What's New
Basin Electric Cooperative Subsidiary pays $39 Million to Department of Energy
Officials from Dakota Gasification Company (DGC) made a $39.2 million payment to the U.S. Department of Energy (DOE) this week. The payment was accepted by U.S. Energy Secretary Samuel Bodman as part of a revenue sharing agreement signed in 1988.
The revenue sharing agreement was signed in 1988 when DGC bought the Great Plains Synfuels Plant -- a coal gasification plant located near Beulah, N.D. As part of the sale agreement, DGC agreed to share revenue from gas sales with the DOE through 2009.
In presenting the check to Bodman, Ron Harper, President of DGC and CEO and general manager of Basin Electric, said the Great Plains Synfuels Plant has proven that coal can be the cornerstone of energy development now and in the future. "Because of what we've learned operating this plant, there is a tremendous potential for gasification technology to use coal efficiently to supply this country's energy needs."
Without the continued support from the North Dakota delegation, the fate of the Synfuels Plant may have been much different.
"The revenue sharing agreement has been a success for both the government and Basin Electric," said U.S. Senator Byron Dorgan. "It allowed a very important energy development project to continue in our state with the prospect that future profits would be shared by Basin Electric and the federal government. I congratulate Dakota Gasification Company for the spectacular success of the only commercial-scale plant in the nation that produces synthetic natural gas from lignite coal."
"The Great Plains Synfuels Plant is one of the best examples of how federal loan guarantees have worked to promote new energy development. The deal between Basin Electric and the Energy Department has allowed the U.S. Treasury to recoup nearly $1 billion in shared revenue and unused tax credits," said Senator Kent Conrad. "Federal investment in the development of domestic sources of energy is a sound policy that will help wean our nation off its dependence on foreign sources of energy."
"The Synfuels plant is a wonderful example of the success that can come from public-private partnership. With assistance from the federal government, Basin Electric has not only turned the Synfuels plant in to a profitable enterprise, but has also helped establish North Dakota's role as a national leader in cutting-edge carbon sequestration technology," Congressman Pomeroy said.
The parent company of DGC, Basin Electric Power Cooperative, Bismarck, was selected by DOE in 1988 as the successful bidder for the facility. DGC was formed by Basin Electric to own and operate the gasification plant.
The amount of revenue shared is based on a formula that takes into account natural gas prices and other economic indicators. The arrangement was made to help DOE recover funds lent to the original developers of the plant who defaulted on guaranteed loans in 1985 after it was built.
In 2000, the gasification plant began capturing carbon dioxide (CO2) and piping it to an oilfield in Canada for enhanced oil recovery. In 2006, a second oilfield was added, increasing CO2 production capacity up to about 160 million cubic feet per day. The oilfields are operated by EnCana Oil and Gas Partnership Limited and Apache Canada Limited. "This is one of the largest CO2 capture and sequestration projects in the world," Harper said.
In the early 1980s, DOE guaranteed a $1.5 billion-loan to the original developers of the Synfuels Plant. The developers defaulted on that loan in 1985, and the DOE repaid the lenders and took control of the plant. In fact, DOE operated the plant from 1985-88, during which time the decision was made to offer the plant for sale through a bidding process.
When Basin Electric purchased the plant, it committed not only to share revenue with DOE, but also to not take advantage of production tax credits for producing synthetic fuels that were available at the time. The tax credits expired in 2002 with a value of about $754 million.
The payment made today is the seventh one made under the terms of the revenue-sharing agreement. The total amount paid to DOE "as part of the revenue-sharing agreements" now grows to $285.2 million since the sale of the plant to Basin Electric, Harper said. When taking into consideration the tax credit given up by Basin Electric, the total benefit to the federal government of selling the plant to Basin Electric is $1.1 billion.
During the 1980s and 1990s, gas prices were quite low. As a result, minimal payments were made to DOE based on the revenue-sharing formula. However, beginning in 2001 natural gas prices started trending upward -- reaching more than $10/dekatherm at times - contributing to multi-million dollar revenue-sharing payments being made on an annual basis.
Besides the revenue sharing, Harper said close to $400 million has been invested in the plant since 1988 to achieve environmental compliance, improve efficiency, and invest in new byproduct development. "We've been able to increase production at the plant by more than 25 percent of original design," he said. "The efficiency improvements benefit DOE and DGC because the revenue sharing formula is based in part on the amount of natural gas produced by the plant."
Because of the investments made by DGC for environmental improvement, byproduct development and increased production, Harper said the plant operation has turned challenges into opportunities. "Our people are committed to keeping this plant a symbol of stability in a volatile time. This is a world-class facility," he said.
Headquartered in Bismarck, DGC owns and operates the Great Plains Synfuels Plant near Beulah, N.D. The plant produces natural gas and other byproducts from a coal gasification process. DGC is a subsidiary of Basin Electric Power Cooperative, Bismarck.
The revenue sharing agreement was signed in 1988 when DGC bought the Great Plains Synfuels Plant -- a coal gasification plant located near Beulah, N.D. As part of the sale agreement, DGC agreed to share revenue from gas sales with the DOE through 2009.
In presenting the check to Bodman, Ron Harper, President of DGC and CEO and general manager of Basin Electric, said the Great Plains Synfuels Plant has proven that coal can be the cornerstone of energy development now and in the future. "Because of what we've learned operating this plant, there is a tremendous potential for gasification technology to use coal efficiently to supply this country's energy needs."
Without the continued support from the North Dakota delegation, the fate of the Synfuels Plant may have been much different.
"The revenue sharing agreement has been a success for both the government and Basin Electric," said U.S. Senator Byron Dorgan. "It allowed a very important energy development project to continue in our state with the prospect that future profits would be shared by Basin Electric and the federal government. I congratulate Dakota Gasification Company for the spectacular success of the only commercial-scale plant in the nation that produces synthetic natural gas from lignite coal."
"The Great Plains Synfuels Plant is one of the best examples of how federal loan guarantees have worked to promote new energy development. The deal between Basin Electric and the Energy Department has allowed the U.S. Treasury to recoup nearly $1 billion in shared revenue and unused tax credits," said Senator Kent Conrad. "Federal investment in the development of domestic sources of energy is a sound policy that will help wean our nation off its dependence on foreign sources of energy."
"The Synfuels plant is a wonderful example of the success that can come from public-private partnership. With assistance from the federal government, Basin Electric has not only turned the Synfuels plant in to a profitable enterprise, but has also helped establish North Dakota's role as a national leader in cutting-edge carbon sequestration technology," Congressman Pomeroy said.
The parent company of DGC, Basin Electric Power Cooperative, Bismarck, was selected by DOE in 1988 as the successful bidder for the facility. DGC was formed by Basin Electric to own and operate the gasification plant.
The amount of revenue shared is based on a formula that takes into account natural gas prices and other economic indicators. The arrangement was made to help DOE recover funds lent to the original developers of the plant who defaulted on guaranteed loans in 1985 after it was built.
In 2000, the gasification plant began capturing carbon dioxide (CO2) and piping it to an oilfield in Canada for enhanced oil recovery. In 2006, a second oilfield was added, increasing CO2 production capacity up to about 160 million cubic feet per day. The oilfields are operated by EnCana Oil and Gas Partnership Limited and Apache Canada Limited. "This is one of the largest CO2 capture and sequestration projects in the world," Harper said.
In the early 1980s, DOE guaranteed a $1.5 billion-loan to the original developers of the Synfuels Plant. The developers defaulted on that loan in 1985, and the DOE repaid the lenders and took control of the plant. In fact, DOE operated the plant from 1985-88, during which time the decision was made to offer the plant for sale through a bidding process.
When Basin Electric purchased the plant, it committed not only to share revenue with DOE, but also to not take advantage of production tax credits for producing synthetic fuels that were available at the time. The tax credits expired in 2002 with a value of about $754 million.
The payment made today is the seventh one made under the terms of the revenue-sharing agreement. The total amount paid to DOE "as part of the revenue-sharing agreements" now grows to $285.2 million since the sale of the plant to Basin Electric, Harper said. When taking into consideration the tax credit given up by Basin Electric, the total benefit to the federal government of selling the plant to Basin Electric is $1.1 billion.
During the 1980s and 1990s, gas prices were quite low. As a result, minimal payments were made to DOE based on the revenue-sharing formula. However, beginning in 2001 natural gas prices started trending upward -- reaching more than $10/dekatherm at times - contributing to multi-million dollar revenue-sharing payments being made on an annual basis.
Besides the revenue sharing, Harper said close to $400 million has been invested in the plant since 1988 to achieve environmental compliance, improve efficiency, and invest in new byproduct development. "We've been able to increase production at the plant by more than 25 percent of original design," he said. "The efficiency improvements benefit DOE and DGC because the revenue sharing formula is based in part on the amount of natural gas produced by the plant."
Because of the investments made by DGC for environmental improvement, byproduct development and increased production, Harper said the plant operation has turned challenges into opportunities. "Our people are committed to keeping this plant a symbol of stability in a volatile time. This is a world-class facility," he said.
Headquartered in Bismarck, DGC owns and operates the Great Plains Synfuels Plant near Beulah, N.D. The plant produces natural gas and other byproducts from a coal gasification process. DGC is a subsidiary of Basin Electric Power Cooperative, Bismarck.
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