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“RULING REGARDING THE GREAT PLAINS COAL GASIFICATION PLANT” mentioning the U.S. Dept. of Energy was published in the Extensions of Remarks section on pages E107-E108 on Jan. 26, 1996.
The publication is reproduced in full below:
RULING REGARDING THE GREAT PLAINS COAL GASIFICATION PLANT
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HON. EARL POMEROY
of north dakota
in the house of representatives
Friday, January 26, 1996
Mr. POMEROY. Mr. Speaker, I rise today to discuss a very troubling ruling regarding our Nation's only commercial-size synthetic natural gas plant, the Great Plains Coal Gasification Plant. This project's importance to North Dakota and the Nation demand the attention of this body and the commissioners at FERC.
Make no mistake, if this decision is approved by FERC, Great Plains will close and the impact will be far reaching. The plant directly employs 640 people and is associated with nearly 7,000 other jobs. Twenty percent less lignite would be mined in North Dakota and Federal and State governments would lose $17.5 million in tax revenue. The total impact of this project on North Dakota is $490 million annually.
In late December, an administrative law judge struck down the settlements reached by Great Plains, three pipeline companies, and the Department of Energy. By doing so, this judge has single-handedly put the future of the Great Plains Synfuels Plant in jeopardy.
The importance of this project to North Dakota cannot be overstated, but Great Plains also has relevance to each Member of this body and their constituents. For starters, the Department of energy shares profits derived from the plant. What's more, the eight-state region served by the Plant would be hit by rate increases totalling nearly $30 million annually, or 10 percent above current costs.
In addition, there are new technologies benefiting all Americans developed at Great Plains on a regular basis. Among the most recent are the production of the rare gases krypton and xenon, and using synthetic gas to produce anhydrous ammonia and ammonium sulfate, two commercial fertilizers.
I am hopeful that the commissioners at FERC will see this ruling for what it is--an administrative law judge run amok, believing he knows more than the agency, industry, and consumers working with this project on a daily basis. If this ruling were to stand, Great Plains would likely have to shut its doors forever. This is simply not right. It is time the absurdity of this decision was brought to full attention of this body and the American people.
What we have here is sophisticated parties entering into contracts and making investments based upon those contracts. Then along comes an administrative law judge who retroactively nullifies the express agreements and imposes his judgement. In the process, he single-
handedly destroys the viability of the entire project.
I would like to outline the most disturbing aspects of this ruling, if it were accepted by FERC.
It requires the plant to sell the product to the pipelines at well-
below the cost of producing the gas. The judge's ruling would set the purchase price at almost $1 per dekatherm below the cost of production and resulting in a loss of $55 million in 1995. This is totally unacceptable.
The ruling would also require the pipeline companies to retroactively refund customers to the tune of $280 million. This cost would no doubt be passed on to the plant itself, further jeopardizing Great Plains' ability to meet its bottom line.
Amazingly, the judge provided more relief than was even sought by the consumers. The judge strayed far from the matters at hand into issues of production capacity at the plant. He ruled that the pipeline companies would no longer have to receive what is produced at the plant--around 160 million barrels per day. Rather, they would only have to receive what was expected to be produced at the plant--131 million barrels per day.
If FERC were to approve the ruling, it would completely set-aside FERC's own Opinion 119 agreement between Great Plains and the four pipeline purchasers which allowed the project to go forward in the first place. Opinion 119 was the basis for further negotiations enabling Great Plains to be sold to the Dakota Gasification Co., a subsidiary of Basin Electric, with a profit-sharing arrangement with the Department of Energy. To abandon Opinion 119 at this time would be a disservice to all parties involved--especially when you consider that it was the consumer representatives themselves that drafted the pricing formula of these gas purchase agreements.
This issue will be decided by FERC in the near future. I urge each Member of that body to give this matter their most careful attention. Their decision will have ramifications on the Department of Energy, my State of North Dakota, and the energy future of this Nation.
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