$3 Billion Coal-to-Gas Plant to Be Built in Kentucky

Kentucky has been picked as the site for the new $3 billion coal-to-gas plant from Peabody Energy (BTU) and Conoco Phillips (COP). The decision was announced Monday in Louisville, KY, in front of the University of Louisville's Speed School of Engineering.

The $3 billion coal-to-gas plant will convert coal into a synthetic natural gas, which is supposed to be cleaner burning. Peabody Energy had considered several different locations in Kentucky, Illinois, and Indiana. However, Kentucky's state legislature had passed an energy bill earlier this year with the proper regulatory provisions to provide the incentives Peabody was looking for, if the plant was to be built in Kentucky. The bill was passed, even though it faced opposition and criticism from citizens of the state of Kentucky. It was argued that the tax incentive package was too great and because of it, it would take decades to realize any real economic benefit from the plant. Furthermore, the plant's negative environmental impact would greatly outweigh any economic benefit Kentucky could realize. By the time any economic benefit might in fact be realized, the plant might even be obsolete due to new environmentally friendlier energy production methods.

Nevertheless, the bill was passed and went into effect. Last week the Kentucky Economic Development Finance Authority, based on the new energy bill, had made provisions for a $250 million tax incentive package for Peabody. This provision prompted the company's decision to narrow down the search for a proper location to Kentucky.

According to Rick Bowen, a Peabody Energy executive, the location search will be centered on areas in western Kentucky. The company will conduct a feasibility study 'followed by a detailed engineering and design study'. Based on the results of these studies, the final location and investment decision will be made by the project managers.