Status of the Great Plains Coal Gasification Plant

Great Plains Gasification Associates proposes to construct and operate a coal gasification plant in North Dakota. GAO was requested to study: (1) the impact of the Federal Appeals Court decision declaring illegal certain financial terms approved by the Federal Energy Regulatory Commission which were critical to the Department of Energy's (DOE) conditional commitment to guarantee a $1.5 billion loan for the project; (2) the course of action presently preferred by DOE and Associates to revitalize the project since the court decision; and (3) the status of DOE compliance with the loan guarantee requirements contained in the Department of Energy Act of 1978.

Since the court decision, American Natural Resources (ANR), acting on behalf of Associates, has carried on an intensive effort to secure a loan guarantee under an alternative financing plan in order to avoid a delay in the start of construction. ANR is optimistic that construction can begin on time, even though finalization of the loan guarantee has been delayed. It has considered a variety of options in order to get the project going, including appealing the court decision, seeking a federal legislative solution, and changing the project to produce liquids instead of gas. Associates prefers restructuring the financing plan, which would include a $1.8 billion loan guarantee from DOE as well as $600 million in equity financing from various project sponsors. DOE believes that it has satisfactorily completed several required actions in compliance with the basic terms and conditions for guaranteed financing set out in the Department of Energy Act of 1978. GAO generally agrees with DOE but questions the adequacy of its compliance in areas involving implementing regulations, congressional report requirements, and the establishment of a synthetic fuels advisory panel.