The private firms that own the Great Plains coal gasification plant notified the government yesterday that their consortium intends to abandon the North Dakota facility and default on the $1.5 billion federal loan it received to build the plant.
The action, prompted by Energy Secretary John S. Herrington's refusal this week to pump more federal subsidies into the plant, represented the final chapter for the country's largest synthetic fuels project -- a decade-old experiment that was supposed to help reduce the nation's dependence on foreign oil.
As a result of the decision, ownership of Great Plains immediately reverts to the Energy Department. Department officials said they asked Great Plains managers to continue operating the project temporarily, while they study the quickest and most cost-effective way of shutting it down.
The ultimate cost to the taxpayers from yesterday's decision will be about $1.2 billion, according to department estimates.
Under the terms of the original 1982 loan agreement, the Great Plains owners will be required to return $330 million to the government that they received in tax benefits.
But the rest of the loan will have to be borne by the Energy Department, which a DOE official said will force the department to seek an immediate appropriation from Congress to repay the lending agency, the Federal Financing Bank.
The consortium members who took yesterday's action included Tenneco Inc., the huge Houston-based energy conglomerate; American Natural Resources Co. of Detroit; Transco Energy Co. of Houston; MidCon Corp. of Lombard, Ill., and Pacific Lighting Corp of Los Angeles.
In a statement released by the consortium's Washington lobbying firm, Clifford Rackley, the chairman of the Great Plains management committee and a senior vice president of Tenneco, blamed their decision on the Energy Department, saying they were left with "no alternative" after Herrington refused to agree to a plan to renegotiate their debt to the government and provide an additional $720 million in subsidies to operate the facility.
Although Great Plains was constructed on schedule and began producing synthetic gas for midwestern pipelines more than a year ago, the sharp decline in energy prices made the plant increasingly uneconomic and prompted the owners to appeal for more federal help. Great Plains has been selling its gas for about $5.65 per million British thermal units, which is nearly twice current market prices.
Rackley called Herrington's decision a "blow to the nation's efforts to assure our future energy security." But DOE officials said that there was little reason to believe that Great Plains gas would ever be competitive and that to continue operations would only have increased the cost to the taxpayers.
Energy Department officials would not say yesterday how long they expected to keep the plant operating, but they noted that there was a seven-day supply of coal on site and another seven-day supply on order. An official department news release said Herrington would try to "minimize impacts on workers and affected communities" when the plant was closed.
Meanwhile, the 1,000 employes at the Beulah, N.D., facility will stay on the job. Rep. Byron L. Dorgan (D-N.D.), who participated in a last-ditch effort to save the facility on Wednesday, said that closing it will cause "major economic problems" for the state.