Grassroot Pennsylvania Power Plants Line Up to Burn Marcellus Gas

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The state of Pennsylvania has granted all necessary permits to the state's first grassroot power plant to burn natural gas from the Marcellus Shale formation, and several other natural gas combined-cycle (NGCC) projects have applied for permits. The plants will be constructed to replace coal-fired generation that is being retired due to stricter environmental regulations, and to meet future electric demand growth.

The Williamsport regional office of the Pennsylvania Department of Environmental Protection (DEP) (Harrisburg, Pennsylvania) recently granted permits to the Moxie Liberty Generation Power Plant, an 820-megawatt (MW), natural gas-fired, combined-cycle generator planned to be constructed in Bradford County. The project has a total investment value of about $825 million.

"Today is a red-letter day for Pennsylvania," said DEP Secretary Mike Krancer in an October 10 statement after granting Moxie Liberty its permits. "With this approval, Moxie now has all that it needs from DEP to move forward with the construction of this historic facility, which will use clean, pipeline-quality, locally produced natural gas as fuel. It is a win-win and another landmark moment in the long history of Pennsylvania's leadership role in producing and delivering energy for our nation."

"I couldn't say for a fact that every cubic foot of gas for Moxie Liberty will come from the Marcellus Shale," DEP spokesman Kevin Sunday told Industrial Info in an interview. "But by and large, the majority of it is expected to come from the Marcellus, which would make Moxie Liberty the first grassroots power plant in our state to rely on gas from that formation."

Next month, the DEP will consider a second proposed $825 million generator from Moxie Energy LLC (Vienna, Virginia), called "Moxie Patriot." That plant is identical to the Moxie Liberty plant, right down to the plan to burn Marcellus Shale gas. It is planned to be constructed in Lycoming County, Pennsylvania.

"At this point, we're not sure if we'll start constructing Liberty or Patriot first," said Kent Morton, vice president of Moxie Energy, in an interview. "Since Liberty has all its permits, you might think we'd break ground on that one first. But we haven't decided yet. We'll break ground on the first project in either the first or second quarter of 2013. Assuming we get the permits for the second plant, we'll start building that three to four months after that."

Gemma Power Systems LLC (Glastonbury, Connecticut), a unit of Argan Incorporated (AMEX:AGX) (Rockville, Maryland), will provide engineering, procurement and construction (EPC) services for both plants, Morton said. Major equipment has been selected for the project, but he declined to name the winning supplier. Each project will take 30 to 32 months to construct, he estimated. The project that starts construction first should be online in late 2015 or early 2016, while the second project will be online in 2016, Morton said.

"The Marcellus is what got us into Pennsylvania," Morton said of Moxie, which was formed in 2009. "Because we have cheap gas and highly efficient equipment, we'll be keeping local resources local. Shale is a revolution in Pennsylvania, and we saw that opportunity early. We started developing that project in 2010." Moxie is still in the process of selecting a fuel supplier, he added.

Morton said his firm is in an "advanced" stage in negotiating financing. One factor that may affect financing terms is whether the developer signs a power-purchase agreement (PPA) for some or all of either plant's output, chooses to operate them as merchant generators, or some combination of the two.

"We're still looking at our options" between signing a PPA and being a merchant generator, he said. While he said he'd prefer signing a PPA for one or both plants, "the fallback as a merchant facility works well too. Or we could come up with a hybrid," in which some output is sold under a PPA and some is sold as market-based rates.

"Until Moxie has PPAs and confirmed financing, it would be difficult to see how these two projects can move forward in the current environment," said Brock Ramey, Industrial Info's North American Power Manager. "These two projects may not kick off until 2014."

Beyond the two projects from Moxie Energy, developers want to a build several other grassroot NGCC projects in Pennsylvania and repower an existing coal-fired generator to burn gas, according to Sunday, the DEP spokesman. "Approximately 4,820 MW of coal-fired generation in Pennsylvania will be closed by 2015." Aside from the two Moxie projects, Sunday said the DEP has received applications to build more than 5,000 MW of other grassroot gas-fired generation. If all projects are approved, Pennsylvania would replace all the coal capacity that will be closed and add new generation to meet future load growth.

Aside from the two proposed Moxie plants, developers want to build several other grassroot NGCCs in Pennsylvania, according to Sunday. It is assumed that gas from the Marcellus Shale will account for some, if not the majority, of fuel to be used at those plants. The projects, developers, and scheduled construction kick-off dates are:

• Berks Hollow Power Station, a 685-MW project developed by Berks Hollow Energy Associates LLC (St. Louis, Missouri), a unit of L.S. Power (New York, New York). This project, with a total investment value (TIV) of $450 million, is scheduled to be built in Berks County. Construction is slated to begin in late 2013 and finish in mid-2016.
• Hickory Run Energy Center, a 750-MW project with a TIV of about $750 million. LS Power (New York, New York) is developing that project, which is scheduled to be built in Lawrence County. Construction is slated to begin in early 2014 and finish in early 2017.
• Westmoreland County Generating Station, a 950-MW project being developed by a unit of Tenaska Incorporated (Omaha, Nebraska), is planned to be built in Westmoreland County. The TIV for this project is $1.1 billion. The planned start of construction is early 2014, and the plant should be operating by in late 2016.
• Lebanon County Power Station, a second 950-MW project being developed by Tenaska, is slated to be constructed in Lebanon County. This project also has a TIV of $1.1 billion. Construction is slated to begin in late 2015 and finish in mid-2018.
• Good Spring Power Station is a 300-MW project planned for Schuylkill County. The $330 million project is being developed by EmberClear Corporation (TSV:EMB) (Calgary, Alberta). This project is scheduled to begin turning dirt in early 2014 and be operating by the end of 2016.

Aside from these proposed grassroot NGCC projects, the owner of the coal-fired Sunbury Cogeneration plant in Snyder County wants to repower it to burn gas. The owner, Sunbury Generation LLC (Shamokin Dam, Pennsylvania), plans to repower the existing five-unit coal plant with three NGCCs totaling about 1,064 MW of generating capacity. That project is scheduled to kick off in early 2014 and to be operating by mid-2016.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.