INDIANAPOLIS (AP) — The company that plans to sell produce synthetic natural gas from coal in southern Indiana and sell it to the Indiana Finance Authority might need to refund to customers every three years if the energy source costs too much, according to legislation introduced in the Indiana Senate.
Republican Sen. Doug Eckerty of Yorktown told the Indianapolis Business Journal for a story Tuesday (http://bit.ly/W5z2Cv ) that his bill is aimed at addressing concerns by consumer groups and others about a 2010 law supporting the $2.8 billion Indiana Gasification LLC plant proposed for Rockport.
Under the law, the Finance Authority would sell the synthetic gas on the open market and Indiana utility customers would receive discounts or increases on their bills, depending on whether the agency makes a profit or loss. The proposed legislation says Indiana utility regulators could order Indiana Gasification to refund utility customers every three years if the price of its synthetic gas is higher than the market price of natural gas over the period.
The Finance Authority would purchase the gas for an average of $6.60 per million British thermal unit in 2008 dollars over the life of a 30-year contract. When the plant was first proposed about six years ago, natural gas traded at more than $10 per million BTU, but a U.S. shale gas boom has driven prices closer to $3 per million BTU.
"With these changes in mind, many state officials — including myself — believe it is not in Hoosiers' best interests for the state to put taxpayers at risk by subsidizing substitute natural gas," Eckerty said in a statement.
Evansville-based gas utility Vectren projects the synthetic gas would cost customers $1 billion in the first eight years, or as much as $375 for an average retail customer.
Kerwin Olson, executive director of consumer advocacy group Citizens Action Coalition, says the bill "clarifies the Legislature's original intent."
Indiana Gasification has challenged opponents' claim that natural gas prices will remain low, saying natural gas prices historically have been volatile.
Mark Lubbers, Indiana Gasification's project manager, issued a statement Tuesday evening saying Eckerty's bill appears to violate a provision in the 2010 law barring the state from taking any action against a contract between the company and the Finance Authority.
"We've spent in excess of $20 million in reliance on this provision," Lubbers said.
Regulatory approval of the gas supply contract between Indiana Gasification and Indiana Finance Authority was thrown out in October by the Indiana Court of Appeals, which found the 2010 law was not intended to result in certain industrial customers' sharing in the costs or benefits of the purchases, as residential customers would.
Indiana Gasification needs to break ground on the $2.8 billion project by the end of this year under the terms of its state air pollution permit. The company has said the plant about 30 miles east of Evansville will take four years to build and should start producing synthetic gas by the end of 2017.
Information from: Indianapolis Business Journal, http://www.ibj.com