Plant paying $79 million to Department of Energy

Plant paying $79 million to Department of Energy
By DALE WETZEL
Associated Press Writer

Buoyed by high natural gas prices, the Great Plains Synfuels Plant has paid $79 million to the U.S. Department of Energy as part of an agreement that rescued the Beulah factory from a possible shutdown.

Great Plains makes synthetic gas from lignite. Daryl Hill, a spokesman for Basin Electric Power Cooperative, said Monday that the annual payment is the largest since a Basin subsidiary, Dakota Gasification Co., bought the plant from the federal government 18 years ago.

A consortium of five natural gas pipeline companies built Great Plains in the early 1980s. The federal government guaranteed $1.5 billion in construction loans for the factory, which made its first gas deliveries in July 1984.

Low natural gas prices made the synfuels plant unprofitable, and the pipeline companies defaulted on their loans in August 1985. The Energy Department, after operating the plant for three years, sold it to Dakota Gasification in October 1988.

As part of the sale, Dakota Gasification agreed to make annual revenue-sharing payments to the Energy Department until 2009, if natural gas prices were high enough and other economic conditions were met.

When the latest payment is included, the company has made $241 million in revenue-sharing payments to the federal government so far, Hill said.

Dakota Gasification also paid $85 million for the plant when it was sold, and declined to use federal tax credits worth $754 million. The credits expired four years ago.

For most of the plant's history, natural gas prices have not been high enough to trigger the annual payments. The plant has made them during the last three years, but Hill said the $79 million is only the sixth revenue-sharing disbursement made since Dakota Gasification acquired the factory.

Revenues from Great Plains' natural gas sales totaled $227.8 million last year. The plant has about 700 employees.

Great Plains produces an average of about 160 million cubic feet of gas daily. BP Canada buys about 23 percent of the factory's production, while Tenaska Marketing Ventures, a wholesale natural gas marketing company based in Omaha, Neb., buys about 22 percent. The rest is sold on the open market.