A Sweet Deal Nolan County Lands $3 Billion Power Plant

Nolan County Judge Tim Fambrough walked around with a smile on his face for two months, and his wife was beginning to question why. But he couldn’t say a word; he had been sworn to secrecy.
On Feb. 19, Fambrough’s wife and everyone else in Sweetwater and Nolan County understood why the county judge had been in such a good mood. On that day, Tenaska Inc. announced it would construct a $3 billion, technologically advanced, coal-fueled electric generating plant nine miles east of Sweetwater. The Trailblazer Energy Center will provide enough electricity to power 600,000 homes around the clock while utilizing a new technology that will capture 90 percent of the carbon dioxide, or CO2, to be sold for use in enhancing oil production in the Permian Basin.
Tenaska is projecting to spend $1 billion on the permitting process and the financing costs. Another $2 billion will be spent on construction costs.
If life wasn’t already “sweet in Texas, especially in Sweetwater,” as the city’s motto claims, it certainly is now.
“I just couldn’t believe our good fortune,” Fambrough said.
The first question on people’s minds was, “Who is Tenaska?” Headquartered in Omaha, Neb., Tenaska is one of the largest independent power producers in the United States, according to its Web site www.tenaska.com. The company specializes in:
Power plant development, construction and operation
Natural gas, electric power and biofuels marketing
Energy risk management
Fuel procurement
Energy asset acquisition, development and management
Gas transportation and electric transmission
Forbes magazine ranked the company as 26th in revenues among the 424 largest privately held U.S. companies, based on 2006 revenues, the Web site reported. Its gross operating revenues that year were $8.7 billion, and assets were $2.8 billion.
The next question was, “Why Sweetwater?” Fambrough was told Tenaska was looking for a site where a north-south railroad and an east-west rail line would intersect. Nolan County and its county capital, Sweetwater, offer that combination.
“They found this spot,” Fambrough said of Tenaska executives, “and then they found land for sale right where they needed the plant,” located north of Interstate 20.
David Fiorelli, president and CEO of Tenaska’s Business Development Division, said the 1,919-acre tract “is a unique site in that we have Union Pacific and Burlington Northern Santa Fe railroads on the borders of our property, and we won’t have to construct additional rail lines.”
Greg Kunkel, Tenaska’s vice president of environmental affairs, said a significant part of the project strategy “is to be near markets for CO2 and enhanced oil recovery. Another key is having more than one rail line.”
Having a location away from heavily populated areas is important for getting environmental permits, he added. West Texas fit many of the criteria on Tenaska’s list.
A retired TXU employee, Fambrough at first was concerned about the idea of a coal-fueled power plant.
“But they reassured me they are using a clean technology,” he said.
According to Tenaska, the Trailblazer Energy Center will be fueled by low-sulfur coal. It will generate about 765 megawatts (MW) gross and 600 MW net, using the best available supercritical steam and pulverized coal technology. During the process of producing energy, a byproduct will be CO2, a greenhouse gas considered by some environmentalists to be associated with global warming. This Energy Center, however, will capture that CO2 and deliver it via pipeline to Permian Basin oil fields to be used in enhanced oil recovery and geologic storage.
The existing pipeline infrastructure added another spark to the list.
“There are hundreds of miles of pipeline infrastructure out there,” Kunkel said. “We will make some interconnecting pipeline extensions. We might be working with other companies in the oil industry on these extensions, but Tenaska will take the responsibility for making sure the interconnections happen.”
The concept for the basic coal-fueled plant isn’t unusual, but the process to capture 90 percent of the CO2 is a new element.
“For this size of facility, the Trailblazer Energy Center will be the first plant anywhere to incorporate this idea,” Kunkel said. “This is taking CO2 and putting it underground for good.”
The water cooling process is still being considered, he noted.
“We are looking at the option of using a dry cooling method, and that would make the water requirement minimal. Dry cooling would be a first. Nowhere in North America has a power plant done it this way,” Kunkel said.
Ben Shepperd, executive vice president of the Permian Basin Petroleum Association (PBPA), said that “operators in the area are excited about more sources of CO2 being available. Operators can use all the CO2 they can get for tertiary recovery efforts.”
Announcement of this plant follows the federal government’s decision not to build the FutureGen plant at Penwell, west of Odessa.
“I am much more excited about this private endeavor,” Shepperd said. “We look at it as a regional project, and it’s a great addition to the region.”
Kirk Edwards, president of PBPA, views the Trailblazer Energy Center and its new technology as a “huge boon to the area. The good news is that oil companies can use the CO2 immediately. The FutureGen plant was going to sequester it in the ground for five years. We are excited to see this project work, and we hope to see more plants like this in West Texas.”
For a town of 12,000 people, this $3 billion plant could ignite an economic rocket. Sweetwater’s economy for many years has been based on ranching with some oil and gas. The town bustled during World War II when Avenger Field served as home for the Women Airforce Service Pilots training program. In recent years, the sparsely populated county has been sought after by wind energy firms. Today, Nolan County serves as the center of the Western Hemisphere’s leading wind power generation, according to the Sweetwater Web site.
“All the comments I’ve heard from people in Nolan County have been positive,” Fambrough said of the proposed power plant.
Tenaska has completed the first step in gaining approval to construct the plant by filing the air permit application with the Texas Commission on Environmental Quality (TCEQ). The final decision to proceed is expected to come in 2009 based on such factors as availability of local, state and federal incentives, final project cost estimates, and projected market prices for electricity and CO2, said Fiorelli. The current estimates of these factors make the project appear feasible.
The construction phase is expected to require up to 2,000 workers. Once the power plant is operational, which is expected to be in 2014, it will provide up to 100 permanent jobs.
Finding enough construction workers isn’t concerning Tenaska, said Kunkel, as Texas has a reputation of providing “people in the crafts trades who can work on significant projects like this.”
Sweetwater city and county governments already are looking at what they need to do to be ready for construction.
“We’re experiencing a housing shortage now,” Fambrough said, citing the influx of employees for the wind generating plants. “We’ve contacted several builders to get started on houses and apartments.”
While the county budget is expected to grow, the judge recognized that extra monies will be targeted for road construction and maintenance.
As for the local incentives mentioned by Fiorelli, Fambrough said the company is expected to ask for a tax abatement.
“We’re used to that,” he continued. “The wind generating companies asked for a tax abatement and received it. An abatement gives these companies a tax break, but it still generates revenue for the county. If we give Tenaska a 50 percent tax abatement, they don’t have to pay 50 percent of the tax bill. But we still collect 50 percent on $2 billion.
“That’s a lot of money,” he said with a smile.
By Lana Cunningham, Special Correspondent