DOE suspends stimulus funding for Calif. carbon-capture project

By Manuel Quiñones | 07/10/2015 01:06 PM EDT

The Department of Energy has suspended Recovery Act funding for a California project to trap carbon emissions from a coal-fired power plant, an agency spokeswoman said.

This story was updated at 4:09 p.m. EDT.

The Department of Energy has suspended Recovery Act funding for a California project to trap carbon emissions from a coal-fired power plant, an agency spokeswoman said.

DOE had set aside $408 million for Hydrogen Energy California LLC’s effort to produce power from coal and petroleum coke, trap most of its CO2 emissions, and use the carbon for making fertilizer and stimulating oil wells. Of the total, $275 million was American Recovery and Reinvestment Act dollars.


But DOE says HECA has not met certain benchmarks. The company has, for example, recently said it failed to secure customers for the enhanced oil recovery portion of the project.

That means DOE is withholding $250 million in funding for HECA. DOE has already reimbursed the company $153 million. The agency has said the money was well spent because it has helped enhance knowledge of such projects.

DOE says it made the decision months ago as a way to protect taxpayer money. The agency is leaving the door open to reconsidering its funding decision depending on the project’s progress.

The administration’s focus on researching and developing carbon capture technologies for power plants is part of an effort to make coal viable while also heeding concerns about climate change.

HECA’s woes with Recovery Act money are not unlike those of FutureGen 2.0, a now-defunct carbon capture and sequestration project in Illinois that also failed to meet DOE development benchmarks.

Lawmakers did not make stimulus spending open-ended; the main idea was to boost the economy. So recipients had to commit funds by this summer and spend them by the end of September.

At a conference earlier this year, after DOE scrapped FutureGen, the agency’s fossil energy chief Chris Smith expressed concerns about HECA. He suggested the company might not get all its stimulus dollars (E&ENews PM, Feb. 5).

DOE pulling the plug on FutureGen, a public-private partnership, meant the end of that project. The same does not apply to HECA, which can go on with private financing.

Hydrogen project CEO James Croyle responded during the conference paraphrasing Mark Twain: "The rumors of my demise are greatly exaggerated."

He said the company may indeed lose out on some federal funds but added, "It doesn’t matter to us," because the loss wouldn’t be enough to kill the project.

HECA was one of the projects U.S. EPA used to substantiate a proposed rule to mandate carbon capture technology for all new coal-fired power plants.

EPA critics have said carbon capture technology is not available enough commercially for its proposed mandate. They point to problems with FutureGen, HECA and other projects.

Agency defenders, however, are confident such a rule could pass legal muster if EPA decides to stay the course on requiring carbon capture for all new coal plants.

Beyond problems meeting DOE benchmarks, HECA is also facing strong resistance from environmental groups. They have expressed concerns about transporting the coal and petcoke, on-site waste, and the plant’s water use, particularly during the ongoing drought in the West.

Earlier this year, the Sierra Club and resident associations asked the California Energy Commission to halt certification proceedings for the plant. This month the commission decided to give HECA managers more time to find a buyer for the plant’s carbon emissions.

"It’s time for the Commission to follow through with the criteria it set and terminate this project in six months when the developer will inevitably not have come up with all the outstanding information and CO2 contracts," said a Sierra Club statement.

Environmentalists have long been divided about carbon capture. Some see the technology as helping with the climate effort. Other say large investments are better made to move the world away from fossil fuels.

DOE has long been more positive about Summit Power’s Texas Clean Energy Project, which has permits and carbon agreements in place. Still, the spending deadline could affect the project. DOE says it has spent $99 million of the $200 million allocated.