Second Large NGCC Plant Wins Permits from Pennsylvania Regulators

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Pennsylvania Department of Environmental Protection (DEP) (Harrisburg, Pennsylvania) this summer issued environmental permits for the Hickory Run Power Station, a $750 million, 900-megawatt (MW) project being developed by a unit of LS Power LLC (New York, New York). The plant is scheduled to be built in Lawrence County on the site of a former explosives factory that has been vacant for 50 years.

"We viewed the air permit as kind of the keystone permit for the project," Hickory Run project manager Casey Carroll told the Pittsburg Tribune-Review. "When we feel like the market conditions are right, then we will be able to go ahead and complete the project." In addition to its air permit, the DEP granted Hickory Run water and wastewater permits in separate actions.

Hickory Run is the second large gas-fired grassroot power project to be permitted by the state; late last year state regulators granted environmental permits to the Moxie Liberty Power Plant, an $825 million generation station that could generate up to 1,000 MW of electricity. Site preparation work for Liberty has begun. For more on the Liberty permit, see December 6, 2012, article - Grassroot Pennsylvania Power Plants Line Up to Burn Marcellus Gas.

The Liberty and Hickory Run projects are expected to burn a significant amount of gas produced from the Marcellus Shale formation. They are believed to be among the area's first industrial projects that will be fueled by gas produced from that formation, which lies under Pennsylvania, West Virginia and New York.

In addition to the $1.6 billion of grassroot power plants that have been permitted by Pennsylvania, an additional $4.5 billion of gas-fired generation projects are awaiting permits from the state. These plants also are expected to burn gas from the Marcellus, the nation's largest gas formation with an estimated 400 trillion cubic feet (Tcf) of natural gas, according to the U.S. Energy Information Administration (EIA) (Washington, D.C.), the statistical and research branch of the U.S. Department of Energy (DoE) (Washington, D.C.).

"Not all of these Pennsylvania power project proposals will kick off as scheduled," said Brock Ramey, Industrial Info's manager of North American Power Research. "The market is very dynamic right now. Developers and utilities continue to assess their plans as power-plant regulations are proposed, revised, litigated and finalized. The U.S. Supreme Court is scheduled to hear a challenge to the Cross-State Air Pollution Rule (CSAPR) in the term that begins in October. That rule is driving a lot of power plant closure and repowering decisions. Which of these proposed projects actually make it to construction and operation depends on several factors, including getting environmental permits, increasing local electric demand, retiring existing units, securing capital on favorable terms and the Supreme Court's decision," which is expected by next June.

Other Power projects under development in Pennsylvania include the following:

• Moxie Patriot, which is scheduled to be built in Lycoming County, Pennsylvania. This project, capable of generating up to 1,000 MW of electricity at a cost of about $825 million, also is being developed by Moxie Energy. Patriot is scheduled to begin construction in the fourth quarter of 2013 and begin operating in the summer of 2016. Gemma Power Systems LLC (Glastonbury, Connecticut) is the engineering, procurement and construction company for both Moxie projects.
• Berks Hollow Power Station, an 850-MW project also being developed by a unit of LS Power. This project, with a total investment value (TIV) of $750 million, is scheduled to be built in Berks County. Construction is slated to begin in early 2014 and finish in late-2016.
• 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 mid-2014, and the plant should be operating by early 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 2014 and finish by mid-2017.
• 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 2015 and be operating by the end of 2017.

The Liberty and Patriot plants "will be sited in one of the most prolific natural gas production areas in Pennsylvania and the world," Moxie Energy said. "Using Pennsylvania's abundant natural resources within the state, rather than shipping the resources to other states, is a value-added proposition that will bring permanent, high-paying jobs and a significant, long-term tax base that will be used to fund schools and offset property taxes currently being paid by residents and businesses." Marcellus Shale gas, and the electricity generated from it, could also bring additional businesses to the Keystone State, Moxie added.

Aside from these proposed grassroot gas-fired power plants, the owner of the coal-fired Sunbury Cogeneration plant in Snyder County wants to repower some of those units to burn gas. The owner, Sunbury Generation LLC (Shamokin Dam, Pennsylvania), plans to add 549 MW of new gas-fired capacity to the power station. That $400 million repowering project is scheduled to kick off in mid-2014 and to be operating by mid-2016.

An environmental health organization that opposed the Hickory Run project questioned whether the market could support all of the proposed new gas-fired generation. "Even in a state with a lot of natural gas, we don't believe the demand for Hickory Run is there," Matt Walker, a communications outreach director for the Clean Air Council (Philadelphia, Pennsylvania), told Industrial Info. His organization does not plan to litigate the Hickory Run permits.

"Demand in PJM is weak and electricity prices are low," Walker continued. "Future electric demand could be met at lower costs and reduced risks with energy-efficiency projects and renewable generation."

The gas plants are being developed, in part, to replace retirement of thousands of megawatts of coal-fired generation in the Mid-Atlantic market that includes Pennsylvania, New Jersey and Maryland and is known as PJM. The Marcellus' huge gas reserves and high production will work to keep gas prices in the area low for years to come, experts believe.

The Liberty and Hickory Run projects are being built as merchant generators, without a power purchase contract. In most cases, generators in PJM only receive payment for the electricity they produce. Generally, payments for capacity are not made, which can lead to a less-predictable revenue stream and increase an owner's risks.

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