Ikelic - Alliance Digital Repository

STATUS OF COAL PROJECTS (Underline denotes changes since June 1994)
COMMERCIAL AND R&D PROJECTS (Continued)
would be the highest 10 percent price cap. During these negotiations, Columbia Gas withdrew from the project. On May 13, 1982,
it was announced that a subsidiary of Pacific Lighting Corporation had acquired a 10 percent interest in the partnership; 15 percent
from ANR's interest and 25 percent from Transco.
Full-scale construction did not commence until August 6, 1981 when the United States Department of Energy (DOE) announced
the approval of a S2.02 billion conditional commitment to guarantee loans for the project. This commitment was sufficient to cover
the debt portion of the gasification plant, Great Plains'
share of the coal mine associated with the plant, an SNG pipeline to con
nect the plant to the interstate natural gas system, and a contingency for overruns. Final approval of the loan guarantee was
received on January 29, 1982. The project sponsors were generally committed to providing one dollar of funding for each three dol
lars received under the loan guarantee up to a maximum of $740 million of equity funds. The project's final cost was approximately
$2 billion with a %\5 billion provided pursuant to the DOE guarantee and $500 million by the five partners.
The project was designed to produce an average of 125 million cubic feet per day (based on a 91 percent onstream factor, i.e., a
1373 million cubic foot per day design capacity) of high BTU pipeline quality SNG, 93 tons per day of ammonia, 88 tons per day of
sulfur, 200 million cubic feet per day of carbon dioxide, potentially for enhanced oil recovery, and other miscellaneous by-products
including tar oil, phenols, and naphtha to be used as fuels. Approximately 16,000 tons per day of North Dakota lignite were ex
pected to be required as feedstock.
In August, 1985 the sponsors withdrew from the project and defaulted on the loan, and DOE began operating the plant under a
contract with the ANG Coal Gasification Company. The plant successfully operated throughout this period and earned revenues in
excess of operating costs. The SNG is marketed through a 34 mile long pipeline connecting the plant with the Northern Border
pipeline which in turn transports the SNG to Ventura, Iowa.
In parallel with the above events, DOE and the Department of Justice (DOJ) filed suit in the District Court of North Dakota
(Southwestern Division) seeking validation of the gas purchase agreements and approval to proceed with foreclosure. On
January 14, 1986 the North Dakota Court found the gas purchase agreements valid, that state law was not applicable and that plain
tiffs (DOE/DOJ) were entitled to a summary judgment for foreclosure. A foreclosure sale was held and DOE obtained legal title
to the plant and its assets on July 16, 1986. This decision was upheld by the United States Court of Appeals for the Eighth Circuit
on January 14, 1987. On November 3, 1987, the Supreme Court denied a petition for a writ of certiorari.
The North Dakota District Court also held that the defendant pipeline companies were liable to the plaintiffs (DOE/DOJ) for the
difference between the contract price and the market value price. This decision was upheld by the United States Court of Appeals
for the Eighth Circuit on May 19, 1987. No further opportunity for appeal exists and the decisions of the lower court stands.
In early 1987, the Department of Energy hired Shearson Lehman Bros, to help sell the Great Plains plant. In August, 1988 it was
announced the Basin Electric Power Cooperative had submitted the winning bid for approximately $85 million up-front plus future
with profit-sharing the government and a waiver of production tax credits. Two new Basin subsidiaries, Dakota Gasification Com
pany (DGC) and Dakota Coal Company, operate the plant and manage the mine respectively. Ownership of the plant was trans
ferred on October 31, 1988.
Under Dakota Gasification ownership, the plant has been producing SNG at over 125 percent of design capacity on an annual
basis.
In 1989, DGC began concentrating on developing revenue from byproducts. On February 15, 1991, a phenol recovery facility was
completed. This project produces over 2 million gallons of phenol annually, providing manufacturers an ingredient for plywood
and chipboard resins. The first railcar of phenol was shipped in January 1991. DGC has signed contracts with three firms to sell
all of its output of crude cresylic acids, which it produces from its phenol recovery project.
Construction of a facility to extract krypton/xenon from the synfuel plant's oxygen plant was completed in March 1991. DGC
signed a 15-year agreement in 1989 with Praxair (formerly Linde Division of Union Carbide Industrial Gases Inc.) to sell all of the
plant's production of the krypton/xenon mixture. The first shipment of the product occurred on March 15, 1991. In March 1993,
DGC installed a hydrotreater which enabled it to commence the sale of the plant's naphtha production. Other byproducts being
sold from the plant include anhydrous ammonia, sulfur and liquid nitrogen. Argon, carbon dioxide, ammonium sulfate and cresote
are also potential byproducts.
In late 1990 DGC filed with the North Dakota State Health Department a revision to the applications to amend the Air Pollution
Control Permit to Construct. The revised application defines the best available control technology to lower SO and other emis
sions at the plant. In 1993, the North Dakota Department of Health approved the permit for the flue gas desulfurization system at
the Great Plains Synfuels Plant. In March 1994, DGC announced it would install a flue gas scrubber which will use anhydrous am
monia as the reagent, a process that will produce ammonium sulfate, a commercial fertilizer, which DGC intends to market.
DGC has 4 years to complete construction of the main stack scrubber. The estimated cost of this environmental improvement is
$100 million.
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SYNTHETIC FUELS REPORT, JANUARY 1995