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By Ari Natter
March 16 — Two carbon capture and sequestration projects are at risk of having hundreds of millions of dollars in Recovery Act funding revoked by the Energy Department if they can't meet spending deadlines set out in the law, current and former Energy Department officials told Bloomberg BNA.
Like the Energy Department's February decision to suspend $1 billion in American Recovery and Reinvestment Act (ARRA) funding for its premiere carbon capture and sequestration project FutureGen, two additional demonstration projects are racing to meet a deadline that requires the funding to be committed by July 1 and spent by Sept. 30. Any funds not spent by then would revert to the Treasury.
“We have some other challenges in the portfolio, and I think you’ll be seeing our responses soon,” Energy Secretary Ernest Moniz told reporters last month.
“I can’t discuss the specifics of these projects with companies until we make decisions. But you are certainly right. There are some additional challenges with the ARRA deadline.”
The projects, the Hydrogen Energy California (HECA) carbon capture and sequestration project, which received over $400 million in federal funding, and the Texas Clean Energy Project, which got $450 million from in Recovery Act funds, are both behind schedule and have yet to begin construction.
“Quite frankly, I think all of them face a very challenging time frame where the project has to be in a fairly significant phase of development or construction for the funds to have been paid out,” Charles D. McConnell, who formerly served as the Energy Department's assistant secretary for fossil energy, told Bloomberg BNA. “Any project that hasn't been significantly developed will be at risk.”
Of the two, the HECA project, being developed by Concord, Mass.-based SCS Energy LLC, is considered to be most at risk of not meeting the spending deadline, said Jim Wood, who served as deputy assistant secretary of energy from 2009 to 2012.
The $4 billion project in Kern County, Calif., would convert coal and petroleum coke into hydrogen, which would be used to fuel a 300-megawatt power plant and produce 1 million tons of fertilizer annually. The carbon dioxide from the project would be transported via pipeline to the nearby Elk Hill Oil Field, where it would be used to increase oil production by an estimated 5 million barrels per year.
However, according to the Energy Department's project website, “delays associated with the finalization of the carbon dioxide off-take agreement and other issues are impacting the HECA project.”
“Although the period of performance for the DOE award ended on January 20, 2015, HECA continues to fund project development independently,” the department said. “HECA has made a request to extend the project, and DOE is evaluating the path forward.”
Privately held SCS Energy could not be reached for comment.
Wood, who now heads the U.S.-China Clean Energy Research Center at West Virginia University, said the HECA project is “further behind than FutureGen.”
“If I had to guess, I would say its a stretch for HECA” to meet the Recovery Act deadline.
The Texas Clean Energy Project, being developed by Summit Power Group LLC, is considered to be further along, but it has yet to finalize financing for the $1.7 billion project, Wood said.
The project, planned for Penwell County, Texas, would generate 400 megawatts of electricity and capture about 2.6 million metric tons of carbon dioxide per year, according to the Energy Department. Three-quarters of that carbon dioxide would be compressed onsite and delivered via existing regional pipelines to depleted West Texas Permian Basin oil fields, the department said.
“They have to get their financing done,” Wood said. “If they don't get that done by summer, then it gets serious.”
A Summit Power spokeswoman said the company is working with the Export-Import Bank of China on financing and is expected to close the deal prior to the Sept. 30 deadline.
The Texas Clean Energy Project entered into a 25-year power purchase agreement with CPS Energy of San Antonio to buy 200 MW of power from the project, and Summit also has announced that Whiting Petroleum Corp. had signed a 15-year contract for the purchase of carbon dioxide, according to the Massachusetts Institute of Technology's Carbon Capture and Sequestration Technologies Program.
The Energy Department in February announced it was halting $1 billion in Recovery Act funding for the $1.65 billion FutureGen project, all but ensuring it won't be built after determining it wouldn't be able to meet the Recovery Act deadline.
“I think it definitely leaves open the door for more of these projects to have money withheld,” said Autumn Hanna, an energy analyst at Taxpayers for Common Sense. “These projects are not in great shape.”
An Energy Department spokesman didn't return requests for comment.
In testimony before the House Science, Space and Technology Committee, Moniz said many of the carbon capture projects being supported by the DOE go beyond the roughly 30 percent reduction in greenhouse gas emissions from existing power plants that the Environmental Protection Agency estimates the Clean Power Plan will achieve by 2030, based on 2005 levels.
“These projects are pushing the edge,” Moniz said during a February hearing held by the committee. “We are not backing away from our clean coal approaches.”
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