In 2009, the Indiana legislature quietly passed a bill which would force Indiana natural gas consumers to assume all the financial risks for an expensive new coal gasification plant proposed by New York-based Leucadia National Corporation. In the 2013 legislative session, the Sierra Club committed to advancing crucial protections agains the dirty plant. In the General Assembly's final vote of the year, representatives passed legislation to protect Hoosier ratepayers from the Leucadia Tax. The bill, which passed by a margin of 70-28 in the House and 43-7 in the Senate, allows legal challenges to play out and gives the state another opportunity to review, modify, or reject this expensive and dirty project.
"We applaud Governor Pence for signing these important safegaurds into law and thank him for looking out for ratepayers. While we still must rely on a favorable Indiana Supreme Court decision, this legislation provides important safegaurds that will shield Hoosier families and small businesses from the proposed 'Leucadia tax.' Hoosier families should never have to bear the risk for an uncompetitive project, while an out-of-state Wall Street corporation reaps the rewards." - Steve Francis, president of the Sierra Club's Hoosier Chapter.
This couldn't have happened without the strength of Sierra Club members and supporters! Sierra Club supporters have taken more than 6,000 Leucadia-related actions to date -- thousands emailed legislators and hundreds more made phone calls, spread the word on social media, attended events, or wrote letters to the editor. Our volunteer leaders, staff, and allied organizations also played a vital role -- winning public opinion with editorial pieces and press quotes, running radio ads that drove our message home, and building legislative support in the Statehouse to protect Hoosier ratepayers.
We're now very close to protecting the people of Rockport and the Ohio River Valley from this dirty plant and protecting ratepayers from higher natural gas bills.
Developers of the dirty and expensive project have been dealt a serious setback, but they aren't yet calling it quits. Their last hope lies in the Indiana Supreme Court overturning a lower court's earlier ruling against them. Even then, Leucadia would still need to line up additional funding for the project and secure more than $2 billion in taxpayer-funded loan guarantees from the U.S. Department of Energy.
Read on for the top five reasons why protections are so sorely needed!
1. Coal Gasification Is a Money-Loser. Coal gasification uses a complicated technology and high-temperature chemistry to turn coal into a synthetic natural gas. However, the synthetic gas it produces can’t compete with the price of natural gas. Leucadia National Corporation, the Wall Street hedge fund financing the Rockport proposal, recently reversed their plans for a similar plant in Mississippi because it’s a money-loser. A recent study by Indiana University’s Kelly School of Business says: “Current forecasts of natural gas prices through 2025 suggest that the [state] will incur heavy losses under the contracted pricing scheme. These losses will act like an excise tax applied to natural gas customers. The surcharge is approximately $895 million, or $110 million per year, from 2018 to 2025.”[i]
2. Ratepayers Are on the Hook, Instead of the Plant’s Owners. Leucadia is a private business, not an electric utility. Yet Indiana ratepayers will cover the losses, and potentially be stuck with a polluted, worn-out coal gasification plant as our reward. Under the contract between Leucadia and the state, Hoosier gas utility customers will pay 100 percent of any losses during the 30-year startup period for the plant. What do we get in return? A lien on their money-losing coal gasification plant. In other words, if the project doesn’t work out, Indiana will own a 30-year-old plant with outdated and worn out equipment, likely on polluted land.
3. All Ratepayers Are Not Treated Equally. A new excise tax will be placed on utility bills for Indiana gas customers, except for industry and large businesses. If the project is such a good deal, why are industrial and large commercial customers excluded from paying for it? This serves to lay the burden of a bad deal on the backs of Hoosier families, churches, farmers and small business.
4. More Jobs Lost Than Gained. New jobs in coal mining and syngas production will come at the expense of jobs elsewhere in the state. According to the IU study: “The winners are workers in coal mining and [syngas] production. The losers are workers predominately in retail and manufacturing. In broad strokes, one might say that mining and [SNG] production jobs come at the expense of jobs in other sectors.” In fact, IU estimates 1,800 jobs will be lost, on average, each year if the plant is built as planned.
5. 30-Year “Guarantee”: Who Will Be Around to See That? The project will not reconcile losses and benefits from the project until the end of the 30-year term. That’s a timeframe many Hoosiers will not live to see. What about an 80-year-old grandmother – will she be alive in 30 years to get her refund? What about a family that has to transfer out of state? A 40-something couple with plans to retire to a warmer place in 25 years? They’ll never get their money back.