Summit: Just a few hurdles left

October 2, 2011
Celinda Hawkins
Odessa American

The news of the approval of a federal grant for Summit Power Group’s Texas Clean Energy Project is moving the process forward and only a handful of hurdles are left to get the project up and running.

Summit Project Manager Laura Miller said last week that when the project was getting off the ground four years ago, there were as many as 50 hurdles to overcome but “now we are down to only a few.”

The project received approval for $450 million in grant funding from the Department of Energy for the 400-megawatt plant, bringing Summit closer to breaking ground on the $2.4 billion plant to be located 15 miles west of Odessa near Penwell. Now contracts must be signed for construction and a contract for a water source must be firmed up to get Summit to the financial closing on the project.

“We are still on track to break ground in January 2012,” Miller said.

Miller and other Summit officials have been spreading the word about the groundbreaking, one-of-a-kind project across the nation and the world. This week, Miller will be speaking at the Global CCS Institute’s members meeting in Melbourne, Australia. Last week, she was in New York, Michigan and Austin, talking about the TCEP.

“I hope everybody in Odessa has their ears burning next week when I’m in Australia talking about them,” Miller said. “Already this project is great for Odessa.”

Last week’s DOE approval will allow federal funding to be used to help build one of the world’s most advanced and environmentally clean coal-based power plants, officials at the DOE said in a Tuesday news release.

“This is yet another milestone that has been completed to move this project forward toward realization,” said Guy Andrews, executive director of the Odessa Development Corporation. “The Odessa Development Corporation and the Chamber of Commerce continue to work with Summit Power on a daily basis to make sure that this project remains on track.”

The $450 million DOE grant comprises about 19 percent of the total cost, Miller said. The other funds will come from private investors and banks, she said.

One of the next hurdles Summit must address is a glitch in the federal tax code that would require Summit to pay taxes on the $450 million grant – about $150 million, Miller said. The clause in the tax code from the 1950s gives corporations a tax break on federal grants, but not partnerships, like the Summit TCEP project.

So Sen. John Cornyn and Congressman Mike Conaway got to work on an amendment that will treat all Clean Coal Power Initiative (CCPI) award recipients equally.

“It makes no sense for that to be a taxable event,” Conaway said in Odessa Friday. “It is a quirk in the tax law that no one intended.”

The amendment will “allow Summit to move forward.” Conaway said.

Last week Summit received good news from the Joint Committee on Taxation which determined fixing the glitch would not affect the federal budget.

“We are very grateful to Conaway and Cornyn for spearheading this,” Miller said.

There is no word as to when the amendment will be filed, but it will be soon, Miller said.

A water supply

The next major hurdle will be to find a water provider, which has been difficult due to major drought conditions and water restrictions in West Texas. Summit has been in negotiations with the City of Midland to purchase effluent water, but no contract has been signed, Miller said.

Now Summit officials are seriously considering a desalination plant at the Penwell site, so that brackish water from the Capitan Reef, can be used to provide the 4.2 million gallons the plant will need daily to operate. The Capitan Reef is part of the Pecos Valley Aquifer which lies beneath portions of Ector, Crane, Loving, Pecos, Reeves, Ward and Winkler counties.

“We don’t have a firm handle on what it would cost to build our own plant,” Miller said, adding that a regional desal plant could be the answer.

But if the City of Odessa, the ODC or the Colorado River Municipal Water District embarks on a desal project, it may not be up and running in time.

“We are looking at going it alone if they cannot do a regional facility in three years,” Miller said.

Last month, the Odessa Development Corporation approved $1.5 million for a feasibility study regarding construction of a desalination plant to provide water to industrial customers.

“The Summit Project is a big driver and a wake-up call for us,” Andrews said in early September. “In exploring water sources we are really moving toward desal.”

Completion on the plant is expected to be in late 2014 or early 2015.

Other hurdles

Summit must also get the contracts signed with CPS Energy of San Antonio for the sale of electricity to 717,000 customers in San Antonio.

In June, Summit announced a 25-year agreement to sell electricity to CPS Energy of San Antonio, marking another major milestone in getting the construction of the plant off the ground. CPS, is the country’s largest municipally owned natural gas and electric utility. It provides service to about 717,000 electric customers and 325,000 natural gas customers near the city of San Antonio, a news release stated.

Plus contracts with Siemens Energy, Inc. the equipment provider and the Linde Corp. the engineering and design, firm, must be signed.

“Once these things are resolved we can go to financial closing,” Miller said.

Summit job boom

During construction, the energy plant is set to create 2,000 jobs with as many as 200 permanent jobs created once the project is completed.

But finding a place for all of the workers to live during construction is proving to be yet another hurdle Summit must consider.

The oil and gas boom has resulted in a serious lack of temporary housing across the Permian Basin.

“We are having very serious discussions with Siemens and Linde about what we would do when 1,500 to 2,000 people show up for work,” Miller said. “We are having discussions with the Odessa chamber as well.”

There are apartments going up in Odessa and Midland and several housing developments. Hotels are full too.

One possibility is a work camp, provided by Summit or the construction contractors near the site.

“All of this has to be well thought out,” Miller said.

No matter what, when and if construction begins on the project, there will be interest worldwide and Odessa will be on the map.

“We look forward to people from scientists and engineers from all over the world to come here to look at this facility once it is up and in operation,” said Mike George, executive director of the Odessa Chamber of Commerce.