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Bond sold for La. energy plant
Billion-dollar-plus gasification project planned in Calcasieu Parish
By GARY PERILLOUX Advocate business writer Published: Apr 3, 2008Consistently high natural gas prices have spawned what some Lake Charles officials are describing as the largest capital development in Calcasieu Parish’s history at $1.6 billion, several times greater than Pinnacle Entertainment’s investment to date in southwest Louisiana gambling facilities.
Lake Charles Cogeneration LLC, owned by New York-based Leucadia National Corp., will begin construction on the facility in early 2009 after the sale of $1 billion in Gulf Opportunity Zone bonds were completed Wednesday, said Hunter Johnston, a Washington, D.C.-based development partner in the project.
The project will create 3,000 temporary construction jobs and 150 permanent jobs, beginning in 2012, at a 70-acre Port of Lake Charles site.
Leucadia, with interests in telecommunications, timber, real estate, gambling, medical products and wineries, is a $1.1 billion-a-year diversified holding company that previously pursued a project to supply Venezuelan-owned Citgo with methanol at its Lake Charles area refinery, Johnston said. That project didn’t succeed, but soaring natural gas prices in the past three years led Leucadia to pursue gasification projects in Indiana and Louisiana.
The principal Lake Charles product – 35 billion cubic feet per year of synthesis natural gas made from petroleum coke, a refining byproduct – will be sold on long-term contracts to electric utilities that want to avoid the volatile and often-high price of natural gas, Johnston said.
“In essence, what this project is, is a long-term physical hedge against (natural) gas prices,” said Johnston, president of the Johnston Development Co. that’s chaired by his father, former U.S. Sen. J. Bennett Johnston. “What this will do is provide a low-cost domestic source of gas that you would otherwise have to get from LNG (liquefied natural gas) or from drilling.”
Over the long term, the Lake Charles gasification plant will be able to beat market-based natural gas prices with synthesis natural gas sold in fixed-price contracts, Johnston said.
“We think that’s going to save consumers – ratepayers – billions of dollars over the course of 30 years,” he said.
Third-party pipelines will transport the gas to electric utilities. The project also will produce hydrogen for sale to chemical manufacturing suppliers and carbon dioxide will be captured in the gasification process and sold for use in enhanced oil recovery.
“We believe this is the largest single capital project ever for Calcasieu Parish,” David Darbone, the port district president, said in a news release. Bonds were issued through the Port of Lake Charles after the State Bond Commission approved the $1 billion allocation in May from $7.9 billion in GO Zone bonds available to the state after hurricanes Katrina and Rita.
The tax-exempt private activity bonds typically save developers more than 2 percent on interest rates and produce huge financing savings over the 30-year life of the bonds, something that made the Lake Charles Cogeneration project doable, Hunter Johnston said.
Though the project has an out-of-state owner, many companies with Louisiana and Gulf Coast regional ties are involved. Among them are the Jones Walker law firm, which served as bond counsel; Baton Rouge-based Turner Industries Group LLC, which will lead construction and fabrication services; and Houston-based Kellogg Brown & Root LLC, which will provide engineering, procurement and program management services.
The Lake Charles port will gain a $40 million upgrade to its fuel-handling system, funded by Lake Charles Cogeneration. The company has a contract with Koch Carbon LLC for the supply of 7,500 tons a day of petroleum coke as the fuel source, with the pet coke coming from Gulf Coast refineries. -
After seeing the GTC (Gasification Technology Council) news posting ( http://www.gasification.org/news/2008.htm ) on Leucadia LC Petcoke/Coal Gasification project – I snagged this other recent news article – that shows Citgo/methanol version not in the current project & it is going make Syngas & fund its own $40mm dock facilities. Koch has supply contract for petcoke to Leucadia – probably will be taking advantage of all new delayed cokers coming online around USGC.
Regards
Charlie Randall
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