Ameren and Nicor Gas have signed 20 year contracts to purchase pipeline quality synthetic natural gas starting in 2010 from a coal gasification plant to be built by Power Holdings LLC in Southern Illinois.

About 10,000 tons/day of Illinois coal from a mine still to be constructed will feed a sendout of 50 Bcf/year or 137 MMcf/d from the plant. The two utilities are purchasing about two/thirds of the output. Ameren said the synthetic gas will make up about 16% of the supply for its utilities AmerenCilco and AmerenIP. A spokesperson said Ameren would take about 15 Bcf/yr at a fixed price slightly below today’s price level.

It will be “a new supply source immune from hurricanes,” the spokesperson said, adding that it also would help revitalize the coal industry in the state. Illinois coal is very high sulfur, but the gasification process takes out almost all the sulfur in a process that creates very little pollution, Power Holdings said. The plant will be located in Jefferson County, Southwest of Mount Vernon, IL.

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