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Planck, Natural Gas In; Baard, Coal Out
Oct. 18, 2011 7:14 a.m.
By Jeremy Lydic
WELLSVILLE, Ohio -- A new developer and a new fuel -- natural gas -- have changed the direction of the Ohio River Clean Fuels project and ended, for now, the objections of environmental groups.

Disputes over the proposed coal liquefaction plant came to a head Friday when environmental groups reached a settlement with the project's new developer, Planck Trading of Boca Raton, Fla. In the agreement, coal is being taken out of the production process, with natural gas used its place to make diesel and Naphtha transportation fuels.

Planck, which assumed all controlling interests in the project from the former developer, Baard Energy of Vancouver, Wash., will use natural gas to create a synthetic gas, which will then be used to make the transportation fuels, said its vice president of development, Stephan Dopuch, who joined Planck after holding the same position with Baard.

Under Baard's plan, the plant would have used 20,000 to 25,000 tons of coal daily to produce about 50,000 barrels of fuel every day via a Fischer-Tropsch gasification process. Planck's design uses about 500,000 cubic feet (McF) of pipeline-quality natural gas daily to produce the same amount of liquid fuels, resulting in a shorter, "much simpler process compared to the gasification of coal," Dopuch said.

"It's going to be a much lower capital cost for the plant," he continued. "It's much easier to convert natural gas to [synthetic] gas than it is from coal."

It also reduces emissions of criteria pollutants, such as carbon dioxide (CO2), by "more than half less than the coal project," Dopuch said. CO2 emissions sparked much of the outrage from environmental groups. Sulfur Oxide, or SO2 emissions, are reduced by more than 90%, he added.

"Everybody's pretty excited about that," Dopuch said. "There are five or six criteria pollutants, plus smaller hazardous materials. Some of them are reduced as little as 15%, some are reduced by 90%."

While Dopuch didn't have an exact figure of the revised project's total cost, he expects it to be "more than half less" than the $6 billion estimated to develop the coal liquefaction plant. The footprint will also be slightly smaller than the 522 acres originally needed for the coal liquefaction plant. Planck has already purchased some 425 acres for the project and may eventually purchase the full 522 depending on engineering schematics. "There won't be all that coal coming in, so we won't have to store 30-days worth of coal on the site," Dopuch said.

Planck executives discussed the changes with the Sierra Club of San Francisco and the New York-based Natural Resources Defense Council, who filed challenges against the coal project's building permits in 2008. The plaintiffs accused the Ohio Environmental Protection Agency and the U.S. Army of Engineers of failing to adequately assess the environmental impact of the plant. This forced Baard to rescind its funding request through the U.S. Department of Energy's Loan Guarantee Program, effectively halting the project.

On Friday, Planck and the environmental groups agreed to jointly request that the Ohio Environmental Review Appeals Commission vacate further deliberations on the challenges. Dopuch expects the commission to sign-off on the filing in the next few days so Planck can begin modifying the building permits, he said. What's more, he doesn't expect any further action from the environmental groups regarding the changes to the plant.

"We shared with them what our projections were for criteria pollutants," Dopuch said. "And they're very pleased with that."

Planck has agreed to hold a public comment period regarding the changes in the building permits, Dopuch said.

The Natural Resources Defense Council and the Sierra Club have agreed to stay their legal challenges until the building permits are modified and they've had a chance to look them over. Should the modified permits meet their approval, the groups said they will dismiss the appeals.

"Coal to liquids technology has always been dirty and expensive, and today's announcement makes it clear that it remains a bad bet," said the NRDC's senior attorney, Shannon Fisk. "Four years into this mess, the Baard facility has not been able to sort out its pollution permits or financing because making liquid fuel out of coal simply doesn't work economically or environmentally."

"While we do not support the new refinery plan and believe it is unnecessary no matter what feedstock it uses, this is a giant blow to coal in Ohio and the nation," said the Sierra Club's spokesman, Nachy Kanfer. "We will continue to take on dirty coal plants in the Buckeye state and around the country."

Dopuch said there is no schedule for breaking ground, but Planck is in discussion with contractors interested in performing site preparation. With the changes to the plant, he expects construction to take less time than the coal liquefaction plant, and it will require fewer construction workers. The original estimate of 450 full-time plant employees will also be reduced, he said.

"Much of that had to do with the coal," Dopuch said. "Eliminating the coal use from the plant is going to have an impact on the number of full-time employees at the facility."

Baard secured Planck's involvement last year to help finance land purchases for the coal project. Planck subsequently became interested in how the project might take advantage of recent drilling in the Marcellus and Utica shale regions, and the possibility of using natural gas rather than coal, Dopuch said. Preliminary engineering "proved to us that we could convert this to a natural gas process quite easily," and do the same project using natural gas rather than coal, he said.

"There's been a remarkable change in just the past few years with all the natural gas that's flooding the market," Dopuch said. "Natural gas prices are expected to be very flat for the coming years and even decades because there's so much gas on the market. Prior to that time, there was a great volatility in the price of natural gas."

When Baard first proposed its coal project, gas prices varied from $4 to $13 per McF, making it difficult for investors to put money into a gas-powered plant, Dopuch said. But with recent developments in the Marcellus and Utica shale regions, "it's really increased the amount of natural gas that's available and really made a steady price for us where we can make that decision."

Exploration of the Marcellus and Utica shale deposits in Ohio and Pennsylvania is prompting Planck to explore other opportunities as well, and the company is in talks with oil and gas companies about possible long-term agreements for natural gas. "But right now, we're not committed to anything," Dopuch said.

Progress in the natural gas industry is also improving financing opportunities for the project. "Planck is so far self-funded, and plans to do so for the near future," Dopuch said. "But they are talking to investors who are interested in stepping in."

Although no longer involved with the Ohio River Clean Fuels project, Baard Energy hasn't given up its presence in the tri-state area. Baard's CEO, John Baardson, said the company is entering into the permitting process for gas liquefaction plants in West Virginia and Pennsylvania, with projected output to be about the same as the Ohio River Clean Fuels plant.

With regard to Planck moving forward with the proposed Wellsville plant, he said he has no regrets in letting it go.

"We think it's wonderful," Baardson said. "It's really positive that they're going forward with a 50,000-barrel-a-day facility."

Copyright 2011 The Business Journal, Youngstown, Ohio.



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