Leucadia National Corporation is a holding company that, through its subsidiaries, engages in mining & drilling services, telecommunications, healthcare services, manufacturing, banking and lending, real estate, and winery, among other businesses, including joint ventures with Berkshire Hathaway.
Leucadia’s land based contract oil and gas drilling operations are conducted by Keen Energy Services, LLC (“Keen”), formerly known as Goober Drilling, LLC. In November 2009, the Company acquired the remaining equity interests in Keen that it did not previously own and Keen became a consolidated subsidiary.
- Indiana Gasification SNG project
- Leucadia Illinois Plant
- Louisiana Lake Charles Gasification
- Mississippi Gasification SNG project
Leucadia, Syngas Plants, and DOE Funding
Title XVII of the Energy Policy Act of 2005 (EPAct 2005) established a loan guarantee program within the Department of Energy (DOE) to foster "innovative technologies." In a federal loan guarantee program, the government guarantees that it will pay lenders if a borrower defaults on a loan, helping borrowers obtain credit on more favorable terms than would be available in private lending markets.
In 2008, DOE issued solicitations for $6 billion in loan guarantees for projects that incorporate carbon capture and sequestration (CCS) or other emissions-reducing carbon technologies into retrofitted and new coal plants, or industrial coal gasification activities, and $2 billion for loan guarantees for advanced coal gasification projects.
In 2009, the DOE selected several projects for final loan guarantee negotiation. These projects included:
- Leucadia's Indiana Gasification SNG project – loan coverage of $1.6 billion to produce Substitute Natural Gas (syngas) from coal for sale to customers in Indiana, with proposed carbon capture for enhanced oil recovery.
- Leucadia's Mississippi Gasification SNG project – loan coverage of $1.689 billion to produce syngas from petroleum coke feedstock, for sale to electric utilities in the region, with proposed carbon capture for enhanced oil recovery.
Leucadia has also received federal financial support for the estimated $2 billion Lake Charles Gasification plant in Louisiana, including $1 billion in tax-exempt Gulf Opportunity Zone bonds and $800 million from the American Recovery and Reinvestment Act through the U.S. Department of Energy (awarded in two phases). In July 2010, Leucadia asked for an additional $400 million in Gulf Opportunity bonds. On April 29, 2011, the DOE announced that it intented to prepare an EIS for the Leucadia/Lake Charles Cogeneration project. DOE selected this project for an award of financial assistance through a competitive process under the Industrial Carbon Capture and Sequestration (ICCS) Program.
Proposed Indiana SNG plant
In 2008, Leucadia, through its subsidiary Indiana Gasification LLC, proposed Indiana SNG, a facility that would convert 3 million tons per year of Indiana coal into substitute natural gas (SNG). The project has two "development partners," E3 Gasification and Johnston & Associates.
In November 2009, the U.S. Department of Energy announced that it was considering the project for a federal loan guarantee. The project eventually got loan coverage of $1.6 billion from the U.S. Department of Energy's Energy Policy Act of 2005.
In February 2010, legislation to grant eminent domain for a carbon dioxide pipeline starting at the proposed plant and leading to oil fields in Texas cleared the state Senate, and was sent to the House Commerce, Energy, Technology and Utilities Committee. E3 Gasification LLC is working to develop the project, including a pipeline that would run underground from the Rockport plant down to Louisiana and Texas. Coal would be burned in Indiana to produce energy, while the carbon dioxide produced would be captured and then pumped through the pipeline, to be injected into oil fields and used to apply pressure to increase oil production in Texas and Lousiana.
On December 16, 2010, Indiana Governor Mitch Daniels made the announcement that the Indiana Finance Authority (IFA) Board had voted unanimously to approve the $2.65 billion project in Spencer County. According to the agreement, IFA will enter into a 30-year contract with Indiana Gasification, LLC, a subsidiary of Leucadia National Corporation, to purchase 38 million MMBtus (approximately 17 percent of the total used by non-industrial customers in the state) of substitute natural gas when SNG production begins in late 2015. Indiana coal will be used to produce the SNG, as well as other byproducts - sulfuric acid, argon, other rare gases, and vitreous slag for building roads. The IFA has completed its negotiations and will file a petition to the Indiana Utility Regulatory Commission (IURC) for approval of the agreements related to this project. Indiana Gasification is in the final stages of negotiating its loan guarantee with the U.S. Department of Energy. Depending on the completion of the IURC process and the environmental impact study, construction is set to commence in early 2012.
On February 8, 2011, Indiana Senators rejected an imminent domain measure for a pipeline to move carbon dioxide from the proposed Indiana SNG plant to buyers on the Gulf Coast. The vote was 28-21, with 16 of the chamber's 37 Republicans opposed. Without the legislation allowing eminent domain for pipelines, lead investor Leucadia doubts it could secure the federal guarantees on construction loans for the plant. A top Leucadia official in Indiana, Mark Lubbers, once a chief adviser to Gov. Daniels, is expected to confer with company and legislative leaders about bringing the eminent domain measure back to the General Assembly.
On November 22, 2011, state regulators approved construction of the coal gasification plant and a 30-year contract for a state agency - Indiana Finance Authority - to purchase its output, a move that could raise utility bills for NIPSCO and other utility customers across the state. The Indiana Finance Authority will buy most of the synthetic natural gas the plant produces and then sell it to the state's utility companies. Those utilities in turn will charge their customers for any difference in price between the synthetic natural gas produced by the plant and prices on the open market. There also are provisions to return some of the profits to utility customers if the synthetic natural gas costs less than gas on the open market.
Proposed Leucadia Illinois Plant
The company is proposing a $3-billion Chicago coal gasification plant at an abandoned steel site along the Calumet River in Cook County, Illinois. With pollution in Cook County above the limits allowed by federal law, the U.S. Environmental Protection Agency in 2005 issued an edict: before more pollution can be added to the air in the area, a new polluter must first prove that an existing polluter has reduced its emissions. To fulfill that criteria, Leucadia wants to persuade the state to let it purchase the permission to pollute from the owners of the industrial site, a coke facility that has been idle since 2001. The Illinois Environmental Protection Agency has opposed the sale of the pollution offsets, saying the coke plant's pollution was never factored into Cook County's toxic air because it stopped operating years before the edict was issued.
The gas plant site, 11400 South Burley Ave., is where LTV Corp. once manufactured coke used in making steel. The facility closed in December 2001 when LTV filed for bankruptcy. Alan, Steve and Simon Beemsterboer, who acquired the site in bankruptcy court, made plans in 2004 to restart the coke plant near Lake Calumet. But those plans never materialized. Now the Beemsterboers, through an entity called Chicago Coke LLC, are fighting the Illinois Pollution Control Board to allow it to sell its permission to pollute, along with the property, to Leucadia. The move follows years of meetings and letters, outlined in legal documents, between Chicago Coke and the Illinois EPA, which repeatedly denied the company's request to sell its permission to pollute, saying that the intent behind emission reductions is to clean up existing pollution, not to give previous polluters a commodity to sell on the open market.
Chicago Coke filed simultaneous appeals to the Illinois Pollution Control Board and the Chancery Division of Cook County Circuit Court, arguing that the state EPA had given the go-ahead to pollute when it was planning to restart the coke plant and that it should have the right to sell that permission. The Circuit Court dismissed the case this month, leaving it up to the Pollution Control Board to decide. A hearing date has not been set.
March 2011: Illinois Governor vetoes proposed Leucadia plant
On March 14, 2011, Illinois Gov. Pat Quinn vetoed two coal gasification plants that would have locked in rates for the facilities, saying he was committed to "clean coal" but that the Power Holdings Company plant and a proposed $3-billion Chicago plant at an abandoned steel site along the Calumet River by Leucadia would result in higher utility bills for Illinoisans. Leucadia reportedly lobbied intensely for the plant.
June 2011: Governor to vote on Leucadia plant
On June 1, 2011, legislation needed for three multibillion-dollar coal gasification projects to move forward in Illinois - FutureGen 2.0, Power Holdings Company plant and a proposed $3-billion Chicago plant at an abandoned steel site along the Calumet River by Leucadia - arrived at Governor Pat Quinn's desk after winning final approval in the General Assembly the night before. Quinn must decide whether to sign or veto S.B. 2062, S.B. 1533 and S.B. 2169, relating to FutureGen 2.0, Leucadia and Power Holdings, respectively.
The Leucadia and Power Holdings bills allow for the companies to construct synthetic gas plants on Chicago's South Side and in southern Illinois, respectively. Leucadia's plant would cost about $3 billion, Power Holdings about $2 billion. Together, the plants would create a market for more than 4 million short tons of high-sulfur coal annually. Quinn, a Democrat, vetoed previous Leucadia and Power Holdings bills in March 2011, citing "inadequate consumer protections" (PCT 4/15). Since then, the companies have worked with the governor's office in an effort to get the plants passed. Phil Gonet, president of the Illinois Coal Association, said: "I would be shocked if Quinn does not approve these. I think they're ready to hit the ground running."
Quinn has until late August 2011 to sign or veto the measures.
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Resources and articles
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- United States and coal
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- Federal coal subsidies
- Proposed Synfuels Plants in the United States
- Integrated Gasification Combined Cycle (IGCC)
- Existing U.S. Coal Plants
- Coal-to-Liquids Fuel Promotion Act of 2007
- Petroleum coke
- Coal-to-Liquids Coalition
- Coal-to-Liquids in Australia
- Coal-to-Liquids in China
- Greenhouse Gas Limits in 2007 Energy Act
- "2009 Form 10K Edgar Online, Filed Feb. 26, 2010.
- "Phasing Out Federal Subsidies for Coal" Synapse Energy Economics Report, April 2010.
- "DOE Announces Projects to Receive CCS Funding" Coal Gasification News, January 2, 2010.
- David Phillips,"Denbury Resources: No Rocky Mountain High From Depleted Oil Fields" bnet, April 2, 2010.
- "Stopping the Coal Rush" Sierra Club, accessed November 2011.
- "Indiana Coal to SNG," company presentation, accessed June 2008
- Notice of Intent to Prepare an Environmental Impact Statement for a Loan Guarantee, Federal Register, November 12, 2009
- "Phasing Out Federal Subsidies for Coal" Synapse Energy Economics Report, April 2010.
- Evan Shields,"State lawmakers laying plans for coal-gas pipeline to Rockport" Evansville Courier & Press, February 9, 2010.
- "State reaches agreement on plans to build SNG facility, bring jobs to southern Indiana" State of Indiana press release, Dec. 16, 2010.
- Ted Evanoff, "Gas plant backed by Daniels hits snag" IndyStar, Feb. 14, 2011.
- Keith Benman, "Gasification plant gets green light, NIPSCO rates could go up" nwi.com, Nov. 22, 2011.
- Julie Wernau, "Seeking permission to pollute" Chicago Tribune, Jan. 21, 2011.
- Steve Daniels, "Quinn vetoes kill 2 proposed coal-to-gas plants" Chicago Business, March 14, 2011.
- Sayeh Tavangar, "Illinois passes bills for 3 gasification projects" Platts Energy Weekly, June 2, 2011.