SUMMIT: Project moving forward

So far, there have been very few bumps in the road for the Summit Power Group and so far, the Texas Clean Energy Project is a go.

“Everything is moving forward briskly, which is good,” said Laura Miller, director of projects for Summit Texas.   

The $2.2 to $2.5 billion Texas Clean Energy Project is to be located in Penwell 15 miles west of Odessa. During construction, the energy plant is set to create 2,000 jobs with 150 permanent jobs created once the project is completed.

“Every indication is that this is going to go through,” said Odessa Economic Development Director Guy Andrews.

The 400-megawatt plant is designed to capture 90 percent of the carbon dioxide it produces. Summit plans to sell the CO₂ as enhanced oil-recovery, which will help companies bring more oil out of the ground. The plant will also produce and sell electricity and fertilizer.

The coal gasification plant will create three sellable by-products for Summit including electricity, CO₂ and fertilizer or urea.

And so far, Summit is on track to sell all three by-products.

Miller said having customers lined up is very important in getting investors interested and in moving the financing process forward.

“That is a big milestone because when you go to the investment community and say would you like to invest in this project they ask if you have sold all of your products and are they long term contracts,” Miller said.  “We have answered that question - and in the industry that is a huge step forward.”

A major milestone occurred last week, when Summit and Blue Strategies LLC announced that Whiting Petroleum Corporation had signed a 15-year contract for the purchase of CO₂. Whiting will be the largest customer purchasing 60 percent of the CO₂ for the next 15 years.

Last month Summit announced a 25-year contract with CPS Energy of San Antonio to sell 100 percent of the electricity.

Summit has also secured a long-term contract for an unnamed company to purchase the urea or fertilizer, said Chris Kirksey, director of projects for Summit. The plant will be capable of producing 750,000 tons of urea per year, Kirksey said.

Three tax abatements have been approved by the City of Odessa, Ector County and the Ector County Hospital District.

The 10-year abatements are 100 percent of the cost of the project and contingent on the creation of construction and permanent full-time jobs.

So far, the Ector County Independent School District has not approved an abatement. Miller made a presentation to the ECISD trustees June 21.

“By state law they (ECISD) are not allowed to give us 100 percent,” Miller explained. “We are working on the 200-page application that has to be submitted to the state comptroller’s office. The ECISD has to look at this to determine how much that abatement is before they submit the application.”

The completed abatement application has not been presented to trustees for approval.

Under Chapter 313 of the state tax code, Summit would have a five-year qualifying period during which the company is taxed at 100 percent of the appraised value. At the end of the five years, the project’s appraised value is capped at $80 million.

“So the district would be receiving tax revenue based on the $80 million tax valuation,” said Mike Adkins, communications director for ECISD.

After the eight years is up, the valuation goes back up to 100 percent, so the tax revenue goes back up. The statute requires that the company maintain operations for three years after the eight years are up, Adkins said.

In December of 2009 TCEP received a $350 million award in 2010 from the U.S. Department of Energy’s Clean Coal Power Initiative (CCPI), which included funds from the American Recovery and Reinvestment Act as part of the U.S. Department of Energy’s Clean Coal Power Initiative. The award was increased in August of 2010, to $450 million.

TCEP received its final air quality permit from the Texas Commission on Environmental Quality (TCEQ) on December 28, 2010. The project will be located in Penwell, Texas, 15 miles west of Odessa; construction is scheduled to begin in the fourth quarter of 2011.

Summit officials are hoping to close on the financing for the project by September, but several there are several hurdles for the company to clear before financing can be approved. Summit’s goal is to have the plant operational by the end of 2014 or early 2015.