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Legal Update

Good and Bad News for Carbon Capture and Storage in Illinois

17 August 2010
Mayer Brown Legal Update

There has been both good and bad news for carbon capture and storage (CCS) in Illinois recently with two separate and significant positive developments and one negative development.

The Good News

  • Tenaska’s Taylorville Energy Center received approval from both the Department of Energy and the Internal Revenue Service for over $415 million of investment tax credits, described as the largest ever granted to a single project.
  • The US Department of Energy (DOE) announced that it will provide more than $1 billion of Recovery Act funding for the re-designed FutureGen project (also known as FutureGen 2.0).

Both of these CCS projects are briefly described below.

Taylorville Energy Center

The Taylorville Energy Center is being developed by Christian County Generation, a joint venture between affiliates of Tenaska and MDL Holding. The Taylorville Energy Center is a proposed 716 MW (gross) and 602 MW (net) coal-fed plant using Integrated Gasification Combined Cycle technology with carbon capture and storage. The project seeks to benefit from the Clean Coal Portfolio Standard Law in Illinois and the mandatory purchases by utilities and alternative retail electric suppliers from a qualifying initial clean coal facility.1

As required by the Clean Coal Portfolio Standard Law,2 the Taylorville project earlier this year released and submitted a Facility Cost Report (FCR) that estimated the cost of the project at $3.522 billion.3 The significant cost of the project, coupled with the mandatory purchase, has elicited significant comment4 and has resulted in a broad-based coalition (the STOP Coalition5) seeking to draw attention to the high price for the project and the billions of dollars that Illinois consumers and businesses will pay in higher electric rates. Tenaska has previously reported that it has been selected for a Department of Energy loan guaranty for up to $2.6 billion and is currently negotiating the terms thereof and is the subject of due diligence by the DOE.

FutureGen 2.0

FutureGen 2.0 will retrofit and repower an idle 200MW coal plant of Ameren in Meredosia, Illinois, with an advance oxygen-combustion technology. The plant’s new boiler, air separation unit, CO2 purification unit and compression unit will deliver 90 percent CO2 capture and eliminate most SOx, NOx , mercury and particulate emissions. The captured CO2 will be transported in a new 175-mile regional CO2 pipeline to a deep saline injection storage facility in Mattoon, Illinois. If approved by the FutureGen Alliance,6 it is likely that FutureGen 2.0 will replace the original FutureGen project.7

The Bad News

The negative news was the report that the City of Mattoon, Illinois, has declined to provide the proposed deep saline injection facility required for FutureGen. Mattoon was selected, after a competitive solicitation, over another site in Texas to host the earlier version of the FutureGen project (a proposed new 275MW near-zero emission plant), which was controversially cancelled by the then-Secretary of Energy, Samuel Bodman, in the waning days of the Bush Administration. The decision by Mattoon has already received some criticism in the local press and sparked expressions of interest from other nearby Illinois towns, including Decatur, Tuscola and others.8 Since there are many locations in Illinois that would probably be eligible as CO2 injection sites,9 ultimately this may not be material to FutureGen 2.0.

While neither the good or bad news is dispositive for CCS in Illinois, the recent good news probably outweighs the bad news and indicates some forward progress for these complex and challenging CCS projects.

For more information about the topics raised in this Legal Update, please contact at +1 312 701 7366 or at +1 202 263 3204.

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Endnotes:

1. See 20 ILCS 3855/1-75.
2. See 20 ILCS 3855/1-75(d)(4).
3. Based upon assumptions set forth in the FCR.
4. Comments can be viewed by clicking the “view comments” link at www.icc.illinois.gov/electricity/tenaska.aspx.
5. See: www.stopcoalition.com and including the Building Owners and Managers Association of Chicago, Chicagoland Chamber of Commerce, Chemical Industry Council of Illinois, Illinois Competitive Energy Association, Illinois Manufacturers’ Association, Illinois Retail Merchants Association and the Illinois State Chamber of Commerce.
6. See: www.pittsburghlive.com/x/pittsburghtrib/business/s_694703.html.
7. A proposed 275MW near-zero emission plant at Mattoon, Illinois (see: www.futuregenalliance.org/about.stm).
8. See Bloomington-Normal Pantagraph report.
9. For the Illinois Basin, already the subject of a regional CCS partnership with the Department of Energy; namely, the Midwest Geological Sequestration Consortium (see: www.sequestration.org).

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