Dakota Gasification makes final payment to feds

Originally published by The Bismarck Tribune
Reported by Lauren Donovan

If owners of Dakota Gasification Co. broke out the champagne for a mortgage-burning party they might be surprised at how many people showed up to celebrate with them.

The company, a subsidiary of Basin Electric Power Cooperative, made its final revenue-sharing payment to the Department of Energy in January.

The co-op has been making the payments for 20 years based on agreement signed when Basin bought the synthetic fuels plant from DOE, which acquired it when the original owners defaulted on a $2 billion federal loan guarantee.

For three years, from 1985 to 1988, the federal government was in the odd, uncertain and much-criticized position of owning an almost experimental synthetic natural gas plant. Some around the country called it a white elephant run amok from a ’70s energy independence policy.

The default was a scary time for Hazen, Beulah and the entire county and the announcement of it is remembered by some as “Black Tuesday.” The brand new plant’s future was suddenly in jeopardy and nearly 700 jobs — many held by wage earners who lived in the county — were on the line.

“We were all on pins and needles,” said Hazen banker Chuck Stroup. Much was at stake for everyone, including schools, businesses and new and young families. At Union State Bank, “We had outstanding loans with families who might lose their jobs. It put the value of real estate at risk and that was felt for 10 more years,” Stroup said.

He called Basin’s decision to buy the plant “a defining moment” in the county’s history.

It’s one that still resonates today.

Basin operates the Antelope Valley Station power plant adjacent to the synfuels plant. DGC is a sizeable electric customer and the two facilities were built with some mutual coal-handling facilities.

January’s $7 million payment brings to $388 million the shared-revenue payments over the years. The payments were based on a formula including the fluctuating value of natural gas and for half of those years, there was no revenue to share.

In total, Basin has now paid DOE $1.3 billion, including the purchase price, revenue sharing and surrendered tax credits, said Gary Loop, DGC’s chief operating officer.

Ron Harper, Basin’s chief executive officer, said the co-op also invested more than $400 million in the gasification plant to make it more efficient and produce more gas.

Another investment was in technology and pipeline to sell carbon dioxide from the DGC process for enhanced oil production in Canada, where it’s injected deep underground and sequestered from the atmosphere. It is the largest carbon sequestration anywhere in the world.

Harper said the gasification plant has proved that coal is a cornerstone of energy development's future.

“The DOE has certainly received a benefit from its investment by way of encouraging new technologies for using coal as a fuel for future generations to come,” Harper said.

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