Leucadia's Coal Gasification Deal Looking Like Another Solyndra

The more we learn about the special deal Gov. Mitch Daniels' administration brokered with Leucadia to develop a coal gasification plant in Rockport, the worse it looks for consumers and taxpayers. Indiana lawmakers are now considering an exemption from the 30-year agreement for large industrial customers from the likely natural gas rate increases other utility consumers will be forced to pay because of the deal. Vectren Corp. estimates that Leucadia's coal gasification plant will lose more than $800 million during its first eight years of operation due to low natural gas prices. Under the 30-year deal Daniels brokered for the company, Indiana natural gas customers will be forced to buy synthetic natural gas from the company at $6 per million BTU, even if prices are below that level. The current market price is half that amount. If the large industrial customers are exempt from paying the higher price guaranteed to Leucadia, that means consumer costs will be even higher than they already promise to be. An AP story explains Vectren's opposition to the exemption contained in SB 344, which is now before the House Ways & Means Committee after clearing the Senate:

A utility executive told a legislative committee Tuesday that a drop in natural gas prices as a result of the nation's shale-gas boom has made a proposed southwestern Indiana coal-gasification plant a project "whose time has passed."

Jerry Ulrey, Vectren Corp.'s vice president for regulatory affairs, also told the House Ways and Means Committee that the utility estimates the proposed plant would lose more than $800 million over its first eight years, given current natural-gas price projections.

He testified as the panel considered a bill exempting large industrial customers from rate increases resulting from a state-negotiated gas supply deal for the plant, which is proposed near the Ohio River town of Rockport. The Senate passed the bill earlier this month.

Ulrey told the committee that excluding large industrial customers could end up doubling the rate increases for some of Vectren's 760,000 residential and small-business customers in Central and Southern Indiana, including large portions of the Indianapolis suburbs . . .

You may recall from my earlier posts that this deal seems more about making a bunch of money for one of Daniels' political cronies, Mark Lubbers, who works as a consultant for Leucadia and the developer, William Rosenberg. The company is counting on federal loan guarantees, in addition to the long-term purchase agreement to which Daniels has committed the state under the 30-year deal. Private investors obviously don't want to risk their money on this shaky deal so taxpayers are being forced to finance it for the politically-connected deal makers. Daniels has said the company would help Indiana's coal industry but another provision in SB 344 seems to exempt the company from a requirement that it use Indiana coal. That provision isn't mentioned in the AP story. He also says the company would generate jobs for southwestern Indiana, but it's a few hundred employees at best. I believe if reporters looked into this further they would also find that INDOT is spending a bunch of money on a highway project to nowhere down there specifically to benefit Leucadia's coal gasification plant. Mark Lubbers apparently testified at the same hearing doing his best job of "hey, look over here, not there" routine:

Mark Lubbers, a former Daniels aide who is an Indiana consultant for New York-based Leucadia, said large industrial customers are able to buy from diverse sources, which enables them to hedge against price changes.

He told the Ways and Means Committee on Tuesday that the Rockport project would do the same for other natural-gas customers because the coal that will be bought for the plant historically has had more stable prices.

I'm not sure if there are any voices for consumers in the legislature. With deals like this one, it makes you wonder. Rosenberg is quoted in the story as saying that the IURC knew about all of these facts when it unanimously approved the deal. Of course, the IURC is the most corrupt utility commission in the country which is populated with a bunch of political hacks put their to do nothing but do the bidding of political insiders. Those IURC members could care less about consumers.