By JOE NOCERA
New York Times
March 15, 2013

Sometime this summer, in Odessa, Tex., the Summit Power Group plans to break ground on a $2.5 billion coal gasification power plant. Summit has named this the Texas Clean Energy Project. With good reason.

Part of the promise of this power plant is its use of gasified coal; because the gasification process doesn’t burn the coal, it makes for far cleaner energy than a traditional coal-fired plant.

But another reason this plant — and a handful of similar plants — has such enormous potential is that it will capture some 90 percent of the facility’s already reduced carbon emissions. Some of those carbon emissions will be used to make fertilizer. The rest will be sold to the oil industry, which will push it into the ground, as part of a process called enhanced oil recovery.

Let us count the potential benefits if plants like this became commonplace. Currently, some 40 percent of carbon emissions come from power plants. The carbon-capture process Summit will employ “is the only technology that can reduce CO2 emissions from existing, stationary sources by up to 90 percent,” said Judi Greenwald of the Center for Climate and Energy Solutions. To put it another way, this technology could be a climate-saver.

Second: Environmentalists could call off their war against the coal industry, thus saving tens of thousands of jobs, as climate-destroying coal-fired plants were replaced by clean coal gasification plants. Third: Gas-fired power plants, which already emit 50 percent less carbon than coal-fired plants, could become even cleaner if they included the carbon-capture technology. Fourth: Using carbon emissions to recover previously ungettable oil has the potential to unlock vast untapped American reserves. Last year, ExxonMobil reported that enhanced oil recovery would allow it to extend the life of a single oil field in West Texas by 20 years.

Fifth: China. Too often, American environmentalists ignore the reality that the Chinese are far more concerned with economic growth than climate change. (And who can blame them? All they want is what we already have.) The Chinese are relentlessly building coal-fired power plants, which Western environmentalists couldn’t stop even if they tried. But if power plants like Summit’s — which will turn CO₂ into profitable products — were to gain momentum, that would likely catch China’s attention. A reduction of carbon emissions from Chinese power plants would do far more to help reverse climate change than — dare I say it? — blocking the Keystone XL oil pipeline.

The Summit executive most closely associated with the Texas Clean Energy Project is Laura Miller. Her environmental credentials are unimpeachable. As the mayor of Dallas in 2006, Miller founded the Texas Clean Air Cities Coalition to fight a plan by TXU Energy, a big power company, to build 11 new coal-fired plants. During a trip to Europe, she saw both coal gasification and carbon-capture technologies being used. When she left the mayor’s office, she signed up with Summit and became a passionate advocate of the Odessa plant. Eric Redman, the president and chief executive of Summit Power, describes her as “the public face of the project.” (As a young man, by the way, Redman wrote one of the classic works about Congress, “The Dance of Legislation.” It’s still worth reading.)

So who could possibly be against coal gasification and carbon capture? Ratepayers, for one, mainly because carbon-capture technology is so expensive. In 2011, American Electric Power, or A.E.P., canceled a big carbon-capture project, in part because it was clear that state regulators were not going to allow the company to pass on the additional costs to its customers.

To help make the project economically viable, the Texas Clean Energy Project is getting a $450 million grant from the Department of Energy. (Absurdly, the Internal Revenue Service is requiring Summit to pay taxes on the federal grant, which means that a third of it will go right back to the government.) But if the plant proves successful — as I believe it will — and others replicate it, the costs will inevitably come down, and federal help won’t likely be needed.

And the other opponent? None other than Bill McKibben, Mr. “Stop Keystone” himself. When I e-mailed him to ask whether he supported carbon-capture for enhanced oil recovery, he replied that if carbon were sent back into the ground “the worst possible thing to do with it is to get more oil above ground.” He continued, “It’s time to keep oil in the earth, not to mention gas and coal.”

To me, at least, his answer suggests that his crusade has blinded him to the real problem. The enemy is not fossil fuels; it is the damage that is done because of the way we use fossil fuels. If we can find a way to create clean energy from fossil fuels, then they can become (as they used to say) part of the solution instead of part of the problem.

Thankfully, Laura Miller and Eric Redman understand that, even if Bill McKibben doesn’t.

SAN ANTONIO, TEXAS (September 12, 2012) – At the 12^th annual U.S.-China Oil & Gas Industry Forum (OGIF) in San Antonio, Texas, Summit Power Group (Summit) yesterday introduced major new project participants who will advance and help assure the financing and construction of the Texas Clean Energy Project (TCEP). The news was announced at an industry luncheon attended by all of the companies involved with TCEP from the United States, Europe and Asia.  After remarks by federal, state, and local elected and appointed government officials, the event culminated with the signing of a Memorandum of Understanding by representatives of Summit, Sinopec Engineering Group and The Export-Import Bank of China (“Chexim.”) 

TCEP, a large scale commercial coal gasification power/polygen project that Summit is developing near Odessa, Texas, will capture ninety percent (90%) of its carbon dioxide for use in enhanced oil recovery (EOR) by producers in the Permian Basin of West Texas, boosting U.S. oil production by some seven (7) million barrels per year and generating thousands of jobs in Texas and throughout the U.S.  TCEP will also produce more than 700,000 tons per year of urea as fertilizer for U.S. farmers and a long-term, 200 megawatt supply of ultra-clean and low-carbon electric power for CPS Energy, the municipal electric and gas utility of San Antonio.

At the event, Summit also announced that Minnesota-based CHS Inc. is the purchaser of TCEP’s entire urea output, which is expected to reduce annual U.S. imports and U.S. dependence on foreign urea fertilizer by more than ten percent (10%).  CHS, a Fortune 100 company owned by farmers, ranchers, and cooperatives across the United States, has signed a long-term off-take agreement with Summit.  On Tuesday, CHS also announced that it will make a small equity investment in the project.  TCEP will boost U.S. domestic production of urea fertilizer for American farmers by approximately twenty percent (20%).

Major transactions now in progress and memorialized in the memorandum of understanding signed by the parties yesterday include a new engineering, procurement, and construction (EPC) contract for TCEP’s gasification and chemical block, which Summit intends to award to the Sinopec Engineering Group (SEG).  SEG is the newly consolidated engineering subsidiary of Sinopec Group, one of the world’s largest companies, and has extensive experience in the design engineering of coal conversion projects and other major oil, gas, and chemical plants in more than fifty (50) countries worldwide.  SEG will select U.S. construction contractors for the TCEP chemical block, which like TCEP’s power block, will be built by U.S. construction workers. 

Under a previously signed EPC contract for the power block, Siemens will provide a state-of-the-art Siemens high-hydrogen combustion turbine to be manufactured by U.S. workers in North Carolina.  Selas Fluid Processing Corporation, a U.S. affiliate of Linde, will continue to provide key equipment and otherwise support SEG in the chemical block EPC contract.

To support SEG’s new EPC contract, Summit and SEG also disclosed that the Export-Import Bank of China (“Chexim”) is expected to be the sole financial lender to TCEP, subject to completion of the EPC contract and Chexim’s customary due diligence.  Summit stated that the Chexim loan amount, which will be based on a percentage of the dollar amount of SEG’s EPC contract, will be sufficient to satisfy all of TCEP’s needs for project debt.   

As previously announced, Whiting Petroleum Corporation has executed a contract to purchase a major portion of TCEP’s captured carbon dioxide for use in Whiting’s enhanced oil recovery operations in Texas.  Denver-based Whiting is a publicly traded independent exploration and production company, and operates one of America’s largest EOR projects at its North Ward Estes Field in the Permian Basin. 

TCEP’s total sales of captured CO₂ for EOR will be approximately 2.5 million tons per year.  In Texas EOR operations, the captured CO₂ is effectively a solvent that helps release trapped oil for recovery.  No “hydro-fracking” is involved, and any injected CO₂ that comes to the surface with the produced oil is re-captured, re-compressed, and re-injected, resulting ultimately in permanent geological sequestration of CO₂.

Other previously announced contracts noted at the luncheon ceremony include the long-term power purchase agreement (PPA) with CPS Energy of San Antonio, the largest municipal electric and gas utility in the United States, and a contract with Houston-based Shrieve Chemical Company to purchase TCEP’s output of sulfuric acid.

Because of TCEP’s high carbon capture rate, the power CPS Energy buys from TCEP for San Antonio consumers will have less than one-tenth the CO₂ emissions per kilowatt-hour of power from a plant that burns coal and less than one-quarter the CO₂ emissions per kilowatt-hour of power from a plant that burns natural gas.  CPS Energy is the first utility in the U.S. to enter into a PPA that will provide power with such ultra-low CO₂ emissions from a commercial scale, hydrocarbon-based power plant. Shrieve Chemical Co. will market all of the approximately 50,000 tons per year of merchant-quality sulfuric acid that would otherwise have been vented to the atmosphere as sulfur dioxide in the absence of TCEP’s low-emissions gasification technology.     

The total cost of TCEP will be more than $2.5 billion.  Of this amount, $450 million will be provided by a cost-sharing award announced in 2010 by the U.S. Department of Energy (DOE) under DOE’s Clean Coal Power Initiative (CCPI), a Congressional program to aid development of power projects that capture their carbon dioxide.  The Siemens and Linde equipment used at TCEP are commercially proven and allow CO₂, sulfur, and mercury to be removed from the project’s gas stream prior to combustion, leaving only a high-hydrogen/low-carbon clean “syngas” as the sole fuel that is burned. 

TCEP has been repeatedly described by U.S. Department of Energy officials as one of DOE’s “flagship” projects that will prove the commercial viability of carbon capture, utilization and storage (CCUS), whereby carbon dioxide is used to increase domestic oil production instead of being released to the atmosphere and will ultimately be stored safely and permanently in the ground – at least 99 percent of it for at least 1,000 years, as mandated by Texas State Law.

Summit is in discussions with a number of potential U.S., European, and Asian sources of equity to accompany Chexim’s provision of project debt for TCEP.  Summit’s bankers and financial advisors for this purpose include the New York office of Royal Bank of Scotland (RBS), the New York and Beijing offices of the China International Capital Corporation (CICC), and Washington, D.C.-based Wellford Energy – representatives of each attended today’s San Antonio announcement.  TCEP has already obtained all the permits and contracts needed to allow financing and construction of the plant.  Financial closing and start of construction for the project are now targeted for the end of 2012 and the beginning of 2013 respectively.  From the start of construction, the project will require between three and four years to be built, commissioned, and achieve commercial operation. 

“This is a milestone event for TCEP,” said Donald Paul Hodel, the Chairman of Summit Power Group and a former U.S. Secretary of Energy and U.S. Secretary of the Department of the Interior under President Ronald Reagan.  “Because of its full commercial scale and its exceptionally clean use of coal as a chemical feedstock instead of a fuel, TCEP has always been recognized as a project of true global significance.  The coming together in San Antonio of so many U.S., European, and Asian entities to help ensure that TCEP is financed and built underscores the full extent of domestic and international support for TCEP.  We are pleased to have created a global, collaborative initiative that will not only create U.S. jobs and so many valuable products to meet U.S. needs, but raises the bar in clean energy and supply chain innovation.”

Other attendees at yesterday’s announcement included Scott Klara, Principal Deputy Assistant Secretary for Fossil Energy for the U.S. Department of Energy; Samuel Coleman, Regional Administrator for Region 6 of the U.S. Environmental Protection Agency;  and representatives of the buyers of TCEP’s four major products:  CHS Inc., Whiting Petroleum, CPS Energy, and Shrieve Chemical Company. Also in attendance were Sinopec Engineering Group, Siemens, and Linde, the key TCEP contractors; The Export-Import Bank of China as the prospective project lender; potential U.S. equity investors in TCEP; Chinese government officials; and local Texas elected officials who have supported TCEP, including State Sen. Leticia Van de Putte, D-San Antonio, State Rep. Tryon Lewis, R-Odessa, and City of Odessa Mayor Larry Melton.  Other attendees included representatives from Lawrence Livermore National Laboratory and the Clean Air Task Force, one of the national environmental groups that has strongly supported TCEP from the outset.

For more information about the Texas Clean Energy Project, please go to the website: http://www.texascleanenergyproject.com, or contact Laura Miller, Director of Projects, Texas, for Summit Power Group at lmiller@summitpower.com, 214.763.0600