N.D. Synthetic Fuel Plant Planned

Chuck Kerr, chief executive officer of Great Northern Power Development LP, said Tuesday there was an 80 percent chance the project would be built. If it is, the synfuels plant and a nearby coal mine will provide about 200 permanent jobs, Kerr said.

The plant and lignite mine will be near South Heart, west of Dickinson in western Stark County, officials said. Kerr said the company wants to begin construction in late 2009, and begin operating in 2012.

An affiliated company, Great Northern Properties LP, holds 3 billion tons of lignite reserves in western North Dakota. Both companies are based in Houston.

Kerr said the project is expected to use 4.9 million tons of coal annually, which would represent a 16 percent increase in North Dakota's annual production.

Since 2001, Great Northern has been exploring whether to build a new, 500-megawatt electric generating plant at the same location.

Project planners began thinking of a shift to a synthetic gas plant three years ago, Kerr said. Energy prices were rising sharply, and an electric plant in southwestern North Dakota would need costly upgrades for the state's power transmission network to be able to sell its output.

A synthetic gas plant would be cleaner than a coal-fired electric power plant and would give off much less carbon dioxide, which is a plus when federal regulation of the heat-trapping gas is becoming more likely, Kerr said. Rising carbon dioxide emissions are blamed for global warming.

"We started looking at our hole card," Kerr said. "That hole card was coal gasification."

Gov. John Hoeven said it will be possible to store the plant's carbon dioxide output deep underground, in saline aquifers in western North Dakota, or use it for enhanced oil recovery projects in the state's western oil patch.

Kerr said he believed prices of at least $60 a barrel for oil and $6 per thousand cubic feet of natural gas are "sustainable." They make it economically practical to develop North Dakota's second synfuels plant, he said.

The first synfuels factory, which was built in the 1980s near Beulah, has been making synthetic gas from lignite for more than 20 years.

Al Lukes, a former chief operating officer of Dakota Gasification Co., which owns the Beulah synfuels plant, said the proposed Stark County project will use different technology that is cleaner and more efficient, and uses less water. Lukes, who retired from Dakota Gasification in January 2006, is affiliated with the new project.

The gasification technology will be licensed from Advantica Ltd., of Loughborough, England, and Envirotherm GmbH, of Essen, Germany, which is part of Allied Resource Corp. of Wayne, Pa.

Rhem Wooten, president of Allied Syngas Corp., a unit of Allied Resource, said Allied would invest in the project as well as allow it to use its gasification technology.

"This will be one of the cleanest coal-fueled plants of any description, anywhere in the world," Wooten said. "It will be, we think, a model for the types of projects that will be built as we go forward in a carbon-constrained world."

Kerr said Great Northern still must get a number of permits for the project, including water and air quality permits. Work already done for the proposed electric power station should give the company a head start, he said.

Tony Clark, a North Dakota public service commissioner, said the PSC also has jurisdiction over the siting of the synfuels factory and coal mine.

Kerr said two major natural gas pipelines, the Northern Border and Williston Basin pipelines, are near the Stark County plant site and would provide ready access to markets.

Williston Basin Interstate Pipeline Co. is a unit of MDU Resources Group Inc., of Bismarck, while the Northern Border Pipeline is owned by Oneok Partners LP, a unit of Oneok Inc., of Tulsa, Okla., and TC PipeLines LP, a unit of TransCanada Corp., of Calgary, Alberta.

North Dakota's Industrial Commission voted Tuesday to provide a $7.3 million state grant for the project. Earlier, the commission has awarded $2.7 million in grants for the proposed electric power plant, Hoeven said.

As much as $4.13 million of the $10 million in grants must be repaid if the project is not built, according to the grant's terms. Great Northern will not have to repay any of the money if the plant is built and operates for 10 years using North Dakota lignite.

The grant money is coming from a lignite research fund, which is controlled by the Industrial Commission and financed by a portion of North Dakota's tax on coal mining. The commission is made up of Hoeven, Attorney General Wayne Stenehjem and Agriculture Commissioner Roger Johnson.