West Virginia, Ohio Lead Nation in 1Q Project Cancellations as Other Projects Develop

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Researched by Industrial Info Resources (Sugar Land, Texas)--To date, Industrial Info has tracked more than $43 billion of projects that were originally scheduled to kick off in the first quarter of 2010, but were subsequently placed on hold or cancelled. In terms of value, Wisconsin leads the U.S. for "on hold" projects, primarily because of Murphy Oil Corporation's (NYSE:MUR) (El Dorado, Arkansas) delaying the sour crude conversion at the company's Superior, Wisconsin, refinery because of economic conditions. Texas follows with more than $5.5 billion of "on hold" projects. In terms of flat-out project cancellations, however, West Virginia and Ohio, each with about $3.5 billion of project cancellations, tower above other states.

Click on image at right for a breakdown of cancelled 1Q10 projects by market region.

Ohio and West Virginia's top status for project cancellations comes primarily from the cancellation of very large individual projects in each state. In West Virginia, Rentech Incorporated cancelled a planned grassroot coal-to-liquids plant in Mingo County for financial reasons. The Mingo Project had been in planning since late 2006. The estimated $3.5 billion project was to have produced approximately 25,000 barrels per day of clean fuels using the Fisher-Tropsch coal-liquefaction process.

The Great Lakes region, with the cancellation of 49 projects totaling more than $5 billion that were planned to kick off this quarter, leads the nation on a regional basis for cancellations. Ohio's project cancellations contribute significantly to the Great Lakes region's top position. After project costs began spiraling out of control, American Municipal Power Incorporated (AMP) (Columbus, Ohio) cancelled a planned 1,000-megawatt (MW) coal-fired power station in Meigs County, Ohio. The project, originally considered for another location, had been in development for more than six years, but was cancelled in November last year when the engineering, procurement and construction contractor indicated that capital costs for the estimated $3.25 billion would be 37% higher than initially stated, rising to more than $4 million.

There may be a silver lining to the cancellation, however. AMP is now considering converting the project from a coal-fired facility into a natural gas-fired combined-cycle plant to lower capital costs. "The conversion of this project from coal to natural gas combined cycle would reduce capital costs and fit well into AMP's carbon strategy," said AMP president and CEO Marc Gerken in a press release announcing the company's likely conversion of the project. "We own a valuable electric generating site in Meigs County and will be considering that site for the natural gas combined-cycle facility," said Gerken. "We look forward to continuing our relationship and discussions with the people in Meigs County who have been so positively engaged in the project over the past four years." The new combined-cycle plant, which is in the early planning stages, has an estimated total investment value of $1.2 billion.

AMP is also developing five run-of-river hydroelectric projects at existing dams along the Ohio River. "Hydroelectric generation is an important component of AMP's power supply strategy," said Gerken in a company press release. "It not only offers competitively priced power and further diversification, but in this region, hydro generation is far superior to other renewable generation technologies." The projects will add more than 350 megawatts to AMP's renewable energy portfolio.

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