Gov. Pence supports Rockport coal-to-gas plant review
$30M contract under review
Last Updated: 70 days ago
INDIANAPOLIS - Gov. Mike Pence is supporting a measure that could trigger another round of regulatory reviews of Indiana’s 30-year contract with the proposed $2.6 billion Rockport coal-to-gas plant.
"I think it’s worth a second look – and I mean a second look by the Indiana Utility Regulatory Commission," the new Republican governor said of the deal.
His administration will not take executive action, he said, to interfere with a contract to that former Gov. Mitch Daniels’ administration inked in 2010. The state would buy the plant’s product at a pre-negotiated price and then resell it on the open market, with 17 percent of all Indiana gas customers’ bills bet on the deal saving them money.
Pence already supports legislation that has cleared the Senate and could get a hearing in the House Utility Committee in the coming weeks, he said. It would defer the first move to the Indiana Supreme Court – but if the court ultimately mandates changes to the deal, the bill would then send the entire contract back to regulators.
The governor’s stance comes as the Rockport plant’s financiers, Leucadia National Corp., defend their project and its economic development aspects, including the use of Indiana coal, in front of the Republican-dominated General Assembly, and opponents – chiefly Vectren Corp. – cite a nationwide shale gas boom as they lobby to scotch the project.
"I think it’s appropriate to take a second look in light of changing market circumstances and with the lodestar of the interests of ratepayers in the long-term in mind," Pence said.
"It’s a very big project. It would mean jobs to that region; the opportunity to sell coal. But at the end of the day, it’s got to make sense for Hoosier ratepayers, and that’s who I’m going to be looking out for."
Also opposing the project are the Indiana Manufacturers Association, the Indiana Farm Bureau and a host of natural gas companies. But Vectren has taken the lead – and succeeded in getting the Indiana Court of Appeals to void the 30-year deal because of a narrow provision included in it.
That case is likely to head to the Indiana Supreme Court in the coming months, and Vectren officials said they are continuing to press lawmakers to return the measure they’re advancing – Senate Bill 510 – to something closer to its original form.
The bill initially would have forced the Rockport plant’s developers to reimburse ratepayers for any losses due to the plant’s prices every three years, rather than at the end of the deal.
That would kill the project outright, said Mark Lubbers, the Indiana project manager for Indiana Gasification LLC, which is the company set up by Leucadia and other developers.
"We continue to have a dialogue with legislators and other key thought and opinion leaders about the significant risks this deal poses for Hoosier natural gas customers," said Mike Roeder, Vectren’s vice president of government affairs and communications.
He said Vectren is continuing to “explore options to improve the bill” in an effort to beef up its ratepayer protection mechanisms – a notion that developers have warned could put the project in jeopardy.
"It is not reasonable for Hoosier natural gas customers to pay for significant losses the state may incur from this plant for the next 30 years, with the expectation that those losses will exceed $1 billion in the first eight years alone," Roeder said.
Lubbers, meanwhile, has defended the project. He said developers’ bet that prices related to the Rockport plant would beat open market rates includes a major piece of protection for ratepayers: The plant itself, which would be turned over to the state.
"The SNG (synthetic natural gas) statute and the contract that resulted are landmark public policy – both as it relates to moving risk from ratepayers to investors and to ending a supply monopoly," he said.
"Even though SNG would be a small fraction of gas supply, and even though it would add nearly $20 billion to the Indiana economy, there are powerful special interests that stand to lose. And it is going to take a few more weeks of debate before we can arrive at a final resolution."
He said he expects lawmakers ultimately not to interfere with the deal.
"As legislators come to understand the 28 months of unprecedented review of this project – the due diligence and met demands of the IFA, followed by the comprehensive examination by the IURC – we believe that the right decision will prevail in the end," Lubbers said.
Pence said he has worked since taking office to get up to speed on the complex deal.
"I have been determined to listen to both sides of this argument in a fair-minded way and to examine the facts, and I wasn’t here when the deal was done – passed by the legislature,” Pence said. “So we’ve been trying to assess the idea on the merits, but also trying to determine the appropriateness of that legislation with regard to an existing contract."
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