House committee deals blow to Rockport synthetic-gas plant

Questions about a synthetic natural gas plant proposed for southern Indiana led a House committee Wednesday to strip tax breaks for the $2.6 billion project from a bill that already has passed the Senate.

The Ways and Means Committee also eliminated language from Senate Bill 344 that would have taken industrial customers–those who use so much natural gas they strike their own purchasing contracts–out of the customer deal that led the General Assembly to OK the plant in 2007.

“I am still for the project,” said Rep. Suzanne Crouch, R-Evansville, who voted for the Indiana Gasification plant in 2007 and wrote the amendments on Wednesday.

“But I believe the General Assembly has provided enough tools for the project,” Crouch said. “When is enough enough? When do we move from a public-private partnership to a publicly subsidized project?”

Others, though, expressed concern about whether the project should move forward at all. Rep. Win Moses, D-South Bend, said he initially supported the idea because it would convert Indiana coal to a cleaner fuel and because it seemed like it would save Hoosiers money.

Now, he said, the plant will not be required to use Indiana coal and the savings are unclear.

“I really hoped the governor would pull the plug,” Moses said.

The Ways and Means Committee voted 22-2 to remove the Indiana Gasification language from SB 344.

Officials from Evansville-based Vectren Energy appear to be largely responsible for the Ways and Means Committee’s action on Wednesday. The company has been lobbying against the tax breaks for the project and has appealed a decision by the Indiana Utility Regulatory Commission to OK the 30-year contract between Indiana Gasification and the Indiana Finance Authority.

“We were pleased to see nearly every member of the committee acknowledge that the natural gas world has changed, and that there are serious questions about building a plant that will burden Hoosiers with 30 years of expensive substitute natural gas,” said Mike Roeder, Vectren’s vice president of government affairs and communications.

That contract calls for the state to purchase most of the synthetic natural gas that the plant produces annually. The state will pay a price determined by a formula that takes into account a fixed rate plus fluctuations for the cost of coal and other factors. The state will then sell the gas in the market.

Customers of the state’s natural gas companies–including Vectren but also Citizens Gas, Nisource and other utilities–will then share in half of the profits the state earns or pay more to make up for most of the losses.

But there’s a question about whether industrial customers were originally meant to be part of the deal. Vectren and some lawmakers say yes. Indiana Gasification and other lawmakers say no, which is why those customers were seeking legislation to clarify. That provision was stripped from the bill.

Mark Lubbers, who is spearheading the Indiana Gasification project for parent company Leucadia National Corp., has said the project will be a great deal for Hoosiers. SNG produced at the Rockport plant will cost about $6.60 per dekatherm, which he said will be cheaper than natural gas over the 30-year period.

But Vectren officials–-and now some lawmakers-–-are arguing that the recent emergence of shale gas–which is exhumed from the ground through a process called hydraulic fracturing–has driven prices lower and making the SNG deal questionable.

Currently, natural gas prices are below $3 per dekatherm and futures prices remain below the $6.60 that will be the approximate SNG price.

“Shale gas deposits around the country have increased supply at a historically low price,” Roeder said. “We will continue working with legislators on this topic for the remainder of the session.”

Rep. Matt Ubelhor, R-Bloomfield, was one of two lawmakers who voted against the amendments to take the Indiana Gasification language out of the bill. A manager at a coal mine, Ubelhor said he’s confident the project is still a good one and will create jobs and a market for Indiana coal.

“My fear is that this is the first step toward elimination” of the project, Ubelhor said.

But Rep. Terry Goodin, D-Crothersville, said there is no legislation to eliminate the project. “This will just be a bigger magnifying glass” on it, he said.

Because SB 344 passed the Senate with the Indiana Gasification language in the bill, it remains alive for this session. That means it could still be amended into other legislation.

Ways and Means Chairman Jeff Espich, R-Uniondale, said the issue might not be dead but said it “needs to continue to be reviewed.”