Indiana legislators close to deal that developers say would kill Rockport plant

House and Senate negotiators are currently putting the finishing touches on the bill. If it wins the approval of both chambers by Friday, it would mark a victory for opponents of the plant and a stinging defeat for those who hoped to see it built.

Lawmakers unveiled the latest draft of the bill at a Thursday morning conference committee meeting. Mark Lubbers, the project manager for the Indiana Gasification plant being financed by New York-based Leucadia National Corp., said the new version would force the Rockport plant through too many new hoops.

He called it "a good indication that our $3 billion investment isn't wanted" and said that while he's not sure whether developers would continue to advocate for their effort in an ongoing court battle, he does not believe the project could survive the new standards the bill would impose if it becomes law.

"It's not even a close call," Lubbers said. "We don't want to be someplace we're not wanted."

The debate is over the wisdom of the Indiana Finance Authority’s 30-year contract to buy the Rockport plant’s synthetic natural gas at a pre-negotiated rate and then resell it on the open market, with the gains or losses passed on to ratepayers.

As long as the Indiana Supreme Court upholds an appellate court’s decision, the legislation that top-ranking Republicans met twice Wednesday to hammer out would put the project through a tough new review by the Indiana Utility Regulatory Commission.

The Rockport plant’s developers argue that the new review included in the new legislation would force them to meet ratepayer savings standards throughout the life of the contract and comply with other regulatory procedures that were not in place when their deal with the state was signed in 2011. Thus, they say, they could no longer finance the project.

However, lawmakers involved in the negotiations said the second review is what Pence wants. House Speaker Brian Bosma said Pence’s administration has encouraged them to pursue that option and leave the final yes-or-no decision in the hands of utility regulators.

“They’ve been very actively involved,” Bosma, R-Indianapolis, said of the governor’s legislative aides.

Both Bosma and Senate President Pro Tem David Long, R-Fort Wayne, said they’d agreed on what shape the measure would take. The chief advocates of another regulatory review, Sen. Doug Eckerty, R-Yorktown, and Rep. Suzanne Crouch, R-Evansville, said Wednesday evening that they are pleased by the progress.

Lawmakers have agreed that they will not intervene if the Indiana Supreme Court upholds that deal in full. However, such a victory for developers is seen as unlikely, since a 37-word technical clause prompted the Indiana Court of Appeals to void regulators’ approval of the deal last year.

Under the measure lawmakers are finalizing, changes – including that technical correction – would trigger a full new review that would have to take place over a nine-month period.

Lubbers said last week that if lawmakers go forward with “the attempt to create new standards for the contract, to create new regulatory procedures and requirements for the contract,” it would lead developers to walk away from the deal.

“There’s no one who will finance this project if the counter-party, the partner on the other side, changes the rules in the middle of the game. This is not a difficult concept,” Lubbers said. “Those things kill the plant.”

Lubbers had pushed lawmakers to pursue an alternate option. He wanted the Indiana Utility Regulatory Commission to issue a non-binding opinion on whether the state’s Rockport contract remained a wise one, rather than conduct a binding review using new standards that developers previously did not have to meet.

In exchange, Lubbers said, he would agree to give Pence’s administration broad authority to opt out of the contract. Late last week, both Bosma and Long told reporters that they were considering something like what Lubbers and the Indiana Coal Council, which supports the project, had sought. However, on Wednesday they had changed course.

Opponents of the project – chiefly, Evansville-based Vectren Corp., as well as the Indiana Manufacturers Association and the Indiana Chamber of Commerce – said they were pleased with this week’s developments.

“I'm encouraged legislative leaders and the governor’s office are working toward a solution that protects customers,” said Mike Roeder, Vectren’s vice president of government affairs and communications. “It is important the legislative solution guarantees savings under all the complicated scenarios.”

The debate has focused on whether ratepayers would save money – both in the short run and over the lifetime of the 30-year deal – as a result of the rates that Daniels’ administration negotiated.

The Rockport plant’s developers estimate that they would be selling their product to the state at an average price, in today’s dollars, between $6.50 and $7.50 per million British thermal units.

They argue that the deal amounts to a smart hedge against the volatile price of natural gas, which sold for less than $2 per unit a year ago, tops $4 per unit now and has tripled that amount in recent years.

Opponents dispute that price estimate.

They note that its rates could increase by nearly $2 per unit if developers are unable to meet their profit estimates as they sell related products, such as the carbon dioxide they would pump through a pipeline and to the Gulf of Mexico for use in oil production.

Lawmakers are set to conclude their 2013 legislative session by Friday night and the House requires that its members get 24 hours to review each bill before casting votes. That leaves just hours to decide whether to step into the Rockport deal.