The Obama administration recently announced its plans to contribute more than $1 billion to the FutureGen project, a carbon capture and sequestration demonstration plant in Mattoon, Ill. As part of the deal, the FutureGen Alliance has agreed to seek 60 percent capture initially and then work up to a 90 percent capture goal. During today's OnPoint, Michael Mudd, CEO of the FutureGen Alliance, responds to criticism of the scaled-back carbon capture goal for the project. He explains why the total cost of the project may be less than previously projected. Mudd also gives his take on international competition to create a commercially scalable CCS plant.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Michael Mudd, CEO of the FutureGen Alliance. Mike, it's great to have you back on the show.
Michael Mudd: Thank you, a pleasure being here, Monica.
Monica Trauzzi: Mike, DOE recently revived the FutureGen project, announcing it plans to contribute slightly more than $1 billion to the effort. It's a reversal of the Bush administration decision, but it's not come without controversy. We've seen Republicans come out in strong opposition as well as some environmental groups that have some concerns about it. And the enviros have begun calling this project YesterGen because it would only seek to capture 60 percent of the missions as opposed to 90 percent that the original FutureGen project would have done. Why such a dramatic reduction in the goals of FutureGen?
Michael Mudd: It's not an accurate way to put it. FutureGen will still be designed for 90 percent carbon capture. It's a very important to advance the technology. When we met with the Department of Energy there were concerns about the cost and also some aspects of the risk. So in our meetings with the DOE the idea came up why don't we start out with 60 percent carbon capture with the goal of still going to 90 percent carbon capture? That is still the key point of FutureGen and, at the end of the day, FutureGen will have 90 percent carbon capture, but to manage the startup risk and the cost we will start out with 60 percent carbon capture.
Monica Trauzzi: But aren't there are ready existing projects that are achieving 60 percent or trying to achieve 60 percent and don't we sort of have a so-what factor if FutureGen is not trying to push past that?
Michael Mudd: Right now there are no IGCC projects operating with carbon capture and sequestration, so the answer no, there are none. Now, the basis of 60 percent carbon capture is because it is basically what is the California standard which is equivalent to natural gas combined-cycle plant. So, we're still doing first of a kind. We're still advancing the technology. We're proving that you can have an integrated gasification plant that integrates gasification with coal, carbon capture and carbon sequestration, a key element to advance the technology and very necessary. So the fact that we are taking a smaller step to 60 before going to the 90 percent carbon capture is that way to ensure that we can do it right and maybe manage the risk a little bit to make it easier to get that ultimate goal of 90 percent carbon capture.
Monica Trauzzi: So, what kind of timeline are you looking at to go from 60 percent to 90 percent and how would that fall in line with a potential cap-and-trade plan?
Michael Mudd: I don't know how it really follows in with a cap-and-trade plan because, you know, there are so many variables out there. But from a technology perspective we will have a four-year window of operation of the plant. And we had come to closure with the DOE on the path forward less than within the past two weeks. So now we're looking at the schedule, looking at the plant to find out when during that four-year test window we would increase the carbon capture from 60 to 90 percent.
Monica Trauzzi: Former Energy Secretary Bodman had pulled funding for this project because of the exponentially increasing costs. And we had discussed that the last time you were on the show.
Michael Mudd: Right.
Monica Trauzzi: Where does the total cost stand now? And if cost was such a concern a year ago, why isn't it still a concern now, especially considering the current economic crisis that we're in?
Michael Mudd: Well, when we had finished the cost, the cost came out to roughly $2.4 billion. That is called as-spent money, that's including the inflation through the construction and operation of the plant and when we met with the DOE that was a concern. And, once again, I want to point out that that cost was not an increase by change of scope or change of design, but because of the very high rate of inflation that was experienced for all power plants, all chemical plants until the downturn that we had in the economy last year. Now what's interesting is that we had assumed 5 percent inflation in going forward to that $2.4 billion cost estimate. What we don't know is perhaps the cost has gone down. The cost of steel, it went up quite a bit, now it's gone down a bit. The cost of labor, it hasn't gone down that much, but right now the firms are not as busy, so the big imbalance that we saw in the marketplace between the amount of projects that wanted to be built and the resources, the people and the steel and so on, that imbalance is not there anymore. So actually the cost may go down, we're not sure. I mean we have to look and say what is going to happen to the economy as we go forward? Will the cost of steel, concrete and labor itself go up, down or be the same? That's part of the element that we'll be looking at as we go forward. In addition, knowing that we do have to find a way to bring the cost down, we're going to be looking at the basic plant design itself and in working with the Department of Energy see how we can bring that cost of the project down further.
Monica Trauzzi: So, DOE isn't handing over the cash just yet. The project needs to go under some sort of review moving forward, is that correct?
Michael Mudd: That is correct. In the terms that we came out to with the Department Of Energy we will be looking at the design of the plant and the cost from now through the end of the year and there will be a milestone decision early next year. We will sit together and look at the design of the plan, look the cost of the plant and then look at how we can fund the plant and there may be a gap between the approximately $1.1 billion that is now on the table from DOE, the $4 to $600 million that we envision bringing in from industry and say what is the best way to close that gap? And part of the work scope during this year is to look at ways that we can bring down the cost and also close that gap.
Monica Trauzzi: Dick Durbin, Rahm Emanuel, Ray LaHood., President Obama, they have all previously supported this project and they also have very influential positions in government. It looks like a pet project and it looks that way to many Republicans and Republicans have come out saying that this is plain out pork barrel spending and this is something that Democrats promised they wouldn't do with the stimulus money. So is this a fair and effective way to be spending taxpayer dollars and is this going to give the economy a boost that it needs in the short term?
Michael Mudd: We have to remember that FutureGen did not start out in Illinois. It wound up in Illinois.
Monica Trauzzi: Right.
Michael Mudd: We went through a very transparent process that we talked about when we were here the last time and Illinois became the site for FutureGen, not because of politics, but because it was the best possible site based on the business standards, based on the technical standards, based on the scientific standards, the geology and so on. So, because it is there it's because it's the best site in the country to build that plan right now. The next thing is that FutureGen has national and worldwide benefits. I mean it needs to be built. We need plants like this to prove that can be operated in an innovative fashion. So, while we definitely appreciate the strong support of the Illinois leadership I would hardly say that it would be considered a project specifically for Illinois. It is of national and world benefit, not just for the state of Illinois. Yes, it will benefit the people of Illinois. Yes, it will have jobs in Illinois, but it will also generate up to 1500 jobs, 15,000 jobs in direct and indirect jobs throughout the whole country. So it is shovel ready. It will generate jobs to benefit the country. It will help to advance coal. So it's got the elements for something that benefits our country and our world, not just the state of Illinois.
Monica Trauzzi: Final question here, you mentioned the worldwide impacts. How closely are you watching international competition on the creation of this specific technology? I mean it seems like there's a race to who can get this done first.
Michael Mudd: OK, I don't see this as competition. There is no competition between the projects. Our world needs many, many FutureGen type of projects. There are many different ways to do it. You can do it with IGCC like FutureGen. In Europe they're doing it with post-capture through what is called a carbon scrubber. They're doing it with a technology called oxy-fuel combustion. There are different ways to do it. Many different spots in the world are using different ways to do it. So it's not this or that or that. If we want to solve this huge problem of advancing the technology to reduce CO2 emissions it's got to be FutureGen and green gen and zero gen and there's other projects that are going on in Europe. That's how we can most rapidly advance the technology which is so important that we need to help to maintain clean energy and to ultimately reduce the CO2 emissions by burning fossil fuels.
Monica Trauzzi: All right, we'll end it right there. Thank you for coming on the show again.
Michael Mudd: Well, thank you. It is my pleasure.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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