SPRINGFIELD – A planned coal gasification plant for Chicago’s south side will increase natural gas prices for Ameren and Nicor customers downstate, a coalition of business and environmental groups said Thursday.
They are asking Gov. Pat Quinn to veto a bill passed in the closing hours of the spring session that would allow the $3 billion facility to be built by Leucadia National Corp.
The Leucadia plant would convert coal to synthetic natural gas that then would be sold to Illinois utilities. The opponents argue that the plant does not make economic sense for consumers when the price of natural gas recovered from the ground is at an all-time low.
“The cost of Leucadia’s natural gas is nearly four times higher than what you can buy on the market today,” said Mark Denzler, vice president of the Illinois Manufacturers’ Association. “It’s unaffordable, it doesn’t make sense.”
The coalition said the higher-priced synthetic natural gas produced by the Leucadia plant will cost the typical Ameren residential user $170 to $192 per year.
Denzler said manufacturers could see cost increases in the “tens and even hundreds of thousands of dollars per year.”
Jeffrey Adkisson, executive vice president of the Grain and Feed Association of Illinois, said grain elevators and feed dealers use natural gas to power dryers that make grain suitable for storage. Those costs will increase if the Leucadia plant is built, he said.
“We estimate the impact is going to be about $35,000 per company,” he said. “That translates into $7 million to $10 million statewide. Our costs are passed directly back to farmers. Paying three to four times more for a product than the marketplace is selling it for doesn’t make sense.
The Citizens Utility Board, which supported a proposed coal gasification plant in Taylorville, also wants Quinn to veto Senate Bill 3766.
“We have to make sure everyone pays their fair share,” said Bryan McDaniel, CUB’s director of governmental affairs. “This plan is now being put on suburban and downstate customers. That’s who’s paying for the plant. We have a real problem with that.”
A year ago, lawmakers approved a bill requiring utilities to buy gas produced by the Leucadia plant.
However, the bill also gave utilities the option of not buying the gas, but being subject to regular rate reviews. Peoples Gas and North Shore Gas chose not to buy the gas.
However, that left Leucadia with no buyer for 16 percent of its output. The bill pending before Quinn would require Ameren and Nicor to buy more gas from the plant than they originally envisioned.
“The scope of the project changed dramatically,” said Randy Mitchelson, Ameren’s managing supervisor of government relations.
“That’s when we decided we didn’t think it was in the best interest of our customers to be passing that along. Our downstate customers won’t get any benefit of the gas or the jobs, but yet will be paying the price.”
The bill’s sponsor, state Sen. Donne Trotter, D-Chicago, called criticism of the project “more hyperbole” that overlooks the benefits of building the plant. He said 1,100 jobs will be created to prepare the plant site and construct the plant, and another 200 permanent jobs will come from its operation. He also said the plant will help the Illinois coal industry, although the critics said there are limits to the amount of Illinois coal that would be used.
Trotter said the legislation contains a cap on customer price increases that can result from use of synthetic natural gas from the plant. And while natural gas prices are low now, he said, who knows what they will be in the future?
“This is a 30-year proposal,” Trotter said. “Prices always go up and come down. If they’re saying in the next 30 years there’s not going to be a fluctuation in prices once again, quit smoking those banana peels. Things do change. Prices will go up again.”