In what may be the death knell for the $3.5 billion Taylorville integrated gasification combined cycle (IGCC) project, the Illinois Senate voted 33-18 in early January against authorizing construction of a coal gasification and power generating plant proposed in the state by Tenaska. The independent power producer must now decide whether to start over again in the state’s new legislative session.

While failing to approve Tenaska’s project at Taylorville, Ill., in the waning hours of their lame-duck session, state legislators sent Illinois Gov. Pat Quinn (D) bills that back multi-billion-dollar facilities in south Chicago and southern Illinois that would convert coal to synthetic natural gas. The legislation also would press the state’s gas utilities to buy the synthetic gas for their customers.

The approval for the Chicago plant planned by Leucadia National Corp. and the southern Illinois plant proposed by Power Holdings of Illinois came despite opposition from consumer advocates, who said the synthetic gas would cost much more than increasingly cheap natural gas from drillers.

It was not clear whether the legislative approval of the synthetic gas plants factored in the defeat of the Taylorville plant in the Senate.

However, the Senate vote was particularly disheartening for Tenaska and backers of the 602 MW facility because the margin of defeat was substantially larger than in an initial Senate vote in early January when opponents of the project prevailed in a 29-25 vote.

With the Illinois General Assembly already having voted to back construction, Tenaska officials—backed by labor unions and top state Democrats—had hopes of winning over a few more votes to reverse the Senate’s verdict in a second vote.

Instead, opposition snow-balled amid heavy lobbying against the project by industrial groups and Exelon Corp., among others, who argued that the Taylorville plant would impose high electricity costs on the state’s businesses and ratepayers.

Tenaska issued a statement on Jan. 12 in which it thanked its supporters—which included state Senate President John Cullerton (D), House Speaker Michael Madigan (D), Illinois Attorney General Lisa Madigan (D) and the Illinois chapter of the AFL-CIO—but declined to say whether it would continue to fight for the Taylorville Energy Center (TEC).

"We are currently evaluating our next course of action," Tenaska Vice President Bart Ford said in a statement. "We believe that there is a great deal of support in Illinois for the idea of clean coal power.

"Throughout the legislative process, we challenged opponents of the legislation to explain how a cutting-edge, baseload project like TEC could be built without legislation of the type that we proposed. We renew that challenge now, with the hope that Illinois will not give up on using its most abundant resource to generate power cleanly."

In addition to having substantial support among top Democrats in the state, the Taylorville project received strong backing from the Obama administration, with the Energy Department initially awarding a $2.579 billion federal loan guarantee and then following with a $417 million tax credit, the largest ever allotted to a single project.

Tenaska has invested some $40 million in developing the plant, which is being advanced under the auspices of a 2008 law passed by the state legislature that was aimed at spurring construction of a clean coal plant that could use Illinois coal without heavy greenhouse gas and other emissions.

Tenaska qualified the plant for state subsidies under the law, which would require the state’s utilities and power retailers to buy up to 5% of their electricity from the Taylorville plant under a guaranteed 30-year power purchase contract if the legislature approved construction of the facility.

Opponents of the Taylorville project say it would impose over-priced electricity on ratepayers amounting to a subsidy of $8.7 billion over 30 years. The Illinois Commerce Commission in a September report to the legislature also appeared to question the plant, saying it would provide "high costs to ratepayers with uncertain benefits."

The commission also said the plant might not meet state law requirements that it have a generating capacity of at least 500 MW. The commission said the planned 602 MW facility near Taylorville, Ill., was designed to produce a substantial amount of power by burning regular natural gas delivered by pipeline, and that it could only deliver 296 MW from synthetic natural gas to be derived from the gasification of coal.

But Tenaska officials said the commission also endorsed the company’s finding that the plant would raise rates by only 1.8% over 30 years, and that the state backed the project to boost clean coal capacity in the state, not provide the lowest possible rates.

Tenaska also said the plant is being opposed by Exelon and other big generators in the state because it would significantly increase power supply in the state, thus lowering prices and hurting generators’ profit margins.

—George Lobsenz (globsenz@ihs.com) is the editor of The Energy Daily (www.theenergydaily.com), where this article first appeared.