DOE Suspends $1 Billion in FutureGen Funds, Killing Carbon Capture Demonstration Project

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By Ari Natter

Feb. 4 — The Energy Department has suspended funding for FutureGen 2.0, all but ensuring that the carbon capture and sequestration project in Illinois won't be built.

The department halted plans to provide $1 billion in American Recovery and Reinvestment Act funding to the FutureGen Alliance—a nonprofit organization made up of coal mining and electric power companies that include Alpha Natural Resources Inc., Anglo American SA, Joy Global Inc. and Peabody Energy Corp.—after it determined the project wouldn't be able to meet a Recovery Act requirement that the money be committed by July 1 and spent by Sept. 30.

“Frankly, the project has got a bunch of challenges remaining,” Energy Secretary Ernest Moniz told reporters following remarks at a conference held by the National Association of State Energy Officials. “If you look between now and July 1, without them having closed their financing, and try as we might, we just don’t see how it gets over the finish line.”

Required Technology 

The project, estimated to cost $1.65 billion, would be the nation's most comprehensive carbon capture and storage (CCS) demonstration project, intended to demonstrate that the technology effectively required for new power plants by the Obama administration is achievable.

Critics have said it's not yet commercially viable.

“While this is an unfortunate outcome, the department acquired valuable information and tangible benefits from the work accomplished to date,” an Energy Department spokesman told Bloomberg BNA in an e-mail. “That progress will continue to benefit our broad clean coal portfolio, helping to further the deployment of carbon capture and storage projects and the development of next-generation technologies.”

Ground-breaking on the project, which involves retrofitting one boiler at a nearly 50-year-old coal plant owned by Ameren Corp. to capture roughly 90 percent of its carbon dioxide emissions, began in August.

Ken Humphreys, chief executive officer of the FutureGen Alliance, told Bloomberg BNA in August that the group still needed to secure $650 million in private debt and equity before major construction could begin.

In a statement provided to Bloomberg BNA Feb. 4, Humphreys said the Energy Department has “directed the suspension of FutureGen 2.0 project development activities.”

Energy Department Issues Directive 

“Despite the Alliance’s commitment to advancing carbon capture and storage technology and cleaner energy from coal, as well as our belief that there are solutions to address the impending deadline, the Alliance must comply with DOE’s directive,” he said.

Of the nearly $1 billion awarded to the project, about $116.5 million has been spent on the power plant portion of the project, with another $86 million invested in the underground storage site and related infrastructure, according to the Energy Department, which maintains that the spending wasn't a total loss.

“Work to date at the site has proven that the deep saline formation remains a world-class location for geologic carbon sequestration, and the Department of Energy will retain the rights to use the property acquired at the site for a future storage project,” the department said.

The first-of-its-kind project, which was scheduled to become operational in 2017, would use oxyfuel combustion, a process in which coal is burned in oxygen instead of air, yielding a flue gas composed almost entirely of carbon dioxide and water. The emissions would them be piped to an underground storage facility site 30 miles away in Morgan County, Ill.

Commitment to Coal Questioned 

Proponents of the project, such as the National Mining Association, said the administration's decision to halt the project “calls into question the commitment of the Administration to the development of clean coal technologies.”

“This decision cannot be reconciled with the Administration’s proposal to require CCS as the only acceptable technology for any new coal-fueled power plant in the U.S.” Hal Quinn, the association's president and chief executive officer, said in a statement. “FutureGen has secured the permits, possesses an investment-grade power purchase agreement and has broken ground.”

Opponents of the project, which include the Friends of the Earth, an environmental group that challenged the project in court, and taxpayer advocacy groups, hailed the department's decision.

“Today marks another nail in the coffin of the ‘clean coal' myth,” Friends of the Earth said in a statement. “After 10 years and millions of wasted dollars, the Department of Energy announced what we knew all along: Coal has no place in our energy future.”

Hope for Future of CCS 

“Ding dong, FutureGen is dead,” Taxpayers for Common Sense said in an e-mail to reporters.

The project was first conceived in 2003 under the Bush administration but was discontinued in 2008 for reasons that included increasing costs. The Obama administration resurrected the project in 2010, renaming it FutureGen 2.0.

A second, larger CCS project being constructed by Southern Co. subsidiary Mississippi Power in Kemper County, Miss., is further along, but it also has run into major cost overruns and delays. The $5.5 billion, 582-megawatt plant is scheduled to become fully operational in the first half of 2015, according to the company.

“Our hope is that industry and government will continue to find ways to develop CCS technology for a cleaner, more secure energy future,” Humphreys, of the FutureGen Alliance, said in his statement.

To contact the reporter on this story: Ari Natter in Washington at anatter@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com