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Stepping off the gas

Legislation approved by Indiana lawmakers to trigger review of the risky financing plan behind the Rockport coal gasification plant most likely means the $2.8 billion project will never come to pass. It also decreases the chances that Hoosiers will be left on the hook to pay for it.

State legislators did the right thing in passing a bill in the last hours of the session that may permit the Indiana Utility Regulatory Commission to review the state’s 30-year contract with Indiana Gasification LLC and Leucadia National Corp. to finance the Spencer County project.

The controversy has attracted more attention in southern Indiana, where the proposed plant was slated for construction. But all Hoosiers will be affected if the contract is allowed to stand. A court case challenging its validity could go before the Indiana Supreme Court, which would need to uphold the contract in its entirety, including a 37-word section struck by the Indiana Court of Appeals, for the project to proceed.

Former Gov. Mitch Daniels signed the long-term deal with Leucadia, which calls for the state to buy the synthetic natural gas produced by the Rockport plant and then resell it. According to the deal, if the price of synthetic natural gas exceeds that of natural gas on the open market, Indiana’s 1.7 million natural gas utility customers – including NIPSCO customers in northeast Indiana – will make up 100 percent of the difference through a surcharge on their gas bills. Utility customers will get only a 50 percent credit if the price of synthetic gas drops below that of natural gas.

Mark Lubbers, the project director for Leucadia and a former Daniels adviser, is now suggesting that even if the company wins the court case, it won’t be moving forward with the plant. He told the Evansville Courier & Press the bill created too many hoops to jump through and newly elected Gov. Mike Pence and legislators clearly don’t support the project.

A coalition of consumer and environmental advocacy groups, including the Sierra Club and Citizens Action Coalition, have long opposed the deal, referring to it as the “Leucadia tax.”

“If the coal gasification project were to move ahead as planned, ordinary Hoosier ratepayers would be required to foot the bill for premium-priced synthetic coal gas even though natural gas is available at lower cost on the open market,” the Sierra Club said in a news release. “A new ‘Leucadia tax’ would appear on natural gas bills and would disproportionately impact senior citizens, low-income communities, and communities of color who traditionally spend more of their income on energy.”

The volatility of the natural gas market makes the deal too risky for Indiana utility customers. State lawmakers took appropriate action to protect their interests.