WATERED-DOWN INDIANA GASIFICATION LANGUAGE DIES IN STATE HOUSE

Lindsay Kalter
GHG Monitor
04/19/13

The proposed $2.8 billion Indiana Gasification plant slated for construction just outside Rockport, Ind., experienced yet another setback this week when language that could potentially save the highly contested project died in the Indiana House. The amendment to SB 510, proposed by Rep. Matt Ubelhor (R) and passed last week, would have only required the project to endure a non-binding, informal evaluation by the Indiana Utility Regulatory Committee (IURC). The modification significantly softened previous language in the bill that mandated another full round of regulatory reviews. Although Ubelhor’s amendment passed, the bill containing the amendment was not called for a third reading this week, which was its last chance to advance in its entirety. This leaves only the previous more stringent version of the bill eligible to be salvaged during conference committee negotiations, which will be ongoing until April 29. “The only version of the bill that’s still able to advance is the language that would kill the project,” Indiana Gasification spokesman Mike Murphy told GHG Monitor this week.

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.

Indiana Gasification: ‘We’ll Work With Committee Members’

The language that is now up for negotiation would subject the project to a second full regulatory review by the IURC, which would be 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. Now that conference committee has commenced, the bill’s original author, Sen. Doug Eckerty (R), will begin looking for similar gas or energy bills in which to insert the language. If he succeeds, the language will be evaluated by the chosen bill’s conference committee, generally comprised of four legislators: a House Republican, House Democrat, Senate Republican and Senate Democrat. Otherwise, it will be assigned to its own committee. “We are still hopeful,” Murphy said. “We are planning to work with whatever members of the conference committee that are appointed.” If all four conferees sign off on the language, it will then be sent to the governor, who will have 10 days to veto it, sign it or let it become law without his signature.

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. If no language passes legislature, then Indiana Gasification will wait to see if the Supreme Court will hear the appeal, and on a separate front, will continue the process of obtaining a federal loan guarantee.