Status of the Great Plains Coal Gasification Project Loan Guarantee

As required by law, GAO audited the recipients of loan guarantees issued under the Department of Energy (DOE) Act.

DOE awarded its first loan guarantee under the Act to a partnership for construction of a coal gasification plant, a pipeline connecting the plant to the interstate pipeline network, and a share of the mine which will supply coal to the plant; funds for construction of the facilities are being provided by the Federal Financing Bank (FFB). The plant will be the Nation's first commercial facility for generating synthetic natural gas from coal. As of early 1982, plant construction was about 9 percent complete based on a composite of 33 types of construction activities involved, and construction activities relating to development of the coal mine were almost 40 percent complete; pipeline construction had not started. DOE agreed to guarantee three-quarters of the project's costs plus half of a secondary contingency for unanticipated cost overruns. The partnership will provide DOE with a quarterly estimate of funds needed for the project which DOE will review and, when approved, funds will be disbursed by FFB. During the construction period, the partnership has the option of requesting short-term loans; when the plant is at full production, all loans will be consolidated into one or more long-term loans. DOE stated that it intends to closely monitor construction and operation of the project to insure control and proper release of Government funds.