Court smacks down gasification plant deal

2012-10-30T15:15:00Z 2012-10-31T13:30:05Z Court smacks down gasification plant dealBy Keith Benman, (219) 933-3326

The Court of Appeals of Indiana voided an Indiana Utility Regulatory Commission action that critics say could have added billions of dollars to natural gas customers' bills across the state over the next 30 years.

The court reversed a 2011 IURC order Tuesday approving a contract under which the Indiana Finance Authority would buy synthetic natural gas from a plant being developed by Indiana Gasification LLC, in Rockport, Ind. Under the terms of that contract, utility customers across the state would reimburse the IFA for any losses it incurred.

"We live to fight another day," said Kerwin Olson, of the Citizens Action Coalition, one of the groups fighting the deal.

The court's ruling gives the Indiana General Assembly another chance to clarify its intent in passing the 2009 law that laid the groundwork for the Indiana Gasification deal, Olson said.

"We believe the General Assembly thought ratepayers would be paid guaranteed savings over 30 years and the court's order disagrees with that," Olson said.

NIPSCO customers would be among those across the state who would be on the hook for potential losses at the Indiana Gasification plant. NIPSCO on Tuesday issued the following statement in response to the court's ruling:

"We support the court's ruling that there needs to be guaranteed savings for our customers associated with this project. So, we will be closely watching to see how the Indiana Gasification and the IFA will guarantee savings through the project, especially, given the current low gas prices."

Indiana Gasification pointed out Tuesday the court affirmed some key parts of its broader deal with the IFA, while acknowledging large industrial transport customers like ArcelorMittal will be excluded from the Rockport deal.

“We are very pleased with 95 percent of the Court opinion, and we see a clear path to resolving the technical issue that the court identified,” said Indiana Gasification Project Manager Mark Lubbers.

In particular, Indiana Gasification cited the court's nuanced argument on the "guarantee" of consumer savings as a key part of the ruling that reinforces the company's position.

Indiana Gasification and the IFA now have two routes they can pursue if they want to preserve their deal.

They could appeal Tuesday's ruling directly to the Indiana Supreme Court, according to IURC spokeswoman Danielle McGrath. Or they could submit a revised contract to the IURC that accords with the court's ruling. At that point, the IURC would have to determine how best to proceed, McGrath said.

If Indiana Gasification and the IFA take the first option and the Supreme Court denies the appeal, they could still file a revised contract with the IURC in the hope of winning its approval, McGrath said.

Vectren Corp., a southern Indiana natural gas utility, presented evidence during the 2011 IURC proceeding that the IFA's contract with Indiana Gasification could inflate utility customers' bills by anywhere from $1.7 billion to $4 billion over the 30 years of the contract.

Indiana Gasification and the IFA claim consumers could see significant savings under the deal if natural gas prices were to increase significantly. They have also established a reserve that could help cushion the blow for consumers if there are losses.

Among large industrial companies challenging the contract in court were ArcelorMittal USA, Rochester Metal Products Corp. and Countrymark Refining and Logisitics LLC.

Industrial customers large and small that buy natural gas direct from wholesale suppliers in contracts not regulated by the IURC will have to be excluded from being involved in the IFA's contract with Indiana Gasification, under the ruling.

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