INDIANA GASIFICATION SEES SMALL VICTORY IN STATE HOUSE

Lindsay Kalter
GHG Monitor
04/12/13

Members of the Indiana House advanced legislation this week that could save a proposed $2.8 billion gasification plant slated for construction just outside Rockport, Ind., which so far has been fraught with legal and legislative roadblocks. The House adopted an amendment to SB 510 proposed by Rep. Matt Ubelhor (R) this week that significantly softens the bill’s previous amendment—language passed by the Utilities and Energy Committee last week—that mandated another full round of regulatory reviews. Ubelhor, a coal miner, called the legislation in its previous incarnation a “jobs-killing bill,” saying the project would not survive another formal, in-depth analysis. “My amendment is an attempt to take the bill as it sits and turn it into something we can all support,” Ubelhor said during the bill’s second reading on Wednesday. “There are several provisions in the bill that will kill the Rockport synthetic natural gas plant as it stands today. I’d like to fix some of those issues that are out there.”

The Spencer County project, under development by Indiana Gasification, a subsidiary of Leucadia National Corp., plans to gasify 3.5 million tons of Illinois Basin coal annually, converting the feedstock into substitute natural gas that would be sold to the state at a pre-negotiated rate. Project opponents, led by Vectren Corp., the primary natural gas-provider for central Indiana, have expressed doubt that natural gas prices will rise enough to make the 30-year agreement beneficial to residents. The utility predicted the contract would cost ratepayers $1 billion over the plant’s first eight years of operation. It has also argued that the agreement is limiting for the state’s natural gas providers and called into question the lengthy and unchecked nature of the contract.

The previously amended version of the bill would have subjected the project to a second full regulatory review by the Indiana Utility Regulatory Commission (IURC), which would have been overseen by state lawmakers. Initially, the bill left the fate of the purchasing agreement in the hands of Indiana’s Supreme Court. If the court had determined the contract to be invalid, it would have been sent back to the IURC, leaving it back at square one. Ubelhor’s amendment instead calls for the IURC to conduct an informal, non-binding analysis to determine whether natural gas prices will indeed rise over time—a finding that would deem the contract advantageous for ratepayers. “What my amendment does is simply take a look at the provisions and allow the IURC to take a look at it,” Ubelhor said. “My amendment simply says let’s take another look at natural gas prices, coal prices, take a look at what we said was a good deal in 2011 and report back to the general assembly and the governor.”

Opposition Calls Amendment “Toothless”

Opponents of the amendment insist its lax nature will fail to sufficiently protect ratepayers. Rep. Suzanne Crouch (R) said Ubelhor’s amendment would not only deprive the public of financial protection, but it would leave ratepayers out of the IURC’s reevaluation entirely. “The part about this amendment that I have the most problem with is that it does not require for an IURC to have a public hearing to take a second look. No public notice, no public hearing,” she said at a hearing this week. “If the public is shut out of the process, they cannot know what’s going on.” Rep. Matt Pierce (D) said the new language amounts to nothing more than a request for “some friendly advice” from the IURC. Rep. Eric Koch (R) also stood in opposition to the amendment, calling the measure “toothless.” “It has no force of law,” Koch said. “The amendment doesn’t have a definition of savings, it doesn’t have a request to the IURC to establish a true-up period, and it doesn’t have ratepayer protection.”

The recent amendment is the latest in a string of changes that have watered down the original SB 510, which would have forced Indiana Gasification to reimburse the state every three years for any losses that customers might incur as a result its 30-year purchasing agreement. Under the original agreement, the developer would only have to reimburse ratepayers for losses once, at the end of the 30-year deal. Indiana Gasification has said the three-year provision would serve as a death knell for the project. The measure that passed the House committee last week would have left it to the IURC to determine the intervals at which reimbursement reviews would need to occur. However, developers said if the contract would have been required to endure yet another stringent evaluation, the project would have remained on shaky ground. The legislation is scheduled for a third reading April 15, at which point the House will vote on the bill in its entirety.

Meanwhile, the Indiana Supreme Court is conducting its own evaluation of the contract in a process entirely separate from the legislation. The high court is ruling on a previous Court of Appeals decision on disagreements that Vectren and Leucadia had about specific language within the contract. Both sides are in the process of filing briefs.