The FutureGen Carbon Capture and Sequestration Project: A Brief History and Issues for Congress

Congressional research reportFeb 10, 2014

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The FutureGen Carbon Capture and

Sequestration Project: A Brief History and

Issues for Congress

-name redactedSpecialist in Energy and Natural Resources Policy

February 10, 2014

Congressional Research Service

7-....

www.crs.gov

R43028

FutureGen: A Brief History and Issues for Congress

Summary

More than a decade after the George W. Bush Administration announced its signature clean coal

power initiative—FutureGen—the program is still in early development. Since its inception in

2003, FutureGen has undergone changes in scope and design. As initially conceived, FutureGen

would have been the world’s first coal-fired power plant to integrate carbon capture and

sequestration (CCS) with integrated gasification combined cycle (IGCC) technologies. FutureGen

would have captured and stored carbon dioxide (CO2) emissions from coal combustion in deep

underground saline formations and produced hydrogen for electricity generation and fuel cell

research. Increasing costs of development, among other considerations, caused the Bush

Administration to discontinue the project in 2008. In 2010, under the Obama Administration, the

project was restructured as FutureGen 2.0: a coal-fired power plant that would integrate oxycombustion technology to capture CO2. FutureGen 2.0 is the U.S. Department of Energy’s (DOE)

most comprehensive CCS demonstration project, combining all three aspects of CCS technology:

capturing and separating CO2 from other gases, compressing and transporting CO2 to the

sequestration site, and injecting CO2 in geologic formations for permanent storage.

Congressional interest in CCS technology centers on balancing the competing national interests

of fostering low-cost, domestic sources of energy like coal against mitigating the effects of CO2

emissions in the atmosphere. FutureGen 2.0 would address these interests by demonstrating CCS

technology as commercially viable. Among the challenges to the development of FutureGen 2.0

are rising costs of production, ongoing issues with project development, lack of incentives for

investment from the private sector, and time constraints. Further, FutureGen’s development would

need to include securing private sector funding to meet increasing costs, purchasing the power

plant for the project, obtaining permission from DOE to retrofit the plant, performing the retrofit,

and then meeting the goal of 90% capture of CO2.

The FutureGen project was conceived as a public-private partnership between industry and DOE

with agreements for cost-share and cooperation on development, demonstration, and deployment

of CCS technology. The public-private partnership has been criticized for leading to setbacks in

FutureGen’s development, since the private sector lacks incentives to invest in costly CCS

technology. Regulations, tax credits, or policies such as carbon taxation or cap-and-trade that

increase the price of electricity from conventional power plants may be necessary to make CCS

technology competitive enough for private sector investment. Even then, industry may choose to

forgo coal-fired plants for other sources of energy that emit less CO2, such as natural gas.

However, Congress signaled its support for FutureGen 2.0 via the American Recovery and

Reinvestment Act of 2009 (ARRA, P.L. 111-5) by appropriating almost $1 billion for the project.

ARRA funding will expire on September 30, 2015, and it remains a question whether the project

will expend all of its federal funding before that deadline.

A proposed rule by the Environmental Protection Agency (EPA) to limit CO2 emissions from new

fossil-fuel power plants may provide some incentive for industry to invest in CCS technology.

The debate has been mixed as to whether the rule would spur development and deployment of

CCS for new coal-fired power plants or have the opposite effect. Multiple analyses indicate that

there will be retirements of U.S. coal-fired capacity; however, virtually all analyses agree that

coal will continue to play a substantial role in electricity generation for decades. The rapid

increase in the domestic natural gas supply as an alternative to coal, in combination with

regulations that curtail CO2 emissions, may lead electricity producers to invest in natural gas-fired

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FutureGen: A Brief History and Issues for Congress

plants, which emit approximately half the amount of CO2 per unit of electricity produced

compared to coal-fired plants.

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FutureGen: A Brief History and Issues for Congress

Contents

Introduction and Background .......................................................................................................... 1

DOE CCS Programs .................................................................................................................. 2

Current Status of FutureGen ...................................................................................................... 2

Policy Challenges and Issues for Congress ..................................................................................... 5

Cost, Schedule, and Funding ..................................................................................................... 5

Project Costs........................................................................................................................ 5

Schedule and Funding ......................................................................................................... 6

Public-Private Partnership ......................................................................................................... 6

EPA Proposed Rule to Limit CO2 from New Power Plants ....................................................... 7

The Natural Gas Alternative? .............................................................................................. 8

Outlook .......................................................................................................................................... 10

Timeline ......................................................................................................................................... 10

Figures

Figure 1. Map Showing the Town of Meredosia, IL, the Proposed Pipeline Route, and the

Proposed CO2 Sequestration Site.................................................................................................. 3

Contacts

Author Contact Information........................................................................................................... 14

Acknowledgments ......................................................................................................................... 15

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FutureGen: A Brief History and Issues for Congress

Introduction and Background

This report briefly summarizes the history of FutureGen, discusses why it has gained interest and

support from some Members of Congress and the Administration while remaining in initial stages

of development, and offers some policy considerations on barriers that challenge its further

development as a model for a CCS program. A timeline history of FutureGen is found at the end

of this report.

FutureGen is a clean-coal technology program managed through a public-private partnership

between the U.S. Department of Energy (DOE) and the FutureGen 2.0 Industrial Alliance. The

FutureGen program as originally conceived in 2003 by the George W. Bush Administration had

the intent of constructing a net zero-emission fossil-fueled power plant with carbon capture and

sequestration (CCS) technology.1 CCS is a process envisioned to capture carbon dioxide (CO2)—

a greenhouse gas associated with climate change—emitted from burning fossil fuels and store it

in deep underground geologic formations, thus preventing its release into the atmosphere. If

widely deployed in the United States, CCS could decrease the amount of U.S.-emitted CO2. In

2008, DOE withdrew from the FutureGen partnership, citing rising costs of construction as its

reason. Subsequently, DOE restructured the FutureGen program to instead develop two or three

demonstration projects at different power plants around the country. In 2010, the Obama

administration announced another change to the program with the introduction of FutureGen 2.0,

which would retrofit an existing fossil fuel power plant in Illinois with CCS technology.2

The FutureGen project was originally conceived as a cost-share between the federal government,

which would cover 76% of the cost, and the private sector, which would provide the remaining

24%. Between FY2004 and FY2008, Congress appropriated $174 million to the original

FutureGen project. DOE obligated $44 million and expended $42 million between FY2005 and

FY2010 toward the original project.3 Under the Obama Administration, Congress appropriated

almost $1 billion in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5)

for FutureGen 2.0. Furthermore, DOE has obligated nearly $60 million but has expended $2

million from regular appropriations to FutureGen 2.0 since FY2010.4 Together with the

approximately $74 million expended on the project from ARRA funding (discussed below), total

expenditures for FutureGen since its conception were between $110 and $120 million as of early

2014.

The FutureGen Industrial Alliance estimated the total cost of the FutureGen 2.0 program to be

nearly $1.3 billion, with $730 million used toward retrofitting and repowering Ameren

Corporation’s power plant in Meredosia, Illinois, and $550 million used for the construction of a

CO2 pipeline, storage site, and training and research center. In 2011, they estimated that the

project would create approximately 1,000 construction jobs and another 1,000 jobs for suppliers

across the state.5 A 2013 report from the University of Illinois predicted that the project could

Congress first appropriated funds specifically for FutureGen in FY2005.

U.S. Department of Energy National Energy Technology Laboratory, “Secretary Chu Announces FutureGen 2.0:

Awards $1 Billion in Recovery Act Funding for Carbon Capture and Storage Network in Illinois,” press release,

August 5, 2010, http://www.netl.doe.gov/publications/press/2010/10033-Secretary_Chu_Announces_FutureGen_.html.

Email correspondence with Jeff Hoffman of the Office of Major Demonstrations in the Department of Energy’s

National Energy Technology Laboratory.

Ibid.

FutureGen Alliance, “FutureGen 2.0,” press release, February 24, 2011, http://www.futuregenalliance.org/pdf/

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create an average of 620 permanent jobs for 20 years and approximately $12 billion of business

volume by 2037 for the state of Illinois.6

DOE CCS Programs

Current scientific research associates an increase in atmospheric GHGs (in particular CO2,

methane, and nitrous oxides), which trap heat in the earth’s atmosphere, with the potential for

changing the Earth’s climate. The increase in the atmospheric concentration of CO2 in the 20th

and 21st centuries is due almost entirely to human activities.7 If successful, FutureGen 2.0 would

demonstrate a technology that, if widely deployed, could capture a significant fraction of U.S.

CO2 emissions for geologic sequestration.

DOE’s Office of Fossil Energy directs three major CCS programs: the Clean Coal Power

Initiative (CCPI), Industrial Carbon Capture and Storage (ICCS), and FutureGen 2.0.8 Through its

CCPI program, DOE partners with industry leaders in a cost-share arrangement to develop new

CCS technologies for power plant utilities in order to reduce greenhouse gas emissions by

boosting plant efficiencies and capturing CO2. Of the six projects selected under the most recent

funding for CCPI (Round 3), three have withdrawn, citing concerns over costs and regulations.

DOE’s share for the three active projects is $1.0 billion of a total $6.1 billion, approximately

17%. DOE is also partnering with industry for 31 projects in the ICCS program, which supports

R&D in a non-utility large-scale industrial CCS program and a program to support beneficial CO2

use. The combined total DOE share for all the ICCS projects is $1.422 billion of a total $2.0

billion, approximately 70%.

FutureGen 2.0 is DOE’s most comprehensive CCS demonstration project, combining all three

aspects of CCS technology: capturing and separating CO2 from other gases, compressing and

transporting CO2 to the sequestration site, and injecting CO2 in geologic formations.

Current Status of FutureGen

In October 2010, FutureGen 2.0 developers began working on Phase 1 of the project with the PreFront End Engineering Design (Pre-FEED) report, which included plant design, estimated project

cost, and basis for applying for National Environmental Policy Act (NEPA) review and other

state and local permits.9 The report showed that the estimated price for FutureGen 2.0 had

increased from $1.3 billion to $1.65 billion. Subsequently, cost reduction measures were

(...continued)

FutureGenFacts.pdf.

University of Illinois, Institute of Government and Public Affairs, Regional Economics Applications Laboratory,

Economic Impacts of FutureGen 2.0 on Illinois and Local Economies, Urbana, IL, June 2013, http://www.jredc.org/

resources/Economic_Impact_FutureGen2%200_Hewings_6-2013_Final.pdf.

For a more detailed examination of the science of climate change, see CRS Report RL34513, Climate Change:

Current Issues and Policy Tools, by (name redacted)http://www.crs.gov/pages/Reports.aspx?PRODCODE=RL34513.

For a more detailed examination of DOE’s CCS program, see CRS Report R42496, Carbon Capture and

Sequestration: Research, Development, and Demonstration at the U.S. Department of Energy, by (name redacted).

D. K. McDonald, M. Estopinal, and H. Mualim, “FutureGen 2.0: Where Are We Now?,” (Technical Paper, Babcock

& Wilcox Power Generation Group, Inc., 2012), pp. 2-3, http://www.babcock.com/library/pdf/BR-1870.pdf.

(Hereinafter referred to as McDonald.) Babcock & Wilcox Power Generation Group is a technology provider for

FutureGen 2.0 carbon capture project.

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FutureGen: A Brief History and Issues for Congress

identified and implemented, including establishing the plant gross output at 168 MW (the steam

turbine is nominally rated at 200 MW), and using a combination of 60% Illinois coal and 40%

Powder River Basin (PRB) coal to reduce sulfur and chlorine emissions.10 Also, in late 2011

Ameren announced it was closing its power plant in Meredosia, Illinois, and discontinuing its

cooperative agreement with DOE.11 Following that announcement, the project was

redesigned to reflect that the Alliance would take control of the capture process as well as the

transportation and storage site. The Alliance is currently negotiating the purchase of parts of

the Meredosia Energy Center from Ameren to continue with project development. Figure 1

shows the location of the town of Meredosia, Illinois, the proposed pipeline route, and the

proposed carbon sequestration site where the captured CO2 would be injected underground

and stored.

Figure 1. Map Showing the Town of Meredosia, IL, the Proposed Pipeline Route, and

the Proposed CO2 Sequestration Site

Source: The FutureGen Alliance, http://www.futuregenalliance.org/futuregen-2-0-project/pipeline/.

Notes: The proposed pipeline is approximately 30 miles long. Construction is anticipated to begin in the

summer of 2014, according to the FutureGen 2.0 Industrial Alliance.

McDonald et al., 2012, p. 4.

Tennille Tracy, “Ameren Quits FutureGen Pollution Project,” The Wall Street Journal, November 28, 2011.

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FutureGen: A Brief History and Issues for Congress

Throughout the summer and fall of 2012, the project continued to confront rising cost

estimates, as well as challenges in negotiating a long-term power purchasing agreement with

the state of Illinois.12 However, the project has achieved several milestones since 2012 that

could favor its future progress. In late December 2012, the Illinois Commerce Commission

voted 3-2 to approve a power procurement plan for the state that requires utilities to purchase all

the electricity generated by the FutureGen 2.0 facility for 20 years. That decision cleared a major

hurdle for FutureGen 2.0, and the decision allows Commonwealth Edison and Ameren Illinois to

collect costs for the project from the state’s alternative retail electric suppliers.13 Opposition to the

power procurement proposal stemmed primarily from those opposed to its potential to raise costs

for retail customers.14

In February 2013, DOE approved the start of Phase 2 of the project, which includes final

permitting and design activities that precede a decision to begin construction.15 The project

faced delays while it was being redesigned following the release of the Pre-FEED report;

however, the FEED activities resulted in a 70%-90% design completion for the project, which is

better than the industry standard of about 25%, according to the FutureGen 2.0 Industrial

Alliance.16

On October 25, 2013, DOE issued the final environmental impact statement (EIS) for FutureGen

2.0. The proposed action in the EIS is for DOE to provide funding of approximately $1 billion to

the FutureGen 2.0 Industrial Alliance to support the completion of Phase 2—preliminary and final

design for the project—followed by construction and commissioning (Phase 3) and operations

(Phase 4).17 On November 30, 2013, EPA published a notice of availability in the Federal

the NEPA process. Issuance of the ROD clears the last hurdle in the NEPA process, and

reportedly allows the FutureGen 2.0 Industrial Alliance to move forward pending approval of a

permit to install the CO2 injection wells and meeting financial requirements.”19

“At the Major CCS Projects: HECA, FutureGen,” GHG Reduction Technologies Monitor, July 20, 2012,

http://ghgnews.com/index.cfm/at-the-major-ccs-projects-futuregen-20-heca/?mobileFormat=false. (Hereinafter referred

to as GHG ReductionTechnologies Monitor, July 20, 2012.)

Tamar Hallerman, “Ill. Regulators Approve 20-Year Power Contract for FutureGen,” GHG Reduction Technologies

Monitor, December 21, 2012, http://ghgnews.com/index.cfm/ill-regulators-approve-20-year-power-contract-forfuturegen/. (Hereinafter referred to as GHG Reduction Technologies Monitor, December 21, 2012.)

GHG Reduction Technologies Monitor, December 21, 2012.

See FutureGen 2.0 Industrial Alliance, Community Corner Archive, http://www.futuregenalliance.org/communitycorner/2013/03/.

Ken Humphreys, CEO of the FutureGen 2.0 Industrial Alliance, personal communication, April 18, 2013.

DOE, EIS-0460: Final Environmental Impact Statement, FutureGen 2.0 Project, Morgan County, Illinois, October

25, 2013, http://energy.gov/nepa/downloads/eis-0460-final-environmental-impact-statement.

Environmental Protection Agency, “EIS No. 20130314, Final EIS, DOE, IL, FutureGen 2.0, Project, Review,” 78

Federal Register 65643, November 30, 2013.

Christa Marshall, “FutureGen Gets Final Nod from DOE,” ClimateWire, January 17, 2014, which cites a statement

by FutureGen Industrial Alliance CEO Ken Humphreys.

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FutureGen: A Brief History and Issues for Congress

Policy Challenges and Issues for Congress

After more than 10 years and two restructuring efforts since FutureGen’s inception, the project is

still in its early development stages. Although the FutureGen 2.0 Industrial Alliance completed

drilling a characterization well at the storage site in Morgan County, IL, and installed a service rig

over the well for further geologic analysis, issues with the power plant itself have not yet been

resolved. Among the remaining challenges are securing private sector funding to meet increasing

costs, purchasing the Meredosia power plant from Ameren, obtaining permission from the DOE

to retrofit the plant, performing the retrofit, and then meeting the goal of 90% capture of CO2. In

addition, the Alliance is awaiting approval for a Class VI well permit for the injection and

sequestration wells.20

Cost, Schedule, and Funding

Project Costs

Increasing projected costs have posed significant problems for FutureGen’s development since

2003. Confronted with increasing projected costs in 2008, DOE under the George W. Bush

Administration first restructured FutureGen, then postponed the program when cost projections

rose from $950 million to $1.8 billion.

When Secretary of Energy Steven Chu announced the new FutureGen 2.0 in 2010, the cost was

estimated at $1.3 billion, with the DOE covering 80% of costs and industry partners contributing

the remaining 20% of the total. Initially, FutureGen 2.0 was to be implemented through two

separate cooperative agreements, with approximately $590 million of ARRA funds allocated to

Ameren Corporation to retrofit a power plant21 and approximately $459 million of ARRA funds

to the FutureGen 2.0 Industrial Alliance to implement a pipeline and regional CO2 storage

reservoir project.22

According to the FutureGen 2.0 Industrial Alliance, total capital costs for the FutureGen 2.0

project are estimated to be $1.65 billion.23 The Alliance is expected to cover the additional cost

The permit would be issued pursuant to the Safe Drinking Water Act, Underground Injection Control Program at

EPA. The FutureGen Industrial Alliance has submitted applications for four Class VI CO2 sequestration wells. See

http://www.epa.gov/r5water/uic/futuregen/.

DOE partnered with Ameren to retrofit the corporation’s obsolete 200 MW power plant in Meredosia, IL, with oxycombustion technology. The plans are for the retrofitted power plant to capture 90% of emitted carbon dioxide and

transport it from Meredosia to a storage site in Morgan County, IL, to store up 1.3 million tons of carbon dioxide per

year. The portion of funding from ARRA is $589,744,000. After Ameren withdrew from the cooperative agreement,

the FutureGen Industrial Alliance took responsibility for the capture technology portion of the project as well as the

pipeline and sequestration portion.

U.S. Department of Energy National Energy Technology Laboratory, FutureGen 2.0, Project Facts, June 2011,

http://www.netl.doe.gov. Funds apportioned from the DOE to the FutureGen Alliance include $404,985,000 from

ARRA funds and $53.6 million from prior year appropriations toward the FutureGen project through the Office of

Fossil Energy.

FutureGen 2.0 Alliance, “FutureGen 2.0, Frequently Asked Questions—General,” December 2013,

http://www.futuregenalliance.org/wp-content/uploads/2013/12/FutureGen-FAQ-General-Dec-2013.pdf. According to

the July 2013 DOE FutureGen 2.0 Fact Sheet, the total cost of the project is estimated to be $1,774,849,504, of which

$1,048,348,11 would be covered by DOE, and the remaining portion would be covered by the FutureGen Industrial

Alliance. See http://www.netl.doe.gov/publications/factsheets/project/FE0001882-FE0005054.pdf. Some more recent

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FutureGen: A Brief History and Issues for Congress

beyond the original cost estimate for FutureGen 2.0. Rising costs of construction may continue to

be a challenge to the project’s development.

Schedule and Funding

Some projections for FutureGen predict construction on the power plant, pipeline, and storage

facility will conclude by 2017.24 A looming question is whether the FutureGen 2.0 Alliance will

have sufficient time to expend the nearly $995 million of ARRA funding appropriated by

Congress for the project before it expires on September 30, 2015. As of October 2013, the

FutureGen 2.0 Alliance has expended about $73.97 million, or about 7.4%, of the total

$994,729,000 appropriated under ARRA.25

Once construction begins, the rate of spending will undoubtedly increase. Now that the DOE

ROD has been issued, it is likely that construction will begin sometime in spring or early summer

of 2014. But even if construction began as early as March 2014, the project would need to spend

approximately $921 million over 19 months, or about $48 million per month until the end of

September 2015 to exhaust all the ARRA funding. According to the investigatory work of one

industry observer, using documents obtained from DOE under a Freedom of Information Act

request, DOE would grant the Alliance the flexibility to accelerate the cost-share and expend the

ARRA-provided funding to cover capital costs before using private funds from the Alliance to

cover its portion of the cost-share.26 According to the report, DOE would require an increased

level of oversight over the project to safeguard the public investment in the project. Further, DOE

would have the ability to suspend or terminate funding if the project failed to demonstrate

sufficient progress.27

Public-Private Partnership

The partnership between the federal government and the private sector in funding and developing

FutureGen has been marked by a series of setbacks and challenges. Some critics of the publicprivate partnership attribute the project’s decade-long stasis to a lack of incentives for industry

leaders to invest seriously in clean coal technologies. A report released by the Massachusetts

Institute of Technology in 2007 stated that government investment and leadership in carbon

capture technologies are necessary: “Given the technical uncertainty and the current absence of a

carbon charge, there is no economic incentive for private firms to undertake such projects.”28

Since the MIT report was published, Congress has appropriated nearly $7 billion in CCS research

(...continued)

reports put the project cost at $1.68 billion, see Christa Marshall, “FutureGen Gets Final Nod from DOE,”

ClimateWire, January 17, 2014.

McDonald et al., 2012, p. 4.

Recovery.gov website, FutureGen Industrial Alliance, Inc., October 2013, http://www.recovery.gov/arra/

Transparency/RecoveryData/Pages/Recipient.aspx?duns=603703799.

Tamar Hallerman, “DOE, FutureGen Eye Tight Project Timeline,” GHG Reduction Technologies Monitor, October

25, 2013, http://ghgnews.com/index.cfm/vol-8-issue-46/doe-futuregen-alliance-eye-tight-project-timeline/.

Ibid.

Massachusetts Institute of Technology, The Future of Coal: An Interdisciplinary MIT Study (2007), p. xiii.

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and development (R&D), including FutureGen; however, Congress has not enacted any form of a

“carbon charge,” through either a cap-and-trade system or a carbon tax.29

Ameren Corporation, which partnered with DOE to retrofit its power plant in Meredosia, IL, for

FutureGen 2.0, discontinued operations at the Meredosia Energy Center where the plant is

located, stating that it would not be able to afford the costs to comply with air pollution rules

issued in July 2011 by the EPA to reduce sulfur dioxide and nitrogen oxide.30 In addition to the

FutureGen project, DOE partnered with industry for six other commercial-scale CCS projects

through its Clean Coal Power Initiative (CCPI) program.31 The 2010 DOE Strategic Plan report

predicted that at least five of DOE’s major CCS projects would become operational by 2016.32

Since the report was released, three of the six industry partners of CCPI projects have pulled out

of agreements with DOE. The departure of several industry leaders from contracts with DOE

demonstrates the volatility of the public-private partnership model.

EPA Proposed Rule to Limit CO2 from New Power Plants

On September 20, 2013, the U.S. Environmental Protection Agency (EPA) re-proposed a standard

that would limit emissions of carbon dioxide (CO2) from new fossil-fueled power plants. As reproposed, the rule would limit emissions to no more than 1,100 pounds per megawatt-hour of

production from new coal-fired power plants and between 1,000 and 1,100 pounds per megawatthour (depending on size of the plant) for new natural gas-fired plants. EPA proposed the standard

under Section 111 of the Clean Air Act. According to EPA, new natural gas-fired stationary power

plants should be able to meet the proposed standard without additional cost and the need for addon control technology. However, new coal-fired plants would be able to meet the standard only by

installing carbon capture and sequestration (CCS) technology to capture about 40% of the CO2

they typically produce. The proposed standard allows for a seven-year compliance period for

coal-fired plants but would demand a more stringent standard for those plants that limits CO2

emissions to an average of 1,000-1,050 pounds per megawatt-hour.33

On January 8, 2014, EPA published the re-proposed rule in the Federal Register.34 Publishing in

the Federal Register triggers the start of a 60-day public comment period: comments will be

accepted until March 10, 2014. The initial 2012 proposal generated more than 2.5 million

Philip Webre and Samuel Wice, Federal Efforts to Reduce Cost of Capturing and Storing Carbon Dioxide,

Congressional Budget Office, June 2012, p.5, http://www.cbo.gov/sites/default/files/cbofiles/attachments/43357-0628CarbonCapture.pdf.

Ameren Energy Resources Company, LLC, “Two Ameren Merchant Generating Company Energy Centers to Cease

Operations,” press release, October 4, 2011, http://ameren.mediaroom.com/index.php?s=43&item=981. In January

2013 Ameren Energy Resources agreed to sell a portion of the Meredosia Energy Center to the FutureGen 2.0 Alliance

for the FutureGen 2.0 project. Ownership is expected to formally transfer to the FutureGen 2.0 Alliance in 2014 prior to

the start of construction of the and if all contractual conditions are met. See http://www.futuregenalliance.org/

community-corner/2013/03/.

See CRS Report R42496, Carbon Capture and Sequestration: Research, Development, and Demonstration at the

U.S. Department of Energy, by (name redacted).

Steve Koonin, DOE Strategic Plan, U.S. Department of Energy, December 8, 2010, p. 8, http://efcog.org/library/

council_meeting/SAMtg.120810/Presentations/Koonin,%20Steve.pdf.

The proposal and background information is available at http://www2.epa.gov/carbon-pollution-standards/2013proposed-carbon-pollution-standard-new-power-plants.

Environmental Protection Agency, “Standards of Performance for Greenhouse Gas Emissions From New Stationary

Sources: Electric Utility Generating Units,” 79 Federal Register 1429, January 8, 2014.

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comments, which prompted, in part, the September 20, 2013, re-proposal. Promulgation of the

final rule could be expected sometime after the public comment period ends and EPA evaluates

the comments.

The re-proposed rule would address only new power plants. However, Section 111 of the Clean

Air Act requires that EPA develop standards for greenhouse gas emissions for existing plants

whenever it promulgates standards for new power plants. In his June 25, 2013, memorandum,

President Obama directed the EPA to issue proposed standards for existing plants by June 1,

2014, and to issue final rules a year later.

Given the pending EPA rule, congressional interest in the future of coal as a domestic energy

source appears directly linked to the future of CCS. The history of CCS research, development,

and deployment (RD&D) at DOE and the pathway of its signature program—FutureGen—invite

questions about whether DOE-funded RD&D will enable widespread deployment of CCS in the

United States within the next decade.

The Natural Gas Alternative?

When EPA first proposed a new rule regulating GHG emissions from power plants that would

likely require CCS, Congress considered legislation to block the new regulations. For example,

the Subcommittee on Energy and Power of the House Science, Space, and Technology

Committee held a hearing on June 19, 2012, where opponents of the new rule, including

FutureGen Alliance Chairman Steven E. Winberg, criticized the regulations: “In effect, EPA’s rule

will eliminate any new coal for years to come because EPA is requiring new coal-fueled power

plants to meet a natural gas equivalent CO2 standard, before CCS technology is commercially

available.”35

Following the September 20, 2013, re-proposal of the rule, the debate has been mixed as to

whether the rule would spur development and deployment of CCS for new coal-fired power

plants or have the opposite effect. Multiple analyses indicate that there will be retirements of U.S.

coal-fired capacity; however, virtually all analyses agree that coal will continue to play a

substantial role in electricity generation for decades. How many retirements would take place and

the role of EPA regulations in causing them are matters of dispute.36

Since the September 2013 re-proposal, the argument over the rule has focused, in part, on

whether CCS is the best system of emissions reduction (BSER) for coal plants and whether it has

been “adequately demonstrated” as such, as required under the Clean Air Act. In its re-proposed

rule, EPA cites the “existence and apparent ongoing viability” of several ongoing CCS

demonstration projects as examples that justify a separate determination of BSER for coal-fired

plants and integrated gasification combined-cycle plants. (The second BSER determination is for

gas-fired power plants.)37 The EPA noted that these projects had reached advanced stages of

U.S. Congress, House Committee on Energy and Commerce, Subcommittee on Energy and Power, The American

Energy Initiative: A Focus on EPA’s Greenhouse Gas Regulations, 113th Cong., 1st sess., June 19, 2012, testimony of

Steven E. Winberg, Vice-President, Research and Development, CONSOL Energy, Inc., p. 6.

For a detailed discussion of the EPA’s regulation of coal, see CRS Report R41914, EPA’s Regulation of Coal-Fired

Power: Is a “Train Wreck” Coming?, by (name redacted) and (name redacted).

The projects cited in the re-proposed rule are the Southern Company Kemper County Energy Facility, the SaskPower

Boundary Dam CCS project, the Summit Power Texas Clean Energy Project, and the Hydrogen Energy California

Project. The Boundary Dam project is a Canadian venture; the other three projects are in the United States and are

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construction and development, “which suggests that proposing a separate standard for coal-fired

units is appropriate.” FutureGen 2.0 was not included as one of the projects used to justify the

proposed rule, despite its 10-year long history and more than $1 billion in committed federal

support. Its omission from the EPA re-proposed rule further reinforces FutureGen’s status as a

CCS project in the early stages of development.

The huge increase in the U.S. domestic supply of natural gas, due largely to the exploitation of

unconventional shale gas reservoirs through the use of hydraulic fracturing, has also led to a shift

to natural gas for electricity production.38 The shift appears to be largely due to the cheaper and

increasingly abundant fuel—natural gas—compared to coal for electricity production. The EPA

re-proposed rule, discussed above, noted that “power companies often choose the lowest cost

form of generation when determining what type of new generation to build. Based on [Energy

Information Administration] modeling and utility [Integrated Resource Plans], there appears to be

a general acceptance that the lowest cost form of new power generation is [natural gas combinedcycle].” Cheap gas, due to the rapid increase in the domestic natural gas supply as an alternative

to coal, in combination with regulations that curtail CO2 emissions, may lead electricity producers

to invest in natural gas-fired plants, which emit approximately half the amount of CO2 per unit of

electricity produced compared to coal-fired plants. Regulations and abundant cheap gas may raise

questions about the rationale for CCS demonstration projects like FutureGen.

Alternatively, and despite increasingly abundant domestic natural gas supplies, EPA regulations

could provide the necessary incentives for the industry to accelerate CCS development and

deployment for coal-fired power plants. As part of its re-proposed ruling, EPA cites technology as

one of four factors that it considers in making a BSER determination.39 Specifically, EPA stated

that it “considers whether the system promotes the implementation and further development of

technology,” in this case referring to CCS technology. It appears that EPA asserts that its rule

would likely promote CCS development and deployment rather than hinder it. Those arguing

against the re-proposed rule do so on the basis that CCS technology has not been adequately

demonstrated, and that it violates provisions in P.L. 109-58, the Energy Policy Act of 2005, that

prohibit EPA from setting a performance standard based on the use of technology from certain

DOE-funded projects, such as the three projects cited in the EPA re-proposal, among other

reasons.40

On January 9, 2014, Representative Whitfield and 62 cosponsors introduced H.R. 3826, the

Electricity Security and Affordability Act, which would essentially impose a number of

requirements to be met before EPA could issue greenhouse gas emission regulations under

Section 111 of the Clean Air Act, such as the EPA re-proposed rule discussed above. On January

14, 2014, the Energy and Power subcommittee, House Energy and Commerce committee, voted

(...continued)

receiving funding from DOE. See CRS Report R42496, Carbon Capture and Sequestration: Research, Development,

and Demonstration at the U.S. Department of Energy, by (name redacted) for more information on DOE funding for CCS.

For a detailed discussion of how natural gas is affecting electric power generation, see CRS Report R42814, Natural

Gas in the U.S. Economy: Opportunities for Growth, by (name redacted) and (name redacted).

The other three are feasibility, costs, and size of emission reductions.

See for example, the November 15, 2013, letter to EPA Administrator Gina McCarthy from Rep. Fred Upton, chair

of the House Committee on Energy and Commerce, http://www.eenews.net/assets/2013/11/22/document_daily_03.pdf;

and the December 19, 2013, letter to Administrator McCarthy from Rep. Lamar Smith, chair of the House Committee

on Science, Space, and Technology, http://science.house.gov/sites/republicans.science.house.gov/files/documents/

Letters/121913_mccarthy.pdf.

Congressional Research Service

FutureGen: A Brief History and Issues for Congress

to report the bill. Much of the discussion during the bill’s markup centered on whether CCS was

an adequately demonstrated technology to meet the requirements of the Clean Air Act.

Outlook

Congressional consideration of CCS has focused on balancing competing national interests, such

as fostering low-cost domestic sources of energy like coal versus reducing greenhouse gas (GHG)

emissions in the atmosphere. Legislative proposals during the 109th and 110th Congresses focused

on advancing carbon capture technologies that reduce CO2 emissions to mitigate GHG-induced

global warming. Congress began appropriating funds specifically for FutureGen beginning in

2005. Previously, DOE had allocated funds under its Clean Coal Power Initiative (CCPI)

program. With the American Recovery and Reinvestment Act of 2009, Congress appropriated

approximately $1 billion for the FutureGen 2.0 project.

The revival of FutureGen under the Obama Administration as FutureGen 2.0 has sparked

increased scrutiny of the future of integrated CCS technology on a commercially viable scale.

FutureGen was originally proposed to demonstrate the feasibility of using CCS technology to

mitigate CO2 emissions into the atmosphere. Among the challenges that continue to influence the

development of FutureGen 2.0 are rising costs of construction, ongoing issues with project

development, lack of incentives for investment from the private sector, and time constraints on

project development. Despite congressional and Obama Administration commitments to the

FutureGen 2.0 project, particularly the $1.0 billion appropriation from ARRA, questions remain

as to whether or not FutureGen 2.0 will succeed.

The Congressional Budget Office (CBO) published a report in June 2012 stating that the success

of CCS technology depends on reducing technical costs, ensuring the effectiveness of CCS, and

adopting policies that provide incentives for industry to pursue the high-cost demonstration

technologies.41 The report explained that if regulations, tax credits, or policies such as carbon

taxation or cap-and-trade that increase the price of electricity from conventional power plants are

adopted, then CCS technology may become competitive enough for private sector investment.

Even then, industry may choose to forgo coal-fueled plants for natural gas or other sources that

emit less CO2 compared to coal, according to CBO.42

Timeline

The timeline that follows shows a chronology of the history of FutureGen since 2003.

Philip Webre and Samuel Wice, Federal Efforts to Reduce Cost of Capturing and Storing Carbon Dioxide,

Congressional Budget Office, June 2012, pp. 14-15, http://www.cbo.gov/sites/default/files/cbofiles/attachments/4335706-28CarbonCapture.pdf.

Several CRS reports cover the issues of technology and cost of capturing CO2, as well as the challenge of storage

capacity in the United States for captured CO2, regulatory challenges, public acceptance, and others. See CRS Report

R41325, Carbon Capture: A Technology Assessment, by (name redacted); CRS Report R42532,

Carbon Capture and

Sequestration (CCS): A Primer, by (name redacted); CRS Report RL34601,

Community Acceptance of Carbon Capture

and Sequestration Infrastructure: Siting Challenges, by (name redacted), and others.

Congressional Research Service

FutureGen: A Brief History and Issues for Congress

Congressional Research Service

FutureGen: A Brief History and Issues for Congress

Congressional Research Service

FutureGen: A Brief History and Issues for Congress

Sources: Information for the FutureGen Timeline has been acquired from the following sources.

Articles from the St. Louis Business Journal between April 22, 2003 and December 7, 2011 by various authors,

http://www.bizjournals.com/stlouis/search/results?q=FutureGen.

Christa Marshall, “FutureGen Carbon Capture Project Affirms Main Storage Site,” Environment & Energy, July 18,

2012, http://www.eenews.net/climatewire/print/2012/07/18/6.

Congressional Research Service

FutureGen: A Brief History and Issues for Congress

D.K. McDonald, M. Estopinal, and H. Mualim, “FutureGen 2.0: Where Are We Now?”, (Technical Paper,

Babcock & Wilcox Power Generation Group, Inc., 2012), http://www.babcock.com/library/pdf/BR-1870.pdf.

Heartland Coalfield Alliance, “FutureGen 2.0 June Scoping Meetings,” press release, June 2, 2011,

http://heartlandcoalfieldalliance.org/futuregen-2-0-scoping-june-meetings/.

John Reynolds, “Ameren power plant closures: Fewer jobs, cleaner air.,” The State Journal Register, October 4,

2011, http://www.sj-r.com/breaking/x432920643/Ameren-cites-EPA-rules-in-closure-of-2-Illinois-plants?zc_p=0.

Katherine Ling, “Senate panel freezes funding for restructured FutureGen,” Environment & Energy, July 8, 2008,

http://www.eenews.net/eenewspm/climate_change/2008/07/08/3.

Mark Chediak and Katarzyna Klimasinska, “AEP, Southern Withdraw From FutureGen Coal Project (Update2),”

Bloomberg.com, June 24, 2009, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aBeVHVGtr7KE.

Press Releases from The FutureGen Alliance between September 13, 2005 and July 17, 2012,

http://www.futuregenalliance.org/news/press-releases/.

Russell Gold, “Taking Lumps: Futuregen Backers Back Out.,” Wall Street Journal, June 5, 2009,

http://blogs.wsj.com/environmentalcapital/2009/06/25/taking-lumps-futuregen-backers-back-out/.

The text of the Illinois Finance Authority Board Meeting on January 12, 2010 regarding,” Resolution Number

2010-01-09 “A Resolution in Support of the Non-Profit Clean Coal FutureGen Project in Mattoon, Illinois” can

be viewed at http://www.il-fa.com/public/boardbooks/media-1-12-10.pdf.

The text of Illinois S.B. 1821 can be viewed at http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=0970534.

The text of Illinois S.B. 2062 can be viewed at http://www.ilga.gov/legislation/publicacts/97/097-0618.htm.

U.S. Congress, House Committee on Science and Technology, Subcommittee on Energy and Environment,

FutureGen and the Department of Energy’s Advanced Coal Programs, 111th Cong., 1st sess., March 11, 2009.

U.S. Congress, Senate Committee on Appropriations, Subcommittee on Energy and Water Development,

Department of Energy’s Decision to Restructure the FutureGen Program, 110th Cong., 2nd sess., May 8, 2008, 110-826.

U.S. Department of Energy Office of Fossil Energy, FutureGen Integrated Hydrogen, Electric Power Production

and Carbon Sequestration Research Initiative: Energy Independence through Carbon Sequestration and

Hydrogen from Coal, Report to Congress, March 4, 2004, http://www.netl.doe.gov/technologies/coalpower/

fuelcells/publications/fuelcell/fc-cleanup/futuregen_report_march_04.pdf.

U.S. Department of Energy Fossil Energy Techline, “Department of Energy Formally Commits $1 Billion in

Recovery Act Funding to FutureGen 2.0,” press release, September 28, 2010, http://www.fossil.energy.gov/news/

techlines/2010/10048-DOE_Formally_Commits_%241_Billion_to.html.

U.S. Government Accountability Office, Clean Coal DOE’s Decision to Restructure FutureGen Should Be Based on a

Comprehensive Analysis of Costs, Benefits, and Risks, GAO-09-248, February 13, 2009.

Tamar Hallerman, “Ill. Regulators Approve 20-Year Power Contract for FutureGen,” GHG Reduction Technologies

Monitor, December 21, 2012, http://ghgnews.com/index.cfm/ill-regulators-approve-20-year-power-contract-forfuturegen/.

Author Contact Information

(name redacted)

Specialist in Energy and Natural Resources Policy

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

FutureGen: A Brief History and Issues for Congress

Acknowledgments

The initial research and writing of this report was undertaken by Ester Cross, an intern with CRS during the

summer of 2012. Ms. Cross is a Dartmouth College undergraduate student and her work on this and other

projects is greatly appreciated.

Congressional Research Service

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