WyoFile Energy Report

Group says coal-to-gasoline proposal a bad bet for federal loan program

— August 7, 2014

DKRW Advanced Fuels’ proposed coal-to-gasoline plant in Carbon County is too much of a financial and environmental risk to back with federal loan guarantees, according to the environmental group WildEarth Guardians.

Dustin Bleizeffer, WyoFile editor-in-chief
Dustin Bleizeffer, WyoFile editor-in-chief

The group sent a letter, dated August 5, 2014, to U.S. Secretary of Energy Ernest Moniz, urging that the Department of Energy (DOE) reject DKRW’s application for a $1.75 billion loan guarantee.

“Not only would the Department of Energy’s investment in DKRW represent a significant loss for American taxpayers, it would represent a major blow to the climate as any loan guarantee would ultimately fund one of the most carbon intensive means of producing fuels,” wrote Jeremy Nichols, climate and energy program director for WildEarth Guardians.

The Medicine Bow coal-to-liquids plant, first proposed nearly 10 years ago, has never gained enough financial backing to begin construction. Capital costs are estimated at about $2 billion. Earlier this year, DKRW and its lead construction contractor, Sinopec Engineering, parted ways, and one of its key investors —Arch Coal — said it wrote off its investment in DKRW as a $58 million loss.

The DOE in 2009 initiated review of a loan guarantee application of $1.75 billion for the project, under what’s known as the 1703 program.

DKRW officials said recently that the new head of the DOE loan program may be willing to take a fresh look at the company’s application, and that DKRW would spend time lobbying in Washington D.C. this year.

Two concrete pads, poured in late 2010, are the only physical evidence yet of DKRW's project which was first announced in 2004.
Two concrete pads, poured in late 2010, are the only physical evidence yet of DKRW’s project which was first announced in 2004. (Allen Best/WyoFile — click to view)

If DKRW submits a revised loan guarantee application, as it says it will, it would again trigger a review of the project under the National Environmental Policy Act. Nichols told WyoFile that would at least force DKRW to be more transparent about the potential environmental impacts of the project, such as CO2 and particulate emissions and water consumption. However, Nichols said even a NEPA review would be a waste of taxpayer dollars on such an energy-intensive project that the private market has deemed too risky.

“There are many other ways to get fuels and generate energy that get you closer to that one-to-one (energy in / energy out) ratio than this would,” Nichols told WyoFile in a phone interview. “We get accused of overlooking potential pollution control measures and other virtues of this project, but DKRW has not been transparent.”

DKRW has promised that a portion of the plant’s CO2 emissions would be captured and sold for enhanced oil recovery in Wyoming. The company did not return an inquiry by WyoFile on Thursday.

The DOE has a mixed track record on projects that it has helped support in Wyoming. In one major failure, the DOE awarded two stimulus grants to North American Power Group — in 2009 and 2010 — totaling $10 million for a carbon sequestration characterization study in the Powder River Basin. A competing proposal sponsored by the Crow Nation and administered by the Big Sky Carbon Sequestration Project of Montana State University, was rejected. NAPG officers overseeing the effort didn’t have the same level of science and engineering credentials as the Big Sky team.

The grants were suspended in January 2012 due to accounting irregularities and referred to the U.S. Department of Justice where the case remains under investigation. (Read WyoFile’s The Two Elk Saga, by Rone Tempest.)

Read the WildEarth Guardians’ letter:

Here’s the DOE’s response:

— This story was corrected on 9.19.14 to reflect the process in which DKRW’s loan application may trigger a NEPA review.

— Dustin Bleizeffer is WyoFile editor-in-chief. He has covered energy and natural resource issues in Wyoming for 15 years. You can reach him at (307) 267-3327 or email dustin@wyofile.com. Follow Dustin on Twitter at @DBleizeffer

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Dustin Bleizeffer is a Report for America Corps member covering energy and climate at WyoFile. He has worked as a coal miner, an oilfield mechanic, and for 25 years as a statewide reporter and editor primarily...

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  1. The Administration must have forgotten to apply the same robust strategy with Solyndra, Abound Solar, First Solar, Fisker……..and the long list of other programs the Administration forgot to due their due diligence on.

    Don’t get me wrong, the State of Wyoming has had their own laundry list of related project failures, but not the extent and blatant disregard to any level of due diligence recent Federal Projects have had. A basic level of due diligence would be a great start……

  2. I just added the DOE’s response (see second document). Take note of the last line: “The Department of Energy is committed to utilizing its authority under Title XVII to support the President’s ‘all-of-the-above’ energy strategy to accelerate the deployment of innovative energy projects and reduce the harmful emissions that contribute to climate change.”

    If the DOE does grant DKRW’s application for a loan guarantee, perhaps it will mean that President Obama shares Wyoming’s leadership’s view that coal-to-liquids is a sort of “bridge” to zero carbon emissions coal at utility scale. Either way, let’s hope the DOE’s due diligence process in the loan guarantee program is indeed vigorous.
    — Dustin Bleizeffer, WyoFile editor-in-chief