A top Indiana lawmaker said the state’s 30-year deal to buy and then resell the proposed Rockport coal-to-gas plant’s product at a fixed rate needs a fresh review – either in the General Assembly or before utility regulators.
“Just the fact that the world has changed since this idea came into being requires us to take another look at it and see if it’s viable,” said state Senate President Pro Tem David Long, R-Fort Wayne.
Long said he’d like the Indiana Utility Regulatory Commission to review the contract once again – something Vectren Corp. has sued to force, since the Indiana Court of Appeals ruled last year that the contract needed some tweaks.
He said he is not willing to say “yet” that Indiana should try to kill the deal. But with natural gas prices hovering around $3 per million British thermal units as a result of a shale gas boom, Long said lawmakers “all have questions about it.”
“Energy prices have dropped substantially, and what looked like it had real potential when the price of gas was so much higher – now you have to bring into question whether it makes sense,” Long said.
“The idea of using coal in a cleaner way is a great idea, but whether or not this project per se is the way we go about it, given the costs associated with it, we have to ask those questions.”
Long’s comments come as the chairmen of the Indiana House and Senate utility committees consider holding a rare joint hearing on two bills that would revamp consumer protection mechanisms included in the contract.
Mark Lubbers, a former Gov. Mitch Daniels aide who is helming the Rockport project for its developer, Leucadia National Corp., said those bills would kill the plant that Leucadia has already pumped $20 million into if they become law.
“The jobs we would have created will all be killed. But we get the message and we don’t want to be someplace where we are not wanted,” he said.
“I’m not saying we are pulling the plug. I’m just saying that every argument that Vectren is now making, they already made in a 10-month proceeding at the IURC. There is nothing new.”
Asked whether the Senate would hold a hearing to consider a bill to change the Rockport project or require another Indiana Utility Regulatory Commission review, Long said, “I suspect we will. But again, what shape it will be in and the bill itself, we’re still working on that.”
House Speaker Brian Bosma, R-Indianapolis, said he agreed with Long that the deal should be reviewed.
“I would concur that the world has changed since that project first hit the books here in Indiana,” he said.
When lawmakers initially approved the deal, they said they expected Indiana Gasification, LLC – the legal entity developing the Rockport plant – broker deals to sell its synthetic natural gas to utility companies operating in the state.
After those deals fell through, the state-run Indiana Finance Authority, under Daniels, negotiated a 30-year contract to buy and then resell the plant’s product at a rate that they say will average about $6.60 per unit over the life of the contract, but opponents such as Vectren dispute.
Bosma said he has “some philosophical concerns” related to the state’s role in advancing the Rockport plant, and that he is not sure lawmakers would have approved the project at all if they knew how it’d turn out.
“There were some revisions to the original program that didn’t receive a lot of attention that collectively, now, when you look back at the program, you wonder if it would have passed that way in the first place,” Bosma said. “I think it is fair to have a fresh look at the program.”
He said Rep. Eric Koch, R-Bedford, the chair of the House’s utility committee, will be the chamber’s point man on the issue. Koch said Thursday that he hasn’t yet decided whether to hold a hearing – of its own or in a joint meeting with the Senate’s utility panel – on bills related to the Rockport plants.
Natural gas prices have fluctuated wildly in recent years, but Lubbers said they were $3.96 per unit in March 2009, when lawmakers first approved the law authorizing the Rockport project – not much higher than prices are today.
Lubbers said the IURC’s approval of the 30-year contract covered shale gas and its implications on the natural gas market extensively.
“We have trusted that the state was good for their word. This isn’t a game; we would be investing $750 million of our money and borrowing another $1.9 billion we will be obligated to repay,” Lubbers said.
“We regarded Indiana as a stable, committed partner. Being so easily frightened into second guessing is not the kind of thing you want to see when you are investing nearly $3 billion.”