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Indiana Coal-to-SNG Facility Clears Regulatory Hurdle

Regulators with the Indiana Department of Environmental Management (IDEM) have submitted a proposed air quality permit for a $2.5 billion substitute natural gas (SNG) facility to the U.S. Environmental Protection Agency (EPA) for review.

Phillippa Cannon, spokeswoman for the EPA's Region 5 office in Chicago, told NGI's Shale Daily that under Title V of the Clean Air Act, the agency has until June 21 to review and offer comments to the permit IDEM has written for Indiana Gasification LLC's (IG) proposed facility near the Ohio River in southwestern Indiana.

IG plans to annually use about 3.85 million tons of Illinois Basin coal, and possibly some petroleum coke, to generate 47 million MMBtu/year of pipeline-quality SNG. Under the terms of a 30-year purchase agreement, the Indiana Finance Authority (IFA) will buy about 80% of the natural gas (38 million MMBtu/year) from the facility for eventual resale to residential and small business customers in the Hoosier State.

The facility would also annually produce about 5.5 million tons of liquefied carbon dioxide (CO2), which IG plans to sell to oil producers in the Gulf Coast region for enhanced oil recovery operations. The company estimated that the liquefied CO2 could help produce 10 million to 20 million bbl of domestic crude oil per year.

IG, a subsidiary of New York-based Leucadia National Corp., plans to build the facility near Rockport, which is in Spencer County, IN. In a statement Monday, IG said that if the permitting process proceeds as planned, construction could begin in 2013.

"For Indiana, its energy future is now," said William Rosenberg, an IG partner and the former assistant administrator of air and radiation for the U.S. Environmental Protection Agency (EPA). "The IDEM proposed permit demonstrates that our gasification facility will be the cleanest coal plant ever permitted in the United States and among the cleanest in the world."

Rosenberg said 500 permanent jobs for plant operation and mining activities would be created by the project. About 3,000 temporary construction jobs would also be created to build the plant and an interstate CO2 pipeline.

"This facility demonstrates that clean coal remains an integral part of the 'all of the above' approach to domestic energy production endorsed earlier this year by President Obama and numerous energy experts," Rosenberg said (see Shale Daily, Jan. 26).

The proposed permit from IDEM will allow the facility to emit 127 tons per year of nitrogen oxide (NOx), 634 tons/year of carbon monoxide (CO), 16 tons/year of volatile organic compounds (VOC), 100 tons/year of sulfur dioxide (SO2), 67 tons/year of particulate matter (PM-10) and 19 tons/year of hazardous air pollutants (HAP).

Vectren Corp., an Evansville, IN-based energy holding company whose subsidiaries supply electricity and natural gas to customers in Indiana and Ohio, has called IG's plans uneconomical because of the shale gas revolution and low natural gas prices (see Shale Daily, Feb. 16).

Although Vectren -- which generates nearly 1,300 MW/year, most of it (1,000 MW) at coal-fired power plants -- was also critical of the IG-IFA contract, Republican Gov. Mitch Daniels said he supports the coal-to-SNG plant.

Another Leucadia subsidiary, Chicago Clean Energy LLC, has proposed building a similar $3 billion coal-to-SNG facility on the southeast side of Chicago (see Daily GPI, July 14, 2011), but regulators with the Illinois Commerce Commission voted 3-2 in January to put that project on hold.

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