dkrw

DKRW coal-to-gasoline plant in Wyoming faces deadline, questions

2013-06-02T11:00:00Z 2013-10-07T11:25:51Z DKRW coal-to-gasoline plant in Wyoming faces deadline, questionsBy ADAM VOGE Star-Tribune energy reporter Casper Star-Tribune Online

One of Wyoming’s most talked-about energy projects is nearing a critical deadline and facing some significant questions.

DKRW Advanced Fuels, the company behind a coal-gasification plant proposal near Medicine Bow, has until June 19 to submit a new construction plan and socioeconomic impact report to the state Industrial Siting Council.

The Houston-based company pulled both documents — which had been on file with the council — from the record in March after issues with a contractor muddled the long-term plan. The state gave DKRW until June to revise and resubmit the plans, both required under terms of a state permit.

Now less than three weeks from that deadline, the company remains steadfast in its commitment to the project, planned for an area about 12 miles south of Medicine Bow.

“We intend to work with the state and be compliant,” Bob Kelly, DKRW executive chairman, told the Star-Tribune on Friday. “We’re making a very good effort in that area.”

DKRW’s plans, if they come to fruition, would have a big impact both on the Medicine Bow area and Wyoming. The company’s plant — which will convert coal from the nearby Saddleback Hills mine into gasoline — will cost at least $1 billion. The complex will require more than 2,000 construction workers to build and will likely employ more than 400 during normal operations.

Former professor

Concerns raised by citizens have called several issues into question, including the plant’s financing, science and whether it will ever actually be built.

But few, if any, have questioned more loudly than former University of Wyoming professor Jay Lillegraven.

Lillegraven, a nearly 30-year member of the school’s geology-geophysics and zoology-physiology department, has had objections to the project since he read DKRW’s first proposal.

Lillegraven is a longtime student of the geology in the Carbon and Hanna basins targeted by the company. He’s studied and mapped the area for more than 20 years, and plans to publish a related manuscript later this year.

He’s also repeatedly told state regulators that he thinks some science in the project plan is inaccurate.

“I read the whole permit, particularly closely the geological aspects,” he said. “I was simply horrified by the fact there was hardly anything correct in it. This is information the ISC depended on to make an intelligent decision.”

The council approved the project, but Lillegraven has continued to write the agency letters and attend each DKRW permit amendment hearing.

His questions about the project’s science — particularly the geology involved — are many. He questions whether the area has enough coal to fuel the plant’s 30-year lifespan. He has said repeatedly that science has yet to back the company’s water use plan.

But the council has continued to approve the project or allow DKRW more time, including a March decision to give the company until June to produce required documents.

“I would say I’ve attempted to help them,” Lillegraven said. “It has not been successful.”

Company responds

Lillegraven has said repeatedly that the math on DKRW’s project doesn’t add up. There’s not enough coal, he says. There’s not enough water. He also questions whether the needed coal mine would be safe.

In his studies of the basin, Lillegraven said he’s determined that the Saddleback Hills coal mine isn’t on the steady ground suitable for a mine. He said an operation there is potentially “very dangerous.”

But DKRW says the opposite. Kelly, the company’s executive chairman, said DKRW has studied the area’s geology extensively.

“We understand there’s going to be a lot of discussion on geology,” he said. “That’s fine. But the people putting money where their mouth is and doing studies are confident so far.”

Kelly also said the company won’t come close to exhausting the water and coal in the area. Studies performed by DKRW partners show that as many as 180 million tons of coal reserves are available in the Saddleback Hills mine, the primary DKRW source for gasification coal. The company plans to use 1.8 million tons of coal per year, Kelly said, meaning only about 57 million tons are needed over the project’s 30-year life.

Lillegraven said that the math works in Kelly’s projection, but not all that coal may be easily accessible.

“The key is in the word ‘recoverable,’” he said, adding that most DKRW coal numbers he’s seen have pointed to total reserves.

Lillegraven also has his doubts about the water needed for the project.

DKRW plans to draw water needed for their processes from the Mesa Verde aquifer. A State Engineer’s Office report issued during DKRW’s application process in 2007 said the aquifer could support the company’s demand, which at that point was 1,000 gallons per minute, less than several other industrial projects in the state.

Lillegraven said that it’s possible the aquifer could support such use, but he hasn’t seen enough to believe it. He said he took issue with parts of the state engineer’s report, including whether enough wells were drilled to test the aquifer, and whether those wells were tested long enough.

“You need to have more than that,” he said. “You have to show you know what aquifer you’re encountering. Clearly they didn’t.”

Kelly said Friday that the company believes “substantial” water is in place and ready for use. What’s more, he said DKRW has “optimized” bits of its design since the original proposal to cut down on much of the needed water.

The company, for example, will employ air cooling in its systems instead of using water, like many power plants do. In all, Kelly expects to use closer to 500 gallons per minute of water during plant operations, half of its original request. Kelly said he expects the plant’s usage to subside over the life of the project.

“One of the big issues in the West is what’s happening with water,” he said. “We’ve always been concerned about that. We think we have a good design.”

Kelly also touts the final products of the plant — about 11,600 barrels of low-sulfur gasoline daily and sulfur and carbon dioxide for reuse — as benefits of the project.

The sulfur gas can be sold to other companies, he said, and the company already has plans to sell carbon dioxide to Denbury Resources, a company actively working to provide the gas for evolving oil recovery around the state.

“We think it’ll be one of the cleanest gasolines in the U.S. refining mix,” he said. “From an environmental point of view, we think what we’re doing is very good.”

Moving forward

DKRW is approaching a finalized financing structure for the project.

Kelly declined to share details of the company’s anticipated new construction schedule or economic report, saying they’d be on file with the state by the deadline. Despite the delays, Kelly said DKRW continues to make progress on the project.

“Look at any of the major energy projects going on out there — it’s just the nature of the beast,” he said. “They are big, complex and take some time. But nobody’s more motivated to get this done and get this into construction than I am.”

Kelly said the company is in “very intense” discussions with both its engineering company and possible financing partners over how the plant will be funded and built.

“We’re focused right now on engineering and financing, which are critical,” he said. “It’s a big part of the project, and we hope to have some new information coming out shortly.”

Kelly added that the company is unlikely to use a previously discussed $300 million state loan packaged as industrial development bonds. The company expects to “come back and talk to the state” about a county-approved $245 million package of company-issued and tax-exempt bonds.

DKRW prefers to finance the project privately, if possible.

“This is primarily a private sector deal with banks and private sector equity,” Kelly said.

Lillegraven said he will continue to write letters and attend any meetings related to the project.

“I still want to help the state,” he said. “Whether I’m allowed to speak or not, I’ll be at that meeting.”

Kelly said he respects Lillegraven and others who speak out against projects they oppose.

“It’s a free country; everybody has a right to voice their opinions,” he said. “We’re the guys that are actually out spending tens of millions of dollars to make jobs and add value to Wyoming’s resources.

“I would just say that you have to step back and look at what’s in the best interest of Wyoming.”

Reach energy reporter Adam Voge at 307-266-0561, or at adam.voge@trib.com. Read his blog at trib.com/news/opinion/blogs/boom or follow him on Twitter @vogeCST.

Copyright 2015 Casper Star-Tribune Online. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(4) Comments

  1. supercelifragilistic
    Report Abuse
    supercelifragilistic - June 04, 2013 7:33 am
    Sounds like Lillegraven is an environmentalist, he has his job but, why add more jobs in the region? At least that's the way his concerns come across to me. Also, Kelly sounds like his company is fighting the notion of "too many chiefs in the project and not enough Indians" to see it through.
  2. jackel
    Report Abuse
    jackel - June 03, 2013 8:41 pm
    So the good professor should take up fly fishing. Well the Mr. Kelly understands the principles of Bait fishing in Wyoming. Only one problem his bait is night crawlers, used to catch suckers. Since 2005 his bait sure has caught a huge amount of bottom feeders.
    Seems to me Wyoming has kissed coal gasification long enough and personally send the snake old man back to Texas, where the tall stories belong or hold the man accountable and cut his line of bait.
  3. yup
    Report Abuse
    yup - June 03, 2013 1:48 pm
    Sounds like Jay Lillegraven needs to take up fly fishing or something else in his retirement.
  4. Pops
    Report Abuse
    Pops - June 02, 2013 2:40 pm
    The urgency of a deadline does not justify breaking the rules to get the plant constructed. Let everyone voice their opinion.
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