Gas begins to flow
In March of 1980, Mercer County commissioners issued the final zoning compliance certificate. Appeals were then filed to overturn the FERC order by Ohio Office of Consumers’ Counsel, General Motors Corp., New York PSC and Michigan Attorney General.
President Carter delivered a conditional letter of commitment July 18 from DOE to award a $240 million loan guarantee, enough to ensure one year of construction. ANR simultaneously announced plans to begin construction, despite pending the appeals. ANR’s Art Seder met with state and local officials July 25 in Beulah to formally announce the project construction plans.
In November, DOE conditionally approved a $1.5 billion federal loan guarantee for the Great Plains project. The following month, the Federal Appeals Court panel ruled that FERC exceeded its authority on the financing plan for the project. The ruling said FERC had no jurisdiction over the project until synthetic gas was actually co-mingled with the natural gas being transported in interstate commerce. Later, in settlement meetings, issues were raised by General Motors, Ohio and New York on Great Plains' recovery of equity investment should the project be abandoned and they proposed an increase in return on equity. As a result, DOE said it wouldn’t be able to grant loan guarantees to the project.
Order No. 119
The loan guarantee application was increased from $1.5 billion to $1.8 billion at the beginning of 1981. ANR then announced a new financing plan. In March 1981, General Motors and the Ohio consumer office announced an agreement with GPGA over the pricing of synthetic gas from the proposed gasification project. GPGA filed a settlement offer with FERC April 10 tying the price of synthetic natural gas (SNG) from the project to a base of $6.75 per thousand cubic feet with future adjustments and price caps. The settlement was approved by FERC April 30 by issuing Order 119 which marked a major step for the project. The order approved the gas purchase agreements and the ability of the pipeline companies to pass the cost of SNG on to their customers. FERC Order 119 became final on May 28 based on the state of Michigan saying it would not seek a rehearing.
Later that year, newly elected North Dakota Gov. Allen Olson reaffirmed the support for GreatPlains in a letter to DOE Secretary James Edwards and urged prompt action on the loan guarantee. ANR officially declared the project ready for construction. Shortly after, disagreement surfaced in the new administration of President Reagan over the loan guarantee. DOE favored it while the Synthetic Fuels Corp. (SFC) chairman opposed it. As a result, ANR threatened to abandon the project if $2.02 billion in guarantees weren’t forthcoming soon but held off action. On Aug. 5
President Reagan authorized DOE to issue a conditional loan guarantee up to $2.02 billion.
ANR’s Seder returned to Beulah on Aug. 14 to announce full-scale construction. A few weeks later, the water intake structure at Lake Sakakawea was finished by Basin Electric after three years work. The water would be delivered to the gasification plant and Basin’s Antelope Valley Station.
The largest construction project in North America
Pipeline companies (affiliates of the companies building the project) signed gas purchase agreements Jan. 2, 1982, requiring each of them to buy a percentage of the total Great Plains output. On Jan. 29, DOE and Great Plains officials signed an agreement for a federal loan guarantee of up to $2.02 billion. Default by Great Plains would have allowed DOE to take over the project and reinstate gas purchase agreements.
Great Plains began seeking bids for purchasing two byproducts, anhydrous ammonia and sulfur, that February. By mid-year, Pacific Lighting Corp. of Los Angeles announced it would acquire 10 percent interest in the consortium. Including Pacific, the other owners were: Tenneco, 30 percent; ANR, 25 percent; Transco, 20 percent; and Natural, 15 percent.
By the end of June construction of the Great Plains project was about 12 percent complete. The first two of 14 gasifiers were installed without problems on July 19. The final gasifier was installed in November.
Between December 1982 and March 1983 a mild winter permitted extensive work outdoors, allowing 3,000 craft workers to remain on the job. Recruitment began for full-time operations staff.
A growing loss
GPGA's cash-flow projections showed a loss of $840 million in the first 10 years because of falling energy prices. However, a General Accounting Office report said GPGA would make money in the plant’s first 10 years once tax benefits were included.
By April 1983, construction on the gasification plant was about half complete. The construction work force peaked at about 800.
Faced with continued energy price declines, in September GPGA changed it projections to show a loss of $1.3 billion in the first 10 years. The following month GPGA filed for price guarantees with the SFC. Without the guarantees, GPGA said the risk was too great and abandonment was possible. The SFC said it would take requests for assistance from coal gasification projects, clearing the way for discussions with Great Plains on price guarantees. By year’s end, the project was 95 percent complete and the permanent work force stood at 700.
Getting on line
On April 24, 1984, the gasification plant began producing medium-Btu gas. Great Plains shipped its first anhydrous ammonia May 29 to a grain farm near Berthold, ND.
On April 26, the SFC board approved a preliminary agreement to provide up to $790 million in price guarantees for the first 10 years. Shortly afterward, two board members resigned, leaving no quorum to give approval on a final contract.
Unit 1 at Antelope Valley Station began commercial operation July 1.
For the first time, high-Btu gas made synthetically from lignite began flowing July 28 from Great Plains into the nation’s interstate pipeline system. The permanent work force reached about 1,000. With various equipment problems, the plant failed to comply with sulfur emission limits set in the original construction permit.
In October Great Plains’ two production "trains" became operational. Great Plains temporarily achieved peak SNG production of 125 million standard cubic feet (mmscf) per day on Nov. 11.
Great pains for Great Plains
In 1985, North Dakota state legislators agreed not to tax any federal price support for Great Plains, a condition sought by the SFC. A few months later, SFC refused to vote on $820 million price support package in response to a letter from DOE Secretary John Herrington expressing concern that price guarantees wouldn’t ensure the plant’s long-term operation.
In May, the Great Plains plant completed its first successful turnaround or planned maintenance shutdown. Great Plains plant set a production record on June 18 of nearly 139 mmscf per day.
GPGA signed a marketing agreement for a light-oil byproduct to be used as a wood preservative.
SFC board approved an agreement in principle July 16 for $720 million in price supports, based on the DOE rescheduling debt payments. On July 30, the Reagan Administration rejected the latest price support deal. DOE Secretary Herrington said it wouldn’t ensure long-term plant operation at a reasonable cost to taxpayers.
GPGA announced Aug. 1 that the partners would abandon the gasification project and default on the federal loan immediately. On the same day, North Dakota Gov. George Sinner appointed a task force to determine the impact from closing the plant. Sen. Mark Andrews of North Dakota met with Secretary Herrington Aug. 15 and arranged for the plant to remain open until the spring of 1986. Natural Gas Pipeline Co. sued the federal government Aug. 20 claiming the gas purchase agreements were null and void.
U.S. District Judge Patrick Conmy issued a summary judgement Jan. 14, 1986, in favor of DOE. That effectively upheld the gas contracts valid and granted the government’s right to foreclose on GPGA. The following month, DOE announced its intent to sell the Great Plains plant to the private sector. DOE bid $1 billion for the project at a sheriff’s sale June 30 at the Mercer County Courthouse and assumed ownership. (Marshall’s deed is dated July 16.) By August, Pipeline companies appealed Judge Conmy's decision regarding gas contracts.
In June, portion of Unit 2 at Antelope Valley Station began commercial operation. ND Health Department issued a violation notice to DOE regarding sulfur emissions at gasification plant in July.
ANG signed an agreement in December to operate the project under DOE.