West Virginia Natural Gas Power Project Shelved
A developer has shelved a 920-MW natural gas-fired power plant planned for Brooke County, West Virginia, citing “changing conditions in the energy and financial markets” and alleged coal industry interference.
Energy Solutions Consortium (ESC), a single purpose entity engaged in developing natural gas-fired power plants in West Virginia and Pennsylvania that has been active since 2011, said in an Oct. 9 news release that it would not move forward with a $5.6-million loan guarantee that the West Virginia Economic Development Authority (EDA) approved for the project on Sept. 9.
“Due to changing conditions in the energy and financial markets, the company has decided that it is not prudent and in the best interest of all stakeholders, including the state, to move forward with the state’s lending and therefore will not complete the loan that was approved this summer,” the company said on Friday.
The loan “was to fund a letter of credit that guaranteed the interconnection improvements that the grid would need for the construction of the new natural gas power plant,” explained ESC subsidiary Brooke County Power’s CEO Drew Dorn in the release.
However, a political push and pull involving an array of business, industry, union groups, and state leadership appears to have doomed the project.
As MetroNews, a local West Virginia outlet, noted, before the EDA acted last month, state approval of the loan guarantee had been doubtful. “Approval was originally set for [an] Aug. 20 board meeting, but the item was pulled from the agenda,” the newspaper reported.
At a briefing a week later, West Virginia Gov. Jim Justice, who is also a billionaire coal magnate, questioned the need for the natural gas project in the state. West Virginia produced 92% of its net generation from coal in 2018, according to the Energy Information Administration. In 2018, natural gas provided 2.1% of the state’s net generation.
“Why in the world if this project was valid and really a go, why would the powers-that-be be struggling and needing a state loan guarantee,” the Parkersburg News and Sentinel reported Justice as saying on Aug. 27. “In other words, you’ve got people who are perpetuating this and this is becoming the ultimate real estate with no money down. It doesn’t really make a lot of sense.”
On Aug. 31, however, the Office of the Governor said Gov. Justice “took time out of his briefing to announce that he has directed Commerce Secretary Ed Gaunch to instruct the West Virginia Economic Development Authority [to] once again review the application for the proposed natural gas power plant in Brooke County.”
But the project was fiercely opposed, by the West Virginia Coal Association, a trade group that this August endorsed Gov. Justice for re-election. In a letter to the EDA on Sept. 8, the group’s senior vice president, Chris Hamilton, said the proposed Brooke County plant would displace coal mining jobs. “It makes no sense to us and fails to make sound economic policy to simply trade one state energy job for another or worse yet, to trade one state energy job for several others,” he wrote.
The coal association has backed the development of natural gas resources, including advocating for the construction of a storage hub, pipelines, liquefied natural gas exports, fracking, and natural gas–based legislation, Hamilton wrote. “Frankly, where we draw the line is when gas projects or renewables serve to displace active coal production, coal miners or others within the broader coal economy.”
The Brooke County Power project planned to access natural gas by interconnecting to existing local natural gas pipeline infrastructure. Once completed, ESC planned to sell its power on the PJM Interconnection’s 13-state market. ESC said the project would have provided a $1.25 billion economic impact for West Virginia during construction, and a $440 million economic impact annually to Brooke County and the surrounding area.
The project had the backing of the West Virginia Chamber of Commerce and the West Virginia Independent Oil and Gas Association, as well as the Affiliated Construction Trades. These groups suggested that the project would have boosted demand for West Virginia natural gas production—the Brooke County Power project was slated to become the largest downstream user of natural gas in the Mountain State—and driven economic development in a region, where coal production fell 10% in 2019 compared to 2018.
Despite uncertainties, ESC had made notable headway on the project. This February, it picked Argan Inc.’s wholly owned subsidiary, Gemma Power Systems, as its engineering, procurement, and construction contractor. Construction was scheduled to begin this year once ESC achieved financial close.
However, “The external perception of a challenging climate in West Virginia has added to the difficult investment sector that changed drastically since the summer, when the project initially approached the state’s development authority about a loan guarantee,” said Dorn on Friday.
—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine).