Status of the Great Plains Coal Gasification Project--Summer 1983

In its semiannual report on the Department of Energy (DOE) loan guarantee to the Great Plains Gasification Associates to build the Nation's first commercial-scale plant producing synthetic natural gas from coal, GAO reviewed how well the construction schedules are being met and how much has been spent, the economic viability of the project, the project's management, and DOE monitoring of the project.

As of May 31, 1983, construction on the plant was about 3 weeks behind schedule, but construction was expected to be accelerated, coal mine development was almost on schedule, and pipeline construction was ahead of schedule. Initial gas production is scheduled to begin during August 1984 with full gas production scheduled for December 1984. Costs incurred through May 31, 1983, were $125 million less than estimated because of schedule slippages and lower costs for materials and equipment, lower interest expenses, lower than anticipated subcontractor costs, and higher than expected productivity. The Great Plains cash-flow projection showed a much less optimistic financial picture than the projection made when the loan guarantee was signed because of a drop in gas prices. However, when taxes are considered, the economic viability of the project could be more positive than the Great Plains estimates. GAO found that Great Plains gave high priority to environmental issues and met their permit requirements, and DOE is developing a supplemental environmental program to provide additional data not now available on pollutants and emissions generated by the synthetic fuel process. A DOE audit of the eligibility of costs incurred from the beginning of the project through November 1982 questioned $4 million which included interest costs, donations, and consultant fees. Ultimately, DOE determined that only $86,752 of that amount was ineligible.