Coal:

FutureGen Alliance CEO reacts to DOE decision to hold approval of carbon capture site

Last December, the FutureGen Alliance announced Mattoon, Illinois as the site for construction of a government-funded coal-fired power plant that will use carbon capture and sequestration technology. Following the announcement, the Department of Energy did not immediately approve the site, citing high costs. During today's OnPoint, Michael Mudd, CEO of the FutureGen Alliance reacts to and explains why, he believes, DOE has not yet approved the project. Mudd explains what the FutureGen Alliance is doing to try to bring down the cost of the project and responds to claims that his organization is moving forward with construction plans too quickly.

Transcript

Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Michael Mudd, CEO of the FutureGen Alliance. Michael, thanks for coming on the show.

Michael Mudd: It's my pleasure, Monica.

Monica Trauzzi: Michael, in December your organization chose Mattoon, Ill., as the site for the FutureGen project. And FutureGen, for those people that don't know, is basically this $1.5 billion project to build this coal plant that would use carbon capture and sequestration technology.

Michael Mudd: That's correct.

Monica Trauzzi: The Department of Energy has not yet given its approval for the site. So let's get everyone up to speed on where the FutureGen project stands today.

Michael Mudd: OK. The FutureGen project has been going since late 2005. And since then we've gone through a cost for the plant, a design for the plant, and then we went through the site selection process, which took roughly a year. And then another environmental -- to go through the necessary work to get the environmental impact statement, which took another year. That built us up to ready to announce the site, the end of last year. And then in order to keep this project going we made the site announcement subject to Department of Energy's issuing the Record of Decision. The Record of Decision is the last step of what's called the NEPA process that's required before we can actually say that's where the site will be and to satisfy all of the requirements of the environmental impact statement.

Monica Trauzzi: Okay, so right now DOE is not approving the site. Why? What are the reasons that they're citing as to why they're not approving it?

Michael Mudd: We don't know why the Department of Energy has chosen not to issue the Record of Decision. The project itself, it is ready to go. It's the most advanced carbon capture and sequestration project in the world. It has the support of the largest coal companies in the world, including seven companies in the U.S., six companies overseas, so it's an international effort. Cost is very important to us. With inflation of power plants, with the costs going up for power plants, the cost of steel, cost of concrete, the cost of labor, which one cannot avoid, it's just a fact of life, every delay can cost us in the order of $10 million a month. So we're very anxious to get this project back on track and get the Department of Energy to issue the Record of Decision so that we can move forward with the project.

Monica Trauzzi: Okay, but DOE says that it believes that the public interest mandates that FutureGen deliver the greatest possible technological benefits in the most cost-effective manner. They're asking for the cost of the project to be cut down essentially. So is your organization working to find a way to diminish the costs of this project?

Michael Mudd: Yes. One of the first ways, as I said, is to maintain the schedule. FutureGen is on a very fast-track schedule and every month of delay will raise the costs. So getting the project on track to keep the schedule will help to control costs. Further, we have looked at other ways to reduce the costs. Of course, it has to be meaningful. So if one were to downscale the project to a smaller size, that may eliminate the opportunity to have FutureGen be the catalyst to quickly allow carbon capture and sequestration technology, at the full scale, be replicated at other plants, both within the U.S. and overseas.

Monica Trauzzi: The project, by some estimates, stands at about $1.8 billion now and when it initially started it was about $1 billion, so there has been an increase in cost. Do you think that this is an effective way to spend the taxpayer's dollars?

Michael Mudd: I certainly do. And understand the increasing cost is due to inflation. Just like if one had bought a house a year ago, of course with the housing market things have changed, but think about the housing boom any place throughout the country. Cost of labor goes up, cost of the goods goes up to build a plant, and that's what's going on. There's a big boom in the world, especially in China, building the new coal plants, building the new chemical plants, building the new ethanol plants throughout the world. And that has caused a large increase in the costs. They are what they are and whether it's building a power plant for a utility company, a power plant for a developer, or FutureGen itself, our industry and our society needs projects like this in order to advance the use of coal, America's most abundant fuel, America's cheapest fuel, and ensure that it can be done cleanly and efficiently and with lowest cost. The only way to bring those costs down is to build projects like FutureGen.

Monica Trauzzi: So up until the day that you made the announcement of the Mattoon site, had you gotten any indication from DOE that perhaps they would not be giving the approval immediately?

Michael Mudd: We were advised by DOE shortly before we had announced the -- well, actually, the first indication from the Department of Energy was positive. When they issued their environmental impact statement, which is a 30 day notice before issuing the Record of Decision, their press release said that that would enable them to have us announce the site by the end of the year. So we had always had discussions with the DOE along the lines of enabling, announcing the plant site by the end of the year. And then they had advised us shortly before the scheduled date of the site announcement that they would not issue the Record of Decision, once again, no reason given other than saying that they would not issue it.

Monica Trauzzi: So, you have no idea why, in that 40 day time span, why they went from basically one way of thinking to another?

Michael Mudd: That is correct. We do not know why.

Monica Trauzzi: Is there a possibility that FutureGen might actually not end up happening, the way you see things now, the way the DOE is talking?

Michael Mudd: I certainly hope not. FutureGen is too important for our country and for our world to ensure that we can advance carbon capture and sequestration technology and ensure that coal remains a vital part of our energy for, once again, the nation and the world. China is going to continue to build power plants. They say it builds approximately one plant every week. India is going to continue to build coal-fired power plants. I think our nation itself, we also should be building coal-fired power plants only as we allow technology to advance at the same time. That way, with projects like FutureGen, we can ensure for the public good that we can continue to have coal in the money. So I think that it's very important and the alliance members are working passionately to ensure FutureGen can continue.

Monica Trauzzi: One of the things that DOE has said since they didn't make their approval announcement is that the FutureGen Alliance is moving too fast here. Do you think that we need to take a step back and reassess the project and the amount of money that's going into it?

Michael Mudd: I don't think so. Delays cost money. So if we step back -- you know, FutureGen -- as I've gone and given talks about the project throughout the world, one thing that I hear when I was in Europe during the fall, people came up to me and says, you know, in many of parts of the world -- this meeting is to say we need to do projects. We need to do projects. FutureGen is doing the project. They come up and say FutureGen is great. It's great for the country. The U.S. should be proud of it. It's the most advanced carbon capture and sequestration project in the world. So therefore, I think that it's to the advantage and necessary for our country in order to keep FutureGen moving as quickly as we can. There's no reason to slow it down.

Monica Trauzzi: Are there outside investors that could take on a portion of the 74 percent that DOE holds in the project?

Michael Mudd: FutureGen is not a business venture. The FutureGen itself, the alliance members formed FutureGen as a 501(c)(3) not-for-profit entity. So they're not making investments, they are giving a contribution to a project with no expectation of return. There is no return on investment. There's no opportunity for the investors, for the contributors to get the IP, the intellectual property. So therefore, that's the beauty of FutureGen. It doesn't have the typical constraints of many business projects where they have to run reliability, they cannot take the opportunity to advance R&D, perhaps take risks that you would not take with the business. So therefore, while we welcome the opportunity for other companies to contribute to the project, and we do intend to grow the membership, it should not be viewed as an opportunity for investors to come in.

Monica Trauzzi: There's this whole other aspect to the story here and that is that Mattoon, Ill., was chosen as the site. What is the reaction of the people living in that area?

Michael Mudd: Oh, fantastic. Our technical people had a meeting there last week and they came back just with total praise for the local people, just the excitement generated there. When I was there during a public hearing as part of the environmental process, to see the town hall filled with people saying, "We want FutureGen in Illinois," it kind of shows this concept of NIMBY, not in my backyard, is not always true. Here we found towns which say BIMBY, build in my backyard. And it's wonderful to see the excitement of the local people there, the opportunity for jobs, the opportunity for growth. Mattoon is now on the world map. And I certainly hope and expect we will do our best to ensure that FutureGen is built there, because we owe it to the state, we owe it to the people, and we owe it to our country.

Monica Trauzzi: So basically, at this point, a wait-and-see game to see what DOE does next with this?

Michael Mudd: That is correct. At this point we continue to look forward to having the opportunities to meet with DOE, to find positive paths forward for this very important project.

Monica Trauzzi: All right, we're going to end it right there on that note. And I thank you for coming on the show.

Michael Mudd: Thank you, my pleasure.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

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