ND company makes final payment of $7.1M to federal government for synthetic natural gas plant

ND synfuels plant makes $7.1M last payment to feds

BISMARCK, N.D. — A North Dakota company has made its final payment to the federal government for a synthetic gas plant, making up most of the $1.5 billion loss taxpayers initially had on the project.

Dakota Gasification Co., a subsidiary of Bismarck-based Basin Electric Power Cooperative, said the $7.1 million share of its revenue from synthetic gas sent to the U.S. Energy Department ends a two-decade agreement with the agency.

Basin Electric Power Cooperative bought the Great Plains Synfuels Plant in Beulah from the federal Energy Department in October 1988, three years after a group of five companies that built the plant defaulted on $1.5 billion in federally guaranteed loans.

The company said the plant, northwest of Bismarck, is the nation’s only commercial scale plant producing natural gas from lignite, a low-grade coal that is plentiful in North Dakota.

The newly formed Dakota Gasification subsidiary paid $85 million for the plant and agreed to pass on tax breaks and share revenue with the federal agency through 2009, if natural gas prices were high enough and other economic conditions were met.

Basin spokesman Daryl Hill said the $7.1 million payment was the ninth one made to the government. The payments totaled more than $388 million, he said.

The federal government has now recouped more than $1.3 billion from the project, when unused tax credits are calculated, said Ron Harper, the chief executive officer and general manager of Basin Electric Power Cooperative. Dakota Gasification is a subsidiary.

“This is truly something that has brought value to the federal government,” Harper said.

The plant was built for $2.1 billion in response to the energy crisis of the 1970s.

It began producing gas in 1984 but the factory’s original owners abandoned it about a year later, and the Energy Department foreclosed.

“The project was a victim of the market place and got caught in the financial wave of the 1980s,” said John Panek, an analyst for the Energy Department’s Office of Clean Energy Collaboration, who has been monitoring the plant’s operations for more than 20 years. “Natural gas prices were about half of what were originally anticipated.”

Panek said the default on the Energy Department loan was probably the largest in the agency’s history, but Basin turned the project around.

“They’ve been an invaluable partner in the process, and have been critical in terms of technology and return to the taxpayer,” he said.

Basin Electric Power Cooperative has invested more than $400 million since its purchase in 1988 to keep the plant in compliance with environmental regulations, Harper said.

The gasification process at Great Plains involves using high-pressure steam and air to break down lignite — about 18,000 tons daily — to make natural gas that is piped to Iowa, where it is distributed to markets in the eastern and southeastern United States.

The process also generates carbon dioxide, which Great Plains pipes to oil fields in southern Saskatchewan, where it’s pumped underground to force oil to the surface.

The gasification plant is only one of two in existence; the other one is in South Africa. The Great Plains plant is also the largest carbon capture project in the world, Panek said.

Harper said the plant is almost debt-free, except for about $2.8 million that remains on state loan that helped the company build a facility to make anhydrous ammonia, a fertilizer that is one of byproducts from the coal gasification process.

Dakota Gasification is Basin’s largest subsidiary. Basin supplies electricity to members in North Dakota, South Dakota, Colorado, Iowa, Minnesota, Montana, Nebraska, New Mexico and Wyoming.