But Summit Power officials still plan to plow forward on the more than $2.5 billion project through a mix of debt, private equity that the company is still trying to secure, and incentives such as federal grant money and a new round of federal tax incentives that the project received earlier this year, Miller said.
“While we have lost a small amount of our stimulus funding, as expected, we have been prepared, and overall, we are delivering to our equity investors, after we sign our contracts, a stronger project today than we had six months ago,” Miller said. “We continue to push forward. We are laser focused on getting this accomplished. We want to get our contracts in place for a project we can actually build, for the cost we expect. And we are doing what is necessary to get it right.”
Local economic development officials, many of whom attended the Thursday night banquet recognizing new board members of the local chamber, want the Summit project because of the roughly 2,000 workers needed to build the plant and the 150 full-time workers it would employ.
"They are still going – that's the good news to me," said Mike George, president and CEO of the Odessa chamber, who thanked Miller for her work. "It's still alive."
Miller said Summit officials believe they will reach financial closing and break ground soon.
Nonetheless, the loss of the federal stimulus money for Summit represents the latest in a string of such funding losses for carbon capture and sequestration projects in the United States, illustrating the obstacles the technology faces.
As recently as June, Miller said that losing the federal stimulus money was not going to happen and that final contracts were imminent. Prior to that, Miller had said losing the federal money could derail the project.
But on Thursday, Miller revealed that months ago, the Department of Energy, which is expected to revoke the stimulus grant, helped the so-called Texas Clean Energy Project get Investment Tax Credits (ITCs) through the Internal Revenue Service.
The IRS award left Summit with $811 million in tax credits, up from $637 million the company had previously. The money “more than makes up for the amount we lost that expired this year,” Miller said.
Private equity investments that Summit officials are raising will make up about a third of the cost of the plant, Miller said.
The ITCs become available to investors in the Texas Clean Energy Project after financial closing and the beginning of construction, Miller said, adding that "they are a direct benefit to the project."
Miller divulged the ITCs for the first time on Thursday. Summit already had an ITC award of $313 million in 2010, but earlier this year “relinquished” claim to a portion of those funds so they could seek more money in another funding round, Miller said.
Plans for the Texas Clean Energy Project call for a 400-megawatt facility that will capture 90 percent of the CO2 it produces by burning coal and then sell that to the oil companies for enhanced oil recovery (EOR) operations.
EOR remains common even as new drilling activity slows, and it represented a market for products of the Texas Clean Energy Project that similar carbon capture and sequestration efforts lacked.
Besides CO2, the TCEP would produce urea, electric power and, to a lesser degree, sulfuric acid. Summit renewed an agreement in October 2014 with CPS Energy in San Antonio to sell electric power to the utility.
On Thursday, Miller said Summit replaced a buyer of urea fertilizer production with Iowa-based United Suppliers, which agreed to buy all of the product in a long-term off-take agreement. Miller said Summit and the previous buyer, Minnesota-based CHS, Inc., “mutually terminated” the deal earlier this year after executing a contract in 2012.
"Since urea accounts for more than half of our project revenues having a strong buyer for this valuable product is critical to our project’s success,” Miller told the Odessa American. “This partnership will offset more than 10 percent of U.S. imports with domestically produced fertilizer.”
The plant would be a 600-acre site about 15 miles outside of Odessa, land that would revert to ODC if the project should fall through.
In total, Summit received a total of about $450 million from the Department of Energy — most of which will not expire.
Summit has yet to begin building the long-delayed Texas Clean Energy Project, planned near Penwell, and the company is still working to finalize engineering, procurement and construction contracts.
Miller attributed the delay in finalizing contracts to “intense negotiations between three contractors in three different countries.”
“But as the business leaders of this community, you understand better than anyone that it is far more important to reach a solid deal that can actually get financed and built than to sign a weak one that will only result in problems and disappointments later,” Miller said. “Therefore, as of this moment, we are continuing to finish these engineering, procurement and construction agreements.”
This year, the DOE yanked funding for another clean coal project in Illinois called FutureGen 2.0 that was more than 12 years in the making after the agency determined the developer of the project failed to sufficiently progress ahead of the September deadline.
In July, reports surfaced that the DOE suspended funding for another carbon capture and sequestration coal plant, Hydrogen Energy California, after reasoning that the group failed to meet benchmarks like securing customers.
But Summit was seen as a different case, enjoying greater positivity from the DOE.
“It’s a good project,” Jim Wood, a former deputy assistant secretary of energy who specialized in clean coal from 2009 to 2012 and the current director of the U.S.-China Clean Energy Research Center at West Virginia University, told the Odessa American in June. “And all the elements are there.”
The Texas Clean Energy Project stood out as the furthest along among any carbon capture and sequestration effort with the best chance of proving up the technology as commercially viable.
“It’s important to understand that the de-obligation of this money does not reflect a loss of enthusiasm on the part of the federal government, and it doesn't signify a shift in the administration wanting to get carbon capture and storage on the ground,” Miller said. “We are the last big project in America that is still in active development and we are talked about every single day worldwide as being the most ambitious carbon capture and storage project in the world.”
Contact Corey Paul on Twitter @OAcrude on Facebook at OA Corey Paul or call 432-333-7768.