When soaring costs led the George W. Bush administration to scuttle the original FutureGen project in 2008, the decision dealt a setback not only to efforts to advance "clean coal" technology but also to the small southeastern Illinois community chosen to host the project.
Fast-forward six years: FutureGen has been scaled back and revamped. And the economic development agency in Coles County, Ill., has been quietly working with a another developer on a similar but smaller clean coal project.
The developer, Norway's Sargas AS, wants to build an 80-megawatt coal-fired power plant on the same plot of land in Mattoon, Ill., that was intended for FutureGen. The plant would burn Illinois coal and capture 90 percent of its carbon dioxide emissions. But instead of storing it in a liquid state in deep rock formations like FutureGen, developers plan to sell it for enhanced oil recovery.
Also unlike FutureGen, Sargas wouldn't rely on a $1 billion federal subsidy. But the project would need a way to sell its output -- a quest that likely means a request to the Illinois Legislature next spring.
Illinois already has a Clean Coal Portfolio Standard -- a 2009 law that made it a state goal that 25 percent of electricity used in Illinois should come from clean coal plants.
But utilities in Illinois buy their power through the Illinois Power Agency, and how Sargas or any future clean coal project fits into the agency's annual power procurement plan is unclear.
Citing the state's 25 percent clean coal goal, Sargas proposed to the power agency a "competitive clean coal procurement" -- a process in which it would almost certainly be the lone bidder.
But the power agency rejected the request. And a proposed order awaiting a vote by the Illinois Commerce Commission likewise recommends that the Sargas proposal be omitted from the 2015 power procurement plan.
Paul Gandola, Sargas' U.S. president, said the company may need some clarification of the state's clean coal law to advance.
"We're confident we can get financing once we get the power purchase agreement," he said. "Without the power purchase agreement, we need to get some assistance from the Legislature to correct what seems to be this inadvertent definitional gap."
Illinois' clean coal quest
The Sargas project is the latest in a line of clean coal projects proposed in Illinois. State law defines a clean coal project as one that captures at least 90 percent of carbon dioxide produced.
FutureGen, initially proposed by President George W. Bush, was the first. That project was restructured several years ago and is being pursued at a 1940s-era Ameren Corp. coal plant in western Illinois (ClimateWire, Jan. 17).
Several other projects to be proposed in recent years ultimately fell through, including a $3.5 billion project pitched by Omaha, Neb.-based Tenaska Inc. in central Illinois that drew strong opposition from Exelon Corp. and the Illinois Chamber of Commerce.
Gandola said Sargas chose Mattoon for its "flagship" project after being contacted by the area's economic development agency. The initial site analysis done in preparation for FutureGen was a plus, and the state economic development office helped fund two feasibility studies, including one that looked at the potential of the project to sell CO2 for petroleum production.
Partners in the project include carbon capture specialists Summit Power Group LLC, engineering and construction firm SNC-Lavalin and Blue Source, which has experience developing CO2 pipelines. Vargas has also solicited the help of Michael Mudd, the former head of the FutureGen Industrial Alliance.
The project, which could be online by 2018, would initially involve one 80 MW power producing module. But it could eventually be scaled up to three or four units that could supply a wider swath of southern Illinois with CO2 for oil recovery, Gandola said.
But first the project needs a way to demonstrate to lenders that it will produce a reliable revenue stream. And in Illinois, with its deregulated retail energy market, it means participating in an annual procurement run by the state's power agency.
For its part, the agency suggested it's supportive of the project and its potential to create jobs. But it also concluded that it isn't authorized under state law to require alternative retail electric suppliers, which serve most of the electric load in Illinois, to buy power from Sargas or other unspecified clean coal projects.
And customers who still buy energy from incumbent utilities wouldn't be able to absorb the cost of buying the plant's output under a rate cap provision, the power agency said.
"The agency believes that Sargas's best path to a sourcing agreement covering the full output of its proposed clean coal facility would be through express statutory authority developed by the Illinois General Assembly," the agency said in its filing with the ICC.
The cap limits rate increases from clean coal projects to 2 percent for residential and small commercial customers. And the restructured FutureGen project is expected to eat up at least two-thirds of the cap while providing less than 1 percent of the state's energy.
Sargas said the state's 25 percent clean coal goal is a clear signal of "legislative intent" that clean coal projects be included in the power agency's procurement plan.
The company also cited an appellate court decision earlier this year that affirmed state regulators' ability to require alternative retail suppliers to buy output from FutureGen. Sargas said the opinion gives regulators the same power to require purchases from its project.
Gandola said cost data for the Mattoon project are confidential. But he said the project would work within the 2 percent rate cap in the clean coal law.
"We're confident we're able to produce electricity for less than the FutureGen 2.0 project will," he said.
If denied by the ICC, Gandola said, Sargas would be forced to turn to the Legislature. But the company would seek only to clarify the existing law and said there's no comparison with the legislation sought by Tenaska several years ago.
"It's important to note that we're not looking for a special designation for Sargas as a favored technology," he said. "We just want the IPA and the Commerce Commission to promulgate the competitive bidding for clean coal."
The Illinois Coal Association and labor groups have filed with the ICC in support of the project.
Phil Gonet, president of the Illinois Coal Association, agrees that a legislative "tweak" may be necessary to advance the project, which he views as important despite the fact it would be only about half the size of the scaled-down FutureGen.
"We've kind of taken this attitude that any project, no matter how small or large, if it burns a ton of Illinois coal and advances the technology, it's good," Gonet said.
Meanwhile, the ICC staff and utilities agree with the power agency. They have urged regulators to reject the Sargas proposal.
"Sargas' attempts to inflate aspirational language into hard, unflinching requirements in direct conflict with the [Clean Coal Portfolio Standard] are unavailing," Chicago-based Commonwealth Edison, or ComEd, said in a filing.
Regardless of whether legislation is ultimately required, Coles Together, the economic development group in Coles County, remains optimistic that the project will advance. Angela Griffin, the group's chief executive, said it's one that would benefit not only the Illinois coal industry but also oil producers.
"It's a remarkable opportunity to establish the enhanced oil recovery industry in Illinois," Griffin said.
Of course, local officials have seen other promising projects -- notably FutureGen -- vanish into air.
The December 2007 selection of Mattoon as the site of FutureGen made the front page of newspapers statewide. Griffin's computer screen saver remains an image of residents, gathered in the local theater, reacting jubilantly to the announcement.
But not long after that, the Department of Energy announced it was pulling the plug on funding because of rising costs.
There's been much less publicity surrounding the Sargas project, one of many that local officials looked at after FutureGen collapsed. Griffin said development efforts have been purposely kept quiet in the early stages to avoid the same kind of public letdown.
"We didn't want to invest a lot of resources and community goodwill on a project that doesn't have a significant chance of success," she said.
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