DRAFT REPORT FINDS ‘SIGNIFICANT,’ ‘UNRESOLVED ISSUES’ AT HECA

Tamar Hallerman
GHG Monitor
7/19/13

A recently released joint federal and state report assessing the potential environmental impacts of SCS Energy’s Hydrogen Energy California (HECA) project says the proposed carbon capture and storage facility faces “significant, and for the most part, unresolved issues.” The preliminary analysis from the California Energy Commission (CEC)—which also folds in a draft environmental impact statement from the Department of Energy—was published in the Federal Register today and concludes that the $4 billion, 390 MW integrated gasification combined cycle (IGCC) facility planned for a greenfield site near Bakersfield, Calif., is noncompliant or has outstanding issues related to 15 technical areas, including water use, biological resources and greenhouse gas emissions.

The more than 2,000-page assessment highlights HECA’s projected water use and says it “may not be consistent with Energy Commission and other state water policies.” It says the level of water pumping needed to operate the IGCC facility—which will produce hydrogen, electricity, CO2 for enhanced oil recovery and urea fertilizer for the region—could lead to well interference and “exacerbate overdraft in the Kern County sub-basin.” The state and federal report also questions the project’s lack of concrete strategy for managing the thousands of tons of gasification waste that is expected to be generated at the facility annually. It notes that while HECA’s developers are examining reuse markets for the waste, which could be used to produce roofing granules and blasting grit, the lack of concrete plans could be troublesome in the future. If the waste is not reused and is simply disposed of, “the large quantity of waste would significantly impact Kern County landfills and possibly compromise the county’s compliance with [state regulations],” says the report, which notes that the waste could be classified as hazardous under California law.

Report: Environmental Justice Population Nearby

The assessment also notes that HECA’s proposed location in southern California is near a “buffer area” for an environmental justice population, and says that particular attention needs to be paid about the plant’s emissions and its potential impact on public health. “Currently, several members of the technical staff have identified significant impacts from the construction and operation of the proposed HECA project, including the associated EOR operation. Staff does not have the necessary information to determine if these impacts can be mitigated below a significant level. If not, some or all of these impacts could have adverse or disproportionate impacts on an environmental justice population,” the report concludes.

The CEC and DOE also note uncertainties that center around HECA’s dispatchability component. When current developer SCS Energy took over the project from previous owners BP and Rio Tinto in 2011, it chose to modify the IGCC facility’s design, allowing plant operators to ramp up or down the electricity and urea fertilizer produced by HECA depending on demand. The design change was meant to add more flexibility to the project, while allowing the operators to make more money depending on which commodity is more in demand. But the CEC and the DOE point out that the plant’s dispatchability component can also impact the greenhouse gas emissions the facility would produce. “Different operating profiles may need to be evaluated to determine which set of operating conditions represent actual operations and worst case impacts,” the report says. “Some operating profiles may result in the facility not complying with certain regulatory requirements” like the state’s greenhouse gas emissions performance standard, it says.

The report says HECA, though, “should comply” with all air quality laws and standards and “should not result in significant air quality impacts.” It underscores the local economic activity and tax revenue the project’s construction and operation could generate for the surrounding area, to the tune of $843 million in indirect and induced economic output and $28.9 million in annual property tax revenue for the power plant and rail spur, which will transport the coal used for the project from New Mexico. But the environmental assessment does note HECA’s “significant, unavoidable impact” on some species in the area like the Blunt Nosed Leopard Lizard, a protected species in California whose habitat is near the Elk Hills oilfield that will be flooded using CO2 captured from HECA.

‘Comprehensive Review’

A HECA spokeswoman did not comment on the specifics of the report but said the project’s developers are “participating in a rigorous and comprehensive permitting and review process to ensure the project results in a safe, environmentally responsible and economically beneficial project for Kern County and the State of California.” “HECA welcomes the [report] as an important milestone in the permitting process,” spokeswoman Tiffany Rau said in a written statement. “HECA is currently reviewing the 2,000+ [page report] and will respond by the comment deadline. We look forward to participating in upcoming public workshops and working to resolve open issues.”

The report is now open for review under a 45-day comment period, which will inform the CEC’s final analysis that will be used by the state agency at evidentiary hearings later this year to decide whether to grant SCS Energy permission to construct HECA. It will also contribute to DOE’s final environmental impact statement, expected in the coming months, which will help determine whether the Department awards the project’s developers the lion’s share of the $408 million provided in the project’s cooperative agreement. That money, if approved, would help share the cost of the project’s gasifier, syngas cleanup system, combustion turbine, steam generator and turbine and multiple other CO2 utilization components.

IG Report Questioned Project Management

The assessment marks the second report in less than a month in which DOE questioned the project. An audit report from the Department’s Inspector General last month said DOE is managing HECA “at an increased risk level,” and questioned the Department’s decision to allow HECA’s developers to “substantially decrease” their cost-share responsibility for the early stages of the project after it changed ownership. The IG said DOE officials undertook a “substantial increase in upfront risk” to the tune of $133 million in HECA’s first phase if SCS is ultimately unable to secure funding for the next phase without adequately reconciling new projections for factors like interest rates, operations and maintenance costs and property taxes for the retooled project.

The pair of reports come as SCS officials aim for a fourth quarter financial close date for HECA, despite the fact that the project timeline has slipped slightly as SCS waits for the California Energy Commission to issue its final staff assessment and DOE its final environmental impact statements. SCS must also secure a record of decision from DOE to move forward, as well as negotiate a power purchase agreement and secure financing for the now $4 billion project.