Stalled carbon capture coal project in Texas begins to move forward

Work on a long-stalled, almost $4 billion carbon-capture coal plant near Odessa may start construction in 2016 after the developer signed engineering and construction contracts this week Chinese and Canadian firms.

Summit Power Group’s Texas Clean Energy Project is a planned 400-megawatt, coal gasification power plant on 600 acres in West Texas to produce electricity, trap carbon for enhanced oil recovery, and create urea and sulfuric acid byproducts to help make fertilizers. The idea is to trap 90 percent of the emitted carbon for a power plant that runs cleaner than its natural gas-fired counterparts.

Summit this week signed the engineering and construction contracts with China Huanqiu Contracting & Engineering Corp. and Montreal-based SNC-Lavalin Engineers & Constructors Inc. The project would be the first power plant in the country to turn coal into gas while also capturing most of the dirty emissions.

Carbon capture is seen as a technology intended to make so-called clean coal viable in the future for a planet concerned about climate change. However, skyrocketing project costs brought many proposed projects to a halt, including the Texas Clean Energy Project, which stalled in 2013. The surplus of cheap natural gas from shale has disadvantaged coal, while the oil boom that ended this year had contributed to labor shortages and higher construction costs. A continued lack of a carbon tax in the U.S. also has weakened prospects for many carbon capture projects.

However, the ongoing bust in oil prices has brought down construction costs and freed up a lot of skilled labor in West Texas, said Laura Miller, Summit’s Texas project director and former Dallas mayor. Now Summit won’t have to build man camps or relocate workers for a project that’s supposed to have 2,000 construction jobs at its peak.

“The costs were very high because of the oil boom, so we’ve been trying over the last 15 months or so to lower costs. The new availability of skilled workers in West Texas has really been helpful,” Miller said. “I think we’ve been able to weather the general storm that (carbon capture) projects internationally have faces the past couple of years.”

Construction costs have been reduced to less than $3 billion, and the goal is to complete financing for the project in the spring, Miller said. Heavy construction is expected to begin — possibly in late 2016 — close to six months after financing is closed, she said, and construction will take close to three years.

Summit Power is formally based in Seattle, but CEO Jason Crew operates out of Houston. He left General Electric in 2014 to take over Summit.

The project has a $450 million federal grant from the U.S. Department of Energy’s Clean Coal Power Initiative, and the project also has $811 million in federal investment tax credits for clean power projects. The Department of Energy has worked with China on such carbon capture efforts.

“These Chinese partnerships have really been nurtured by the two governments and their commitments to climate change,” Miller said.

Although many environmental groups argue carbon capture technology isn’t clean enough, the technology is seen has having a lot of growth potential in large developing countries like China that rely heavily on coal power.

There are few other carbon capture power plant projects moving forward in the U.S though.

NRG Energy is completing its Petra Nova project to add carbon capture to its W.A. Parish coal plant south of Houston in Fort Bend County, but NRG has backed away from investing money in any other carbon capture projects.

The Southern Co.’s Kemper clean coal plant in Mississippi is scheduled for completion next year. But the project cost more than $6 billion – nearly triple the original estimate – and it is behind schedule to the point that the company warned Sept. 29 that it may have to return $234 million in federal tax credits if it misses an April 19 startup date.