The owners of the Great Plains coal gasification plant, showpiece of the U.S. synfuels industry, have told the government that even with planned subsidies they no longer think they can make a profit, it was learned yesterday.
Government sources said that the five companies building the plant in Beulah, N.D., seemed to be hinting that they might pull out of the project, which is backed by up to $2 billion in federally guaranteed loans, unless they receive more subsidies.
The private consortium building the plant, which would be the nation's first commercial-size facility converting coal into substitute natural gas, said that instead of earning a net profit of $1.2 billion in the first 10 years of operation it now faces "losses in excess of $770 million."
Although the consortium of five major energy companies led by American Natural Resources Co. and Tenneco Inc. has not said directly that it is thinking of abandoning the project, its agreement with the government permits it to withdraw if "there no longer exists reasonable assurance" that the plant will generate enough cash to pay back the loans and the owners' equity.
Hence, the consortium's submission of a revised cash-flow projection indicating "significant partnership losses" during the first 10 years of operation has sent tremors through the Department of Energy, particularly in light of the number of synfuels projects abandoned in the past year.
The consortium said that although it originally expected to recover its entire investment in Great Plains in the first nine years of operation, its new projections indicate that it would not do so until at least the year 2000.
"It is not a particularly attractive picture," said Robert C. Porter, a spokesman for the Energy Department, which already has committed $622 million to the project. The plant is scheduled to go into full production in December, 1984.
The government has asked the consortium--which has invested about $300 million of its own funds to date in the half-completed plant--to "come back to us in 30 to 60 days" with a proposal for "what additional type of assistance, if any" it might need from the government to keep the project going, he said.
Porter said the options being considered range from extending the payback period for the loans to providing "additional price supports" for the gas the plant will produce. Any bid to subsidize the project further through new price supports, he said, "probably would have to be submitted to Congress."
Rep. Mike Synar (D-Okla.), chairman of a House Government Operations subcommittee, yesterday asked the General Accounting Office to investigate what a federal bail-out or takeover would cost.
Synar said that if the government sought to enable the companies to earn the rate of return they originally expected by granting Great Plains additional price supports over and above the subsidized rate authorized two years ago by the Federal Energy Regulatory Administration "this price guarantee over the first 10 years of operation would be $2 billion."
Of the large number of synthetic fuels plants announced in the 1970s, when oil prices were skyrocketing, only two--Great Plains and a Union Oil Co. shale oil plant--still are under construction.
The primary problem facing Great Plains is that the pricing formula approved by the Federal Energy Regulatory Commission for the synthetic natural gas it will produce is tied to the price of heating oil and the producer price index.
Anticipating that oil prices would keep rising and with inflation running strong, the consortium expected to charge $9.50 to $10 per thousand cubic feet for gas when the plant went into production. But with oil prices falling and inflation down, the plant would be able to charge only $6 to $6.25 if it were to open today.
Porter said that if the consortium pulled out the project could be abandoned or the government could take over and complete the plant.