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ODC passes agreement
Odessa American - January 29, 2010

ODC passes agreement

BY GEOFF FOLSOM

2010-01-29 14:55:47

With the passage of a $5 million economic development agreement on the final day before a federally mandated deadline, the president of Summit Power Group Inc. hopes crunch time is behind the company and now it will be a much more methodical game for the first of its kind "clean coal" plant.

"To get it done, it’s four yards a carry, four yards a carry," Eric Redman said moments after signing the agreement. "It’s a lot of things that all, individually, have to be done."

Before a packed conference room at city hall Friday, the board of the Odessa Development Corp. approved the deal with Summit that included changes added Tuesday night by the City Council. Summit is required to either provide a letter of credit for the $5 million ODC has granted it in economic development incentives or put the $5 million in escrow.

"It’s been difficult the last week," ODC board member Tom McMinn said. "But the simple fact of the matter is it’s a great project for the city, and it’s been worth whatever effort we had to put in to get it done."

While the company won’t have a letter of credit by the deadline, Redman said Summit will substitute funds and the agreement with the U.S. Department of Energy will be finalized this weekend. That will allow it to receive the first part of a $350 million Clean Coal Power Initiative grant, which is made up of $15 million in federal funds and $15 million the company had to match.

That part is expected to take the company through to the start of construction, Redman said.

Summit looks to begin construction on the $1.7 billion Texas Clean Energy Project, a 400-megawatt coal gasification plant, late this year. The project, planned for a site 20 miles west of Odessa in Penwell, is designed to capture 90 percent of the carbon dioxide it produces, which will be used for enhanced oil recovery in the Permian Basin.

The deal also approves the purchase of 600 acres for the site of the plant for $480,000. ODC, which is supported by a quarter-cent sales tax, will reimburse the cost of the property to the private Odessa Industrial Development Corp., which will transfer the property to Summit.

Getting the site secured was part of the requirement to meet the DOE deadline, which was compressed because the grant was issued as part of federal stimulus legislation. Redman said the American Recovery and Reinvestment Act stipulations, which were intended to get money spent and jobs created sooner, gave the Bainbridge Island, Wash., company only seven weeks to finish agreements from the time it got the grant Dec. 4.

While Summit has built natural gas, solar and wind power facilities, Redman said this would be its largest project. It allows the United States to lessen the need for foreign power sources by using its own natural resources (in this case Wyoming Powder River Basin coal), while reducing its environmental impact.

"It’s just a more clean way to use coal, and it makes coal power more acceptable," he said.

And the coal will produce 3 million tons of CO2 a year, which can be sold in the oil-rich area, Redman said.

That will be a major difference over the FutureGen project, which was proposed for the Penwell site before the area lost out it to a Mattoon, Ill., site in December 2007. Hoxie Smith, the director of Midland College’s Petroleum Professional Development Center who helped led the area’s FutureGen effort, said that project would have required the plant to store 90 percent of its CO2 for four years.

"The fact that it went to Illinois was a big disappointment, but we really felt a commercial project was better," Smith said Friday.

After initially opening as a natural gas-powered plant, the Summit project will slowly convert over to synthetic gas. Redman hopes to have the plant "fully operational" by July 2014.

Before the nail biting of the past week, the project faced several other challenges. After the collapse of worldwide credit markets last year, it became more reliant on government funds to get started. After missing out on a federal loan, Summit awaited the grant money, which will cover about 20 percent of its projected cost.

A bill before the Texas Legislature that will provide it with $100 million in franchise tax credits upon completion went down until the final hours before it was passed in the 2009 legislative session.

Now the company plans to go through a yearlong process of getting to the start of construction. This includes getting air permits and having an environmental impact study performed. But Redman said this process should be made simpler because many of the same actions were taken during the FutureGen process.

The plant will also be designed in more detail with an engineering study between Flour Corp. and Siemens AG, Redman said. And Summit will also work on contracts on everything from coal to transportation to water.

Odessa City Manager Richard Morton said the city would work with Summit if it wants it to build a water line connecting the plant to Odessa, but that Summit has other possible places to find water.

"It’s really up to Summit," he said. "They will probably have several options on where to purchase water from, and we are only one of those options."

Gary Vest, economic development director for the Odessa Chamber of Commerce, said he is working with Ector County on a road to connect Summit’s plant to Interstate 20. And the Texas Department of Transportation will likely have to take part in a project to provide more direct access to Interstate 20.

"That’s going to be a lot of work at a lot of cost," he said. "The governor could have to get involved."

Morton credited ODC, Vest and the staff at the chamber, along with City Attorney Larry Long’s staff and others in city government with bringing the city through the two-year process.

And, while he said Summit would be the first coal-powered plant with this rate of capture, Redman said the technology would continue to improve by the time the company builds its second and third plants. And he’s not ruling out building those plants at the same site, though that would face challenges with transmission, water and financing.

"We would like to come back and build the second plant," he said. "That’s just, at this moment, a thought and a hope. There’s no specific plan."

The agreement calls for Summit to create 125 jobs for 10 years with an annual payroll of $5 million. It must also make "commercially reasonable efforts" to advertise for bids with notice to local contractors and to employ Odessa residents.

It is also expected to create 1,000 construction jobs during the three-year building process. It could also draw interest from around the world.

Vest was expecting to be busy.