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State Supreme Court Hears Coal Gasification Plant Case


The Supreme Court heard oral arguments today on a case that could cost Indiana taxpayers billions of dollars over the next decade.

The Indiana Gasification plant project began in 2007 and is financed by Leucadia National Corporation, a holding company based in New York City. The plant would be built in Rockport to produce substitute natural gas, or SNG, through coal gasification, and construct a 440-mile transportation pipeline to Mississippi.

Lawyers representing both sides of the case presented their arguments this morning regarding a 37-word clause in a contract ruled invalid by the Indiana Court of Appeals in 2012.

The Leucadia/Indiana Gasification contract dictates that 17 percent of customers’ energy bills will be dictated by a pre-negotiated price outlined in a 30-year contract between Leucadia and the Indiana Finance Authority, rather than by open market rates.

Supporters of the project say that the contract would save taxpayers money in the long run, but many organizations say the speculative nature of the 30-year contract defies Indiana’s “guarantee of savings” law, which states companies must provide the lowest-cost utilities to customers.

Karl Mulvaney represents Indiana Gasification and the Finance Authority. He says an amendment to the contract, negotiated between the plant and the state, fixes the problem.

“Indiana Gasification and the Indiana Finance Authority have made this agreement and they shouldn’t have to go back and have somebody review it,” Mulvaney says.

The Indiana Utility Regulatory Commission, who initially approved the contract on the grounds that it would save ratepayers money, declined to comment further.

Vectren, a private utility company that distributes natural gas to more than two-thirds of the state of Indiana, generated a report that ratepayers would pay over $1.2 billion more in the next 8 years, and nearly $8 billion by the end of the project, to finance the construction of the plant and the production of SNG.

Several organizations, including the Citizens Action Coalition and the Sierra Club, are fighting to squash the project based on the economic impact it will have on Indiana ratepayers.

Kerwin Olson, executive director of the Citizens Action Coalition, says that the private markets will not support the venture.

“There’s no question at least in the short term in everybody’s minds that the taxpayers of Indiana would stand to lose in the billions…they need massive amounts of ratepayer taxpayer subsidies to make this thing happen,” Olson says.

Supporters of the gasification project say although the Indiana Court of Appeals reversed the IURC order regarding the 37-word clause, the rest of the contract remains intact and can be amended. Opponents of the project argue that the Court of Appeals ruling nullifies the entire contract, leaving the project dead in the water.

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