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Legislation may kill Spencer County plant

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ROCKPORT – The future of a gasification plant in Rockport is likely grim after Indiana legislators finally came to terms for new requirements the company would have to meet. The bill will likely halt the venture as developers regroup and determine if they should move forward with plans in a state that seems to not want their services, Indiana Gasification project manager Mark Lubbers said.

After months of negotiations that saw several variants of an amendment to legislation that could have either advanced or limited the project, Senate Bill 494 passed both houses of the legislature in the wee hours Saturday morning. The Senate approved it 43-7 and the House 70-28 in its final vote of the 2013 session.

The bill requires tighter regulatory review of the project if a current contract – that has been amended by a state appeals court – between the state and the $2.8 billion plant’s developers is upheld in the state Supreme Court. It could cause the IURC to seek a renegotiation of terms that IG officials said it has no desires to take part in.

The issue has been filed with the high court, but no word has been issued if they will hear the case. 

Supporters of the latest bill feel its caveats better protect ratepayers should natural-gas prices remain low. However, developers have long said changes to the contract and covenants in legislation that allowed for the contract could kill the plant and the jobs it would create.

Lubbers said the bill would likely delay construction for at least two years and add regulatory oversights that were not mandated in the original legislation, adding to the likelihood that the venture is doomed.

“We have labored hard for seven years to build a project that would have been a game-changing innovation for energy policy, environmental policy and the utility- regulation paradigm. In almost 30 years of working in or around the making of public policy, I have never been associated with anything more far-reaching,” Lubbers said. “I am saddest for the terrific people of Spencer County who were true partners in making this huge project possible. We had begun to dream with them about the future of Rockport and the region. I know they must be sick about this; we are too.”

But the issue is far from over. If the Supreme Court takes the case, an original Indiana Utility Regulatory Commission approval could again take effect. An appeals court opinion that overturned the IURC approval of the contract was not unanimous and developers have asked the court to side with the dissent, which said that the court could have upheld the IURC approval and dealt separately with a definition problem. The appeals court determined that certain language in the contract dealing with retail-end-use customers did not meet intended results and was stricken.

“If the Supreme Court takes the case, we think we have a good chance of winning. If the Supreme Court does not take the case, the project is dead,” Lubbers said. “There was an alternative way for the IURC to have a final look at the project to consider if the contract was still good for ratepayers given supposed changes in the energy market. That alternative was rejected in favor of adopting new standards that the legislature and the governor knew would kill the project.” 

In a press release issued Monday, the Sierra Club, one of the project’s most staunch opponents, applauded the bill and its perceived protections from what the group dubbed the “Leucadia Tax.”

Under terms of the agreement hashed out between Indiana Gasification, its parent company Leucadia National Corp. and the state, ratepayers in the state would be charged about $2.85 each month to cover tax-deferment incentives offered to the company.

According to District 75 State Rep. Ron Bacon, who voted against the measure, such tax breaks are often provided to new companies. He said the only difference in this case is the incentive would be fully transparent and the ratepayers would know where the money was going, which often isn’t the case.

Sierra Club activists and volunteers, according to their release, teamed up with Spencer County Citizens for Quality of Life, which has been fighting for many years the plans to build the coal-gasification project in their community, as have the Citizens Action Coalition, AARP Indiana, Indiana NAACP, Hoosier Interfaith Power & Light, Valley Watch, the Indiana Community Action Association, the Indiana Coalition for Human Services, Spencer County Citizens for Quality of Life, League of Women Voters, the Distributed Energy Alliance and others. 

“Today’s vote is a victory for the Hoosier families, small-business owners, faith leaders, community activists and so many more who demanded that their elected leaders put the public interest over special interests,” said Steve Francis, chair of the Hoosier Chapter of the Sierra Club. “We applaud our elected leaders for putting families first in Indiana.”

The bill’s passing comes much to the chagrin of local developers and supporters, many who have logged countless hours into making the venture a reality.

Lincolnland Economic Development Corp. Executive Director Tom Utter, who had worked with Leucadia and IG on the county’s behalf for close to six years, was more than displeased with the new legislation which he believed to be part of a “political ploy” to pass legislation in the eleventh hour.

“We brought a Fortune 500, world-class environmental economic opportunity to Indiana and the state invited the project through innovative legislation … had a long-term purchase agreement, utility regulatory commission oversight and approval of the agreement. Then, after Indiana Gasification spent $20 million based on those negotiations and agreements, and after Indiana Gasification obtained their state and federal permits, the state of Indiana used its legislat(ure) to unilaterally change those agreements in such a way that renders (the plant) financially impossible,” Utter said

According to Utter, reports from state legislators that the bill wasn’t intended to be detrimental to the project are laughable. He felt if those reports are true, “it represents the textbook example of incompetence in business negotiations by a state.”

“After all these years, after all the original legislation, consideration, negotiation and scrutiny, for a Fortune 500 company on a $2.8 billion project, to go back on the agreement and render the project financially impossible and claim ‘oops we didn’t intend for that to happen’ … cut me some slack,” he added.

At this point, the LEDC is in a holding pattern, waiting to see what happens with the Supreme Court and how IG plans to proceed. Utter said IG’s plans could largely be determined by developers’ feelings toward how much the company can trust the state.

But without Supreme Court support, the writing may be on the wall that the end is near.

“Since this conscious decision was made, the judgment of the state is very clear: neither the legislature nor the governor support the contract or the project. Therefore, the claim made by legislative leadership and the governor that everything is fine if the Supreme Court sides with us is a false promise; no one would invest $750 million where such clear opposition from the government is evident. The institutions that provide the capital to build a plant of this size will not do business in a state that is so cavalier about the $20 million-plus we have already invested,” Lubbers wrote in a release sent to the Spencer County Journal-Democrat. “We will finish the judicial review that has been going on now since December 2011. We will file today a motion for the court to schedule oral argument. We will work hard for a win if the Supreme Court takes the case. If we win, however, only a clear reversal of position by the governor would enable the project to go forward.”

Bacon felt the viability of the company locating in Spencer County was still an option regardless of any need for renegotiation, but all parties involved would have to “look outside the box” for a plan B.

District 74 State Rep. Lloyd Arnold, who also voted against the bill, described the General Assembly’s final vote as “frustrating, very frustrating” because “I did everything I could to get that plant to stay alive.”

Arnold went on to say he was disappointed with how Bill 494 was passed. He said after a proposed Senate Bill 510 died days prior, it took new form as Bill 494 – which had been restructured to add the gasification provisions.

“My fear is now that Leucadia is done,” Arnold added. 

He felt the state had shackled the company and paved the way for them to invest elsewhere.

That may come to the detriment of ratepayers who may wish the state had the company should natural-gas prices skyrocket over the next decade, he went on to say. 

State Sen. Lindel Hume, who represents Spencer County, said he would continue support for the development and the stability it could create for the region and its 2,000 coal-mine workers. According to Hume, the coal industry is a huge component of the economy in southwestern Indiana and IG would provide growth for one of the area’s largest employers.

He went on to say that opponents of the project should look to the long term and not make a knee-jerk reaction to the lower natural-gas prices available today. 

Hume felt the low cost of gas would spur more use and ultimately drive up demand, which would cause higher prices. For that reason he felt IG’s product would be competitive.

He was sympathetic about concerns of potential contamination, and felt the company was trying to take a step in the right direction toward helping curb worldwide pollution issues.

Bill 494 is awaiting approval from the governor. However, reports from the state capitol indicate Gov. Mike Pence is reviewing more than 70 pieces of legislation for veto. It is unknown if the gasification bill is among those.