For Immediate Release: 12/21/16
Counsel, Lake Charles Methanol email@example.com
Lake Charles Methanol, LLC Announces Conditional Commitment Offer Issued by the U.S. Department of Energy for Clean Energy Manufacturing Project in Lake Charles, Louisiana
$3.8 Billion investment to construct a facility to produce methanol and other products for domestic and international markets; 1,000 construction jobs and 200 permanent jobs to be created in Louisiana; CO2 to boost oil production from Gulf Coast oilfields
DOE to guarantee up to $2 billion in loan guarantees for the project from Federal Financing Bank of the U.S. Treasury
Fluor Corporation to engineer and build the facility under a lump sum, turn-key, date-certain construction contract
The facility will capture CO2 that will be sold to Denbury Onshore, LLC for use in Enhanced Oil Recovery (“EOR”) in the Gulf Coast to support its current tertiary production in the Gulf Coast of approximately 34,000 barrels per day in addition to supporting future expansion projects, creating an estimated 300 permanent jobs in Texas
Lake Charles, Louisiana (December 21, 2016) – Lake Charles Methanol, LLC (“LCM”) and the U.S. Department of Energy (“DOE”) announced today that DOE has offered to LCM a conditional commitment to guarantee up to $2 billion in loans from the Federal Financing Bank of the U.S. Treasury to finance an approximately $3.8 billion clean energy project that will create 1,000 construction jobs and 500 permanent new U.S. jobs. The facility will produce methanol, hydrogen, CO2 and other valuable chemicals from petcoke, a waste product from the refining of heavy crude oil.
LCM applied for a loan guarantee from the DOE Loan Programs Office (“LPO”). The loan guarantee is authorized by Title 17 of the Energy Policy Act of 2005 pursuant to LPO’s Advanced Fossil Energy Projects solicitation. The announced conditional commitment is the first offer of a conditional commitment for the financing of an advanced fossil project that employs innovative energy technologies that avoid, reduce, or sequester anthropogenic emissions of greenhouse gases (“GHGs”.
LCM’s project utilizes advanced ultra-clean gasification technology licensed by GE to gasify petcoke into a syngas, which is subsequently converted into marketable products through the use of other technologies that the project will license. The petcoke gasification process will reduce pollution by 99% over conventional uses of petcoke, and the project will capture as much as 90% of the CO2 that would otherwise be emitted, drastically improving the environment through the reduction of particulates and GHG emissions.
Once captured, the CO2 produced by the project will be sold to Denbury Onshore, LLC for use in oil fields that it owns in the Gulf Coast region to produce oil that would otherwise not be produced through conventional production. The captured CO2 sold to Denbury Onshore, LLC will approximate 4-5 million tons annually, which would otherwise be emitted into the atmosphere.
Gov. John Bel Edwards of the State of Louisiana said, “DOE’s decision to issue a conditional commitment of up to $2 billion to Lake Charles Methanol proves that Louisiana is a great place to do business and that Louisiana has a promising future in clean energy projects. This project demonstrates how government and private enterprise can work together to support energy technologies that improve the environment while creating new jobs and economic development.”
Don Maley, President and CEO of LCM, stated “Reaching Conditional Commitment with the DOE over the terms of a loan from the Federal Financing Bank of the U.S. Treasury under the loan guarantee program is an important milestone that represents the commitment of the federal government to promote innovative, clean fossil energy technologies and to support the financial close of this project. We hope to reach financial close in 2017 after completing our equity raise and project development. We look forward to the jobs and positive economic impact that the project will produce beginning next year.”
Bill Rase, Executive Director of the Port of Lake Charles said “The Lake Charles Methanol Project is a key opportunity for the Port of Lake Charles to expand its bulk terminal facilities and services and to grow as an increasingly important international Port for the export of chemicals and commodities. We are excited to be the home of a project that uses innovative technology to decrease emissions from the use of petcoke, which is handled every day at the Port, to make methanol and other important chemicals. This clean energy project creates an exciting future for the Port of Lake Charles.”
David Seaton, Chairman and Chief Executive Officer of Fluor Corporation, said “Fluor is proud to be selected as the engineering, procurement and construction contractor for the Lake Charles Methanol Project. After the final decision and award to Fluor, expected in early 2017, the project will employ more than 1,000 skilled engineering and construction personnel thereby significantly boosting economic activity in the region. Fluor has been actively engaged in the pre-construction development of the project over the last 18 months and we look forward to a full release in 2017 for this innovative clean energy facility.”
Fluor Corporation, one of the world’s largest publicly traded engineering, procurement, and construction (“EPC”) companies will design and build the facility under a lump sum, turn-key, date certain EPC contract. The construction activity will employ over six million man-hours of labor on site, leading to a projected date of 2020 for commercial operation of the facility.
Morgan Stanley is the investment advisor for the project and is actively raising equity funds required to reach financial close for the project. Financial Close is expected in 2017.
Long term contracts with major U.S. and international companies will facilitate the purchase of more than 1,000,000 tons of methanol per year and all of the hydrogen, sulfuric acid, and argon produced by the project. The U.S. balance of trade will be improved by the production of methanol and the increase in domestic oil production from the LCM project.
The equity investors in the Project will be able to claim a $130 million federal investment tax credit (“ITC”) under the Internal Revenue Code Section 48B, which was a further indication of the support of the Department of Energy and the Department of Treasury for this clean fuels project. In general, Section 48B provides a federal investment credit for the use of gasification technology that converts petroleum coke into syngas while capturing CO2 as part of the process.
The project represents a capital investment of approximately $3.8 billion and will provide for up to 1,000 plant construction jobs for 3-4 years beginning in 2017. There will be approximately 200 full-time employees at the clean fuels plant paying wages well in excess of the Calcasieu Parish average, as well as 300 jobs created in the Texas oil industry. Operations and management at the project will spend approximately $2 billion over the 30-year project life, which will primarily pay local workforces and purchase locally-procured materials and services. Beyond the direct jobs, there will be a tremendous economic multiplier effect in the surrounding area through housing demand and services needed for the facility and its employees.