Power firms navigate Obama's vision for coal

Rules spell good news for some, bad for others

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For most American companies with an interest in building coal-fired power plants abroad, the president's climate agenda arrived with a thud this summer.

One line in particular sounded an alarm: "I'm calling for an end of public financing for new coal plants overseas," President Barack Obama said on June 25, adding, "unless they deploy carbon-capture technologies or there's no other viable way for the poorest countries to generate electricity."

That last part seemed to offer a glimmer of hope for Downtown-based International Electric Power.

IEP has spent the past three years trying to organize and finance Project Phoenix, originally conceived as a 50-megawatt power plant that would burn garbage collected from the streets in Haiti and supplement that with lignite coal mined nearby.

The company approached the Overseas Private Investment Corp., an international financing agency of the U.S. government, as a possible funding source in 2011. But inside the U.S. government, officials were hesitant to fund fossil fuel projects and suggested the company strip the lignite from its plan, according to Ashley Seitz, vice president at IEP.

So, it did. The Pittsburgh company downsized its plan to try for a 30 megawatt waste-to-energy plant, which it's billing as a renewable fuel. Still, the project has been on hiatus for the past 18 months.

When Ms. Seitz heard Mr. Obama say no more funding for foreign coal except for the most needy nations, she took it as a sign the administration has actually softened its stance, and she's hoping that Project Phoenix will benefit.

"If this was a different country, someplace like China, we would agree that the U.S. should not be paying for the erection of a plant," Ms. Seitz said. "However, because this is Haiti, they have very few options."

When, on Oct. 29, the U.S. Department of Treasury issued its guidance to implement the president's climate agenda, IEP put the lignite coal -- which, because of its relatively low energy content, normally isn't used at coal plants, except at those practically next-door to the mines -- back in the game. It scaled up its plans to the original 50-megawatt level and is now hopeful the Treasury guidance will help the project clear the hurdle.

The capital cost of building the plant and the associated trash-collection and mining businesses would be about $325 million, Ms. Seitz said. The company is hoping a portion of the costs will be funded by OPIC loans.

The Treasury Department represents the U.S. in multinational development banks, such as the World Bank, which lend money to developing nations. The department's recent guidance document spells out the process that coal-fired projects would need to go through to get built.

For most projects in most countries, it would be a nonstarter: They'd have to examine all energy-generating options; show that renewable energy isn't feasible; find the best technology; and install carbon capture and sequestration.

For the poorest nations -- there are 67, according to the World Bank's definition -- the procedure isn't as onerous. Haiti is that kind of nation.

Pakistan is a different story. While it's considered among the poorest nations by the World Bank, it can borrow at levels reserved for more developed countries, so it's treated differently in the Treasury guidance.

That spells bad news for Irfan Ali, managing partner at TharPak, a consortium of firms including Pittsburgh-based industrial drier manufacturer Heyl & Patterson, aiming to mine Pakistan's vast lignite reserves and burn them in newly constructed power plants there.

TharPak has been asking the U.S. government for $50 million for a feasibility study. But the reluctance to fund any coal-powered generation abroad has stymied the effort, Mr. Ali said.

"It's like talking to a wall here in Washington," he said. "This document, actually, in my view makes it worse because it gives them the ability to argue that Pakistan has other alternatives."

Since the climate agenda was announced in June, federal agencies have been parsing what it means for them.

OPIC is currently "updating its energy and environmental policies to more closely align with the president's Climate Action Plan," said spokeswoman Amanda Burke, but its carbon policies have kept the bank from funding coal-fired power plants for years.

The Export-Import Bank of the United States, which helps American companies sell their products and services abroad, also has asked its staff to draft recommendations on how to implement the climate agenda. But its board of directors is an independent body and may not adopt the proposed policies.

Since Ex-Im Bank's draft recommendations were published for comment Sept. 30, it has been meeting with stakeholders -- environmental groups, industry groups, individual companies -- and collecting concerns.

There's no deadline for the Ex-Im board to decide on the recommendations, which have yet to be finalized.

Anya Litvak: alitvak@post-gazette.com or 412-263-1455

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