A blog post

Summit requests year extension

Posted on the 02 June, 2014 at 3:49 pm Written by in Uncategorized

Summit Power Project Manager Laura Miller addresses members of the Odessa Development Corporation in December at its meeting at city hall.

OA file photo
Summit Power Project Manager Laura Miller addresses members of the Odessa Development Corporation in December at its meeting at city hall.

May 31, 2014
By Celinda Hawkins chawkins@oaoa.com

The Texas Clean Energy Project is still a go even though Summit Power officials are requesting yet another extension, which will provide time to realign the project and reevaluate costs.

So far, the project has been in development for four years, and now company officials are hopeful another year will help bring the project to financial closing and eventual construction.

On Thursday, Laura Miller, project manager for Summit Power, met with Odessa city leaders to give an update on the TCEP, a coal-fired power plant, to be located on a 600-acre site in Penwell, and designed to capture 90 percent of the carbon dioxide it produces. During the past four years, the price tag for the project has gone from an estimated $2.2 billion to the current figure of $3.5 billion due to increases in labor and materials costs.

During a conference call at the Thursday meeting, Julio Friedmann, Deputy Assistant Secretary for Clean Coal with the DOE, explained the delays and the importance of the project to the DOE.

During the call Thursday Friedmann updated the group of about a dozen city leaders and stressed the importance of the project and told them that the DOE needs the project to happen. But, Miller explained that he stressed that the difficulty of a project of this magnitude often includes unforeseen obstacles. But the DOE remains committed he said.

“The Department of Energy is committed to the Texas Clean Energy Project, part of the U.S. Department of Energy’s portfolio of major clean coal demonstration projects,” Friedmann said in an email Friday.

Miller made sure the DOE participated in the meeting to give an update.

“I wanted Odessa leaders to hear from Washington that this is an extremely important project not only for Odessa but for the whole country,” Miller said.

“This was an excellent opportunity for the community to hear how important this project is to the Department of Energy,” said Odessa City Manager Richard Morton. “It bolstered our confidence and desire to move forward with the project and it is important to the country because the DOE is behind it.”

State Rep. Tryon Lewis (R-Odessa) said he was glad to hear that the DOE is placing a high priority on the project.

“It was very good to hear just how much of a priority that the department of energy is placing on this project,” Lewis said. “They have not given up on this project — far from it. The delays are expected in a project that is this big.”

Guy Andrews, economic development director for the Odessa Chamber of Commerce, said he is still optimistic that the project will break ground and that the technology is invaluable once it is developed.

“It has a lot of value in our country especially since it is new technology that will be duplicated once the initial plant is built,” Andrews said. “In talking to the DOE, I understand why this takes so long — it has a lot of moving parts and there are all kinds of things that can transpire.”

The meeting preceded the Monday release of a report by the Environmental Protection Agency which is expected to announce new stringent restrictions on coal-fired power plants. The report  says the new regulations will ultimately increase electricity costs, costs jobs and be a drag on economic growth.

In December, the city council and the Odessa Development Corporation agreed to an extension with a June 30 deadline on a $5 million jobs grant and a contract on the 600 acres given to Summit by the ODC.

The council and ODC are set to consider a year-long extension for both items and will put the extensions up for a vote next month, Miller said.

Morton thought sure the council would support the extensions requests.

“While locally, we can put some deadlines on them, and we have, and they continue to show progress on extending the local deadlines,” Morton said. “I would assume that the council will continue to support the project — there is no reason not to.”

Miller added that Summit is requesting an extension from the DOE and is renegotiating the contract for the sale of electricity to the City of San Antonio.

Financial closing for the project is now set for June 2015 with groundbreaking to follow.

Moving forward, Miller said the DOE is on track to make sure Summit is keeping up with milestones.

The TCEP has made some major milestones in the past five years, including securing $450 million in federal funding from the Clean Coal Power Initiative, $600 million in federal tax breaks, financing through a Chinese bank and longterm contracts for the sale of electricity, CO2, urea, sulfuric acid, and argon gas, there will be challenges in the future.

“There are still significant challenges in the future, as Summit Power works to find a way to reduce the extremely high labor costs that prevented the project from having a financial closing and groundbreaking in late 2014,” Miller said.

And so the next step is shaving costs, Miller said.

“We need to cut hundreds of millions in costs,” Miller said during an interview Thursday. “We need to streamline the project.”

Over the next year, the companies will reevaluate costs to see where cuts can be made.

Plans call for the 400-megawatt plant for the hiring of 1,500 to 2,000 workers for the build out of the plant.

Miller said the plan now is to go from three contractors to one. The German companies Siemens, which is supplying the gasifiers, and Linde, which will supply the chemical block that removes the CO2 are still involved, as well as Sinopec, the Chinese company that signed to build the infrastructure. Miller said another as yet unnamed company in China will take Sinopec’s place at the table.

Still, the hope from community leaders is that the TCEP will make it to the finish line.

“I do think that the project is viable,” Lewis said. “Any time that you get into something that is groundbreaking technology and (involves) huge money, things can happen. It is an enormous and important project and I think the prospects are good.”

Morton agreed.

“This would be a great thing for Odessa and the Permian Basin,” Morton said. “It will be a great demonstration project for the environment.”

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