UPDATED: 02/16/2018 — see Change Log

OWNER: Texas Clean Energy Project (Summit Power Group LLC)
PROJECT: Greenfield plant, urea[memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

COST (reported): $3.9 billion
JOB CREATION (reported): 150 permanent, 2,000 construction — see Job Openings [LINK]
START-UP DATE (reported): 2019

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		[None given]	[Membership required]	[Membership required]
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] Company publications give no ammonia capacity. [3] Permit documents not available online. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Bankrupt
The Texas Clean Energy Project was going to be a major “clean coal” power plant with significant urea byproduct but DOE effectively killed the project when it suspended funding. Initiated in 2010 and originally scheduled to be completed by 2014, the project continually failed to raise financing for such a long time that the DOE finally withdrew its support in mid-2016. In December 2016, the developers announced one last idea, ditching power generation altogether to focus on urea production but soon after, in October 2017, the company went bankrupt.

COST: $3.9 billion, originally $1.9 billion
JOB CREATION: 150 permanent, 2,000 construction — see Job Openings [LINK]
START-UP DATE: None, 2019 last reported, originally June 2014
LIKELIHOOD: Dead — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia				791,149 mtpy estimate
Urea		750,000 stpy 679,000 mtpy	2,600 stpd	1,360,777 mtpy
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] Company publications give no ammonia capacity; urea capacity updated on website 09/17/2015. See sources below. [3] Based on US DOE’s Environmental Impact Statement, 2015 Supplemental Analysis. See sources below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; assumes second urea line added with same capacity as company previously stated for first urea line; ammonia capacity estimated as feedstock required for urea production. See Methodology.

FEEDSTOCK: Coal
END PRODUCTS: Urea, Carbon Dioxide, Sulfuric Acid, Argon & others

RESEARCH NOTES:
In December 2016, Summit Power announced that they were no longer trying to raise financing for this project as a power plant but were, instead, going to “reconfigure the project to produce more fertilizer by adding another urea line for the carbon capture coal plant.”

This was a major change of plans after six years of development, but was perhaps the only way for the plant to move forward because “repurposing the project to produce more fertilizer will make raising money for the project easier.”

Sadly, not easy enough: the developer, Summit Texas Clean Energy, LLC, filed for bankruptcy protection in October 2017. Even with a reconfigured project and a Trump presidency, it was unlikely that anyone could successfully raise financing for a “clean coal”-to-ammonia plant in a market environment of cheap gas.

I had estimated that, with two urea lines each equal to the original plant’s size, the plant would have a total urea capacity of 1,500,000 stpy, requiring an ammonia capacity of roughly 800,000 mtpy.

The Texas Clean Energy Project (TCEP) was going to be a 400 MW “clean coal” IGCC polygeneration power plant with CCUS technology, owned by Summit Power.

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.

Although construction of the plant was originally planned for completion in June 2014, the Project remains in the project definition phase … To date, we noted significant project delays had occurred due to Summit’s inability to secure private financing. When the Project was initiated in February 2010, the plan was to have funding in place by December 2010. However, as of February 2016, more than 5 years later, the necessary financing had not been secured. Additionally, since the initiation of the Project, estimated costs for the entire project have doubled from about $1.9 billion to approximately $3.9 billion …

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

Two years later, in February 2018, it became clear that there were other, significant problems with these Federal grants: the DOE was approving all invoices for the project, without question. A Bloomberg article cited a new departmental watchdog report disclosing that “millions of dollars of federal funds … were improperly spent on liquor, lobbying, and spas.”

It seems that Summit also took a creative approach to the notion of cost-sharing. The DOE agreed to contribute its $450 million share toward the cost of a $1.7 billion project. The other $1.25 billion of that project cost was supposed to be real, but it isn’t clear to what extent those budgeted costs, or expenditures by Summit, ever existed. For example, having claimed a $480,000 expenditure for land purchase as part of its cost-sharing agreement, Summit then billed 80% of this to the Department of Energy and – after being reimbursed $384,000 – continued to claim it had made the whole $480,000 expenditure: this has the effect of inflating the apparent investment by Summit: it claims costs of $480,00 but actually pays $96,000. Another creative “cost-sharing” approach involved negotiating deferred “loans” from vendors that Summit pledged it would have to pay in the future, but, on examination of invoices from those vendors, these turned out to be simple discounts on services, and therefore have no impact on Summit’s financial contributions, nor the DOE’s responsibility to pay excessively. Unfortunately, as the audit makes clear, “Fossil Energy had not always effectively and efficiently managed financial aspects of the Project.”

As well as providing 195 MW to the electric grid, TCEP was set to consume 1.8 million tons of (low sulphur) coal per year, from the Powder River Basin, and capture “ninety percent (90%) of its carbon – more carbon than any power plant of commercial scale yet operating anywhere in the world.”

TCEP planned to sell the captured carbon dioxide (CO2) to “local oil field producers for enhanced oil recovery,” (EOR) in the West Texas Permian Basin, as well as selling its other byproducts, including urea and sulfuric acid. Urea production was originally expected to consume around 21% of the captured CO2.

The project was originally budgeted at $1.9 billion. Until mid-2014, the costs were rising steeply: up to $3.5 billion in some reports, primarily due to increasing labor prices. This changed, however, in July 2014, when Summit Power and the US government announced a strategic cooperation initiative with the Clean Energy Research Institute of China Huaneng Group. Huaneng, working with Siemens, were “refiguring the costs” for TCEP in a new study, which they hoped would bring the capital expense down again to $2.5 billion. Huaneng is a subsidiary of state-owned China National Petroleum Corporation (CNPC), and is the operator of GreenGen, “China’s cleanest fossil fuel power plant,” a 250 MW IGCC plant now running (without carbon capture) in Tianjin, near Beijing.

With this “Sino-U.S. cooperation” in place, in July 2014, TCEP had hoped “to achieve financial closing in April 2015,” for construction to begin in “Summer 2015,” with “start-up and testing in 2018.” There were lengthy delays negotiating contracts, however, and in October 2015 the start-up date was pushed back to 2019.

In December 2015, TCEP announced that it had signed new EPC contracts with two engineering firms, who had “entered into a consortium agreement,” the Chinese firm HQC (China Huanqiu Contracting & Engineering Corporation, closely associated with China Huaneng Group mentioned above, and also a subsidiary of CNPC) and the Canadian company SNC-Lavalin. These contracts cover the chemical plants, carbon capture, and “balance of plant” – the coal gasification and power generation system is expected to be built by Siemens.

“The signing comes 16 months after HQC and Summit launched an effort to improve the design of the project with a goal of reducing project costs, which rose sharply in 2013 as a result of soaring Texas labor rates due to the oil and gas boom. With the completion of updated engineering work and the addition of SNC-Lavalin to the team, this contract brings that effort to a successful conclusion. TCEP’s financial closing is targeted for spring 2016.”

The announcement did not, however, provide a current capex estimate. The estimate of $3.9 billion is the latest figure published by the US DOE, in April 2016, when it withdrew its support.

I assume that project backers had been anxiously following developments at Mississippi Power’s Kemper County “clean coal” plant, where cost overruns spiraled, during construction, from less than $3 billion to almost $7 billion.

In late 2015, TCEP also lost $104 million in funding from the American Recovery and Reinvestment Act (ARRA), which expired at the end of September 2015 – but gained $174 million in Investment Tax Credits from the IRS (“bringing the project total to $811M” from Investment Tax Credits). Other financing had included a $450 million grant from the US Department of Energy’s Clean Coal Power Initiative. In April 2016, however, the DEO issued its Special Report, questioning the project’s viability.

Without US DOE funding, it was highly unlikely that Summit could be successful in raising equity financing or commercial debt.

TCEP’s business model also depended, to an extent, on the commercial viability of selling 2.5 million tons per year of carbon dioxide for enhanced oil recovery (EOR). This would have been more than 80% of the plant’s captured CO2, and represented 20% of its projected annual income. Given the recent fall in the price of oil, which made EOR uncommercial, this income was no longer a certainty. TCEP provided no updates on its CO2 off-take agreements, which had been signed years ago based on a start-up schedule that didn’t materialize.

On the other hand, while cheap oil endangered the project’s future cash flows (and environmental viability), the developers claimed that it also brought down the capital costs. As a project leader explained in December 2015, “This year has really helped us a lot … because with oil prices sliding, we are not talking about building giant man camps anymore. We have local skilled labor where we didn’t before, so that’s also good for pricing. We have a bit of a tailwind, which is good right now.”

Significantly, the project did announce, in September 2015, “a new longterm off-take agreement with Iowa-based United Suppliers, Inc. for TCEP’s entire urea fertilizer production of more than 750,000 tons per year.”

The ammonia capacity given here was estimated as the amount of feedstock needed for the project’s urea production of 2,600 stpd, given in the DOE’s Environmental Impact Statement, 2015 Supplement Analysis, which followed the project’s reconfiguration and represented a significant increase on previous numbers.

Urea production will be increased due to the additional amount of clean syngas now being sent to the ammonia/urea synthesis unit … Typical urea production will be between 2,532 to 2,600 [short] tons (2,297 to 2,359 [metric] t) per day as compared to 1,485 to 2,079 tn (1,347 to 1,886 t) per day as stated in the EIS.
US DOE, Environmental Impact Statement, 2015 Supplement Analysis

The 750,000 stpy urea capacity, announced by TCEP in September 2015 (and equal to the NETL factsheet‘s figure of ~697,000 mtpy from November 2014), represented a reduction from previous announcements. Urea capacity was earlier given as 2,156 stpd (~710,000 mtpy) by the company, and even “about 832,000” mtpy in the original DOE funding award project summary.

Summit estimated that 53% of total revenues over 30 years would have come from urea sales; the other revenue streams were power (20%), CO2 (20%), and “argon and others” (7%). Offtake agreements were in place for “100%” of the power, CO2, and urea. Local municipal utility CPS Energy had a 25 year power purchase agreement, which expired at the end of 2013 but was renewed in late 2014. Whiting Petroleum and 2+ other oil producers had offtake agreements for the CO2, covering 30 years and 2.5 million tons of CO2 per year (I have no information about whether these contracts still stand). Shrieve Chemical Company had an offtake agreement for sulfuric acid. CHS Inc, a farmers’ co-operative, which cancelled its own urea greenfield in North Dakota in August 2015, originally had an offtake agreement for 700,000 tons of urea per year – this is no longer in place, and the new urea offtake partner is United Suppliers.

Project partners originally included Clayton Williams, Linde, Siemens, Sinopec, and The Import-Export Bank of China (Chexim); Chinese equity participation is “limited to less than 50%.”

The air permit was approved in December 2010. Operation and Management agreements were in place with Linde and Siemens. “Lump-sum, fixed price, turnkey” EPC contracts were in place with Siemens for the power plant, and with Sinopec for the chemical plant; the Sinopec contract opened the door for Chexim to provide ~$1 billion, or “100% of long-term project debt.” The 2014 alliance with Huaneng and subsequent EPC contract awards, however, suggested that those agreements with Sinopec and Linde were, already, no longer in effect.

Both the TCEP website, which featured many updates and news articles, and the website for its parent company, Summit Power, appear not to have been updated since late 2015.[/memberful]

View larger map with all ammonia plants.

ADDRESS: Penwell, near Odessa, Texas, United States
WEBSITE: http://www.texascleanenergyproject.com/
WEBSITE: http://www.summitpower.com/

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• Construction Permitting: TCEQ permit status [LINK]
• PSD Permitting: TCEQ permit status [LINK]
• National Energy Technology Laboratory: TCEP factsheet, updated November 2014 [PDF]
• US Department of Energy: EIS-0444: Texas Clean Energy Project page [LINK], Environmental Impact Statement, 2015 Supplemental Analysis [LINK / PDF], Special Report, April 2016 [LINK / PDF]

NEWS SOURCES:

• 02/13/2018: Bloomberg: Federal Grants Meant for Clean Coal Misspent on Liquor, Spas [LINK]
• 11/15/2017: Odessa American: Summit bankruptcy frees land, city funds [LINK]
• 12/08/2016: Odessa American: Summit ditches power in bid to salvage project [LINK]
• 05/17/2015: Utility Dive: DOE pulls funding for Texas clean coal project [LINK]
• ONGOING: Odessa American: TCEP local news archive [LINK]
• 12/09/2015: Odessa American: Council grants extension for Summit site [LINK]
• 12/08/2015: TCEP press release: Summit Power Group Announces Signing of EPC Agreement With HQC and SNC-Lavalin for Texas Clean Energy Project With Financial Closing Expected in Spring 2016 [LINK]
• 10/02/2015: Houston Chronicle: Low oil prices cloud futures of clean coal and carbon capture [LINK]
• 09/29/2015: Politico: Carbon-capture projects lose out on DOE stimulus cash [LINK]
• 09/23/2015: ClimateWire: Major Texas project to move forward despite loss of stimulus money [LINK]
• 04/01/2015: Houston Chronicle: Odessa coal-to-gas power plant to break ground this year [LINK]
• 10/06/2014: TCEP press release: CPS Energy Renews Plans for Clean Coal Plant [LINK]
• 07/14/2014: Summit Power press release: Summit Power Group Celebrates Major Milestones at US-China Strategic & Economic Dialogue Meeting [PDF]
• 09/30/2013: Congressional Research Service report: Carbon Capture and Sequestration: Research, Development, and Demonstration at the U.S. Department of Energy [PDF hosted on Federation of American Scientists website]
• 05/2013: TCEP documents: U.S. Congressional [Letters in] Support of the Texas Clean Energy Project [PDF]
• 09/12/2012: TCEP press release: Summit Power Group Celebrates Major Milestones in Financing and Construction of the Texas Clean Energy Project – Generating Jobs and Energy [LINK]
• 09/11/2012: CHS press release: CHS invests in Summit Texas Clean Energy and secures exclusive 700,000 ton urea off-take agreement [LINK]
• 02/14/2012: TCEP press release: Summit’s Texas Clean Energy Project Reaches Major Milestone with Signed EPC and O&M Contracts [LINK]
• 09/29/2011: Federal Register: Record of Decision, Texas Clean Energy Project [LINK]
• 07/03/2008: Forbes Magazine: Old King Coal [LINK]