy-combustion technology and deep saline geologic C02 storage,” CEO Ken Humphreys wrote. “We respectfully request that the Department consider a path forward that supports continued progress that allows completion of a funding expiration solution, equity position finalization, and preservation of the all-important permits to construct the oxy-combustion power plant and C02 storage site. The project is poised for success, and the Department stands to be instrumental in completing it. The world is watching what we do together.”
Representatives from HECA, however, seem largely unfazed by Smith’s comments. “Clearly, we are in the same boat with FutureGen with respect to one thing, which is that if the Department does not advance more ARRA funds between now and September we cannot spend the ARRA fund allocation to the project, in fact we probably will come short of spending enough money because we’re only about $20 million from the finish line. We will have unused ARRA funds of about $80 million. … The thing that we’re not similar to FutureGen about with respect to that is it doesn’t matter to us,” HECA CEO James Croyle said during the Global CCS Institute’s Americas Forum, following Smith’s remarks at the event.
Croyle said, “We do not need ARRA funds to make this project economically viable. In fact in a $5 billion dollar project, $80 million doesn’t move the needle very much on the equity returns on the project. … While we have cooperated with everyone in trying to support the extension of the expiration date in the future, we were relatively indifferent to that.” The HECA project is a poly-generation Integrated Gasification Combined Cycle plant with pre-combustion capture, which will convert coal and petroleum coke to hydrogen to make electricity in Kern County, California.
What Went Wrong?
FutureGen 2.0—which plans to retrofit a decades-old 200 MW oil-fired unit at a mothballed power plant in western Illinois with carbon capture technology for geologic sequestration nearby—was the biggest ‘clean coal’ winner under the 2009 American Recovery and Reinvestment Act (ARRA), netting the $1 billion cooperative agreement with DOE. The stimulus funding is required to be spent by September 2015, though, at which point it will return to the U.S. Treasury and will not be available for other CCS research projects, according to DOE.
The FutureGen 2.0 project has faced numerous delays, which DOE has cited as the main reason for its decision to pull support. These delays were largely related to legal and regulatory issues surrounding the project. In testimony filed by Humphreys with the Illinois Pollution Control Board in July 2014, concerning a suit brought against the alliance by the Sierra Club, he wrote that, “the Project schedule does not allow time for further and extended delays associated with the Claim. To maintain the Project’s schedule and maintain financial viability of the Project, it is critical that the pending Claim be resolved expeditiously. Delay in resolving the Claim risks disruption of the Project schedule such that ARRA funds cannot be spent before the ARRA Spending Deadline. If it appears that sufficient time does not remain to productively spend all or nearly all ARRA funding before the ARRA Spending Deadline-with a portion of the construction funding therefore expiring-mid-construction- USDOE could prevent commencement of construction and direct early termination of the Project.”
While legal challenges certainly didn’t help the project, the root of the problem at FutureGen 2.0 was the lack a business case including CO2 utilization, Chuck McConnell, former Assistant Energy Secretary for Fossil Energy, told GHG Monitor this week. “This absolutely cements that if you’re not utilizing the carbon dioxide for some type of purpose, specifically enhanced oil recovery, the ability for a project like this to be commercially viable is about zero,” McConnell said. “If you look at the clean coal projects in the portfolio at the Department of Energy, the ones that have failed have no utilization of the CO2. The projects that remain active are the ones that do have enhanced oil recovery as part of the project scope. Because of that they can be more commercially viable.”
Decision Draws Criticism from Lawmakers
Lawmakers will likely want to look into the decision to pull federal funding from the project and what that means for CCS research moving forward, Sen. Joe Manchin (D-W.V.) said at the GCCSI forum this week. “We’re going to be talking to Secretary Moniz again to find out what their intentions are since they scrubbed the project, FutureGen, how we’re going to be able to get up and running with the new technology that we’re going to need,” Manchin said.
Manchin also stated that a fight to save the project may be expected from Sen. Dick Durbin (D-Ill.), a long-time supporter of the effort. “I know that Senator Durbin is very much interested. He’ll be working very hard on this. I don’t think he’ll give up until they bury it deep,” Manchin said. “If he thinks there’s a way to resurrect it he will, or keep it alive and I’m sure of that and I understand that.”
Durbin responded to the announcement earlier this week in a statement, calling the news “a huge disappointment for both Central Illinois and supporters of clean coal technology.” Durbin went on to state that, “a decade-long bipartisan effort made certain that federal funding was available for the FutureGen Alliance to engage in a large-scale carbon-capture demonstration project. But, the project has always depended on a private commitment and can’t go forward without it.”
