[Congressional Record Volume 142, Number 11 (Friday, January 26, 1996)]
[Senate]
[Pages S524-S525]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      GREAT PLAINS SYNFUELS PLANT

 Mr. CONRAD. Mr. President, I rise today to discuss an issue of 
extreme important to my State of North Dakota and to this Nation's 
energy security.
  The issue is one currently before the Federal Energy Regulatory 
Commission [FERC], and involves the fate of a unique energy project in 
North Dakota--the Great Plains Coal Gasification Plant located near 
Beulah, ND. The gasification plant converts abundant lignite coal into 
clean-burning synthetic natural gas. It is the only commercial-scale 
plant of its kind that produces synthetic natural gas from coal in the 
world.
  FERC must decide whether to approve certain negotiated settlement 
agreements between Dakota Gasification Company [DGC], owner of the 
synfuels plant, and three interstate pipeline companies which purchase 
the synthetic natural gas produced by the plant. Additionally, DGC 
reached an agreement with the Department of Energy [DOE] which is 
contingent on FERC approval of the agreements between DGC and the 
pipelines.
  Late last month, an administrative law judge at FERC issued a 
decision which could have the impact of closing the project. The judge 
invalidated three of the four settlements between DGC and the 
pipelines. Ironically, the fourth was approved by FERC in January 
1995--1 year ago.
  Mr. President, I hope the FERC commissioners weigh very carefully the 
impact this judge's decision will have on the State of North Dakota, 
the DOE, and our national energy goals. Closing the synfuels plant 
would not serve our national energy interests, and would create a 
serious setback in this country's search for energy independence.
  The $2 billion Great Plains Gasification Plant was constructed in the 
early 1980's after DOE guaranteed a $1.5 billion loan for construction 
of the plant. The DOE loan was made pursuant to the Federal Nonnuclear 
Energy Research and Development Act of 1974. Great Plains is the only 
project operating today developed pursuant to the act. Additionally, 
Great Plains is the only project built as a result of the Government's 
attempts in the late 1970's and early 1980's to demonstrate our ability 
to achieve energy independence.
  The synfuels plant was only made possible as a result of the issuance 
by FERC of its opinion 119 which approved the gas purchase agreements 
between Great Plains and the four pipeline purchasers. As approved by 
opinion 119, these gas purchase agreements provide for the sale of 
synthetic natural gas at prices established by a formula set out in the 
agreements. In issuing the $1.5 billion loan guarantee, DOE relied on 
FERC's opinion 119 and the reasonable assumption FERC would stand 
behind its commitment.
  Unfortunately, the original project sponsors abandoned the project 
after it was completed in 1985 in response to sudden changes in global 
energy prices. DOE assumed operation of the plant, and eventually 
secured ownership through foreclosure. In 1988, DOE sold the facility 
to DGC, a subsidiary of Basin Electric Power Cooperative in my State. 
DOE selected Basin over other bidders because of its commitment to the 
long-term operation of the project.
  When Congress authorized DOE to sell the synfuels plant, Congress 
indicated to the Department that a commitment to the long-term 
operation of the plant was an important criteria in evaluating bids for 
the project. In fact, the conference report accompanying Public Law 
100-202 states:

       The managers agree that the Department of Energy should 
     place higher priority on the continued long-term operation of 
     the Great Plains Coal Gasification Plant as part of its 
     divestiture activity. Continued long-term operation is needed 
     to avoid disruptions to the local economy, capture the 
     benefits associates with extended Plant operations and 
     collect emission reduction technology data.

  That sale also continued the Department's interest in the long-term 
operation of the plant by including a profit-sharing arrangement 
between DGC and DOE for the profits from the sale of synthetic natural 
gas. DGC and DOE reasonably assumed FERC would continue to stand behind 
opinion 119 when they negotiated the sale of the plant.
  Following DGC's acquisition of the project, disputes arose regarding 
the pricing, output, and transportation provisions of the gas purchase 
agreements. As a result, DGC and DOE filed suit against the pipelines 
in 1990. Before the dispute went to trial, DOE, 

[[Page S525]]
DGC, and the pipelines reached settlement agreements in 1994 that are 
expressly subject to FERC approval. Again, it is worth mentioning that 
FERC has already approved one of the four settlement agreements.
  The administrative law judge's decision disapproved the remaining 
settlements negotiated between DGC and three of the four pipelines, and 
ruled that the pricing formula in the gas purchase agreements--as 
approved by opinion 119--should no longer be honored. Additionally, the 
judge's decision put on hold the agreement reached between DGC and DOE, 
which is contingent on FERC approval of the agreements between DGC and 
the pipelines. Finally, the decision retroactively imposed a new 
pricing scheme and ordered refunds that would total approximately $280 
million.
  If unchanged, this decision would close the Great Plains Gasification 
Plant. Mr. President, I believe that result would not serve our 
national energy interests.
  I urge the FERC commissioners to give this matter their most careful 
consideration, and give great attention to Congress' public policy 
objective of continued long-term operation of the synfuels 
project.

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