Bankruptcy for TCEP ends plans for “clean coal” ammonia in US

The company behind the Texas Clean Energy Project (TCEP) filed for bankruptcy protection in October 2017, ending any hope that it would build its proposed million-ton-per-year “clean coal” urea plant.

This means that every one of the “clean coal” ammonia synthesis projects I’ve been tracking since 2012 has failed: in California, in Mississippi, and now in Texas. That’s three strikes; if hydrogen sources were like baseball, coal would be out.

These projects all shared jaw-dropping cost escalations and multi-year delays that forced financing partners to withdraw. Each of them suffered when the price of oil fell, because their business plans relied on selling captured carbon dioxide to oil fields for enhanced oil recovery (EOR): cheap oil made EOR uneconomic.

(The accounting never made sense from an environmental perspective either: according to all the EOR data I’ve seen, the recovered oil contains more carbon than the sequestered CO2, making the practice of EOR quite heavily carbon-positive. “Clean coal” is about as dirty as normal coal, therefore, in terms of its carbon footprint – just far more expensive. As far as I can tell, the only beneficiaries of such an investment would be the owners of the mineral rights, who wish to avoid owning a stranded asset.)

No “clean coal” in California
Last year, Hydrogen Energy California (HECA) withdrew its application to the California Energy Commission, meaning that any renewed activity would take years to permit. The project had failed to find financing as a stand-alone power plant so, as part of the redesigned project, HECA became a proposed polygeneration power plant that would also produce nitrogen fertilizers at a rate of “about one million tons” per year.

According to a DOE audit from 2013, the addition of fertilizer production “reduced the risk of the project by … adding a second source of income,” despite contributing to the vast increase in costs, from $2.8 billion to over $4 billion. Unfortunately, this risk reduction “actually represented a substantial increase in upfront risk to the Department [of Energy] by allowing HECA to substantially decrease its cost share in the early stages of the project.” The DOE pulled funding in 2015, and the project has been irretrievably stalled since then.

No “clean coal” in Mississippi
I can barely describe the boondoggle in Kemper County, MS. The 830 MW power plant, using technology by KBR and others, was originally supposed to cost $2.97 billion but has cost over $7.5 billion … so far.

This year, Mississippi Power finally gave up trying to operate the plant using coal and is running the plant on natural gas, which, as far as I can tell, makes the ammonia production unit obsolete. I’m guessing it’s the most expensive natural gas power plant on the planet.

The expose in the New York Times was fun to read, assuming you weren’t part of the management team, although Southern Company did issue an immediate rebuttal. The lawsuits are flying on this one, and will be for some time.

No “clean coal” in Texas
Like with HECA and Kemper County, the US Department of Energy pulled hundreds of millions of dollars in funding from the proposed polygeneration (power + fertilizer) TCEP plant in Penwell, TX, after the project went too far over budget and too long without raising the rest of the money.

In April 2016, the DOE issued a Special Report as part of a project audit, which “effectively ended [the] Texas clean coal project, pulling some $240 million in funding.”

Due to Summit’s inability to obtain the required commercial debt and equity project financing and the adverse effect of changing energy markets on the demand for coal-based power plants, we are concerned about the viability of the Project and the Department’s continued involvement …

We recommend that the Assistant Secretary for Fossil Energy … Ensure that funding to the Project remains suspended until construction financing has been secured.
DOE Special Report, April 2016

Soon after that, in December 2016, TCEP’s developers announced that they would “reconfigure the project to produce more fertilizer by adding another urea line for the carbon capture coal plant [because] repurposing the project to produce more fertilizer will make raising money for the project easier.”

Unfortunately, raising money for a fertilizer plant doesn’t appear to be much easier than for a power plant.

In all the DOE committed about $450 million to the TCEP. The department spent about $116 million on the project before freezing funding …

Summit Texas Clean Energy, LLC filed the Chapter 7 bankruptcy, a form that calls for liquidation, on Oct. 13. The filing reported total liabilities of about $46.8 million and more than $175,000 in assets.
Odessa American, Summit bankruptcy frees land, city funds, 11/15/2017

You can find more information in my Research Notes for Penwell, TX, Kemper County, MS, and Kern County, CA.