Omaha firm places $3 billion bet on Sweetwater power plant Coal-fired plant would capture CO2, sell it to operators for EOR projects
Mella McEwen
Midland Reporter-Telegram
03/02/2008
mywesttexas.com
An Omaha company is placing a $3 billion bet in West Texas in hopes of hitting a trifecta.
But company officials are confident they're holding a winning ticket.
Tenaska Inc. has just announced plans to develop on a 1,919-acre tract east of Sweetwater and north of Interstate 20 an advanced coal-fueled electric generation plant that is also able to capture up to 90 percent of the carbon dioxide (CO2) that would otherwise be emitted into the atmosphere. The captured CO2 would be sold to oil and gas producers for use in enhanced recovery projects.
Over $2 billion will be spent in construction with the total cost of the plant just over $3 billion. The plant would create up to 2,000 jobs at peak construction and over 100 permanent jobs during its operation. It would generate 600 megawatts, enough to power about 600,000 homes.
David Fiorelli, president and chief executive officer of Tenaska's Business Development Group, explained that the Sweetwater site was chosen because "We wanted to be reasonably close to the EOR markets. We could have moved 50 to 100 miles west and been in the middle of the EOR market, but we felt it was important to have access to more than one rail line. We will be using a significant amount of coal from the Powder River Basin and our experience and the experience is of others is it's best to have more than one rail carrier so there is competition and you have reduced costs. This is a unique site in that we have Union Pacific and Burlington Northern Santa Fe on the borders of our property and we won't have to construct additional rail lines."
When the company announced the proposed plant, Fiorelli reported that an air permit application had just been filed with the Texas Commission on Environmental Quality. Word has just been received, he said, that the commission deemed the application complete, "which sets a statutory timeframe to act on the permit. The commission now has a nine-month period to act on the application, with the ability to extend that period another three months."
While the air permit application is pending, Fiorelli said the company is proceeding on other fronts. "We retained an engineering firm last year to do preliminary engineering on the coal power plant and we have retained a separate engineering firm to work on the CO2 portion of the plant."
A final decision on building the plant will be made in 2009, with completion set for 2014.
He said several factors will play into the final decision, including government action.
"One of the things that's important to point out is the fact that we're assuming in our economics that there will be some sort of federal climate legislation related to CO2 emissions," Fiorelli said by phone from his Arlington office. He cited the Lieberman-Warner bill that would establish a carbon market and provide incentives for projects like Tenaska's Trailblazer Energy Center. He acknowledged that the Lieberman-Warner bill "could take a different form" but said company officials are confident some form of legislation will be signed into law. "Our choice was, rather than wait until a bill passes, analyze it and decide to take action, we decided the odds were strong something like Lieberman-Warner would pass were high enough that we moved into development so we would be ready to move ahead with financing and construction."
The second part of Tenaska's trifecta bet is a market for the CO2 and the electricity generated at the plant. Fiorelli said the company has already had discussions with a number of operators interested in purchasing the CO2 who tell him they are anxious for new avenues of supplies. To deliver its CO2, he said the company could construct a pipeline to deliver the CO2 to customers or to an existing CO2 pipeline, or it could sell the CO2 directly from the plant site to another party experienced in transporting CO2. Company officials estimate that the volume of CO2 expected to be sold from the plant could be used to recover enough oil to add over $1 billion a year of oil production to the Texas economy.
Part three of the trifecta bet is the technology, and Fiorelli said the company is confident CO2-capture technology will work. The proposed plant, he acknowledged, is a significant scale-up from what has been done before, but capture technology has developed significantly in the last 10 to 15 years and "there's no reason to think there's a limit on its improved efficiency."
In fact, he said, the company is studying multiple technologies for removing CO2 that are different from each other, and discussing those technologies with vendors. The plant is so early in the permitting process, he said, that company officials don't yet have to choose a technology.
Tenaska, he said, has also been watching developments in the proposed FutureGen project but the Sweetwater plant will differ in that it will use modern coal pulverization technology rather than coal gasification. But, he said, the company will likely respond to the Department of Energy's Request for Information for commercial power projects that include CO2 sequestration.
"There are indications the DOE will consider sequestration from technology other than gasification," he said. "Ironically, our other project is an IGCC (Integrated Gasification Combined Cycle) plant and is located in Illinois."
Tenaska has also had discussion with environmental groups, which have traditionally opposed coal-powered plants. But Fiorelli said he has found them disposed to proposals that would sequester the CO2 the power plants generate. They are also proponents, he said, of figuring out what to do with existing coal-powered plants and feel the technology developed for the Sweetwater plant could be adapted by other plants.
Fiorelli is confident the $3 billion wager on Texas electricity markets will pay off.
"The electricity market in Texas is overly dependent on natural gas for fuel," he said. "The market is working to add non-natural gas generation, primarily additional coal-fired plants, wind and a number of nuclear projects. There will be a move towards more non-natural gas-fired generation in Texas."
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Mella McEwen can be reached at casell@mrt.com. |
