Project fraught with concerns

The Citizens Action Coalition has legally intervened against the construction of a coal-gasification plant proposed by Leucadia to be located in Rockport in Spencer County.

CAC is a consumer watchdog group of 70,000 statewide members. CAC represents residential ratepayers and homeowners before the Utility Regulatory Commission and the state legislature on energy and utility issues and environmental issues related to energy policy.

CAC has, for several years, been following the progress of the proposed coal-gasification plant, via actions by Mr. William Rosenberg and Leucadia Corp., in their dealings with state legislators and regulatory authorities.

We are especially concerned about the economic and environmental ramifications of such a plant. CAC has intervened against the plant for a number of reasons, discussed below.

The most important reason not to build the plant is cost because of the developers' plan to pass on this cost to Vectren and Northern Indiana Public Service Co., based in northwest Indiana, gas customers. The only way the developers can even hope to build the plant is to shift the entire economic risk of construction and additional costs down the road to ratepayers. Furthermore, no one knows what the costs will be.

No engineering study has been completed, and the costs of coal plants are rising rapidly. Indeed, 48 coal plants have been canceled in the United States within the last year due to cost concerns. With respect to Leucadia's proposal, we have heard anywhere from $2 billion, which is highly unlikely, to $5 billion, which is more likely.

Poorly conceived legislation passed by the Indiana General Assembly allows for Leucadia to negotiate contracts with Vectren and NIPSCO Gas first before any costs are known. That is, if the contracts are signed, ratepayers would be locked into paying for the plant via gas purchases by Vectren and NIPSCO for 30 years with no way out.

That's like having a house built without knowing the costs up front, essentially giving the builder a blank check.

The legislation allows for Leucadia to come back in and add costs to the plant with respect to, for example, carbon dioxide if regulations are adopted for that purpose.

Another cost to keep in mind is that of coal. It is questionable whether the plant will use Indiana coal.

The last indication was that Leucadia could not secure coal contracts in Indiana. However, Illinois Basin coal (Indiana coal) increased in price from about $30 per ton in the spring of 2007 to $84 per ton now. Appalachian coal has hovered around $130 to $140 per ton.

While the cost of coal itself has skyrocketed in the eastern United States, the cost of natural gas (a portion of which would be displaced by the synthesized gas from the plant) has plummeted 40 percent since July.

A new mining method employed in Texas and Pennsylvania has significantly increased natural gas supply for the first time in years.

It is likely that the synthesized gas from the plant may never be able to compete with the cost of natural gas, even without the cost of carbon dioxide regulations.

One other point: If the Leucadia plant and the plant proposed by Duke Energy for Edwardsport are built, rate-payers, who receive their electricity from Duke and their natural gas from Vectren, are going to see significant rate increases at a time when we should be looking for least cost options to meet electric and heating demands rather than relying on the highest-cost options.

Environmental matters are also of much concern to us. There has been a lot of talk by Leucadia and its representatives about how clean the plant will be. It's difficult to tell how big the plant will be. However, William Rosenberg, consultant to Leucadia, mentioned at a legislative committee hearing in 2006 that it would be equivalent in size to the gasification plant proposed by Duke Energy.

If that's the case, emissions, according to Duke's calculations for its plant, would be approximately the following per year for the plant proposed by Luecadia: carbon dioxide, 4 million tons; carbon monoxide, 1,100 tons; nitrogen oxides, 1,600 tons; particulates, 1,200 tons; sulfur dioxide, 432 tons; lead, .085 tons and mercury, .006 tons.

Among these emissions, the lung-damaging pollutants equate to 2,200 tons per year of particulates, nitrogen oxide and sulfur dioxide. This amount may be lower than with conventional coal plants, but it's still excessive for the Ohio River Valley, where coal plants (and other industrial facilities) are the cause of many pollution-induced diseases such as asthma and heart attacks.

The fact that local coal plants cause these diseases has been noted by the Department of Health at Indiana University Medical School.

Parts of Spencer, Warrick and Vanderburgh counties are already in failure of EPA air standards for particulates and have been for at least the past three years.

Spencer County industries are already egregious emitters of toxic pollutants, according to EPA findings.

The coal-gasification plant proposed by Leucadia is a very raw deal for Vectren rate-payers and nearby residents.

This project should be considered a subprime investment because it is financially unviable, highly polluting and the full brunt of the costs for ratepayers remain unknown.

Adding insult to injury, the legislation passed by the Indiana General Assembly to force construction of the plant (because banks would not support it otherwise) allows the developers to walk off with the profits while sticking ratepayers with the entire financial risk and cost of the investment.

Please contact Rep. Russ Stilwell and ask him to reverse the legislation and have the plant canceled because it's not needed and ratepayers have better uses for their money.

Smith is executive director of the Citizens Action Coalition.