TWO MORE CCS PROJECTS TO END IN ILLINOIS, TEXAS

Tenaska Announces Cancellation of Taylorville, Trailblazer

Tamar Hallerman
GHG Monitor
6/28/13

Tenaska Energy pulled the plug on its two remaining carbon capture and storage projects late last week, acknowledging that cheap natural gas and renewables’ growing market share have diminished the business case for coal. The Omaha, Neb.-based power producer said June 21 that it has abandoned plans for its Taylorville gasification project in Illinois and its Trailblazer post-combustion capture plant in west Texas, citing unfavorable project economics. “A number of market and policy changes have occurred since [the 2006-2007 time period, when both projects were initially developed], all of which have contributed to our belief that these projects are no longer viable,” Tenaska President of Development Dave Fiorelli said in a statement.

Fiorelli said Tenaska would instead focus its efforts on natural gas and renewable energy projects elsewhere. Fiorelli said in an e-mail that the company would not close the door to CCS in the future. “We have well-developed expertise in commercial-scale carbon capture that could potentially be applied elsewhere, and we would not rule it out,” he said. Tenaska listed the loss of political support for a 30-year power purchase agreement with the state of Illinois as the final omen for the Taylorville project. Meanwhile, the power producer said the lack of a federal price on carbon or equivalent regulatory policies ultimately led to Trailblazer’s demise.

Both projects had also faced well-funded opposition campaigns from groups like the Sierra Club and, in Taylorville’s case, Exelon Corp., Illinois’ largest utility. Those groups cheered Tenaska’s announcement. “Coal is a bad bet for utilities everywhere, and after years of fighting the inevitable, Tenaska learned this the hard way,” Bruce Nilles, senior director of the Sierra Club’s Beyond Coal Campaign, said in a statement. “The cost of coal will continue to rise as clean energy, especially wind and solar, get cheaper and cheaper. This great news in Texas and Illinois showcases what is happening across the nation … coal is the energy source of the past.”

Taylorville Makeover Not Enough 

Tenaska’s announcement comes a year after the power producer tried dramatically retooling Taylorville’s design in order to get political support from the Illinois legislature. Tenaska had been seeking approval from the body for years to sign off on a 30-year power purchase agreement with the state of Illinois for the original project design, which included integrated gasification and natural gas combined cycle units and a CCS component. The contract would have required the state’s major utilities to purchase power from the 602 MW facility regardless of cost, even if the electricity was priced higher than power generated from more conventional sources. The project had netted a $2.6 billion loan guarantee from the Department of Energy and $417 million in federal tax incentives. 

In a last-ditch effort to gain the support of the legislature last summer, Tenaska offered to delay the coal gasification and CCS portions of the plant until there were “more favorable market conditions,” and instead construct only the NGCC portion of the facility. Tenaska said at the time that the effort would shrink the project’s price tag to $1.1 billion. But that effort ultimately failed to gain enough support in the legislature, with the new proposal never even brought up for a vote. Taylorville got even more bad news last summer when the Illinois Environmental Protection Agency withdrew the project’s air permit at the behest of environmental groups, saying it would reevaluate the proposal to see if it uses ‘best available control technologies.’

While Taylorville had at one point enjoyed approval from both chambers of the legislature, it was never at the same time. Much of that political support had waned following a fierce lobbying campaign from a group of several business, energy and trade groups. Funded largely by Exelon Corp. the Stop Tenaska’s Overpriced Power (STOP) Coalition focused squarely on the project’s high price tag—$3.5 billion—and its effect on ratepayers in the state, as well as the environmental disadvantages of coal compared to cleaner-burning sources like natural gas.

Tenaska Had Sought Fed Money for Trailblazer

While Taylorville was constantly in a state of limbo in the Illinois legislature, its sister project, Trailblazer, never truly got off the ground. Proposed for west Texas’ Permian Basin, the $3.5 billion project would have installed Fluor Corp.’s post-combustion amine capture technology to a new-build 600 MW supercritical pulverized coal plant and pipe emissions to nearby depleted oilfields for enhanced oil recovery operations. While Tenaska had completed a front-end engineering and design study and obtained some of the necessary air quality permits for the project, it failed to secure adequate financial support to move forward. Trailblazer did not secure significant federal money under DOE’s Clean Coal Power Initiative in 2009, nor did it net many other federal incentives like grants, loan guarantees or tax credits. Because of that lack of economic certainty, the project’s proposed schedule had slipped for years.

As recently as last fall, though, Tenaska officials had told GHG Monitor that they were willing to be “patient” in order to obtain the federal financial support to move forward with Trailblazer, saying they were encouraged by DOE’s emphasis on carbon capture, utilization and storage at the time. “I think that federal agencies, particularly DOE, have come around to the view over the years that capturing CO2 for enhanced oil recovery projects presents the most economic opportunity for moving carbon capture forward at this time. We think we’re well positioned given that recognition now to do that,” Tenaska Vice President of Environmental Affairs Greg Kunkel said in an October interview. 

Opponents of Trailblazer emphasized the plant’s water usage in an area prone to heat and drought. “The Tenaska Trailblazer project never made sense for West Texas,” Whitney Root, leader of local opposition group Texans Against Tenaska, said in a statement this week. “Not only would it have taken precious water from our families, farmers and local businesses, but it would have sucked up our tax dollars and left us with nothing but pollution.”