Washington
By ROBERT MACKAY

Illinois and Ohio contend for federal coal gasification subsidy

THE ENERGY Department does not plan to make a final decision until mid-1981 on whether to favor Illinois or Ohio with a federally subsidized $1 billion synthetic fuel plant, but it appears now there is a good chance Congress will provide enough money to allow the building of a coal gasification plant in each state.

Illinois and Ohio have been competing for the federal subsidy to build a coal gasification plant, which turns coal into natural gas, since 1976 when Congress authorized the funds to build one plant as a demonstration model. If successful, the plant would go into commercial use and would be the first of many such plants built across the nation.

Firms in other states also sought the federal subsidy, but the Energy Department whittled its choices down to a proposal for a plant in Perry County, Ill., and one in Noble County, Ohio.

The proposed plants would each cost an estimated $1 billion and would convert coal to natural gas, but that is where the similarity ends. The Illinois proposal is a joint venture by Cogas Development Co. and five utilities called the Illinois Coal Gasification Group (ICGG), while the Ohio plant is proposed by Conoco Oil Co. The five utilities in the Illinois group are Northern Illinois Gas Co.; People's Gas, Light and Coke Co.; Central Illinois Light Co.; Central Illinois Public Service Co.; and North Shore Gas Co.

The major difference is that the Illinois plant would produce not only-natural gas from coal, but also a high-grade liquid product — naphtha — that is the base for unleaded gasoline and fuel oil. The Ohio plant would produce only natural gas. The Illinois process, however, is considered by some to be more complex than the Ohio one, and that could be a determining factor among Department of Energy officials trying to pick between the two.

Developers of the projects had pressed hard for a decision this year, but the department kept revising its schedule and now plans to make that final decision in June 1981. The decision was deferred from last year to spring 1980, and then again to late 1980 before the latest revision.

Agency official Bob Porter said the decision was deferred because the department wants to see a more complete "design package" for each of the rival projects and also wants to know what the firms' financial arrangements will be. But he also conceded that "there's a considerable amount of political interest in the decision" since each of the projects is in a state that could be pivotal in the outcome of the 1980 presidential election.

Sentiment in Congress is "fairly good" to go ahead and build both plants, said Josh Levin, an aide to Sen. Charles H. Percy. "Both houses seem to feel each is different enough and worthy enough to get funding," he added.

The House Science and Technology Committee recently approved dual authorization, that is, giving the department authority to build both plants if it desires. The Senate Energy Committee was also considering a similar, but differently worded, measure.

The Illinois plant, during the demonstration phase, would employ about 1,600 people from Perry County and surrounding areas, would use 2,300 tons of coal a day and heat the equivalent of 40,000 homes. If the plant successfully completed its three-or four-year demonstration phase and was then approved for commercial use, it would mean about 15,000 new jobs, use about 26,000 tons of coal per day and heat the equivalent of 400,000 homes. The plant would use only Illinois coal and heat only Illinois homes.

Because of those factors, Sens. Percy and Adlai E. Stevenson and Rep. Paul Simon, whose district includes Perry County, have been lobbying hard on behalf of the Illinois project, along with ICGG-Cogas. But their competition is Conoco, a large oil firm with a well-financed lobby that recently ran prime time television commercials stating that it is involved in various new ways to produce energy, including "a gasification process."

The Illinois lobbyists point out that the state is the fourth largest coal producer and has never received a major federal coal project. They also argue that the ICGG plant is the project closest to construction, that the Conoco plant would use only 1,200 tons of coal a day (in the demonstration phase) and would produce only natural gas.

Department of Energy officials said the regulatory approvals required for the Illinois project would be somewhat less complex than for Conoco, mostly because the gas output from the ICGG plant would be sold intrastate while the gas from the Conoco plant would move into interstate pipelines and thus require approval from the Federal Energy Regulatory Commission.

No decision will be made until the final designs. ICGG says it can finish its final design by December at a total cost of $40.6 million, while Conoco will take until June 1981 for a total cost of $37.05 million. Construction would take about three years.

If Congress helps allow dual construction, the only decision the DOE officials will have to make in June 1981 is to give their approval for both plants.

August 1980/Illinois Issues/37