Pacificorp may have buyer for its Dave Johnston plant

Market: Coal
25/03/19

A prospective buyer has emerged for PacifiCorp's Dave Johnston coal-fired power plant if the utility chooses to sell it.

Glenrock Petroleum has said it would be interested in purchasing the 762MW plant and equipping unit 4 with carbon capture and sequestration (CCS) technology to use for enhanced oil recovery at a nearby field. Company chief executive Terry Manning declined to give specifics on the potential acquisition, citing a non-disclosure agreement it has with PacifiCorp.

The company is set to retire the facility at the end of 2027, but produced a report in December suggesting that closing at least part of the Johnston plant before then could make economic sense. PacifiCorp is scheduled to submit an updated integrated resource plan in August and said it was premature to discuss the possibility of selling the plant.

But, a new bill signed by governor Mark Gordon (R) this month means PacifiCorp might have to find a buyer for the Johnston plant. The law requires all generators after 2022 to attempt to sell their coal plants before retiring them. Otherwise, power producers will not be able to pass on the costs of building new generation assets to their customers.

Glenrock wants to be the buyer. Manning, who founded the company in 2016, first approached former Wyoming governor Matt Mead (R) in summer 2017, around the time PacifiCorp released its plan to possibly retire the Johnston plant, about the possibility of using CO2 from coal plants for enhanced oil recovery. He has met with other legislators since then.

"There was a confluence of events and circumstances in Wyoming: cheap Powder River basin coal, low-cost power, power plants that were coming to the end of their economically convenient life, and the fact that there were sequestration sights in proximity to these power plant," Manning said in an interview with Argus.

Glenrock would use carbon captured from Johnston's 330MW unit 4 to extract oil from reserves it holds in Converse County, where the power plant is located. The majority of the 44,000 acres of conventional producing mineral leases Glenrock holds have tertiary reserves that require enhanced oil recovery to be mined.

Manning estimates that Glenrock could extract 14,000 b/d using CO2 from the Johnston plant on the company's reserves. He sees potential in PacifiCorp's Wyodak and Jim Bridger coal-fired plants as well.

Glenrock would used the same technology to retrofit Johnston unit 4 as was used at NRG Energy's Petra Nova station near Houston, Texas, and estimates it would cost $430mn-$470mn. The entire project would cost $850mn, Manning said. And, the break-even price of oil production is estimated at $55-$60/b.

PacifiCorp also has expressed some interest in retrofitting the Johnston plant. The company issued a request for proposals in 2018 for "parties that can demonstrate viable technical and commercial and financial proposals to explore the feasibility of carbon capture for the coal-fired power plants with the potential of enhanced recovery in northeast Wyoming," PacifiCorp said.

Glenrock was among the three proposals selected by PacifiCorp and the only upstream oil producer. The two other companies selected would operate a different part of the value chain.

Manning says there have been favorable preliminary talks with potential financiers for Glenrock's proposed purchase, but first PacifiCorp needs to unveil its integrated resource plan before any sort of financing can be committed.

The extension of the 45Q tax credit signed into law by President Donald Trump last year should help projects like Glenrock's secure funding. It allows certain projects using CO2 for enhanced oil recovery to recoup $35/metric tonne. With a capture rate of 55pc, the Dave Johnston CCUS facility would capture 1.26mn t of CO2 every year.

"If you have a tax credit, Bank of America, JP Morgan Chase, several others have indicated over the history of the tax credit business that they have an appetite to get involved," Manning said.

Glenrock has looked at contracting Mitsubishi, which was responsible for the Petra Nova plant in Houston, to design and build the facility.

"That way we have no engagement risk, we have no design risk, we have no engineering risk and we have no implementation risks because they have figured it out," Manning said.

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19/12/24

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