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Duke Energy wants ratepayers to fund carbon dioxide storage site study

December 5, 2009

The state’s utility consumer agency is opposing Duke Energy’s request to have customers pay $121 million to study where to inject underground the carbon dioxide to be produced by the generating plant it is building.

The Indiana Office of Utility Consumer Counselor proposes that customers pay no more than $34 million. It is questioning Duke’s cost estimates and its recent discovery that the sandstone under the $2.4 billion Edwardsport plant may not be suitable for carbon storage as once believed.

“I have a real concern over essentially giving Duke a blank check to perform a research study that has no readily identifiable stopping points,” Cynthia Armstrong, an OUCC analyst, said in recent testimony filed with the Indiana Utility Regulatory Commission.

The cost of storing carbon underground—known as sequestration—is not factored into the plant’s price tag, though sequestration has been hailed by Duke from the start as a potential future complement to the 630-megawatt plant.

In 2005, Duke told the commission initial rock tests under Edwardsport “indicated there is a good possibility of significant amounts of sequestration potential in an area below and immediately surrounding the site.”

Furthermore, Duke said at the time, “this potential … was one of the factors in selecting the Edwardsport site.”

Now it wants to drill test wells 50 miles northeast and west of Edwardsport.

Storing gas miles away would most certainly raise the cost of future sequestration by requiring a piping system.

“Duke’s confidence in the viability of Edwardsport as a suitable carbon storage site played a significant role in the OUCC’s support of the project,” Armstrong told the commission.

Underground carbon sequestration at Edwardsport “was a huge selling point to the press, to the public and to the Indiana General Assembly,” said Kerwin Olson, of Citizens Action Coalition, which has opposed the plant.

Duke spokeswoman Angeline Protogere said the cost to do the site characterization study itself is not any higher at a different site than at Edwardsport.

“We would have to spend the site characterization money even at Edwardsport if it was still determined to be a good site,” she said.

Protogere said a preliminary study by the Indiana Geological Survey had indicated sandstone in the area was favorable. More recent tests found the region is favorable but the rock under the plant is not.

The OUCC asked the commission not only to limit the customers’ share of sequestration studies to $34 million but to seek the money in a subsequent rate case and to require Duke to reimburse customers for any site study funding it may receive from the U.S. Department of Energy.

But Duke Energy Indiana President Jim Stanley, responding to the OUCC, said the utility indeed proposes stopping points. If the utility does not receive substantial federal funding for site characterization, it will scale back the scope of its study and seek regulatory approval for additional phases, he said.

The requested $121 million study pending before the commission could raise rates another 1 percent, according to filings with the IURC.

The new Edwardsport plant, touted to be less polluting by converting coal to gas and using the gas to fuel the plant, is expected to raise rates of Duke’s 775,000 Indiana customers about 18 percent.

CAC argues that sequestration is not without risks, noting the area around Edwardsport is in a seismic zone. Last year, a 5.4 magnitude earthquake occurred near Vincennes.

John Rupp, head of the Indiana Geological Survey and witness for Duke in the IURC case, said while the area Duke is exploring is in the Wabash Valley Seismic Zone, that does not preclude it from consideration.

“From a technical standpoint, residents should not be concerned about having millions of tons of carbon dioxide stored at high pressure beneath their property, if a carbon sequestration project is appropriately managed and the precautionary steps outlined are followed,” Rupp said in testimony responding to the CAC.•

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